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Authentic Business Relationships Authentic Deal-Making Deal-Driven Growth

A Capital Raising Journey

Sherisse Hawkins is a multi-talented builder, learner, risk taker, motivator, rainmaker, and speaker. She has a strong engineering background. Beyond that, she is the creative minded CEO & founder of Pagedip. Sherisse also has a proven record of meeting impossible deadlines, delighting customers, and re-imagining how things can be done. She believes anything is possible in the digital world, and is passionate about driving innovative content. She’s appeared in Vanity Fair and on Shark Tank. In this interview she shares more about her capital raising journey and other business experiences.

Early Deal-Making Experiences

Sherisse notes that she didn’t think of deals or deal-making until she became an entrepreneur. In her earlier work experience she had thought of decisions and deals pertaining to technology usage as being more technical. You examined which systems were most sound and used those. Pretty clear cut!

Moving into the entrepreneurial world and becoming a founder & CEO revealed how many other factors come into play. There are so many factors beyond “by the book” choices. Even when dealing with the objective facts of technology and science, things weren’t as clear as they had once seemed.

Becoming an Entrepreneur 

Not everyone is cut out for entrepreneurship. This isn’t just about having the dream, or being financially set up for success. Instead, there is a necessary personal mindset shift that must be experienced. This shift is what allows some people to make entrepreneurship a reality. 

Having worked in very large organizations, such as Walt Disney Imagineers, Sherisse hadn’t had the experience of working in a small company prior to starting her own. She understood that there were going to be financial risks. But she also knew there were going to be risks of not following her dream. She recognized that she liked starting things, and enjoyed getting things into the state they needed to be. That might be connected to her engineering background.

Sherisse shared that, throughout her life, she’s found that it’s intensely satisfying to take things apart and put them back together. There is a sense of exhilaration when a set of code works, or something comes together for the first time.

She found that same exhilaration in entrepreneurship. Although she had a great title, a corner office, and a bonus system at her role, she had a pull within her heart. She knew she could not deny the call to entrepreneurship. The field of communication and the development of digital tools held huge potential, and Sherisse knew she could make an impact. Finally, she took the leap.

You often hear of people in their young 20’s and even late teens starting companies and becoming millionaires. However, the average entrepreneur starts their business in the 30’s, 40’s, and later. There is no real time in life that it’s too early OR too late to become an entrepreneur.

Seeking a Co-Founder 

With Pagedip, Sherisse shares that she feels they’ve created what Microsoft Word might have been if they had created a word processor in the time of the internet. Essentially, they’ve created an editor that allows the user to marry core content with other elements. This combination creates a narrative flow that compels the reader to actually use the content you create. (Unlike traditional documents or PowerPoints!) Additional information can be added into what you’re sharing, all while allowing readers to stay on one page. 

As a result, materials can be kept up to date. Analytics are possible, so you can see where readers spend the most time, and which addition information mattered to them. Best of all, everything can live in one place. Pagedips are interact-able, measurable, engaging, and secure documents that create experiences for their users.

In terms of raising capital, Sherisse shares that she initially started the company with her own money. She was hoping for a technical co-founder, but had a bit of trouble finding the perfect person. Many of her peers didn’t want to take the risk. Eventually, she found a new graduate who seemed like a good fit.

Shortly after, they headed to an accelerator in Australia to get things moving! (She learned of this from Jen Matthews, who she had connected with after hearing her speak.) With her co-founder, she was able to further incubate the idea and started to understand the role capital raising could play in getting the organization off the ground. Sherisse sees that bootstrapping likely makes sense in some instances. For Pagedip, however, it was clear that bringing in outside capital made the most sense.

Notes on Capital Raising

After their first pitch, there were a number of investors interested in their idea. Not surprisingly, since that initial pitch, Pagedips has pivoted, as most businesses do. That initial interest was a great early start!

Sherisse shares that if she had known everything she knew about how difficult fundraising can be, she might not have taken the leap. (So she’s glad she didn’t know!) Raising money can be really hard. It’s made even more difficult for women and people of color. When she looks back at those early experiences now, she sees that the data supports the experience she had.

The company has now had two rounds of seed investments. Sherisse notes that fundraising takes longer than you think. It really is a full time job. There is a tension between wanting to move the company forward and invest time there, and needing to devote a huge amount of time to actually fundraising.

Along the way she’s had feedback that the company is thinking too small. Some investors have said they should be aiming to be much bigger and larger. She’s also gotten feedback that the idea is too big. This advice is usually paired with a warning that they need to think more reasonably. Between the two, “too small” is most common. Investors want to invest in something that will earn them back the largest possible dividend. That means more income, more markets, and larger numbers. It means casting a bigger vision with more dollar signs.

Want to hear about Sherisse’s appearance on Shark Tank? Curious as to why many companies DON’T need to seek investors? Listen in to the full episode!

Capital Raising as a Woman, a Person of Color, and Engineer

Sherisse shares that she approached this journey as an entrepreneur, a woman, and a person of color. Those identities came into play throughout her business building and fundraising journey. Although you cannot know what your experience would be if you did not possess those identities, she did feel that there were still some stereotypes. This was especially true about what technologists and professionals in the space were expected to look like.

She knew that her company was changing how people would experience information sharing forevermore. That’s a bold statement and huge undertaking! In a five minute pitch for that level of technology, there’s not time to dig into your background, prowess, and ability to pull that off. (And still share about the actual idea you’re presenting).

You don’t have the opportunity to share about the relevant experience you’ve had throughout your 20+ year career. You don’t have time to combat stereotypes AND establish your ability to succeed with a new venture.

Somehow you have to find ways to convey that experience and expertise. You can do this through non-verbal communication to save time. In addition, Sherisse noted that it was essential to bring that background to the forefront. Sometimes that did mean spending a bit more time on those areas than others who more apparently fit the funded founder check-boxes might need to. (Which also means less time to spend on pitching the actual idea itself.)

Sherisse found it was vital that she was able to own the fact that she is a technologist and a visionary in her field. That ownership was a key element in her ability to create a compelling pitch with confidence.

Studies have shown that perceptions about gender and race create huge assumptions about a person’s ability and capability. Everything from music auditions (read about the impact of blind orchestra auditions here), being considered for a Ph.D. program  (read about the impact of name and gender here), to the weight that GPA, professional experience, race, and gender play in hiring (read about the impact of these and other factors here) can be impacted by a person’s perceived race and gender. Appearance can immediately play a role in whether you can even secure the opportunity to show what you’re capable of. (Not only “can”….studies show that it most definitely DOES.)

Personal Growth and the Internal Journey

Sherisse shares that she is tenacious to a fault. Something she’s grappled with in her journey is when (and if) there is a time to say, “This is enough.” She hasn’t found that place yet! Instead, she keeps on pushing forward and growing.

One thing that fuels her is the belief that if you can see it, you can be it. She knows that there aren’t a lot of women, or women of color, within her field. Years ago, Vanity Fair brought Sherisse, as well as other women of color who had raised over a million dollars in capital, together in one place. They all fit in a really small room. There just weren’t that many people in those categories to invite! As someone who knows what it is to be one of the first, Sherisse notes there can be a lot of doubt about what is possible.

She also shares that she would be remiss not to mention that there IS a little part of her brain always processing what is possible in our time and within her industry. There aren’t a lot of people who look like her who have experienced a large amount of success in her industry. That’s a big undertaking, and an interesting journey!

In general, founders raising capital are a small group of entrepreneurs. Capital raising and making over a million dollars, an even smaller group. Among these small groups, white men continue to make up a majority. This means we still have this picture of representation that validates that we belong in the space, and that we can succeed.

As someone who has benefited from some of those privileges and has been committed to use that privilege to promote equity, provide opportunities and stand for representation of people of all backgrounds, I appreciate Sherisse sharing her journey with authenticity. Her commitment and drive to overcome the challenges of not fitting the mold and breakthrough and reshape the mold for her own benefit and that of others inspires me. 

Learn More

To learn more about Sherisse, Pagedip, and the capital raising journey, listen in the full episode! You can connect with Sherisse directly by emailing [email protected].

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 who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

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Authentic Business Relationships Authentic Deal-Making Authentic Leadership Deal-Driven Growth

Mindset of a Deal-Maker

Daryle L. Johnson is the president and co-founder of SmartIT Mobility. He’s also the owner of Ideation to Valuation. Daryle is responsible for setting overall sales, partner, and supplier alliance strategies. He’s also empowered to leverage corporate assets to deliver value with integrity and quality. With the mindset of a deal-maker, he is an innovative, energetic, creative, and very charismatic intrepreneur AND entrepreneur. 

He brings over 20+ years of market, business, and solution development experience to the DealQuest show today! Partners and customers include Google, T-Mobile, Sprint, and HP. In addition, he serves on several boards including Doorways, Mobil Trackr, STEMnasuim Learning Academy, and AIS Solutions. 

Mindset of a Deal-Maker

As an entrepreneur, Daryle believes in taking 100% ownership of his destiny and work. This requires effort, passion, and flexibility. It also requires the powerful mindset of a deal-maker. It’s this mindset that enables him to leverage partnerships, relationships, and opportunities within his business.

Daryle notes that being a deal-maker isn’t just a skill. It’s truly a mindset. 

It is absolutely vital that entrepreneurs understand that deals aren’t a one time event that happen. In fact, often amazing deals are disguised as “sales”. Entrepreneurs may not even realize how many deals they make, simply because they don’t think of them that way. They also may not realize how much power they have to create deals all the time. You must recognize that every sale has the potential to be a deal. When you grasp that, you can influence those outcomes with the mentality you bring to the table, and you have more power in your business.

K-12 Deals

Daryle shares about a deal he negotiateted for schools that took all of their needs into account. From pricing to software, he covered every possible problem that could have created issues for the school board. He partnered with T-Mobile (for both software and sales teams). Then, he brought in a training company to work with teachers, and he leveraged long-term marketing strategies to bring up front costs to the school down to $1 per device.

He also anticipated parent issues, teacher frustrations, and student needs. The final deal was the result of dozens of smaller partnerships, leveraged resources, and connections. Also key? His mindset. Rather than seeing the problem as too big, the partnerships as too complicated, or the schools as too difficult to negotiate with, he chose to see the possibility. 

Every challenge was faced, and solutions were created. Why?  Because he believed that it could be done. Ultimately, the program provided technology to over 60,000 students. It also spawned other local deals for Daryle, as a result of ongoing negotiations and collaborations.

In theory, Daryle could have gone into the school and said he had a solution he was selling for X price. If he had, he wouldn’t have been successful. Instead, his deal-maker mindset enabled him to create a full package. He provided a comprehensive solution in a way that made sense for his audience, and they bought it.

At the end of the day, that deal was all about the impact.

When he looks back at that deal, Daryle sees how powerful the subsidy of the carrier commission was for driving down the prices and making the product accessible. He’s the first one to say that they didn’t make much money on it. Instead, they made an impact. Although his strategies could easily be used in a more financially lucrative way, in this case he wasn’t looking for profit.

Follow the Process

In complex deals and negotiations, there are a lot of parties involved. It can become difficult to manage personnel and expectations. Daryle acknowledges that there are challenges. Over the years, he’s developed a process that works for him and keeps things moving forward.

The first thing he focuses on when making a deal is relationships. He wants to know what kind of relationship businesses or possible partners are open to having. Will it be transactional, strategic, temporary?

He’s open to any answer, but he wants to know up front what the situation is.

Next, he wants to know about the budget. If the numbers are off, it’s better to stop up front. It’s vital to have a money conversation before any party is in too deep. 

From there, clarity on what is being solved is key. Daryle also pushes that “what” one step further. He asks: If we solve that, what happens? What is the impact? What changes?

Once clarity is achieved, he finishes his process by asking how others envision this all happening. It’s key that everyone on the team or involved in the deal has an understanding of what it’s going to take to make it happen. They also need to be onboard with doing what needs to be done.

If someone is still standing, then it’s time to get started! And if the process has eliminated other parties? He can walk away and save a lot of time and trouble.

Strategic Deals

In a strategic deal, each party should understand the potential for something larger than just a single transaction. It’s not about just that one agreement; it’s about the potential of what could occur in a continued relationship.

In addition, Daryle shares that strategic deals have a functional fit. Value for value, every party is fully engaged. There is no one making money or getting paid that isn’t providing value as an essential part of the process. There’s also an understanding about who is taking the risks and where the costs lie.

Daryle prefers to keep a few deals moving at all times.

He’s always looking for ways to expand, grow, and build up credibility. Part of this is in building value equations. It’s not about his name, or a partner’s name. It’s about having something that has value on the market and that can be repeatable, scalable, and sustainable. Rather than one off deals that may or may not go anywhere, Daryle works hard to create deals he can leverage in the future to continue building on his past success.

On a closing note, Daryle suggests that audacity and out of the box thinking are key. Always be looking for new ways to add value, and don’t be afraid to push the envelope. You never know what you’ll get when you ask for the mildly ridiculous!

Listen to the full episode to develop the mindset of a deal-maker today!

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 who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

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Deal-Driven Growth

Applying The Power Of Deals For Social Justice

Regular listeners may have noticed we didn’t put out a new episode last week. That wasn’t part of our original plan, but in light of George Floyd (Breonna Taylor, Ahmaud Arbery and so many others) and the protests, we felt it was much more important to make room for voices speaking around those important social justice issues. As we were also taking part in the #melanatedvoices campaign on our social platforms, we chose to forgo our regular podcast as well.

Our hope was to create more space for conversations about race relations, police brutality, and white privilege.

Those are the conversations we’ve been engaging with, and we plan to continue. Being back this week doesn’t mean we are no longer committed to the cause! I’ve been part of this work for over 20 years, and will continue on.

And since this is a deals podcast…let’s talk about how it all relates!

Biggest Mistakes (In Negotiations AND in Hard Conversations)

If it’s new to you – a new concept, a new conversation, a new way of seeing – definitely start learning and engaging! But please start by remembering that Black people have been living this for hundreds of years. It’s been part of their lives and experiences, and it’s something they’ve been talking about forever and could talk about all the time. There are hundreds of resources you can use to learn more; books, podcasts, educators, social accounts.

So start by investing in educating yourself with resources that already exist (rather than asking a Black person to walk you through it all yet again!). As you do that, you can be thinking about this conversation in the same way you think about a deal:

How do you align?
What’s the best way to support somebody?
How do you understand what the needs are?

For example, when making deals I often point out that the biggest negotiation mistake people make is not listening enough. We tune out, we assume we know, or we spend our “listening” time thinking about what we’re going to say next.

However, this is NOT the time to make that mistake. This is a time to listen – fully listen.

When we are talking too much, it’s often because our ego is engaged. We certainly see that happening in many online conversations right now. We all have opinions. But in the same way that your ego can derail a negotiation, it can derail you right now.

Stop trying to be “right”, and focus on being effective. Rather than jumping in with your own opinion, try listening to others. It will serve you in business and negotiations, and it will also serve you when you engage with hard conversations and realities.

(The other big problem? FEAR. Listen in to the full episode to hear my take on the role fear is playing right now.)

Put Yourself on the Social Justice Court

You absolutely have to be willing to make mistakes.

This isn’t an invitation to be reckless and just and do anything. However, you can’t just refuse to speak up or engage because you’re afraid of messing up. If you want to make something happen, you have to put yourself out there.

In business, you can plan, and plan, and plan….and never get anything done. That’s just as harmful as jumping in too fast and taking action when you’re unprepared. So yes – educate yourself. Make an effort to learn more. Listen well.

But don’t forget to take action as well. Speak up. Engage. Be willing to admit to mistakes you might make as you do so.

In deals, we often make strategic alliances. You can do that here too. Whether that means being an ally to, or better yet, an advocate for friends or colleagues, aligning yourself with a movement like Black Lives Matters, or connecting more fully with your community.

As you do this, it’s vital that your focus is on their needs. As a strategic partner, do you need to share? Listen? Support? Comfort? Rally with?

When it comes to engaging with other white people, consider what will be effective and efficient.

  • Where is your energy going?
  • Who are you elevating?
  • Who do you need to move on from?

When you’re trying to negotiate a deal and it’s clear it’s not going to happen, you move on. You want to go where you can make a difference, where progress can be made. It’s okay to stop sinking your time into a person or conversation that clearly isn’t open to learning and changing right now.

Gain Clarity & Identify Disconnects

Do the work to make sure you understand what is acceptable to you, and what’s not.

When I work with clients, we get super clear on the purpose of any possible deal. We question why we’re pursuing it, what impact we hope it will make, and why it matters to us.

You can do that with this work as well. Don’t be afraid to ask yourself the hard questions, and to dig deeper into what matters to you, and why.

Your deepest why can bring you greater clarity about your principles, your vision, and your values. We are absolutely called to figure out what we truly stand for, who we are, and what we are committed to now more than ever.

Identify disconnects between what you say you are….and who you really are.

It’s easy to post online, but not as easy to take action.
It’s easy to learn the “right” things to say, but not as easy to truly hold those beliefs in your core.

This is the time to question what you are aligned with, and how you can better align with the things you say matter most to you.

Alignment Truly Matters

In every aspect of your life, alignment matters.

Friends, relationship, business, deals, social justice.

When something is out of alignment, it does impact you.

You may find yourself needing to make decisions about people and things that you want in your life, or that you need to remove from your life. Don’t be afraid to take a good long look around and determine what actually aligns with your values, and what doesn’t.

For many years, at the end of every year, I have a practice of evaluating my relationships and determining who I need to eliminate or reduce the time I spend with in my life. It’s become such a habit that I now naturally take care of cutting ties, as needed, throughout the year and there is usually nobody on that list at the end of the year anymore. I’m aware of what aligns and what doesn’t, and I don’t hesitate to make changes in order to amplify what is actually aligned.

You can do the same.

If you say you’re committed to change and growth, you need to make sure your clients, your vendors, your business partners, and your practices are aligned with that value.

More and more, people have the understanding that who you are as a person and who you are as a brand or company is important. If they sense a disconnect, you’re going to have problems. (If you HAVE a disconnect, you have problems!) That’s why paying lip service to an idea without truly aligning yourself and your values is not a solution.

Please take the time to get educated, to explore your deepest values, and to fully listen to the voices of our Black brothers and sisters who are speaking out. Change starts with each of us. You can listen in to the full episode if you’d like to hear the rest of my thoughts on authentic alignment, making a difference in these times and how many of the principles of authentic negotiating and deal-driven growth apply to current challenges and opportunities as well!

As a white person who has been on this journey for over 20 years, I’m here to be a resource to you as well. If you’re serious about growing and learning, feel free to reach out. I would love to be able to provide you with resources and tangible ideas about how you can move forward to truly make a difference in transforming racism and white privilege.

Listen to the full episode here.

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 who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

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Authentic Deal-Making Deal-Driven Growth

Strategic Business Growth Leads to Deal Opportunities

Lately, you may have noticed that we’re having a wider variety of guests on the podcast. They are speaking about the variety of things you need to do in your company to prepare yourself for deal-related opportunities. This includes strategic business growth decisions like building teams and putting processes in place. It also includes building a company that’s less dependent upon you as the founder.

Strategic Growth Positioning

It is a myth that you need to be a huge company with huge resources and major capital to do deals. Why? Because deals are not only about financing. We’ve covered everything from joint ventures and strategic alliances to licensing deals and affiliate deals online. We’ve also discussed sponsorships and business partnerships. Everybody at any size can do a deal.

However, it does take some level of resources. In the very least, you need somebody with the time and focus and energy to get deals done. Are in the position where you are working in your business as the founder? Do you have to be there every single day to make sure that the sausage is getting made, so to speak, or the products are going out? Because if you’re the one actually delivering the services to the client — then you don’t have the time to work on any kind of deal.

If you’re not doing those things and you haven’t built a team and you haven’t put systems in place, your ability to do deals successfully is extremely limited.

Scalable and Salable

You’re probably familiar with the concept of scalable and salable. You know that those principles ring true whether you’re ever going to sell your business or not. But even if you don’t plan to sell, why not be in a position where you can monetize at the end? Too people get to retirement and their business just sort of goes away.

No matter what your business is, ultimately there is a way to monetize it in some way that lasts beyond your ability to run it. But you have to be sure that it’s not solely dependent upon you, and that you build it in such a way that it has value beyond you. When you build processes and systems and shift your mindset to build a team, that’s when you truly build a brand and something that has value beyond your own efforts.

So many experts and entrepreneurs have experience in doing that, which has allowed them to not only be in a better position to do that ultimate exit deal at the end but also freed them up and made the company more valuable with increased profits while they were running it.

It also ensured they had the power to do deals during their operations, not just at the end when they were phasing themselves out.

Working On Your Business

The fundamental level of this is the concept of working on the business and not in it. People have to figure out what their highest and best use areas are. That means what it is that you are great at, and what you love doing.

And too many people stop there. But just because you love it and you’re good at doesn’t mean it is highly leveraged. It may not even make a big difference in your organization.

You have to assess whether it moves the needle. If you’re not doing stuff at that level, then that’s your first problem.

Second of all, build a team. I’ve built this phenomenal team and they do a lot of the work in the areas that they’re more talented in than me or that are not in my highest and best use areas. It’s their highest and best use areas, though, and that allows me to leverage the high-level things that I do.

I’ve had entrepreneurs tell me that they can’t do that because they haven’t got the right people. Usually, they say things like, “I’m kind of a perfectionist”, or “ I don’t think anybody’s going to do it as good as I do”. Well, those are problems. Both the perfectionist thing and also the lack of trust in other people. Ultimately you can find the right people out there, but some of that is a mindset thing. When you believe they aren’t there, and that no one could ever do the job right, you’ll always have a reason to turn potential candidates away. Or a reason to critique and run off the people you do have.

Trust Me – 80% Works

So here’s something to keep in mind. Some people do it differently than you. And it doesn’t seem like it is as good, but you know what, maybe it is as good, sometimes even better. If they can do it 80% as good as you, let them do it. Even if that means you come in at the end and tweak that final 20%, you’ve saved a significant amount of time and started the process of training someone who will get better and better at understanding what 100% looks like.

When you’re in a position to have a successful business that’s grown organically and that scales in a way that’s not dependent upon you, you get to have a better lifestyle. You’re not working 20 hours a day, you’re not under extreme stress all the time, and you’re bringing in expertise and surrounding yourself with people who are better at certain things. If you have systemized things so that you’re acting in your highest and best use areas, you’re now leveraging what you’re best at. That means that you’re going to be producing more revenue. And then you start to build this team, who is also either producing revenue or helping get the work done, so not only are you going to have more time, but you’ll also be more successful.

And of course, that increases your enterprise value and valuation on the back end.

In your business, that can look like whatever makes the most sense for you. There is no one right way to scale or grow, or to run day to day operations. And you certainly shouldn’t feel obligated to grow past the point that you want your business to be at. What’s important is that you have clarity about what you’re seeking in your business.

I’m speaking from experience here and saying that it starts with us. It starts with addressing our own limiting beliefs and our own willingness to be open to learning and growth. All of that mindset work is the stuff that we need to learn as entrepreneurs so that we can continue to develop in a way that will allow our businesses to scale.

Grow Your Mindset

Over on my website I have a whole list of mentors and leaders in the mindset and development space. If you want to be able to grow more and experience more deal-driven growth, it’s vital that you get your business running in such a way that it’s organically successful and less dependent upon you. That starts with a mindset shift and a willingness to do the personal growth work to make that shift. And that feeds back into your ability to continue to scale, build your team, and put new processes in place when you get to that next level.

What I am committed to is not only deals and growth but really entrepreneurial freedom. I think you’ll see that in some of the stuff we’re doing with our upcoming Entrepreneurial Freedom course. If you have any questions about that, definitely reach out. At the end of the day, I love working with entrepreneurs. I love helping people achieve their dreams and visions. It can be some tough work, but it’s always easier when you have guidance and support.

Listen to the full interview here.

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 who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Business Relationships Authentic Deal-Making

The Lower-Middle Market

Gary Kane found a niche in the lower-middle market which tends to be overlooked by a lot of investment banking firms. Chimera Strategies has been thriving in that space since Kane founded it in 2011. Chimera works with businesses between $3M and $25M that are above the business broker line and below the typical investment banking line.

Kane doesn’t approach his prospects as a glorified business broker, but as a simplified investment banker who understands the need for advisory in a revenue range that can’t attract the attention of investment bankers due to the fee structure. A business broker usually follows something similar to a real estate model with listings on a buy-sell website that are marketed passively. The close rate is only around 20% and the deal is usually facilitated by an independent broker with varying motives. Investment bankers work on much fewer deals with higher close rates through controlled auctions and competitive processes and they use active marketing tactics to find a buyer.

Strategic vs. Financial Buyers

In the lower-middle market, Kane primarily works with strategic deals. Larger investment banking firms don’t play in this space as it is difficult to meet the minimum fees, a significant portion of the private equity buyer pool is not interested in the market, financials of selling firms are usually not audited, the business is often not growing and there are no lenders in that space. So that often leaves strategic buyers.

Strategic buyers are ideally in the same or similar industry and geography which allows them to pick up inventory, locations, and people, and 86% of Kane’s deals are done with those criteria.

Financial buyers don’t play in the lower-middle market because of size since it is essentially the same amount of work to do a $5M deal as it is to do a $500M deal. The other problem is that financial buyers are not operators and in the lower-middle market, many of the businesses lack a second layer of management which means that there is no one to run the business when the owner exits.

Terms

Since there are no lenders in the lower-middle market space, almost all of Kane’s terms include 50-60% cash with a balance of a seller’s note and/or an earn-out. An owner’s note is a promise to pay a portion of the purchase price on the back end and an earn-out is a percentage payout contingent on performance over time.

It is a seller’s market right now and buyers want to put their money to work, so with the help of investment bankers like Gary Kane, business owners are cashing out while the times are good. Just because a business is in the lower-middle market does not mean they have to forfeit quality advisory. Chimera Strategies is consistently proving the difference that it can make.

Listen to the Fueling Deals podcast episode featuring Gary Kane’s interview about Strategic Deals in the Lower-Middle Market.

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 who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!