Pat Sandone, welcome to Strategic Exit Advisors interview series, E’s with X’s, where we talk about entrepreneurs who have exited their business. Pat, I'm very glad to have you with us today.
I'm honored that you asked me and happy to participate.
For our audience, can you tell us a little bit about the history of your business Net Driven?
I started Net Driven back in 2007, early 2008. Prior to that, I had worked as a VC, and also for a brief time in my family's business in the automotive space. They sold tires and automotive parts and had some service centers. While I was working in my family's business, I was really surprised to see that others didn't have a product like the one we had. Essentially, we were able to automate online marketing, website creation, and end-to-end online marketing solutions, while reducing costs dramatically for tire dealers, automotive service providers, car dealers and other folks in the retail automotive space.
Previous to us coming into the marketplace, if somebody wanted to have a fully functional website and create a comprehensive and effective online marketing solution with SEO strategy, social media strategy, and the rest, they were looking at upwards of a several hundred-thousand-dollar investment. To be able to get a catalog of all the parts and products and have it be searchable so people could buy those products online was pretty complicated - so a lot of people didn't have it. Those that did ended up spending a lot of money on it. We were able to create an end-to-end solution that gave people a fully functional website with an algorithm that automated a lot of the different factors around online marketing. We were able to get people into a solution that cost a couple of hundred dollars a month. We grew pretty quickly and ended up with over 6,000 retail outlets in the US and Canada using this software when we sold it to KKR in 2015.
So you had the business for about seven years?
Yeah, about seven years.
Tell us a little bit about how you wound up selling it to KKR. How did you know it was the right time? What was the main goal in selling your business?
For me, I think in part, the passion for the business started to evaporate, which I think happens to a lot of entrepreneurs seven, eight years in. I was looking to start exploring the next chapter in my life. I wanted to devote my full attention to that. Also, it got to a mature place where a lot of the exciting, fun, creative challenges had been nailed down and figured out. I felt like my contribution as the parent was done, it was reaching a more mature point and it was kind of time to send it out into the world and get back to what I like doing the most, which is being creative and getting things started.
In an earlier conversation you mentioned that you did not hire an M&A advisor. Tell me how you found KKR, or if they found you, and what that process was like and how you managed to run the day to day business while managing the sale of your company.
Looking back, I wish we did hire an advisor. What I did instead is I hired a few people I knew that had experience in venture capital and M&A to work with me to sell the business. We were able to find three or four interested buyers and had our own auction around it. Looking back, I spent a lot of time on that, that I could have been spending growing the business and doing other things. I do wish we had hired somebody, but we were able to be successful on our own, finding some good buyers and eventually selling it to a subsidiary of KKR.
It's great that you were able to get a couple of experienced folks to help you in the process. At the end of the day, did you have a couple of offers on the table, and how did you make your buyer decision?
Yeah, we did. Price is obviously important. We had a few offers. KKR has very deep pockets, they have a reputation, so you kind of know what you're getting. Some of the other offers were from smaller organizations where there was a question on whether or not they could actually raise the money, it was contingent upon financing, it was contingent upon different things. There was a lot more certainty with the offer from KKR and it was a good number.
Looking back on it, what would you say surprised you most during the process - what was the hardest part in your mind?
I think just managing the uncertainty in the negotiations, and the back and forth. It can become stressful.
In addition to being time consuming, did you find it to be an emotional process?
It was. It's a difficult process. I think it's akin to seeing your child getting married or going off to college. It's like an end of childhood and your job as parent is over. I think there's a similar connection to an entrepreneur and his creation. That's definitely emotional. It's hard. You've got to keep the logical side alive and make logical decisions, but there is a lot of emotions at play. There's a connection to the business that's hard to explain if you haven't been there.
Tell us a little bit about the transaction. Did you wind up staying on for a period of time and how do you feel like the integration has gone, because it's fairly recent.
I sold it in March of 2015. I stayed on through the end of July 2016. There was an earnout – some different metrics we needed to hit to earn additional money.
Did the earnout workout for you?
Yeah, the earnout was good. I was able to hit all but one of the seven different metrics that I wanted to hit. I think the integration also went very well. I think another reason that we chose this company was that they have a history of buying regionally based companies and then keeping the workforce intact in that area. Basically everyone kept their job and I think while the management style may be different, I think it's still going well for people.
That's great. Last question. What are you doing now that you've been out of the business a couple of months? I’m curious what's on the horizon for you.
Good question. I've been taking some time off to travel, catch up with friends, get back in shape and spend time with my kids and do the opposite of what I was doing – give myself a chance to relax and enjoy life for awhile. I'm still young, and I think about what I want to do next from a slightly different perspective, not emphasizing the monetary rewards. What's going to bring me alive, and what I’m going to get excited about doing next.
That's great Pat, best wishes on the next phase of your life. That was Pat Sandone with Net Driven. Pat, I really appreciate your time.
It’s been my pleasure.