Building Employee-Owned Enterprises with Neal Cobb

In this episode of the DealQuest Podcast, I'm excited to welcome Neal Cobb, a serial entrepreneur and dealmaker who built and exited businesses across very different industries. He started his career as a chiropractor, building a high-volume clinic from the ground up before diving into tech where he co-founded Skip Kart, a last-minute delivery startup. They raised over $20 million in venture funding, scaled to 100,000+ drivers across the US, and exited to 7-Eleven within three years.

Neal is now co-founder and CRO of Equity X, a private equity firm focused on acquiring legacy businesses and turning them into employee-owned platforms. What sets his approach apart is his range of experience from small business to venture-backed tech to private equity, combined with his people-first approach to deals. At Equity X, they focus on preserving legacy, aligning teams, and creating long-term value rather than flipping businesses for quick returns.

EARLY ENTREPRENEURIAL INSTINCTS REVEAL BUSINESS PATTERNS

Neal's entrepreneurial journey began remarkably early, working at his father's pharmacy from age five and negotiating his first deal at seven. "I went from a quarter per display case, and I told my dad, I went back to him, I said, I wanna get 50 cents per display case, and I had to negotiate my prices with my dad," he recalls.

Even in high school, Neal demonstrated sophisticated business thinking. He organized dice games where he positioned himself as "the bank" because he understood that having the most money meant "you were likely gonna leave with the most." These early experiences taught him fundamental principles about leverage, risk management, and strategic positioning that would serve him throughout his career.

The lesson here is that entrepreneurial instincts often emerge early and consistently. Look for patterns in how you approach challenges and opportunities.

IDENTIFYING INDUSTRY DISRUPTION BEFORE IT HAPPENS

Neal's foresight about industry changes shaped his career trajectory. In 2004, while studying to become a pharmacist like his father, he witnessed 15% of his dad's business vanish overnight from mail-order pharmacies serving nursing homes. "I can see the writing on the wall that pharmacies were eventually gonna be mail out," he realized.

This prediction proved remarkably accurate. Twenty years later, 30% of independent pharmacies closed down in a single year. Neal's ability to recognize industry disruption before it became obvious allowed him to pivot early and avoid being trapped in a declining sector.

For business leaders, this demonstrates the importance of studying market trends and technological shifts that could impact your industry. Early recognition of disruption creates opportunities while competitors struggle to adapt.

BUILDING BUSINESSES REQUIRES DIFFERENT SKILLS THAN RUNNING THEM

Neal discovered that successfully operating a chiropractic practice didn't automatically translate into scalable business growth. "Chiropractic is a very hands-on personal business," he explains. "Just because I can do it, like I can teach certain things, but you have to have the personality, you have to have also be able to feel certain things and be able to diagnose and treat a certain way."

The challenge became clear when he realized he was "trading time for money" and that training someone else to replicate his specific combination of technical skills, personality, and business acumen would be extremely difficult. This limitation forced him to look beyond traditional service business models.

This insight applies across industries. Service businesses dependent on founder expertise face natural scaling constraints that require different growth strategies than product-based or technology-enabled businesses.

STRATEGIC PARTNERSHIPS ACCELERATE BREAKTHROUGH THINKING

Neal's business partnership with Ben Jones exemplifies how the right partnership can elevate both individuals beyond what they could achieve alone. "I was actually more probably betting on the individual than I was even the business," Neal admits about their Skip Kart venture.

Their complementary skills created powerful synergy. Ben brought visionary thinking and large-scale business experience, while Neal contributed execution capabilities and operational expertise. "He's a unique individual with a skillset. Not many have... he has vision of seeing five years, 10 years down the road and see problems or solutions that other people don't see."
The partnership has endured through multiple ventures because they established trust first as friends, then proved their compatibility under business pressure. For dealmakers, this demonstrates that betting on people often matters more than betting on ideas.

PROOF OF CONCEPT VALIDATES MARKET DEMAND BEFORE SCALE

Before building expensive technology, Neal and Ben tested their delivery concept with basic local newspaper advertising. "We put an ad in the local newspaper, said, Hey, we'll go and do your deliveries," and they were "getting calls left and right."

They personally shopped and delivered orders to validate demand before investing in software development. This wasn't profitable, but proved the concept: "It was more of is this a viable business option?" Once they confirmed market demand, they invested over $250,000 in building their platform.

This approach saved them from the common entrepreneur mistake of building solutions nobody wants. Validating demand with minimal viable tests prevents expensive failures and builds confidence for larger investments.

NEGOTIATION LEVERAGE SHIFTS THROUGHOUT DEAL CYCLES

HEB initially offered Skip Kart $10 million before they completed their first delivery. After spending about $250,000 to build their platform, Neal and Ben countered with $30 million. When HEB declined, they lost their primary customer but gained valuable leverage knowledge.

This experience taught them that early offers often undervalue companies, but waiting too long can eliminate opportunities entirely. "They ended up going on and buying another delivery company for I think around 150 million, which was called Favor," demonstrating how quickly market dynamics can change.

Eight months later, securing a Walmart pilot gave them new leverage and ultimately led to their successful exit to 7-Eleven. Timing negotiations around leverage points and understanding how market conditions affect valuations are crucial skills for any dealmaker.

WHITE LABEL STRATEGIES CREATE COMPETITIVE ADVANTAGES

Skip Kart's breakthrough came from positioning themselves as a white-label provider rather than competing directly with DoorDash and Uber. "Customers didn't even know who Skip Kart was," Neal explains. They became "actually kind of the first one to really start kind of going in that white label space and at scale."

Their strategy focused on serving markets and customers that larger competitors ignored. "Nobody wanted to go to the smaller markets. We said, Hey we'll be your white label provider in all your small markets that nobody wants to go into."

This approach allowed them to build expertise and scale in underserved segments before expanding to competitive markets. For entrepreneurs, white-label strategies offer paths to growth that avoid direct competition with established players while building sustainable competitive advantages.

CAPITAL RAISING REQUIRES PROGRESSIVE VALIDATION

Skip Kart's funding journey demonstrates how successful capital raising builds through incremental validation rather than single large rounds. They started with $600,000 to $700,000 to fund initial operations after securing their Walmart contract.

After proving their model worked, they raised another $800,000 to scale across seven states. By the end of the first two seed rounds, they were at about $1.6 million total. Their Series A came during COVID when delivery demand exploded, allowing them to raise $20 million from German investors to capitalize on market opportunities.

Each funding round was tied to specific milestones and business needs rather than general growth capital. This approach reduced dilution while building investor confidence through demonstrated progress. Business leaders should tie funding requests to specific achievements and market opportunities rather than vague growth plans.

PRIVATE EQUITY CAN PRESERVE RATHER THAN DESTROY CULTURE

Neal's current venture, Equity X, challenges typical private equity assumptions through their employee-ownership model. "What if we come in there with a different mentality, we don't wanna buy and have a short term hold of five years and then spin it off and sell it off to another private equity company."

Instead, they focus on a "long-term hold approach where we buy and hold the company. We don't gut it. We don't get rid of all the people to que squish margins, keep the team intact, and over time, build up employee ownership."

This approach addresses the common fear that private equity buyers will "squeeze it, and they don't care about your people" and "gut your company" to maximize short-term returns. This echoes what Kelly Finnell shared in episode 325 about ESOPs, where employee ownership creates powerful incentives for long-term business success.

TECHNOLOGY ENABLES SYSTEMATIC DEAL SOURCING

Equity X built sophisticated systems to identify acquisition targets systematically rather than relying on broker relationships. Their software "scrapes 80,000 businesses" annually using specific criteria: "needs to be 10 years in business, needs to have over 15% net margins needs to have more than two business managers in place."

The system analyzes 50-page financial documents and evaluates 40 different criteria that banks examine when considering financing. "It sits there and reads the 50 page document with all the financials. And it puts it in an Excel spreadsheet with 40 different things that the bank is gonna look at... and it says, red light, yellow light, green lights."

This systematic approach generated five companies under LOI over six months, with two ultimately closing. For business leaders in acquisition-focused strategies, technology can create significant competitive advantages in deal sourcing and evaluation.

SUCCESS METRICS EVOLVE WITH LIFE EXPERIENCE

Neal's definition of success has fundamentally shifted from financial metrics to family impact. "Success to me is when I'm 70 years old and my kids are adults, do they still wanna hang out with me? 'cause I'm, I was a good dad and I raised them properly."

This transformation occurred after achieving financial success through Skip Kart's exit. "I used to always face it on a monetary value of, of hitting certain numbers, being a billionaire," but realized that pure wealth accumulation "didn't fulfill me."

His current approach balances business ambition with family priorities, recognizing that sustainable success requires alignment between professional achievements and personal values. This perspective influences how he structures Equity X for long-term value creation rather than short-term financial maximization.

Tune in to this episode to hear Neal Cobb share insights from building businesses across multiple industries and creating employee-owned enterprises. From early entrepreneurial lessons to scaling venture-backed companies to reimagining private equity models, this conversation offers frameworks for business leaders thinking about sustainable growth and meaningful exits. For more perspectives on employee ownership models, check out our episode 325 with Kelly Finnell about using ESOPs in succession planning, and episode 350 with Tom Dillon on alternatives to traditional venture capital funding.

• • • Listen to the full episode of the DealQuest Podcast with Neal Cobb • • •


FOR MORE ON NEAL COBB
LinkedIn: https://www.linkedin.com/in/neal-cobb-4a4084179/
Website: www.equityx.co


FOR MORE ON COREY KUPFER
https://www.linkedin.com/in/coreykupfer/
https://www.coreykupfer.com/

Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.


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