The best part of being an entrepreneur is getting to work with amazing people, and I’m excited to be able to once again team up with the folks at LCatterton, and of course, Ken Landis. And just as good, getting to work with Courtney Shields and Jeff Lee from day one on this venture. Exciting times ahead!
L Catterton is betting once again on the founders of Tula Skincare. The private equity firm has just made a “significant” growth investment in color cosmetics brand Dibs Beauty, launched in September 2021 by Tula Skincare founders Ken Landis (who also cofounded Bobbi Brown Cosmetics) and Dan Reich, with Austin, Texas-based influencer CourtneyShields and former chief operating officer of A-Rod Corp Jeff Lee. Terms of the transaction were not disclosed.
This is a repost from a LinkedIn post, for easy reference and since the topic keeps coming up.
A lot of entrepreneurs are now hustling to raise more money or sell their companies. Having just lived through two M&A events this year with P&G and Salesforce, wanted to share some brief M&A lessons:
1. Companies don’t buy companies. People at companies buy companies. Know who your buyers and champions are and build relationships with them.
2. 1,000,000 things need to go right for successful M&A. 1 thing needs to go wrong for unsuccessful M&A. Every detail matters.
3. Bankers are helpful, but don’t expect them to be a silver bullet to getting a deal done. You may pay more than feels reasonable, but it’s still a good insurance policy to making sure a deal gets across the finish line.
4. A deal isn’t done until it’s done. The unexpected will almost certainly happen.
5. You need competitive tension and urgency. Just like sales, or raising money, without compelling events and some FOMO in the process, it’s easy for things to drag out. See 1.
6. Get organized. All of your files, contracts, documents, vendor lists and pretty much everything you’ve ever done will need to be reviewed. Get ahead of it and organize it all so you can move fast and efficiently. Also, see 2, 3.
7. Understand the buyer’s intentions. What’s strategic to them and why? Your business will be valuable for different reasons to different buyers, therefore, your story will need to be different to different buyers. For example, with TULA, some buyers cared more about our science and R&D while others cared more about our digital capabilities.
8. Delegate everything. Once you get into the M&A track, it becomes a full time job. Make sure you’ve delegated as much as possible to your team so you can focus on getting a deal across the finish line. Also, see 3.
9. Manage your emotions. The highs are high and the lows are low. Be prepared to deal with a roller coaster of emotions.
When it comes to building SaaS products, all founders dream of having killer Product Market Fit (PMF). It’s the idea that your product is so good, and solves such a pain, that it basically flies off the shelves.
To do this, founders and product managers think about ways to increase the value of the product. One way to do this is to make the product valuable to a larger set of users across a company. As Clark Valberg, CEO and Founder of InVision once told me about Troops, “your product is so good because it is like tentacles into the entire organization.” The idea is if more people at a company find value, then obviously, the more valuable the product will be and the more likely it will be to sell that product.
However, the paradox of creating more value for more people, is that more people may feel like they need to weigh in on the purchasing decision. And more people, means more meetings, more friction, more decision-makers, more gatekeepers, and a longer period of time to sell the deal, if ever.
So what to do? Well, one approach is to focus on creating a valuable product for just one individual persona, thus limiting how many other people need to weigh in on the decision. Less friction! If you do this, you can get better bottoms-up adoption for that group of people. And perhaps after you’ve done your job here, you can move on and create value for other people in the company. But, making this transition from a single-use, single-persona product, to many personas is not that easy either.
This is the paradox of adding more value, to more people, in SaaS products.
Many of us have ideas for things we’d like to create and invent.
They could be projects or businesses. They could be projects that turn into businesses.
Whatever the case, it’s easy to get stuck in the idea phase but never evolve that idea into reality.
This is true for a lot of people looking to start companies.
I have an idea, but how do I start a company around it?
This is a question I’ve heard a lot over the years.
One trick that’s worked for me is to make that idea tangible by giving it a name.
When you give it a name, it becomes something you can almost touch and feel.
And then it’s easier to talk about and point to.
And the easier it is to talk about and point to, the easier it is for consistency theory to kick in. And this idea of consistency theory, where you must be consistent with what you’ve said or intended to do, will make it more likely that you’ll want to see that idea come to fruition.
So if you have an idea you’ve been thinking about, just try giving it a name to make it more tangible.
What a time to be alive. I asked a machine to provide me with a template to reflect on the year, and now, I’ll do just that.
Personal Reflections: Our family grew to four with the addition of our son, Brayden. Our daughter Michaela is now three and a half years old, and the “time flies” cliche becomes emblazed in my skull a little more each day. I became an uncle, we moved to a new town, and the silver lining with Covid-19 became apparent: I could spend more time with my family and experience a work-life balance I never experienced before. And speaking of family, I was able to make another small dent in the universe by rededicating my childhood school, and renaming it in honor of my grandparents who were Holocaust survivors.
Professional Highlights: I achieved some of my financial childhood dreams with the sale of two of my companies, TULA and Troops, to incredibly iconic companies with Proctor & Gamble and Salesforce (and Slack). But the best part? The people that helped me build those businesses also had life-changing events. There is something incredibly rewarding about building a platform that lets other people do their best work, and seeing it come to fruition is one of the greatest gifts there is. This is one of the reasons I’m so drawn to entprenuership. And if that wasn’t enough, I went on a wild goose chase trying to free some crypto coins from a hard wallet, backed a bunch of amazing founders, and doubled down on beauty with another business I’m excited about called DIBS Beauty.
Challenges and things that keep me up at night: One of my grandfather’s best friends past away. He too was a Holocaust survivor, having survived Auschwitz. I used to think, “one day they won’t be here, and they won’t be able to tell their story.” That day is here. And as their voices diminish, the drum beat of anti-Semitism gets louder and louder with incidents and hate crimes being at an all-time high. Against this backdrop, we have a recession, a population with insufficient education and understanding of history, an economic environment that provides incredibly ripe conditions for scapegoating, and people with pulpits willing to use these conditions to their benefit at the expense of humanity, decency and democracy. We’ve seen this movie before. I’ve been warned about this movie before. Only now, I wonder to what degree my kids will experience this movie.
Looking ahead: I mix these things and more together and I’m still the most optimistic I’ve ever been. We have rockets launching into space and landing on floating barges, artificial intelligence driving cars for us and creating generative images on the fly, gene editing being commercialized, energy being created using nuclear fusion, and the list goes on. I believe that our political institutions will continue to erode, but I’m also confident that founders and innovation will outpace our self inflicted wounds. As one example, while politicians debate things like climate change for political theater, entrepreneurs will develop products and services that people will love (e.g. Tesla) and also produce benefits needed to combat climate change. In short, the spirit of American entrepreneurship will continue to win out.
Conclusion: Despite the hardships and global conflicts that exist, and yes, there are a lot, it’s never been a better time to bet on yourself and try to be a change agent for good. It’s easy to get hung up with the million and one broken things going on, but we each have an opportunity to make a difference in our own lives and the lives of others. The question we should all ask is, how do we do that? And with the year coming to a close, what will our New Years’ resolution be?
For me, I’ll continue to invest in myself, invest in my family, and be a change agent for good. Seems like an appropriate and simple list.
The recent controversy surrounding Twitter’s decision to permanently ban several high-profile accounts has sparked a renewed debate about free speech and the role of social media companies in upholding it. This issue is complex and multifaceted, with no easy answers.
On one hand, companies like Twitter are expected to act as guardians of free speech and uphold the principle of free expression. In this view, Twitter should be a “global town hall” where all voices can be heard and where people can engage in meaningful dialogue with one another. However, as companies operating in the private sector, they are also entitled to their own moderation policies and the right to decide who can participate in their community.
One way to think about this issue is to consider a local bar and restaurant. Everyone is welcome to come in, eat, drink, and talk among themselves. But what if someone stands up at the bar and starts yelling at other patrons? They might start screaming about how Fauci is a crook, how Jews are Satan, or how inflation is ruining our country. People start to yell back, dinner is ruined for some, and a fight might break out. As the bar owner, you have the right to free speech too. You also have the right to decide who can participate in your community and whether or not someone’s behavior is acceptable.
The challenge we face with social media companies is that they are more powerful than most countries. When the people who use these platforms, like scientists, journalists, or even presidents, cause a ruckus and spark a debate, and then get banned, the implications and consequences can be dramatic. We are seeing this play out in real-time and how these decisions impact the most important issues of our time.
Furthermore, our elected officials are often unable to keep up with the times and technology. This leaves us with a group of people, just like us, trying to do their best and make difficult decisions. However, these people also have their own biases and ideas of what is right and wrong.
Ultimately, the debate about free speech on social media is likely to continue for some time. While some may believe that these platforms should be bastions of free expression, others may argue that it is more important to protect users from harmful content.
The echo chamber of social media turns nuanced issues into black-and-white issues, and this is one issue, that has a lot of nuance to it.
Qualified Small Business Stock (QSBS) is a critical topic that most founders are unaware of.
Instead of writing my own blog post about what it is and why it is important, I asked ChatGPT:
describe what qualified small business stock and why it is financially beneficial to people that have equity that qualifies as qsbs
And the answer:
Qualified small business stock (QSBS) is a type of investment in the equity of a small business that offers certain tax benefits to the investor. QSBS is generally defined as stock in a domestic C corporation that is acquired at its original issue, directly or through an underwriter, and that satisfies certain requirements regarding the corporation’s active business, gross assets, and length of time the stock is held.
One of the main financial benefits of QSBS is that it allows investors to exclude a portion of the gain from the sale of the stock from their taxable income. For example, if an investor buys QSBS at a cost of $100,000 and sells it later for $200,000, they may be able to exclude up to $100,000 of the gain from their taxable income. This can result in significant savings on taxes and make the investment more financially attractive.
Another potential benefit of QSBS is that it may qualify for a lower capital gains tax rate. Under certain circumstances, the gain from the sale of QSBS may be taxed at a maximum rate of 28% rather than the higher rates that apply to other types of capital gains. This can further reduce the tax burden on the investment and increase the potential return on the investment.
Overall, QSBS can be a financially beneficial investment for people who have equity that qualifies as QSBS, as it offers potential tax savings and may be eligible for a lower capital gains tax rate.
It missed an important point about how much tax exclusion you can benefit from so I followed up with:
What is the total amount of money an investor can exclude from the gain of the sale if the equity is treated as qualified small business stock?
And the answer:
The total amount of gain that an investor can exclude from the sale of qualified small business stock (QSBS) depends on several factors, including the amount of the gain, the length of time the stock was held, and the amount of the exclusion that was previously claimed on the stock.
Generally, an investor can exclude up to 50% of the gain from the sale of QSBS if the stock was held for more than five years. This means that if an investor buys QSBS at a cost of $100,000 and sells it later for $200,000, they may be able to exclude up to $100,000 of the gain from their taxable income.
However, the amount of the exclusion may be limited if the investor has previously claimed an exclusion on the same QSBS. In this case, the exclusion is limited to the greater of 10% of the stock’s adjusted basis (i.e., the cost of the stock plus any improvements made to it) or $10 million. For example, if an investor previously claimed an exclusion of $5 million on the same QSBS and the stock’s adjusted basis is $100,000, the exclusion would be limited to $10,000 (10% of the adjusted basis).
In summary, the amount of gain that can be excluded from the sale of QSBS depends on several factors and can vary depending on the specific circumstances of the investment.
Lastly, I needed an image for this post. So I asked Dall-e-2:
create an expressive oil painting of a dog in a suit, smiling, depicted as an explosion of a money flying all around them
So there are two really important and unrelated points here:
If you are a founder or early-stage employee, you should internalize QSBS and speak with your accountant about it.
It’s worth spending some time with OpenAI and ChatGPT. It’s wild and only took me 5 minutes to create this post.
When we started Troops, we wanted to reimagine how work gets done. We wanted to make work easier, more intelligent, and more collaborative. In 2016 we launched our first product making that vision a reality by injecting mission-critical, actionable workflows into a new medium people were gravitating towards.
Troops is a Slackbot for sales teams. It makes it easy to use CRM data to do your job — no more trudging through Salesforce. Troops lets you instantly push and pull CRM data in and out of Slack, turning it into the sales hub for both you and your team.
Since that time, we’ve been a leader in the industry, working with some of the fastest-growing companies in the world, including Salesforce and Slack. We’ve done this by delivering real-time insights from systems of record like Salesforce to systems of engagement like Slack, bringing together information and actions that customer-facing teams need to close new deals and support existing customers.
Today, we are pleased to announce that in furtherance of that vision, we have signed a definitive agreement to be acquired by Salesforce. The acquisition is expected to close in the second quarter of Salesforce’s fiscal year 2023 (ending July 31, 2022), subject to customary closing conditions. Upon closing, Troops will become part of Slack, a Salesforce company.
This announcement marks an incredible milestone in the Troops journey and we’d like to thank our community, our valued customers, our partners, our investors, and our team for all your support and partnership.
We’re excited about the future and the best is yet to come!
This week, my family and I were honored by my childhood school for the work we’ve done over the years to give back to the school and to the community.
I gave a speech and made another commitment.
Both are below…
**** The speech ****
Next week is Passover.
It’s a time in the Jewish tradition when we talk about how we escaped bondage, oppression, and persecution and were freed from slavery in Egypt.
Growing up every year, when my grandparents were around, we would go to their house for this holiday. I would sit next to my grandfather at the head of the table, watching him tell the story about how, we, as Jews, were freed from slavery.
As some of you may know, my grandparents were Holocaust survivors. And like the Jews from Egypt, my grandparents managed to survive their own Pharoah and discover freedom on a small farm in Toms River, New Jersey.
To sit next to my grandfather, and listen to him talk about Jews being persecuted and freed, thousands of years ago, was quite surreal to me.
Even in my eulogy about him, I remember remarking about how these moments felt like a window into the past, through his eyes and his narration of the Sedar, with his Yiddish accent.
At a young age, I could appreciate this relationship between Passover and the Holocaust. The Hebrew Academy certainly had a role to play in helping me understand these chapters of our past.
But I remember one year in particular.
I was sitting at the head of the table and my grandfather had a few more cups of wine than usual.
Out of nowhere, for the very first time in my life, he began to tell me stories about his experiences during the Holocaust.
These weren’t stories about the six million Jews.
These were stories about Sam. About his friends. About his siblings. About his parents. About his family.
About my family.
One story he told me was about the time when he was a prisoner of war, he went without eating his bread rations for a week, so he could sell those rations to enemy soldiers and bribe his way out of the camp to work as a carpenter, which he was not.
You could imagine the irony of listening to him tell me about the importance of bread and how it saved his life while starting at a matzah plate in the middle of the Sedar table.
These stories, and others like it that night were the first time that I really internalized the fact that he lost everything, yet, we were here.
We were free.
We had opportunities he never had.
We have opportunities 6 million people, and their children and their grandchildren and their great-grandchildren never had.
This is something I think about every single day of my life.
“In every generation, every individual must feel as if he personally had come out of Egypt”
This visceral understanding gives me perspective and encourages me to make the most of this gift that each one of us has.
The gift of life.
Back at the Passover table, and after he shared his war stories, he then proceeded to give his young grandson some life lessons.
They were simple.
Work hard and go to school. Get a good education.
I think he understood that our kids are our future and that his kids and grandkids were his future.
I think he also understood how education played a central role in it all, especially when he himself was not able to pursue it due to the war.
This is something, as a parent myself, I now really understand but more importantly, it’s something I feel and connect with every time I look at my own kids, Michaela and Brayden.
It’s something my parents understood too when they sent me to school at The Hebrew Academy.
My grandparents and parents knew that if that little boy at the Sedar table worked hard in life and got a good education, he might be ok. And maybe, just maybe, he could help pay it forward and do the same for his family and for others.
And here we are.
I’ve worked hard, had a great upbringing thanks to my parents and The Hebrew Academy, had a little success and a lot of luck, and now recognize that it’s my turn to help ensure our Jewish family carries on for future generations.
That is why, tonight, I am excited to honor the memory of my grandparents, Sam and Betty, by rededicating my childhood school, formerly the Solomon Schechter Day School and currently The Hebrew Academy.
Moving forward, it will forever be known as “The Reich Hebrew Academy”.
I can truly think of no better way to express my love and appreciation for my grandparents and their legacy.
Today more than ever, this is especially important with the backdrop of what’s happening in Ukraine. Once again, people are fleeing Europe to save their lives as my grandparents did from their small towns in Poland years ago, which are now part of Ukraine.
This commitment ensures that my generation and future generations will be afforded the same opportunities that were afforded to me. Opportunities that were not afforded to my grandparents and millions of others.
So here’s my ask to all of you…
Please consider joining me and my family, Joe and Maxine Macnow, and recent others like David and Vanessa Wise, Randy and Laurie Pearlman, in stepping up in a big way and helping ensure this school gets built.
Joe, Maxine, and Yoti told me they had a dream about this project. As an entrepreneur, I too love to live in the clouds and try to invent the future.
And their dream is an amazing one where the past present and future exist concurrently. It’s an exciting vision and we would not be here without them.
Joe, Maxine, Yoti, thank you.
So please, help us make it a reality and help us ensure the path to the future is secured for our kids and future generations.
And now, I’d like to introduce you to the funnier, better-looking Reich, my brother Jeremy.