The Wise Exit

RYAN VAUGHN - Episode 45 of the Cashing Out M&A Podcast

00:00:00:21 - 00:00:17:03
Ryan Vaughn
There's this expectation I think people have that exiting a company is like this big celebration and there's puppies and sunshine and horns and all this stuff. It's not. It's really complicated. There's plenty of good things. And and there's also it's effectively a trauma. It's like a kid leaving the house.

00:00:17:05 - 00:00:40:12
Todd Sullivan
Welcome to the Cashing Out podcast, where our fellow founders share real stories and offer honest advice around selling their companies to some of the top acquirers in the world. My name is Todd Sullivan, CEO of Exitwise, where we help business owners create the exits they deserve. Today, my guest is Ryan Vaughn, the founder of VNN Sports, one of the largest marketing platforms in the U.S. for high school sports.

00:00:40:14 - 00:01:04:23
Todd Sullivan
Ryan caught the entrepreneurial bug at an early age when he started selling Pogs to his classmates in fourth grade. Through the following years of self-discovery, as well as trial and error, Ryan raised capital and willed VNN to life. Ryan made the decision to personally exit his business in 2020 and now coaches, executives and founders through their entrepreneurial journeys and his latest company, Inside Out Leadership.

00:01:05:01 - 00:01:32:21
Todd Sullivan
Today, Ryan and I talk about the resiliency and optimism required for entrepreneurs to build a company against serious headwinds that are often hard to anticipate. We talk about how lonely it can be in the CEO seat when making major decisions that can seriously affect the lives of your family, partners and employees. And finally, we debate when a founder should personally exit the business to focus on his or her next stage of life and leave part of their entrepreneurial legacy in the hands of others.

00:01:32:23 - 00:01:56:02
Todd Sullivan
I hope you enjoy my conversation with Ryan Vaughn. Ryan, thank you so much for doing this. I've just been fired up to talk to you. My fellow founder, a good friend over many, many years. I think people are going to learn a ton about what a founder needs to think about when they go to sell a business or turn the reins over to somebody else.

00:01:56:04 - 00:02:18:22
Todd Sullivan
The legacy that you've built, the identity that you have around running a business, I know that's something you struggle with. Something I struggle with, something a lot of our clients struggle with. And it sounds like you kind of figuring this out, how founders can make this transition or be conscious about what they're going to go through. So I really believe this is going to be one of the most educational podcasts that we have.

00:02:18:22 - 00:02:31:06
Todd Sullivan
I really encourage people to kind of listen to your journey, your advice. To me, this was so important to get out that we had Mark Cuban booked for this spot and I bumped him to get you on. So thank you for being here.

00:02:31:08 - 00:02:35:02
Ryan Vaughn
Yeah, naturally, I'm happy to do it.

00:02:35:04 - 00:02:56:01
Todd Sullivan
But yeah, seriously, this is great, right? We've known each other for so long. And, you know, I remember I was walking the streets of Chicago when you and I kind of got introduced over phone, and I was like, You're in Michigan. I'm in Chicago, And you were looking to fundraise. And there was a guy in Grand Rapids that I knew that I said, Oh, you should go call Jandernoa.

00:02:56:01 - 00:03:16:06
Todd Sullivan
Mike Jandernoa. Right. Yeah. I don't know if that was the very beginning or what, and I didn't know Mike particularly well, but he was, you know, I'd met him and he told me what he was doing and I'm like, maybe I could put these two together. And from there, like, you went on and built this company that has enormous market share in high school media, right?

00:03:16:06 - 00:03:26:12
Todd Sullivan
And and then, you know, the decision is made at some point where it's like, okay, you're going to go do your next chapter after, what is it, 12 years of VNN.

00:03:26:13 - 00:03:32:02
Ryan Vaughn
Yeah, I was I was a CEO in tech companies for 15 years, but I was ten years at VNN and the last ten.

00:03:32:04 - 00:03:34:01
Todd Sullivan
That's right. So you had three startups, right?

00:03:34:04 - 00:03:49:17
Ryan Vaughn
Yeah. Two more. Then we'll call on progressively larger learning experiences, failures. But, you know, mean, I was learning along the way and then and then VNN was it was a ten year journey. So when they say, you know, a startup is a ten year journey, I was a perfect example of that.

00:03:49:19 - 00:04:07:14
Todd Sullivan
So I think the best thing to do is why don't we start back, right? I know you were. I love your story about selling Pogs in, like the fourth grade, right? What made you kind of this entrepreneur? Take us up to, you know, building VNN, and then maybe we'll start asking a few questions about, you know, that experience.

00:04:07:16 - 00:04:28:02
Ryan Vaughn
It's interesting, the topic that we're going to talk about today around identity and what happens when you transition away from a leadership role or what happens that you transition away from the company you built. The way that I think about my story and what brought me to entrepreneurship is a lot about identity. And when I look back, I view my life in sort of four chapters.

00:04:28:04 - 00:04:54:19
Ryan Vaughn
My first vision that I was living into was I was going to be a future NBA player. And so that meant I played basketball all the time, 4 hours a day, you know, from age six to age 18. And I still play all the time now. But it also meant like I got to get tatted up and stuff because I'm going to go play in the league and, you know, and that chapter of my life lasted as long as my temperament at the time allowed it to.

00:04:54:21 - 00:05:17:00
Ryan Vaughn
I actually probably had more talent than I was able to exercise because when senior year, when it was my team and my time to get recruited and all that stuff, I got in a fight with the coach who quit the team. And I was a, you know, a hotheaded, cocky guy and and all that. But, but for me, that was the shutting of a door on who I thought I was going to become.

00:05:17:02 - 00:05:42:05
Ryan Vaughn
And identity was all of a sudden close to me. And that led to a really big just a lot of identity work for an 18 year old kid to have to deal with. And so that sort of ended the first chapter and began the second chapter. The second chapter, I lovingly referred to as my case of the Fuck Its, and is somewhat in response to no longer having the path to becoming an NBA star.

00:05:42:05 - 00:06:06:11
Ryan Vaughn
I was pretty frustrated and pretty mad and and throughout college and then into a couple of years after college, just got heavy into drinking heavy into drugs. And and you know that there's a lot of different ways that that path can go. But for me, it went the bad way, almost died a few times, did a couple really short stints in jail as a result of that for advice.

00:06:06:13 - 00:06:32:19
Ryan Vaughn
And I remember the end of that period of time. This is like a whole lifetime worth of drinking and drugs packed into like four or five years. And the end of that period of time, I was I remember sitting in jail thinking about this, you know, my middle class upbringing and my parents who thought the world of me and all of the people that I had let down and all that stuff and just how irreparably changed my life had become at that stage.

00:06:32:21 - 00:06:57:09
Ryan Vaughn
And that luckily was a wake up call. And so at that point I was dating my girlfriend and now wife who was involved in kind of my my rebuild and was a just has been a wonderful, wonderful influence on me for many, many years now. But around that time, I got sober and and anybody who's done that, that's like an involved process of I'm not going to go into all of that now.

00:06:57:09 - 00:07:19:08
Ryan Vaughn
But but I've been sober 16 years now, and about a year after I got sober, once I got done drying out, that identity question came up again and it was like, Well, okay, so who am I going to be now? And I looked around the world and I was like, Well, you know what it seems like is the creme de la creme.

00:07:19:10 - 00:07:33:01
Ryan Vaughn
The people that, you know, everybody wants to be like as tech founders tuxedos. And so I was like, okay, I'll do that. I'll go I'll go start a company, because that will really, you know, help people to admire me and that will really, really feel good.

00:07:33:03 - 00:07:51:16
Todd Sullivan
I remember when I was in Chicago, Andrew Mason was on the cover of Forbes magazine. Do you remember that? And it was right around the time we first met. And you could tell right there was this fever, certainly before that and all over Silicon Valley. But when it came to the Midwest, it was Andrew Mason on the cover of Forbes.

00:07:51:18 - 00:07:58:22
Todd Sullivan
And that is not an uncommon thing to have thought, like, what is my next chapter? I want to run a tech company. Right.

00:07:58:23 - 00:08:17:14
Ryan Vaughn
Totally. Totally. Well, and social network was, you know, just I mean, that came out a couple of years afterwards, Like there's something in the in the air and in the water that point. But so once I had again, not particularly like conscious of the pattern that I was operating through, but decided that this is what I wanted to do.

00:08:17:14 - 00:08:47:11
Ryan Vaughn
Then I went off and built a couple of companies and kind of learn on the job. And I have been a passionate sports night my whole life, so they were all sports companies. The first three years didn't work, and then the third one was just a an amazing learning experience and in all the different things not to do and then a bunch of things that I'm really proud of like and where we grew from, 15 people to 75 people and, you know, seven, eight months and the entire company broke, which is just that's, that's was a rough time.

00:08:47:13 - 00:09:08:22
Ryan Vaughn
And having to redefine and recreate a culture to sorta to repair all of the damage that that had done when you know the people who did it or all of a sudden the vast minority in the organization and do all that at a venture speed was a really, really cool example of just some of the really neat things that I got to learn throughout that process.

00:09:09:00 - 00:09:41:22
Ryan Vaughn
And so then, you know, through VNN and I was a tech CEO was the third chapter, and that ended when I left VNN. And I left VNN. And before we exited, we in and recently exited as well and, and as a good exit. But I actually left prior to that. And, and I remember vividly I hired a replacement CEO for me, a really good guy who sees that he did a great job with the company after me, but I was not at all prepared for the identity shift that would be required once I stepped away from that as well.

00:09:42:00 - 00:10:00:05
Ryan Vaughn
And I remember when I first signed the paperwork that goes all throughout the recruiting process, I was like, Cool, this is a good guy. This is going to be amazing. Let's just hustle and make and get all this stuff done. And then and we're in a board meeting. And it wasn't until I signed the paperwork and I signed the paperwork and it was just like a gut punch.

00:10:00:07 - 00:10:21:00
Ryan Vaughn
And I was like, you know, who I am is the founder of DNA and what life is about is making Ganon does as big as it can be, as successful as it can be. And like now I'm I am not allowed to be that anymore. Like holy shit, now what am I going to do? And who. Yeah, that was.

00:10:21:00 - 00:10:44:22
Ryan Vaughn
I think it was the combination of that opportunity for women or space for me, which is this really special space after when one thing has ended, but before the next thing has begun. That also coincided with a particular age when a lot of things happen, you know, alcoholic, early middle age, you know, mid thirties to maybe 51, a lot of that reconciliation and I think it happens.

00:10:45:00 - 00:11:07:11
Ryan Vaughn
And the combination of those two things for me really changed kind of everything. And it's a pattern that I see in the founders that I work with now. I've worked with a large number of founders that have come through exits, and oftentimes it's at that level of complexity around not only the identity shift of going from, you know, my identity as this company to to it's not.

00:11:07:13 - 00:11:22:02
Ryan Vaughn
But also it's, you know, if you do that when you're 30 or 40 or 50, you're reckoning with, we're running out of time. Also. And what do you want to do with that? So just a whole bunch of really fruitful learnings throughout that process for me.

00:11:22:04 - 00:11:46:04
Todd Sullivan
Let me step back a little bit because personally, that story undersell deals what you were able to do in building VNN and I feel like I almost had a first row seed into watching this company develop where the market looked to be a large market, right, but so fragmented that it made it really hard to try to get what you were doing.

00:11:46:04 - 00:12:26:06
Todd Sullivan
Having kind of media for every school in the United States, every sports team, right. Like you were just having to herd the kittens of cats. It was so, so difficult. And I was building Spirit Shop at the same time. So we were building the stores, right. And then and then we're even integrated on VNN. So you and I, you know, I feel like we're kind of comrades in this effort to try to figure out how do you work through all of this fragmentation to build a business that could kind of serve right, serve this underserved community or maybe poorly served community or locally served community.

00:12:26:08 - 00:12:49:17
Todd Sullivan
And so, you know, I think what you were able to do and what VNN was able to do, it took a long time to get there. But, you know, it it ended up showing remarkable success. And the reason I say it took a long time to get there. So what I'm leaning on now is we both took venture capital to build our businesses and we both understand the ramifications of that.

00:12:49:17 - 00:13:16:09
Todd Sullivan
And when you take in investors money, right, you are now on the clock right? They have limited partners to return capital to. And you know, you're going to get pressure to build in a way that is to generate the returns that venture wants. And so when you're on the clock and you're building this thing for ten, 12 years, right, it gets really, really difficult to maintain control of what you want to do.

00:13:16:11 - 00:13:40:01
Todd Sullivan
So I just think your story is a really good example that founders need to know about of what what can happen. How does that relationship with venture change from day one? And everybody's like point to one point and then, you know, businesses don't get built the way the Excel sheet say, and how do you deal with those relationships while you're building a company?

00:13:40:03 - 00:13:46:20
Todd Sullivan
Do you think you could talk a little bit about that evolution of the relationship with VC and maybe how that ended?

00:13:46:22 - 00:14:07:00
Ryan Vaughn
Yeah, I'd be happy to. And it's a good point. When I think about Vietnam now, I tend to think about the it's interesting. I notice the challenges that we overcome. That's like the most interesting part to me, looking backwards on it. But we certainly I mean, we collected this hyper fragmented high school sports market. I think now Vietnam represents something like 60% of the market.

00:14:07:02 - 00:14:12:09
Ryan Vaughn
It's crazy. And that was that was a hell of a lot of work and something to be really proud of as well.

00:14:12:09 - 00:14:17:02
Todd Sullivan
So, yeah, it's amazing legacy. Ryan, thanks for this. Fantastic, right? You started that.

00:14:17:04 - 00:14:46:22
Ryan Vaughn
But I think your point around the environment that you step into or the deal that you're signing when you signed on with a venture capitalist is a pretty meaningful one and one that I entered into, certainly naively and, and then changed and, and sort of impacted a lot of what what happened after that. So I think as part of the you know, at the time, I was really interested in building something that was big and then know, leave it at the universe and that sort of thing.

00:14:47:00 - 00:15:04:16
Ryan Vaughn
Venture capital just sort of went hand in hand with that hand in glove. It felt like that was the normal way to do things. And I think to some degree that's still the perception in a lot of a lot of parts of the world that if you're going to build something that's meaningful, the way to do that is by raising venture capital.

00:15:04:18 - 00:15:29:12
Ryan Vaughn
But the primary distinction between a venture capitalist and an entrepreneur. And I think what oftentimes leads to cross the dam working at cross-purposes is a venture capitalist has at least ten bets that they're making, sometimes many more, and they need each one of them to swing as hard as possible for a home run in order to pay for the other nine who are probably going to fail.

00:15:29:14 - 00:15:55:13
Ryan Vaughn
So they have ten shots to get this right. And the only way that the math works out is if whatever one wins changes the world and is like $1,000,000,000 exit. And so there are an infinite number of really successful businesses that exist between a failure and $1,000,000,000 exit. Right? There's I mean, that's 99.999% of businesses and 99.99% of businesses don't fit with venture capital for that reason.

00:15:55:15 - 00:16:27:13
Ryan Vaughn
Because for a VC, the only success is either you failed, the entrepreneur failed, in which case I'll write him off and I'm not going to spend any more time or it's $1,000,000,000 company. So I think it's really wise to enter into that. And if you're going to raise venture capital, enter into that. Knowing that now from my own story and my perspective, kind of how the how that impacted the growth of the company is, you know, when we first got started and started raising capital, we all all said and done.

00:16:27:13 - 00:16:52:22
Ryan Vaughn
We raised about $22 million for to capitalize the company. I'd say three quarters of that was from VCs. Okay. The first million bucks, a little bit more than that was from Angels. And at that stage with Angels, all of the different outcomes were still on the table. You know, we could cashflow it, we could do any number of different things and everybody was the attitudes were more in line.

00:16:53:00 - 00:17:17:16
Ryan Vaughn
And when we raised our first round of venture, we began working with folks who had really different incentives than us, the ones that I described and almost from day one actually before we signed the paperwork. Now that I think about it, there was pressure to go big or go big or go bigger and bigger. So we had a plan which was already an aggressive plan.

00:17:17:16 - 00:17:37:01
Ryan Vaughn
But consistently each time we, you know, we would talk to the investors, the pressure was go bigger. How can this be ten? How can this did it add to that rate? And to some degree, I think that's really healthy. It helps the entrepreneur to get outside the box that they might be in, but it also sets the expectation that that is where we need to be.

00:17:37:01 - 00:17:57:14
Ryan Vaughn
That's where we need to be. Aiming is constantly bigger. And for me, it definitely gave me the perception that like if I wasn't aiming that much bigger that something was wrong and I was I was doing it wrong. And the thing about aiming that big is you have to spend a ton of money to aim that big. And so you have this balance sheet that you've raised a couple of million bucks or whatever it is.

00:17:57:14 - 00:18:21:22
Ryan Vaughn
If you have a seed around and and you get a lot of pressure, my experience is I got a lot of pressure from the investors to spend that balance sheet as fast as we could productively. So figure out the biggest possible plan that we could and then spend aggressively against it when we went into that plan. And what happened to us is I think a really common occurrence is when you spend your venture money, then you need more venture money.

00:18:22:00 - 00:18:43:02
Ryan Vaughn
And so you get on this treadmill of like, we're going to go really big. We're going to spend all this money because we're building we're in our case building market share, which we did. But then we're going to need to go back and raise more capital and early on, I remember talking to many investors and many entrepreneurs. Our ecosystem in Michigan was still pretty young at the time.

00:18:43:04 - 00:19:02:07
Ryan Vaughn
We we're talking to many people and they're like, don't worry about dilution. Like it's, you know what? You just make it $1,000,000 company and then it's not a problem. And now I look back and I'm like, I very much disagree with that. I think there's a dilution is there is an enormous thing I learned firsthand through this organization just how much a company can sell for.

00:19:02:09 - 00:19:20:16
Ryan Vaughn
And it still not be a great outcome for the founders. Yeah, because we had a I think Van sold for 50 million bucks, maybe a little bit more than that. And it's not you know, that feels like life changing money. And it's very much not depending on how much capital you raise along the way and and the way that that looks.

00:19:20:18 - 00:19:38:14
Todd Sullivan
You talked about, you know, raising capital and being naive to the venture game. And yeah, we're we're all going to start there for sure and there are places to learn about it. But, you know, we're selling a business, you know, and this is like $100 million business. And we're looking at the cap table right now for a client.

00:19:38:16 - 00:19:58:11
Todd Sullivan
And I think it's the first $12 million is going to be swept by some venture capitalist that came in later that signed a document that gave them, I think it's like three times preference on their money. Oh, I watched you and I asked and I asked the founder, did they come in pre or post, you know, the Post-Money valuation?

00:19:58:13 - 00:20:28:07
Todd Sullivan
And he is like, Oh, I don't know. I don't know when that came in. Okay. Well, did they truly participate in their equity? I'm not I'm not sure. I mean, you've got a $200 million company here, right? So it's hard to just excel and know everything. But what I would encourage founders is to really understand the documents that they are signing because it gets into the next point of as you are building a company, you're building it presumably for a return on investment, right?

00:20:28:11 - 00:20:46:06
Todd Sullivan
You might not start out that way. It might be just a passion project. But once you take other people's money, it is ROIC return on investment and you want to understand your personal ROI at every step of the game because you raise in those first 2 million bucks, like you said, oh, we could have cash flow. The business.

00:20:46:06 - 00:21:09:06
Todd Sullivan
These were angels. They're betting on me. I'm getting to drive the ship the way I see the business growing. And maybe it's year three where you're getting, you know, like a $7 million exit and wow, that is, you know, Ryan Bond celebration time and everybody's happy. And yeah, you didn't shoot for the moon, right? But that was the right thing for VN and the investor groups that you have.

00:21:09:07 - 00:21:28:01
Todd Sullivan
And then you take on the more sophisticated venture capitalists and the game is totally change. And we hear over and over and over about dilution, right? Their game is to own more of winners, right? So you are going to be diluted and diluted and diluted and for you to maintain your own personal outcome, the hurdles get higher and higher and higher.

00:21:28:01 - 00:21:45:22
Todd Sullivan
We have one client, if they take another $50 million, this is a choice that they have or sell the business, right. Take 50 or so. And if they take 50, guess what? You got to go five more years. Take on a ton more risk and you're going to end up with three private buyers can buy you or you got to go public.

00:21:46:00 - 00:22:00:23
Todd Sullivan
Right? So these are enormous odds and that you've got to you know, you got to jump over. And yeah, I think founders need to be very much aware of dilution to your point. So I didn't mean to interrupt you. I think you brought up some really good points.

00:22:01:01 - 00:22:24:16
Ryan Vaughn
I think it's a really important point and also a credit and and sort of illustrates the importance of the work that you do in educating people around that. But there was a friend of mine that also was building in the high school industry or the school more broadly, like a secondary school industry. My problem that was, I don't know from a revenue perspective, tiny, just a really tiny company.

00:22:24:18 - 00:22:52:13
Ryan Vaughn
I had built a bit of technology locally and it was a friend of mine. We spoke often together and and he sold his company and I don't remember what the number was. I think it was so 10 million, the sale. It was, you know, I don't have to work anymore now. And it was just an example of the way that that they capitalized the organization, left them with so many other options and one that was like, you know, would have been and in fact was entirely off the table for us.

00:22:52:15 - 00:23:10:21
Ryan Vaughn
And we were a much larger company, but for them was a huge win at a much smaller scale. So yeah, I think it's a it's a rare company that that makes sense to go into the venture capital world. And in generally speaking, you know, if you're going to do that, you want to do it because you're certain that that's that, that you're that type company.

00:23:10:23 - 00:23:33:04
Todd Sullivan
You know, I struggle with the advice to give people here, right? I've taken venture capital in not all the companies, but three of the four that I've built and sold. And so I understand what that is. And today, you know, we're building exit wise and we're not taking anyone's capital. And my partner and I, we have the luxury of, you know, funding the beginning, right?

00:23:33:04 - 00:23:51:23
Todd Sullivan
So we know how to build a company. We know what it's going to take to drive real revenue. And then we know how to grow. And we don't need outside capital to do that. But it's very hard to tell some, you know, 26 year old kid, I think I call everyone under 40 a kid now and tell them, no, you got to bootstrap.

00:23:51:23 - 00:24:18:03
Todd Sullivan
Right? And in fact, Brian just wrote, my partner Brian just wrote an awesome article on bootstrapping. Yeah, but it's like when you're trying to build that dream and you've got no money. I remember I was just living in the closet of an attic in a fraternity house because we had no money. And so you, you're willing to sign anything just to have a few dollars to make the moves that you think will help build your company.

00:24:18:05 - 00:24:40:20
Todd Sullivan
So I'm torn, right? Because we're in we have such privilege today that we will build and continue to build and not take other people's money because of the flexibility that you talk about. And Brian and I talk all the time about what do we really want to build, right? And right now, every answer for us comes from how do we best serve our fellow founders?

00:24:40:22 - 00:25:06:22
Todd Sullivan
How do we shed some light on the black box of M&A and the exit that end of your entrepreneurial journey for as many people as we can and when we when we live there and all our decisions are based on that and not that that's really fun. But again, it's really hard for me to tell somebody bootstrap, bootstrap, bootstrap, because you got all the options in the world when you don't know what their starting point truly is.

00:25:06:22 - 00:25:10:01
Todd Sullivan
So I thought that was just important to point out totally.

00:25:10:02 - 00:25:28:00
Ryan Vaughn
And in general I right as maybe it's my line of work, but I try to avoid giving advice in general. Yeah, because every situation is different. And if I look back at the path that I was on and everything that it taught me and everything that it allowed me to create on the table, and I wouldn't change a thing.

00:25:28:02 - 00:25:42:03
Ryan Vaughn
It just took a lot of pain and a lot of, you know, I think there was in hindsight, I can see many cases where I where I if I would have zagged rather than digging outcomes would have been different. And, you know, that's that's also just kind of part of living and learning.

00:25:42:05 - 00:26:02:08
Todd Sullivan
All right. You had this incredible journey. Third company. It is the company in the space now is your legacy. I love kind of the sports analogies. You're obviously an athlete and I just remember being in college and seeing all of these athletes come in to college and think they're going to play a Division one sport, right? They were certainly recruited that way.

00:26:02:13 - 00:26:26:20
Todd Sullivan
But there's a an injury or they end up like on the scout team or something happens that they are not happy with and they quit their sport. And that moment of I am no longer Todd Sullivan, the goalie in college, who am I right? Yeah. And that certainly happened to me. I played one year professionally, but when I ended that, it was like, I think it was the right moment for me.

00:26:26:20 - 00:26:35:01
Todd Sullivan
I knew that was I was not going to take it any further. But like, what do you do next? I've been fortunate enough to always know what that next thing is.

00:26:35:03 - 00:26:54:05
Ryan Vaughn
That's very different than I think the that an an identity level. A lot of the work that I do today, I work as an executive coach. I started a firm called Inside Out Leadership that works with founders at all stages of the Founders journey. And we have coaches that have all been through the Founders journey as well, and a lot of the work that we do ends up having something to do with identity.

00:26:54:05 - 00:27:18:16
Ryan Vaughn
And you, the way that you describe that is your identity was as an entrepreneur and then there was a things you were building, and that's very different from how my identity worked when I was building VNN and that is was who I am as the CEO of this company. And so I'm curious, like that level of firewall or distinction between who you are as an entrepreneur and the companies that you're building.

00:27:18:16 - 00:27:22:02
Ryan Vaughn
Did you always have that? Was that something that kind of evolved over time?

00:27:22:04 - 00:27:45:21
Todd Sullivan
I think so, because I knew I was pretty good at certain or I learned that I was pretty good at figuring out product market fit something knew that a consumer would resonate with a consumer. And then I was pretty good at figuring out the unit economics, like, what does it cost me to build this and what is a customer willing to to sell But was I wasn't great at it was scale.

00:27:45:23 - 00:28:11:04
Todd Sullivan
And so as these businesses grew, I just really relied on other people. And I saw that CEO title as smoke and mirrors. Frankly, I thought the other people were really building these businesses and I was more maybe visionary. I don't love that term. I think there's some like it maybe potentially negative connotations to it, but trying to lead in to my strengths, just to help the overall organization.

00:28:11:04 - 00:28:31:20
Todd Sullivan
So I never saw myself as the shock sky or the crowd zone guy, the better flier guy, the spirit shop guy. That was not me. Now I do look back and go, Wow, Chris Petersen and I built Better Fly and Joshua Warren was the actual original founder of this thing, and we sold it and Microsoft just bought it.

00:28:31:22 - 00:28:51:16
Todd Sullivan
Really cool story. But, you know, it doesn't feel like it's really part of me, I think. And I've never put that together, right? So so yes, I feel my identity is as an entrepreneur. Yeah. My kids asked me what do I do? And we joke because they're four and six and my wife will say, he's a wheeler and dealer.

00:28:51:18 - 00:28:53:17
Todd Sullivan
And I'll say, Well, which one do you want to be?

00:28:53:17 - 00:28:55:18
Ryan Vaughn
Mission of an entrepreneur. Yeah. Oh, yeah.

00:28:55:22 - 00:29:07:09
Todd Sullivan
A wheeler and a dealer. And Sidney will say, I want to be a dealer. And. And Sloan knows that I'll be the Wheeler. And they think that Wheeler is pushing a wheel all day in the back.

00:29:07:09 - 00:29:09:20
Ryan Vaughn
And that that's not.

00:29:09:22 - 00:29:17:10
Todd Sullivan
Well, uphill, right? Our backyard is a little flat. What we do is it's all uphill. Right? So. So that. Yeah, Thanks for pulling that out.

00:29:17:12 - 00:29:45:19
Ryan Vaughn
I actually think there's a lot of of wisdom and not that you intuited at some point throughout your life, but I think that I would be surprised. And as I'm sort of sorting through the clients that we've worked with, if the mid the process of setting a company hits really different depending on where your identity sits, if your identity is tied in with this particular company, you might end up doing something like, you know, trying to break down the doors because they won't let you come back and you have to get a restraining order or whatever.

00:29:45:21 - 00:30:06:01
Ryan Vaughn
But I think that's an interesting story. I hadn't heard that, but it doesn't surprise me versus if your identity is more as an entrepreneur, then it becomes you know, there's less work to do. We abstracted a little more and then there's less work to do when this part of the identity changes. So I think that's really wise.

00:30:06:03 - 00:30:27:04
Todd Sullivan
You know, I think again, this is not about me, but it's very clear to me that the conversations I take home to the dinner table with my wife and family are about listen to this entrepreneur that I got to talk to today and what they've gone through and the things I was able to draw from my past experience that I think was really helpful, right?

00:30:27:05 - 00:30:46:02
Todd Sullivan
That you could see the eyes light up, multiple people going, Oh my gosh, we're going to be better today because of what we heard from Todd. And then my partners would be like, Why don't we ever charge for that? Right? And so so the economics behind that kind of education is, you know, not important at all. To me.

00:30:46:06 - 00:31:04:05
Todd Sullivan
It is this admiration that I have for entrepreneurs, and I feel value in what I do, being able to give value to others. So today, you know, I might say I'm an entrepreneur, but the purpose is really to elevate other entrepreneurs, and it's incredibly rewarding.

00:31:04:07 - 00:31:29:01
Ryan Vaughn
That it reminds me of my favorite working definition of entrepreneurship is, you know, figuring out a way to get paid to do a thing that makes you the best version of yourself. And that's like what you're talking about with the things that you do naturally, the things that light you up. And maybe we don't make money for that now, but figuring out a way to to turn that into an organization that lets you do the stuff that wakes you up, I think that's awesome.

00:31:29:03 - 00:31:47:22
Todd Sullivan
Yeah. I mean that that's that's x it was today so let's let's jump back. We had a founder we sold his business and this was many years ago, three or four years ago, not many. And he did not know what to do with his life. Now, this was a somebody at retirement age and he made excuses to go back to the office.

00:31:47:22 - 00:32:19:20
Todd Sullivan
One was, oh, you know, I really liked that painting on the wall. Right. It was really special to me. Can I have it? Sure, Sure. You can have it. Did I get any mail today? No, nothing. I think I left something in the safe and it was day after day after day, to the point where it was. Hey, why is that door swinging in when safety code says it can only swing out and to the point where they could not get him to stop coming back to work and a cease and desist was an act A not actually issued, but it was, you know, threatened.

00:32:19:22 - 00:32:47:08
Todd Sullivan
And so when we saw that, we said we need to educate our founders around what are they going to do next. Now that person has all the money in the world. So it is not a money issue, but the approach we take is to tell founders, if let's predict what kind of capital you're going to have at the end of this based on what ownership you have of your company and what the tax consequences are going to look like, what are you going to do with this capital?

00:32:47:08 - 00:33:06:12
Todd Sullivan
And what we actually first start with is what do you want to do after the transaction? Is it buy another business, put my kids through college? Yeah, you know, buy a ski house. What are you going to do next? And then we say, okay, is that all possible with the financial outcome that you're going to have? And then if it's yes, it's like, okay, you know, start thinking about this.

00:33:06:12 - 00:33:25:05
Todd Sullivan
You can't take your eye off the ball of building your business and in many cases, you're going to go work for that company for the next two or three years. But just having an understanding of starting to be able to make a mental shift, know that you can make a mental shift into this next phase of your professional life and sometimes personal life we find is important.

00:33:25:05 - 00:33:35:22
Todd Sullivan
I don't have the answers here, Ryan, and that's why I was excited to talk. It's like, is can you share more than than giving you a private a wealth management plan? Right. Because that's essentially what we're doing.

00:33:36:04 - 00:33:56:04
Ryan Vaughn
Yeah, I think I mean, that's a big part of it, right? It's definitely not all of it, but that's certainly that's certainly a part of it because you're you're selling very different problems on the other side of that than than you would have been otherwise. You know, I find that some people, when they exit their company and it's interesting, you you sort of ask like you you said you start with the question, what do you want to do after this?

00:33:56:04 - 00:34:22:10
Ryan Vaughn
Right. And I think some people know that and and that whatever their answer to that question stays the same after the end of the exit. Maybe some people have like some percentage of people have that continuity in that ability do that. In my experience, a lot of people don't. And a lot of people, they may think that this is what I'm going to do, but the experience of exiting the company ends up feeling really different than they expected.

00:34:22:12 - 00:34:47:18
Ryan Vaughn
There's this expectation, I think people have that exiting a company is like this big celebration and there's puppies and sunshine and horns and all that stuff. It's not it's really complicated. There's plenty of good things. And and there's also it's effectively a trauma. It's like a kid leaving the house. And that's sort of combined or exacerbated by the fact that, you know, you mentioned the idea of privilege earlier.

00:34:47:20 - 00:35:10:05
Ryan Vaughn
We're talking about a group of people who are very privileged to have the opportunity to have this conversation and to do that a business. And that can lead to a feeling like, well, I can't talk about this pain because I'm so lucky, right? So I'm going through this big this big challenge, this big identity shift or existential, existential stuff that that that feels really painful to me.

00:35:10:06 - 00:35:32:16
Ryan Vaughn
But if I talk about it tomorrow else, they're just going to think I'm like this entitled narcissistic asshole, right? And so you end up kind of holding it in a way that that is generally unhealthy and probably more so than you do in other areas. But I do think there, you know, in the in the folks that we've worked with, there are definitely some patterns in terms of of what happens at that stage when it's not so clear.

00:35:32:18 - 00:35:54:23
Ryan Vaughn
And so my my first advice would be that if it is clear to you on the other side what you want to do and if when you exit the organization, that still feels clear and it still feels fulfilling to do whatever it was that you had set up to do the next thing, then do it absolutely 100%. Just run after that thing and continue on the path that that that makes the most sense to you.

00:35:55:01 - 00:36:17:02
Ryan Vaughn
I think that's it's as simple as that. Like if it's clear run and I think in many cases when it's not, that's when it gets like gets a little more complicated. So in the case where that is either not clear what comes next or that changes along the way, like the process of exiting feels more disorienting than than was expected and that that clarity isn't there.

00:36:17:04 - 00:36:34:20
Ryan Vaughn
A good example is for me, you know, immediately after leaving my company, my first reaction right away was to start another company, no question. And I did. I started another company right after and then it didn't take me very long to realize that, like, I actually don't want to do that. Like it feels really normal. That muscle memory is there.

00:36:34:20 - 00:36:52:23
Ryan Vaughn
Like, I want to, you know, if it feels like the easiest thing to do would be to start another company. But I don't think that's what I want to do. And for me, it felt like I had been running for so long to build this, you know, this big thing and try to, you know, become a big deal in some way and build something that mattered.

00:36:53:01 - 00:37:15:08
Ryan Vaughn
And having done that a bunch of times, the thought of the after the after the exit, the thought of going back and like trying to go there just felt like it's not going to feel any different. Even if I go bigger, like it's not, you know, I imagine a bigger exit feeling, you know, changing the feeling inside of me that that didn't feel content with the first one.

00:37:15:10 - 00:37:36:13
Ryan Vaughn
And so that caused me to kind of reevaluate the way that I approached it. And instead of just immediately jumping back in and going to the next one, I really look internally at if I'm running my assets and I'm not running towards something, I must be running from something. And if that's the case, then what is it and how do I figure that out?

00:37:36:16 - 00:38:03:17
Ryan Vaughn
So I sort of, you know, backed my way into a lot of this this transition process post exit that I'll describe in a second just by getting off of the treadmill. And I had a chance to work with some really awesome teachers and coaches who who helped me to understand myself a little bit better. But what happened in my case and what happens in many cases with leaders is the first exit.

00:38:03:17 - 00:38:34:01
Ryan Vaughn
The first meaningful exit often happens around mid-thirties ish, just based on the timeline of things and certainly the type of exit mid thirties to early forties, the exits that become complicated often become complicated because it's not only an exit from this organization, but it's also you're entering into the midlife process for a human being. And the midlife process is, you know, I try to call it midlife crisis a to call it a midlife unraveling.

00:38:34:01 - 00:38:58:10
Ryan Vaughn
Brené Brown has this awesome article called a The Midlife Unraveling that I think is brilliant. Had me crying on my porch at one point as I was as I was going through this process. But but that process works differently for an entrepreneur because for, you know, most people that aren't entrepreneurs, those types of big questions are on who am I and what am I going to do with my life are asked and answer ongoing.

00:38:58:10 - 00:39:19:07
Ryan Vaughn
Like it's kind of yeah let's get you know a little bit on in February and then I might do it again in July and I'll just kind of continually, you know, moderate myself and, and make sure that name correctly. But for an entrepreneur, typically what happens is those answers are incredibly clear. Like for me it was who I am as the CEO of CNN.

00:39:19:09 - 00:39:45:08
Ryan Vaughn
And the role in my life is make this thing successful. And then that's the answer to the existential question. When I'm 25 and it never is reevaluated until I'm 35 is it's just very clear. Just go after this, this, this thing. And so when you finally exit the organization, if you're in that period of life, all of that shit comes back all at once and it's like, Oh my goodness, now I have to rethink all of these things that our business has been doing piecemeal.

00:39:45:10 - 00:40:09:02
Ryan Vaughn
I got to do it all at once. So I have a lot of empathy for the entrepreneurs that that exit companies and have that that that process and what we found in doing this now a number of times and working with folks is that there's two big, typically two big identity shifts that happen in that period of time that often coincide with an exit.

00:40:09:04 - 00:40:33:10
Ryan Vaughn
And the first one of those is a shift from the way that we define and create our identity from initially being one of acquisition to being one of expression. And I think this is, you know, there's shades of this in the way that you talk about your current business versus previous ones. So acquisition to expression, the the first phase of of life.

00:40:33:10 - 00:40:59:11
Ryan Vaughn
And for many entrepreneurs, the first company, maybe the first couple of companies is the way that we that we create our identity is by acquiring things from the outside. We acquire a role, we acquire the notoriety that comes with this company. We acquire, you know, the guy who won this and the guy who raised this. And like all of the different things that we do, we kind of go on those onto ourselves to create our sense of self.

00:40:59:13 - 00:41:23:12
Ryan Vaughn
So our sense of self is created as a as a mechanism of of all the shit that we've done. All the stuff we've accomplished. Da da da da da. Right? So our identity is acquired based on those things that we do. And for many people what we find is that there's a limit to that. You get to a point where you've acquired enough that it's like, Well, I don't know, do I really want to just make my whole life about getting the next thing, whatever that is?

00:41:23:13 - 00:41:48:19
Ryan Vaughn
And so and then there's a shift, which sometimes is quick, sometimes is really painful, which shifts into expression. And that rather than acquiring things from the outside and glomming them onto ourselves to create ourselves, we determine who we are at a really deep level on the inside. And work becomes an act of expressing who we are deeply into the world.

00:41:48:21 - 00:42:16:11
Ryan Vaughn
And so companies that come from that place are created really differently. They're not about typically, they're not about let's build big down the universe. They're about who am I and what do I have to uniquely contribute to this world and how do I build an organization around that? So one shifts to pay attention to if you're if you're in an exit and it's not a really easy this is what's next is that shift from acquisition to to expression.

00:42:16:13 - 00:42:43:07
Ryan Vaughn
Another way of thinking about that is people wrestle with purpose and in the first part of life, you find your purpose like you're picking it off of a menu and in the second half of life you have to create it. And so that's that's one meaningful shift. And the other meaningful shift that we often see for entrepreneurs in this in this particular phase around the exit is a shift from their identity being defined as an individual to their identity being defined as a collective.

00:42:43:09 - 00:43:16:21
Ryan Vaughn
And the collective can be, you know, a family, it can be a community, it can be a number of different things. You can kind of define that in in different ways. But oftentimes, you know, in in this special space with an asset, which is really just an opportunity to make change to yourself, right? People start to reevaluate, you know, the and building all of these things and then building this this organization or these companies to serve my life, my self versus to serve myself.

00:43:16:21 - 00:43:43:16
Ryan Vaughn
But myself now includes my kids and now includes the people in my community. It includes some of the other people around me. Yeah. So for me, the the example of that was early on in my career with Vietnam and the previous companies. The goal was, you know, build something that's going to reach a hundred million people. Some version of that, there's this big, massive number of, you know, in essence, like a number on a computer screen.

00:43:43:16 - 00:44:04:23
Ryan Vaughn
I there's no way of even reconciling with 100 million people really in my mind. But post exit and the work that I do now, and I see this in even large organizations as well, I end up looking much more toward how do I serve those folks that are in my community, that are that I care about, not necessarily the world.

00:44:04:23 - 00:44:13:18
Ryan Vaughn
Some people think like that, but much more like me as sense of this whole this broader sense of of identity as a community.

00:44:13:20 - 00:44:46:10
Todd Sullivan
Right. And this is great. I feel like this is like a personal therapy session. So thank you. I hope I know our listeners are going to get a ton out of that. And, you know, I think of my community as my fellow founders, my fellow business owners, right? And so hearing you say that things are resonating of why we do what we do, that it exercise and why we enjoy it so much because we do feel like it is serving a community that we feel so close to and a responsibility, frankly, to help.

00:44:46:12 - 00:45:18:13
Todd Sullivan
And I think you've put it in a way I hadn't really thought about it before so personally. Thank you. And I know, I know, like people are going to get a lot out of this. What I would say is, is there another piece of advice that you might give to founders that are they're going to exit? And here's here's one of the problems that we see very frequently is our investment bankers have come in and the bet they're the best in the world, in your industry, and they are serving up the best possible offer for your business.

00:45:18:15 - 00:45:39:23
Todd Sullivan
And founders are like, Oh, is that really is that Ed? Is that should I accept this? I don't know what to do. And they get incredibly indecisive and I tend to think it is not about the money because the outcomes that we are delivering are 30% above market rate, well above what founders commit before they start working with us.

00:45:40:01 - 00:46:08:08
Todd Sullivan
And so it can't be the numbers, but it has to be something emotional. And in an exit for a founder, there is an amazing translation that happened has to happen emotion to finance. And so I'm really wondering what piece of advice you could give these founders that are at the goal line, recognizing that their lives are going to change financially, certainly positively, professionally, maybe positively.

00:46:08:10 - 00:46:34:22
Todd Sullivan
But then like personally, it's, you know, who knows? And I know the work that you do, and I understand some of the effect of therapy being that you're bringing multiple people together that are facing these issues at the same time. And when you put those people in a room and they recognize it's okay to feel this way and ask questions, then the dialog opens and people come to their solutions and they can share those solutions.

00:46:35:03 - 00:47:00:06
Todd Sullivan
And so I guess what I'm taking from you is not only should somebody find inside out leadership or some equivalent in their community to talk about these things, because maybe just talking about them is going to be enormously helpful to allow you to make the decisions in an area where you're comfortable and know that the future is not kind of this scary mystery.

00:47:00:08 - 00:47:20:14
Ryan Vaughn
So, yes, 100%. And I think it goes beyond just talking to people. I think it's talking to your peers. And I think that's a meaning. There's a meaningful difference between that and your spouse and your friends. And so one of the things that as I was going through my journey, the things that was one of the most useful things is I created these things called Founders Dinners.

00:47:20:16 - 00:47:42:06
Ryan Vaughn
I just brought a whole bunch of excellent founders together. And we we would share stories and we would talk about what this process was like and just, you know, to tune in what you're just saying, the the, the act of seeing really successful people talking about how complicated that process was made it a lot easier for it to be complicated for me, too.

00:47:42:08 - 00:48:05:15
Ryan Vaughn
And so, you know, some of the work that we do now is in creating CEO groups. And so we'll bring together CEOs at various stages and and, you know, enable them to support each other through through various things, not just the exit, but definitely including the exit. And I think, you know, anytime humans don't necessarily we are wired to avoid uncertainty.

00:48:05:17 - 00:48:21:00
Ryan Vaughn
It's kind of, you know, back in the day when from an evolutionary perspective, it's a bad idea to go walking in the woods when you don't know if there are tigers and snakes and all this other stuff there. So you just generally stay away from there unless there's a reason to. Right. And so we have a for a very good reason.

00:48:21:00 - 00:48:43:14
Ryan Vaughn
Humans have an evolutionary bias away from uncertainty. And as entrepreneurs, we tend to maybe have a little bit less of that. We tend to lean more into uncertainty. But even for the entrepreneurs who are the most gung ho when you're confronting something like an ending, like an exit, that's a level of uncertainty. What comes after that, that can be really scary.

00:48:43:16 - 00:49:09:18
Ryan Vaughn
And so I think it's also useful just to recognize that that hesitation at that very end is a natural, a really normal reaction to uncertainty that other people feel with much less uncertainty. But, you know, we're not invincible to it, we're not immune to it, and we're going to feel it sometimes, too. And so, again, you know, understanding what's going on can be a huge part of not necessarily like exiting the company.

00:49:09:18 - 00:49:32:12
Ryan Vaughn
That's fantastic if that's what you want. But just like really reckoning with really what you want, not the fear that has you want to avoid change, but but ultimately making a conscious decision around, is this the end of this chapter? Am I ready to go to my next growth, my next opportunity for growth? Or is there still something for me to do here?

00:49:32:14 - 00:49:58:16
Todd Sullivan
Ryan I think that's perfect. I think we should tie it up there. I want to be respectful of your time. I really appreciate you doing this. This I know this is fantastic. You know, I don't ask this question at the end, but it just feels kind of appropriate. I don't ask it for everybody. But is is there one person that you would like to thank that really contributed to the professional and professional success that you've had?

00:49:58:18 - 00:50:08:01
Todd Sullivan
Right. I mean, this is an incredible journey and you're still in the middle of it. But anyone that you'd like to thank.

00:50:08:03 - 00:50:39:00
Ryan Vaughn
Yes, my wife, no question. I think not only the WFIO moments, the moments where, you know, I was WFIO, that was an acronym that stands for "We're Fucked, It's Over". And successful companies in theory have five of those. I've certainly had more than five, but not only like like being that that rock, that source of stability amidst all of those ups and downs throughout that whole period of time and just being a wonderful human being.

00:50:39:00 - 00:51:04:05
Ryan Vaughn
But also, I mean, in a really real sense, through her efforts, both, you know, professionally and financially, enabling somebody who had a really hectic early career to make that happen. Right? You need somebody with a steady job to be able to make that work. When I think about, like the person that is the most impactful to my to the success that I've had and the success that I continue to have, it's it's no question as Laura.

00:51:04:05 - 00:51:07:07
Ryan Vaughn
So thank you, Laura. If you listen to this.

00:51:07:09 - 00:51:13:12
Todd Sullivan
Very great Thank you, Laura Ryan, this is a great thanks very much. I appreciate it.

00:51:13:14 - 00:51:16:09
Ryan Vaughn
Yeah, you too. Thanks for having me.

00:51:16:11 - 00:51:38:14
Todd Sullivan
Thanks again for listening to the Cashing Out podcast. For more founder exit stories, please subscribe to the Cashing Out podcast on Apple, iTunes, Spotify, or wherever you listen to your favorite podcasts. And please remember exercise dot com and the Cashing Out podcast are for entertainment purposes only. This should not be relied upon as the basis for investment decisions.