AS 60: 5 Words Nathan Latka Used to get an 8 figure exit – Acquisition Advice
26 Sep 2016
Nathan Latka came on the show today, and shared quite a few golden nuggets as well showed us his ambitions moving into the future. He’s got a business podcast – called The Top Entrerprenuers. He tried to buy success magazine for $5m. Sold first business, Heyo, after raising $2.5m and hitting $5m in revenue in Feb 2016. He then Acquired company another company called send later.
What you’ll learn:
- How to go through an acquisition
- How to prepare for an acquisition
- Strategies to get the most out of an acquisition
- What 5 words Nathan Latka used during his acquistion
- How Nathan grew Heyo to 10,000 paying subscribers and got it acquired
- Expanding and scaling, vision into the future
And much more!
David Aladdin: Welcome to the show Nathan,
Nathan Latka: David, what’s up Man, I am excited to be here. I told you better be comfortable on the show so let’s have some fun.
David Aladdin: You are nervous?
Nathan Latka: No, Nathan Latka never gets nervous
David Aladdin: David Aladdin never gets nervous. Alright! Can you take us to the beginning before things got crazy? Let’s hear more about you.
Nathan Latka:That’s a big question, I will keep it very brief, because time is valuable because 19 years old, studying architecture in Virginia Tech, quickly heard fifth years complaining that we are not getting jobs so I said screw, I am not putting myself five years, spending ridiculous amount of money on college education and not having a guaranteed job. I stayed up at my dorm room, rock at my girlfriend Christmas boxers and pre sold 73 grand worth of Facebook fan page. So my PayPal account was just exploding and eventually I decided to drop out, grew the business to about 30 grand a month in recurring revenue.
This was a SaaS business, Software as a Service, margins were through the roof, way higher than the most Amazon obviously products because there was no cost of goods sold outside of very little server cost. Then it kept growing to about 90,000 a month through recurring revenue. We then raised 2 million dollars from a Forbes billionaire named RJ Kirk at pre-money evaluation of 8.5 million dollars which brought our funding to about a total of 2.5 million. A lot of our angel investors were really the smartest in the world, I am talking about folks like David O’Connor, TechStar, many, many say the best investors in the world.
So we grew that to about 10,000 monthly paying customers, 5 million in revenue, 25 employees and sold that in February in 2016 in this year. So I got to tell you it is big, it was exciting and that’s kind of story in a nut shell.
David Aladdin:Let’s go a bit deeper, we have got a small amount of time, about thirty minutes to get everything understood. So you got this business and you grew it to 10,000 users. Even before how did you even get to the first 1000 users?
Nathan Latka:You know I make this clarification, many people lie, how many customers do they have and they say 10,000 and they lie, there are too many users they have which many times most are free, like we have 10,000 paying customers. People give us their credit card that we are billing every month, none of this baloney about users verses customers; 10,000 paying customers.
David Aladdin: And currently I think it’s 29.99 a month, what were you guys charging at the time, was it the same?
Nathan Latka: Average revenue per user per month ranged between $30 to $300.
David Aladdin: And 300 was like the enterprise?
Nathan Latka: That was the agency plan, enterprise.
David Aladdin: Alright so that’s pretty awesome, so before you got to 5000 users or even before 1000 users what were you guys doing to build your brand up?
Nathan Latka:I mean a lot of content marketing, a lot of hustling, cougars loved me, ok they love to come over, they love that the shirt’s unbuttoned so I played the cougars and they bought the product like you wouldn’t believe.
David Aladdin:So lets break it down a little further, so you were 19 at the time and how old are you know?
David Aladdin: So about 7 years, so when did it get acquired by the way
Nathan Latka: February 2016, this year.
David Aladdin: Awesome, ok about seven years’ acquisition. Right?
Nathan Latka: Yup.
David Aladdin: Very cool, ok and then so your first thousand paying users when did that happen, how long did it take you to get to that stage?
Nathan Latka: 13 months.
David Aladdin: That’s actually pretty good growth and then it seems like a skyrocketed from there and then it took over a year to get 1000 and then 9000 more you know took seven years to growth and then it grew faster and faster at some point, was there any type of event that happened that caused the.
Nathan Latka: Hustle, I mean everyone listening that is an entrepreneur that sold a company knows that. There is not a magic bullet and I will be totally lying if I told you that there was. It came down to pure hustle and quite frankly the reason I won, the reason we smashed many of our competitors because we were way more creative than all of them. We did marketing stunts that were just different and it worked, I mean a lot of it was webinars, a lot of it was putting on a show, a lot of it was entertained and people buying emotions so that’s how we sold the platform over and over again.
David Aladdin: I don’t know if you have ever seen gladiator, are you not entertained.
Nathan Latka: I have no idea, star wars I can’t do it, I can’t do star trek, I can’t do this type kind of stuff.
David Aladdin: Its medieval almost but gladiator was in arena and all of these people are watching him fight, this major battle and he didn’t want it to do for entertainment but the whole reason was entertainment. Once he figured that kind of secret sauce, he became like the best gladiator and he grows all the way up to mark himself from slavery, I didn’t know how I summarize that so well.
Alright so you pretty much figured out how to unlock the entertainment in marketing, let’s hear more about that how you do that and so let’s say we have a product and what would you do if you are say selling pencil, how would you make that pencil you know some millions of units.
Nathan Latka: It has to be a story, it has to be the same style of pencil that princess Diana used when she signed the will that gave all of her royal palaces to her son. Like every product . . . one of my favourite things to do, people say you can’t copy your competitors, you know what I say copy the hell out of your competitors and then beat them on something unique that you do. My strength is story telling so I copy people all the time and then I destroy them because I tell them better story about the product or service. I don’t buy companies, I buy stories, and then you just stick in to the product or service or the technology. So the way you went on Amazon in my opinion is you can have the exact same product but whoever tells a better story is going to win.
David Aladdin: I love it! Its good advice! So you are telling the best story with hayo and who are your competitors at that time.
Nathan Latka: I mean we had tons, we had Short Stag, Vodogo, Wild Fire, Buddy Media, it was a very fragmented, highly competitive space.
David Aladdin: Awesome! It looks like you beat them. So let’s talk about the acquisition part of that, a lot of our guests are trying to get acquired or they are in the acquisition phase, how did that play out?
Nathan Latka:That was very simple, I mean I did things you don’t everyone always tells you don’t sell a company, you have to be bought, so you have leverage and that’s a bunch of baloney, no one is just going to randomly come to you and say can I buy your company unless you get very lucky. What is much better for you to intentionally setup a system to attract buyers and then use psychology to get them to bid up and give you better deal? So look I was expecting like one or two people to watch this slide but there’s like three or four of you in the Facebook group so just to let you know I’m watching that and so is David, so you can ask questions there and I will answer them there and David’s dog is very excited about this interview that as well as you can see in the background.
David Aladdin: Wake up Doby.
Nathan Latka: What I did was I collected all the email addresses of the business development guys in our space of all our competitors and I sent an email that basically said we are shutting the business down and here is why and it looked like an email blast to all our customers. The reason I did that was because business development guys don’t acquire businesses, they don’t want to spend a bunch of money on fast growing business. What they want are deals. They want to find a deal and then go brag to their CEO about this great deal they found. So I need to create a story line that position Heyo as a great deal for one of these guys want to buy.
When they saw this email, they go, oh my gosh Heyo was a great brand, they are shutting down, we should see if they have any assets left to buy. The second the business development person gets buying from their CEO to put in a letter of intent to buy the company, their ego and their reputation are on the line within their team. In other words if they don’t get the deal done, they have to tell their CEO sorry I was really excited but we didn’t get it done and that’s a bad thing. So, I needed to get people a little bit, ok and close them just like good sex.
So you have to tease a little bit, get them in, and then go from there. So what I did, I sent that email to about 20 business development people, from that seven of them wrote back and said we are interested and I said great I am collecting LOI’s and they all wrote back, I got LOI’s on the table which of course all were very low, because they are going to be shutting down and I will give you a really low offer. What happened was four people did that; four companies gave me a letter of intent and this was on Monday and I wrote back and I used five very specific words that had a very interesting affect on these people and it was on a Monday and I wrote back and said I am making a decision on Friday who I should sell to and here are the five word, are we ready. The five words were “IS THAT YOUR BEST OFFER”. That’s it.
“IS THAT YOUR BEST OFFER”. So I am making a decision on Friday is this your best offer and David I am expecting like nobody to write back. What happened was four of them wrote back and doubled their offer. So if their first offer was 5 million, they wrote back and offered 10 million, they doubled and this was on like on Wednesday before the Friday and I said wow that doubled my offer for the first time, I am just going to keep doing it. So I wrote back and said “Thanks for the offer, I’m glad you increased it but is this your best offer”. And guys watching what do you thing happened, tell me the comments, what do you think happened? Two of the four; okay I lost two of them but the other two doubled their offer again.
So they started from 5 and going to 10 and then 10 went to twenty and long story short, I ended up selling to a company called Votigo for four times the initial price they offered just by using the five words, IS THAT YOUR BEST OFFER and the reason those words worked was because its psychological I was applying that their offer wasn’t good enough for me initially accept that one of their competitors might win the bid for Heyo and that would be a very bad press for them. That’s how we sold the business and by the way I have a very successful podcast called The Top Entrepreneur and it has 2 million listeners. I have recorded the entire acquisition process and posted as episodes which you can view them at www.nathanlatka.com/sold .
David Aladdin: I will put that in the show notes to. So, let’s break that down a little bit so these five words used them, what about their initial email to you. Was there an offer and did they ask you for a number. How did they, you know I have been approached a few funds that want to acquire one of my brands.
Nathan Latka: Which brands?
David Aladdin: Well I can’t really mention at this moment.
Nathan Latka: Why not.
David Aladdin: It’s complicated. They approached me and what would I do give them a number or do I wait for them to give me a number.
Nathan Latka: It is very simple you say “Oh guys, no, we are shrinking the business out, I am not looking to sell this right now, if you want the assets, give me a number.
David Aladdin: Got you and then I got be “Is that your the best offer”.
Nathan Latka: Yeah they are going to give you a lower number and they are going to say “Fine if you don’t want the business anymore, I will offer you a hundred grand for it”. It doesn’t matter what the first offer is, you just want them at the table. So your goal originally is to get them to the table and then get them to bid up against each other once their ego is on the line. The podcast which I started few months before I sold; the podcast is very simple, I get the world’s best, the richest, there are many, many billionaires that come on my show and many, many of them asking right now, I have many sharks from sharks tank and one who came on my show to promote the new series, you know the new season on shark tank and some are say no and some are say yes but I ask them all the revenue numbers. How much equity they own? Last month’s revenue? What’s there cap table? How much they have raised? What’s their gross margin, what’s their net margin, what are their expenses, customer acquisition cost and everything in fifteen minutes everyday and I am probably the most sued podcaster because I get guests on, I pressure them to give me all this data because my audience loves that and they immediately regret that and they say take it down and I say No.
In fact they were so good I am going to publish it twice because they gave me the right when they schedule to do whatever I wanted to do with the content. So it’s a very aggressive show but the audience are loving it and that’s why it’s the fastest growing business show on earth and this is from Ink; Ink ranked it number one. But it has got 2.5 million downloads in its first 12 months, really an unbelievable amount of people that’s like talking to almost like 24 NFL stadiums at once.
David Aladdin: Without the echo, right. Alright, so where do you see this all going, you had this huge acquisition happen, our podcast don’t cost a lot of money to run. I mean what you have done with all that money.
Nathan Latka: This is actually David driving me crazy David, this epipen thing right now with Congress like killing the CEOs you know if you are not happy with the price of epipen, stop moaning and groaning and start your own company. Create them at a cheaper price. You know the people at congress don’t know a damn thing about health care and all of these entrepreneurs, invested all of this money to create beautiful products, if you have been a monopoly on a product, you should charge a ton, that like Rockefeller, JPMorgan and Carnegie that is how they got very, very rich, Microsoft, everybody that’s like very rich.
So that’s a very big problem, governments gets in the way, what I’m doing now, is I’m run and win the presidency in 2036, we are going to land like super-fast, people are going to blink and I am going to be president and that is going to be great. So I am going to win presidency and before that though next year I am planning to release next year a bestselling business book and I need to sell about 10 million copies to be number 1.
We will sell it, it’s going to be a book like people have never seen before, what surprises like you have never imagined, it’s going to be a great book and then after I run for presidency I plan to run the world and really start the world’s largest hedge fund which we need about 200 billion in assets under management and we will do that. Right now I am buying a lot of real estate. So I plan to take back RIT – Real estate Investment Trust public at some point in my life but before that I have spent so money in acquiring businesses all over the place.
So I just acquired a company called www.nathanlatka.com/sendlater, it helps the people that sell on Amazon find JV Partners who will promote their product. You can send emails and it will put them on the auto reply follow up chain so you get an increased response rate. You can set reminders in your inbox, there are templates in there about how I got billionaires on my show and how do get response from bulk emails. So that worked really and I plan to take that company public by the time I am thirty which would be four years from now, I am currently 26.
David Aladdin: How much do you acquire that for?
Nathan Latka: That amount of money will surprise a lot of people.
David Aladdin: You got a number or no?
Nathan Latka: No.
David Aladdin: Hey is that because I didn’t share my numbers earlier..
Nathan Latka: Yeah.
David Aladdin: Yeah, whatever.
Nathan Latka: Why should I tell you how much I sold that for? What do I get out of that?
David Aladdin: Out of how much you have bought it for?
Nathan Latka: What is in it for me if I tell your audience how much I bought it for? What do I get from that? I get nothing from that. Why would I do that?
David Aladdin: Curiosity is answered.
Nathan Latka: I don’t care, stay curious, I would rather be curious, you are going to think about me, you are going to research me and you are going to go to my websites and you are going to follow me more. Why would I want to eliminate the curiosity?
David Aladdin: You bring about quite a good golden nuggets you know, creating the curiosity, you know people have to find out and so like whether you are doing it whether with your persona or you know whether we are doing it with our brands, it is something that we need to all start focusing on I guess more.
Nathan Latka: That was a good way to change the subject,
David Aladdin: No, it’s not it actually analysis of the subject, you have got Heyo, not Heyo, some later now and how you are going to build that up to go public.
Nathan Latka: Well, you need about 15 million dollars in annual revenue to go public which means I need a thousand companies paying me 4 grand a month. So every day I am focused on how do I find companies that can pay me 4 grand a month for this tool or service, get them on the phone and close them.
David Aladdin: Or just get on the AMZ Secret podcast, we have got tons of companies listening to this so what is your favourite book?
Nathan Latka: I am reading like a bunch of books right now. I love biographies in general, well because people can’t lie about their success, it’s usually a true story. This is the problem with most successful entrepreneurs, and in fact you know David people that you have got in your show because I know their background, they may or may not have shared publicly. You know they say they talk about their last exit or whatever they sold their company for, they did it like ten years ago, and they don’t talk about other shitty failures, they just say how great it was. Most successful people lie about their success so I love reading bios written by other people because it’s usually a great story
David Aladdin: Failures have you had so far.
Nathan Latka: I don’t fail,
David Aladdin: What have you learnt from, what are some of the biggest problems you have so far? How have you reacted to them?
Nathan Latka: I go through life, I tackle things very quickly. If I meet something that is tricky to get through, I just plough through it but you know I don’t fail. People always, it’s a sexy thing to say fail fast, fail quickly, it is a bunch of baloney, people use that because they want to create this false sense of vulnerability. Okay relaunch as they go big, they never fail, they either win or they learn. Alright there are many things I have learnt by doing different things you know I could have sold for 300 million instead of what I actually sold for, I could have done this different, that different. So I mean I am constantly learning.
David Aladdin: What do you not doing enough of that you wish you could be doing?
Nathan Latka: Totally control what I do. I do what I want and when I want. When I feel like reading I read, I feel like writing, I write. I have a really good balance right now. There is nothing that I wish I was doing that I am not currently doing it.
David Aladdin: What’s your morning routine look like?
Nathan Latka: I wake up, I grab coffee, I quickly check emails, I then usually have three hours where I am doing something that is very tricky to do that requires a lot of brain power, Once I knock that out, I am usually just doing some sort of research, working out or going outside hiking, after this this interview, 2:04 PM right now in Austin Texas I might probably go out for a walk and enjoy being outdoors.
David Aladdin: What do you do challenge your brain in the mornings.
Nathan Latka: Like I have to write a chapter in a book. I will block off like 3 hours in the morning to knock that off or if there is a biography or a person that I am studying I read that bios like 3 hours chunk so its batching.
David Aladdin: What are you currently writing?
Nathan Latka: It’s not public yet but it’s going to sell copies like very, very fast. People are calling it a combination of Tim Ferriss in terms of productivity and Dave Ramsey in terms of money. I mean I don’t know another 26 years old that understands money that is better with money than I am. I mean I easily point top one percent. I mean really, really the money and its not because I am some genius, I mean I learn it and I have done it over and over and I have stated a lot of money related things. So the book is probably called something like “The New Rich” you know I can get what you want in less time while you are anywhere in the world.
David Aladdin: That’s awesome dude, 2036 you are going to be the president.
Nathan Latka: I will be elected president.
David Aladdin: That’s awesome. What’s the strategy there?
Nathan Latka: All you have to do is controls who run Election Day because voter turnout is what wins elections; you give all of your voter’s free rights in the polls you win.
David Aladdin: Why don’t they do that nowadays?
Nathan Latka: Because no one is smart as me.
David Aladdin: Thanks for coming on the show Nathan Latka. Davis Aladdin, Nathan Latka out.
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