1 00:00:00,000 --> 00:00:04,320 Kevin Mako: Hello, product innovators. Today we learn how to prepare to sell your hardware product business 2 00:00:04,320 --> 00:00:11,440 Kevin Mako: from a 30-year investment banker in the manufacturing industry. This is the Product Startup Podcast, a show to learn 3 00:00:11,440 --> 00:00:16,820 Kevin Mako: from top leaders in hardware product development, prototyping, manufacturing, product selling, and everything in 4 00:00:16,820 --> 00:00:22,040 Kevin Mako: between. Hosted by Kevin Mako, the leading expert on product development for hardware startups. 5 00:00:23,000 --> 00:00:26,440 Kevin Mako: Welcome back, everyone. I'm very excited to introduce Dan Shea to the show. 6 00:00:26,980 --> 00:00:30,040 Kevin Mako: Dan is the managing director of Objective, Investment Banking and Valuation. 7 00:00:30,060 --> 00:00:35,980 Kevin Mako: He's been doing mergers and acquisitions deals as an investment banker in the manufacturing sector for over 30 years. 8 00:00:36,440 --> 00:00:44,240 Kevin Mako: Today, Dan will share some valuable knowledge for inventors, startups as well-manufactures on thinking about the value of your product and product business well before a sale, 9 00:00:44,500 --> 00:00:51,400 Kevin Mako: focusing on quality product and customer needs and adding innovation to increase the valuation of your product for an eventual exit sale. 10 00:00:51,600 --> 00:00:52,900 Kevin Mako: Now, on to the episode. 11 00:00:54,160 --> 00:01:00,680 Kevin Mako: This show is produced by Mako Design, the original firm providing end-to-end consumer product development services, 12 00:01:00,700 --> 00:01:05,300 Kevin Mako: tailored specifically to hardware startups, small manufacturers, and inventors. 13 00:01:05,440 --> 00:01:11,320 Kevin Mako: Take your product from idea to store shelves at MakoDesign.com. Now on to the episode. 14 00:01:13,030 --> 00:01:14,250 Kevin Mako: Hey, Dan, welcome to the show. 15 00:01:14,710 --> 00:01:15,918 Dan Shea: Glad to be here. 16 00:01:15,918 --> 00:01:20,750 Kevin Mako: Well, excited today to talk to you about building value for a potential exit for a 17 00:01:20,750 --> 00:01:25,570 Kevin Mako: hardware startup. How does a hardware startup, even in the early days, and as they're developing the product, 18 00:01:25,730 --> 00:01:29,150 Kevin Mako: getting to market, and more importantly, as they're starting to scale the business, 19 00:01:29,150 --> 00:01:33,950 Kevin Mako: what do they start thinking about in terms of the value that they're providing to the world that a 20 00:01:33,950 --> 00:01:38,450 Kevin Mako: potential buyer of their actual product business might be looking for at the end of the tunnel? 21 00:01:38,890 --> 00:01:43,310 Kevin Mako: Before we get into all of that, exciting stuff, just give us a bit of a history of how you got to be 22 00:01:43,310 --> 00:01:45,130 Kevin Mako: the success story that you are today. 23 00:01:45,650 --> 00:01:51,910 Dan Shea: Yeah, thank you so much. So I've been an investment banker for over 30 years, and what that means for me 24 00:01:51,910 --> 00:01:58,470 Dan Shea: is helping entrepreneurs sell their businesses. And these businesses can range in value from 10 million 25 00:01:58,470 --> 00:02:06,110 Dan Shea: into over 300 million is kind of like the two endposts of my experience over 30 some years. 26 00:02:06,650 --> 00:02:12,270 Dan Shea: Primarily work with manufacturers, and oftentimes those manufacturers have a branded product, 27 00:02:12,910 --> 00:02:18,310 Dan Shea: a highly designed engineered product, oftentimes a consumer product, like a lot of the folks 28 00:02:18,310 --> 00:02:24,150 Dan Shea: you work with Kevin. And also I work with engineering services companies that help companies 29 00:02:24,150 --> 00:02:27,670 Dan Shea: design those products, a very valuable piece of the puzzle there. 30 00:02:27,670 --> 00:02:33,650 Dan Shea: And so I'm really excited to talk about with you how those folks can build value for the customer. 31 00:02:34,330 --> 00:02:39,370 Dan Shea: And that translates into value for themselves as they scale their business and ultimately as they think 32 00:02:39,370 --> 00:02:43,090 Dan Shea: to exit. You know, you've heard the saying start with the end in mind. 33 00:02:43,810 --> 00:02:47,690 Dan Shea: Not every entrepreneur starts with the idea that I'm going to build something that I'm going to sell. 34 00:02:47,690 --> 00:02:52,210 Dan Shea: But over time and probably early on, that does enter their thinking. 35 00:02:53,090 --> 00:02:57,650 Dan Shea: And so we like to help people start to really focus on how they're going to. 36 00:02:57,670 --> 00:03:01,910 Dan Shea: they can build value that's conveyable to a buyer at a high valuation. 37 00:03:02,490 --> 00:03:06,510 Kevin Mako: That's great. And this is a really powerful subject because a big trend that I've noticing 38 00:03:06,510 --> 00:03:12,530 Kevin Mako: and talking with a lot of the big corporate folks as well is that big companies are investing 39 00:03:12,530 --> 00:03:18,830 Kevin Mako: less in R&D and more in the acquisition of the next hot thing typically that's coming to market 40 00:03:18,830 --> 00:03:23,250 Kevin Mako: from startups. They're looking to see, okay, what can we grab out there? 41 00:03:23,250 --> 00:03:27,650 Kevin Mako: Somebody who's seeing the innovation that our R&D team didn't see. They've released something 42 00:03:27,670 --> 00:03:32,050 Kevin Mako: quickly, typically because they're nimble, they're fast, or they're just more creative, or a whole number of 43 00:03:32,050 --> 00:03:36,690 Kevin Mako: reasons that hardware entrepreneurs have an advantage over big corporate in many ways, 44 00:03:37,110 --> 00:03:41,170 Kevin Mako: and then leveraging their existing networks to make massive scale. So it's a good deal for both 45 00:03:41,170 --> 00:03:45,170 Kevin Mako: parties. And it's something that we see a lot of, especially like many of the customers at Mako, 46 00:03:45,170 --> 00:03:49,570 Kevin Mako: even as they're starting to get early traction, it's interesting to see those companies start knocking 47 00:03:49,570 --> 00:03:54,290 Kevin Mako: at the door earlier and earlier than ever before historically. So it's at a really good time now, 48 00:03:54,290 --> 00:03:57,650 Kevin Mako: as we're looking forward to say, as a hardware startup, know that. 49 00:03:57,670 --> 00:04:02,270 Kevin Mako: that it's not just about cash flow. As you build cash flow, you're building equity and equity is 50 00:04:02,270 --> 00:04:08,110 Kevin Mako: translatable into value for a probably much larger entity that can really leverage the amazing product 51 00:04:08,110 --> 00:04:12,490 Kevin Mako: innovation group of products or whatever else that you've created, let alone additional value like 52 00:04:12,490 --> 00:04:16,650 Kevin Mako: brand IP, et cetera. So I love the fact that so much of this is happening in the industry, and that's 53 00:04:16,650 --> 00:04:20,430 Kevin Mako: why I really wanted to get you on to talk about this today, just even at a minimum to start planting 54 00:04:20,430 --> 00:04:25,370 Kevin Mako: the seeds into hardware entrepreneurs as to how they can truly build that value and then obviously 55 00:04:25,370 --> 00:04:27,570 Kevin Mako: translate that into a bigger, better sale. 56 00:04:27,670 --> 00:04:32,470 Kevin Mako: down the road. So let's start, you know, early on and big picture here. Let's just look at what do you mean 57 00:04:32,470 --> 00:04:39,450 Dan Shea: by building value in a hardware startup? So large companies, mid-sized companies, any company, 58 00:04:39,530 --> 00:04:45,910 Dan Shea: they don't have a lock on all the insights. They really don't. And oftentimes, it sizes their enemy, 59 00:04:46,170 --> 00:04:50,690 Dan Shea: frankly, because, you know, they have big organizations and it's hard to turn a big 60 00:04:50,690 --> 00:04:57,650 Dan Shea: organization on a dime when a great idea comes up. So oftentimes in the corporate development, 61 00:04:57,670 --> 00:05:03,650 Dan Shea: departments, which are my counterparts in a transaction. They're the finance-oriented people 62 00:05:03,650 --> 00:05:08,150 Dan Shea: that look for opportunities to buy, whether it's a product line or an actual company, 63 00:05:08,690 --> 00:05:13,910 Dan Shea: they're constantly doing this calculation, make versus buy. Can we make it or should we 64 00:05:13,910 --> 00:05:18,610 Dan Shea: buy it? And oftentimes, they can't even make something that looks great in the marketplace because 65 00:05:18,610 --> 00:05:23,430 Dan Shea: smart entrepreneurs have protected their technology. You can't even reverse engineer it because 66 00:05:23,430 --> 00:05:27,650 Dan Shea: you violate patent or a patent pending. It's a little easier if it's a little easier if it's 67 00:05:27,670 --> 00:05:32,970 Dan Shea: just know-how, but proprietary know-how is proprietary. So these large corporations 68 00:05:32,970 --> 00:05:39,630 Dan Shea: got on our door all the time and say, what have you got in this particular area of the economy? 69 00:05:40,390 --> 00:05:45,710 Dan Shea: So I would say to you that in the majority of the businesses in this country are small companies, 70 00:05:46,050 --> 00:05:50,970 Dan Shea: that's where all the innovation happens, despite the fact that large companies get all the press. 71 00:05:51,830 --> 00:05:57,610 Dan Shea: So, you know, I would say to you that keep coming up with those great ideas, but be calculating about 72 00:05:57,670 --> 00:06:02,750 Dan Shea: it. When you have a great idea, make sure as you develop it, make sure you're checking 73 00:06:02,750 --> 00:06:07,510 Dan Shea: yourself and make sure that there's a large addressable market. And make sure it's something 74 00:06:07,510 --> 00:06:12,810 Dan Shea: customers want, need and value. Take a look at the competition, see who the competition is out 75 00:06:12,810 --> 00:06:18,830 Dan Shea: there. And is your product truly an innovation? Kevin, you probably are familiar with the Blue 76 00:06:18,830 --> 00:06:24,970 Dan Shea: Ocean strategy. Have you heard of that? Harvard business would do. I had a client, and this is kind of 77 00:06:24,970 --> 00:06:27,470 Dan Shea: jumping ahead, so forgive me, and we can always go back. 78 00:06:27,670 --> 00:06:32,890 Dan Shea: But I saw this in many of my clients, and one in particular that worked so well. 79 00:06:33,450 --> 00:06:38,190 Dan Shea: They consulted with folks like yourself, but they also had an in-house team, and their whole 80 00:06:38,190 --> 00:06:44,870 Dan Shea: job was to try and come up with innovations in a really mundane industry where the consumer might 81 00:06:44,870 --> 00:06:49,010 Dan Shea: sit back and say, there's no innovation happening in this. It's a building products company, right? 82 00:06:49,590 --> 00:06:55,070 Dan Shea: What else can you do with building products? They innovated every year and came up with these great 83 00:06:55,070 --> 00:07:00,910 Dan Shea: products based on what the installers needed to build houses, build buildings and what 84 00:07:00,910 --> 00:07:06,050 Dan Shea: have you. And they would come up with these great products, test it with the consumer, which was the 85 00:07:06,050 --> 00:07:13,190 Dan Shea: worker at the construction site. And if it was a great idea that saved the worker time or money 86 00:07:13,190 --> 00:07:19,070 Dan Shea: and the install of this particular family of products, they would finalize the product and they would 87 00:07:19,070 --> 00:07:24,350 Dan Shea: put a living fence patent around it. And they built their business on chunks of products. 88 00:07:25,070 --> 00:07:34,410 Dan Shea: And because of that, they had a portfolio of highly engineered, highly designed products for the building products industry that buyers were salivating over. 89 00:07:34,410 --> 00:07:41,310 Dan Shea: Buyers, meaning not the customer, but buyers of the business, were salivating over because this business was rock solid. 90 00:07:41,430 --> 00:07:48,050 Dan Shea: It was built based on product design, protected product design, and it was based on a family of products. 91 00:07:48,690 --> 00:07:53,930 Dan Shea: So the breadth of this company was, and the foundation of this company was rock solid. 92 00:07:54,390 --> 00:07:55,050 Dan Shea: So something that's a product. 93 00:07:55,070 --> 00:08:00,030 Dan Shea: think about, I know a lot of your listeners are earlier stage, you know, but it starts 94 00:08:00,030 --> 00:08:06,370 Dan Shea: with one product. But be mindful of the fact that that product probably can become part of a family 95 00:08:06,370 --> 00:08:11,550 Dan Shea: of products. And you build a family of products and you continue to innovate. Innovation doesn't stop 96 00:08:11,550 --> 00:08:18,330 Dan Shea: once that initial product is built. That's where it starts. And then you build on that. And I can assure 97 00:08:18,330 --> 00:08:25,050 Dan Shea: you that when you do that properly, you're creating institutional value that's conveyable to 98 00:08:25,070 --> 00:08:30,290 Dan Shea: a buyer when your great entrepreneurs decide that they need to take some chips off the table. 99 00:08:30,850 --> 00:08:35,850 Kevin Mako: That's powerful advice. And something that's really special in there that you mentioned is the fact that 100 00:08:35,850 --> 00:08:41,230 Kevin Mako: this company was innovating based on their customer feedback. And that's something that as a hardware 101 00:08:41,230 --> 00:08:45,630 Kevin Mako: startup, if you're looking to build this portfolio of products or evolve your product or have multiple 102 00:08:45,630 --> 00:08:50,470 Kevin Mako: lines of a similar one or accessories or whatever it might be, it's called some related family suite of 103 00:08:50,470 --> 00:08:54,870 Kevin Mako: products. First of all, as an inventor and an innovator, you've already come up with the first idea. So 104 00:08:54,870 --> 00:08:59,530 Kevin Mako: the probability that you're going to continue to come up with ideas only accelerates as you get more 105 00:08:59,530 --> 00:09:03,790 Kevin Mako: customers and more feedback and more stakeholders and engagement, whether it's investors or 106 00:09:03,790 --> 00:09:09,130 Kevin Mako: designers or whatever else, the ideas are going to become more frequent. And the value of those ideas 107 00:09:09,130 --> 00:09:13,870 Kevin Mako: are going to be more and more known to you as you evolve the business. So you can start as a hardware 108 00:09:13,870 --> 00:09:17,150 Kevin Mako: startup. The second thing I find, which is amazing, which ties to the first that you mentioned 109 00:09:17,150 --> 00:09:24,110 Kevin Mako: is you can start with the first product. And then over time, you're going to evolve that into either 110 00:09:24,110 --> 00:09:29,230 Kevin Mako: or a family product or additional markets or whatever else, but you can grow from your customers 111 00:09:29,230 --> 00:09:33,870 Kevin Mako: and from better information as you scale up, as you get more money to scale up, whether it's 112 00:09:33,870 --> 00:09:38,590 Kevin Mako: on revenue and investors or whatever else. And as you're doing that, you're creating a tremendous 113 00:09:38,590 --> 00:09:43,230 Kevin Mako: amount of equity. In fact, you use the word kind of like institutional interest. This is where you've 114 00:09:43,230 --> 00:09:48,830 Kevin Mako: got the bigger, more serious buyers looking at these new hardware innovations to see what makes 115 00:09:48,830 --> 00:09:52,910 Kevin Mako: sense for either their clients or if they're a company themselves for their own portfolio of product 116 00:09:52,910 --> 00:09:54,030 Kevin Mako: to see how they can leverage it. 117 00:09:54,110 --> 00:09:59,510 Dan Shea: Yeah. So fast forward to the time when you're thinking of selling. Buyers will look at the business and 118 00:09:59,510 --> 00:10:05,010 Dan Shea: say, let's take a look at the history and what the company has done. That is some evidence of what 119 00:10:05,010 --> 00:10:09,570 Dan Shea: it's capable of doing. But make no mistake, a buyer doesn't buy a business based on what it's done 120 00:10:09,570 --> 00:10:15,150 Dan Shea: in the past. If they buy it based on what they can do with it post-close. So when you're building 121 00:10:15,150 --> 00:10:21,010 Dan Shea: your organization, think about building a culture of innovation. It's not just one product 122 00:10:21,010 --> 00:10:24,090 Dan Shea: or a family of products like we say. Is there a team of people that are 123 00:10:24,110 --> 00:10:28,810 Dan Shea: thinking about innovating? Are they consulting with firms like yours, Kevin, in such a way that 124 00:10:28,810 --> 00:10:34,490 Dan Shea: they're partnering to constantly think about ways to innovate in ways that the customer will 125 00:10:34,490 --> 00:10:41,670 Dan Shea: appreciate and pay for and pay for at a price that allows you to be profitable. Profitable, and I would 126 00:10:41,670 --> 00:10:47,310 Dan Shea: submit to you if you're constantly thinking about the blue ocean strategy, you're innovating in the blue 127 00:10:47,310 --> 00:10:52,190 Dan Shea: ocean, not the red ocean, where there's a lot of competition. It's the blue ocean that's the head of everybody 128 00:10:52,190 --> 00:10:58,470 Dan Shea: and you can charge more for that product, charge relative your cost. And in those cases, 129 00:10:58,830 --> 00:11:04,470 Dan Shea: you build a business that is not only durable in terms of innovation in products, but margin. 130 00:11:05,070 --> 00:11:10,250 Dan Shea: You know, many industries have typical or average margin. So buyers look at that. They look at the 131 00:11:10,250 --> 00:11:15,430 Dan Shea: margin of your business and compare it to the industry and say, these people are either doing something special 132 00:11:15,430 --> 00:11:22,170 Dan Shea: or they're not doing something special enough based on where you sit within your field of focus. So there's a lot 133 00:11:22,190 --> 00:11:27,530 Dan Shea: to it, but the good news is nothing happens overnight. You know, you've probably heard 134 00:11:27,530 --> 00:11:32,610 Dan Shea: the saying, overnight success, 10 years in the making. So entrepreneurs out there, 135 00:11:32,670 --> 00:11:38,410 Dan Shea: you're going to make a billion decisions between startup to when you exit. Just have these broad 136 00:11:38,410 --> 00:11:44,030 Dan Shea: themes in mind, these themes of innovation, constant innovation, building a culture around 137 00:11:44,030 --> 00:11:50,030 Dan Shea: innovation, looking to what the customer really wants. And as I was preparing to speak with you 138 00:11:50,030 --> 00:11:54,470 Dan Shea: today, Kevin. I was thinking about what buyers get excited about, buyers of businesses, 139 00:11:54,830 --> 00:12:00,110 Dan Shea: and they get excited about the people who work there, they get excited about the customer list. 140 00:12:00,510 --> 00:12:05,310 Dan Shea: That's why some websites, ours does, yours does, have your customers on there. 141 00:12:05,750 --> 00:12:10,870 Dan Shea: Buyers get excited about who you're able to serve. They get excited about your geography, 142 00:12:10,870 --> 00:12:15,770 Dan Shea: your brand, your name, all these things. But I would submit to you that perhaps the most important 143 00:12:15,770 --> 00:12:20,010 Dan Shea: things is your products, because those are really tangible. You can convey those to buyers, 144 00:12:20,030 --> 00:12:24,890 Dan Shea: They now own the products. They own your designs. They own the markets you serve. And what can 145 00:12:24,890 --> 00:12:31,410 Dan Shea: they do with those to go forward? So think about leaving some ups for the buyer by building a foundation 146 00:12:31,410 --> 00:12:36,670 Dan Shea: of growth through product innovation. And as a hardware startup, that's something inevitably you're going 147 00:12:36,670 --> 00:12:41,150 Kevin Mako: to do because you're limited on budget, time, scope, history, etc. There's a lot of things 148 00:12:41,150 --> 00:12:46,470 Kevin Mako: that even if you do a really good job of a product launch, you're only capturing a certain piece of the market. 149 00:12:46,650 --> 00:12:50,010 Kevin Mako: So a company that's been in the space for 2050, 100 years. 150 00:12:50,030 --> 00:12:54,210 Kevin Mako: is going to look at that and say, wow, look at what you've achieved as a startup in a 151 00:12:54,210 --> 00:12:58,390 Kevin Mako: relatively short period of time, even if it's a few years. It's still small in the grand 152 00:12:58,390 --> 00:13:03,450 Kevin Mako: scheme of big corporations especially. So look at what you've done there. Imagine if you had 153 00:13:03,450 --> 00:13:10,810 Kevin Mako: the scale and breadth of a large corporate buyer behind executing on increasing iterations and versions 154 00:13:10,810 --> 00:13:14,430 Kevin Mako: of that, which I guess is why it's so important. You mentioned looking at the company's history 155 00:13:14,430 --> 00:13:18,150 Kevin Mako: and seeing, okay, you went to market, then what did you do? How did you improve your product? 156 00:13:18,150 --> 00:13:20,010 Kevin Mako: How did you listen to your customer? How did you come up with? 157 00:13:20,030 --> 00:13:25,210 Kevin Mako: with an accessory or the next version of the product. They're looking for the way that the company actually 158 00:13:25,210 --> 00:13:29,530 Kevin Mako: operates and, of course, a great product at the end of the day. So if you have an amazing product, 159 00:13:29,790 --> 00:13:33,910 Kevin Mako: but you're also a firm that's continuing to innovate, that gets a buyer really excited. Like, 160 00:13:33,910 --> 00:13:38,190 Kevin Mako: you're adding compounding value on top of the product itself. But of course, the product is the 161 00:13:38,190 --> 00:13:43,450 Dan Shea: foundation of most hardware product businesses. It's interesting. Maybe the term to be used is 162 00:13:43,450 --> 00:13:49,130 Dan Shea: institutionalize innovation. If you can institutionalize that in your organization, and most people 163 00:13:49,130 --> 00:13:54,570 Dan Shea: have more than one employee. And you've got a small team when you're starting out. The other thing 164 00:13:54,570 --> 00:13:59,510 Dan Shea: that I've seen in my client base, when I speak to them, you know, granted, it's at the tail end of it, 165 00:13:59,510 --> 00:14:04,910 Dan Shea: but, you know, I've spoken with my clients and say, how did you start 30 some years ago? And they figured 166 00:14:04,910 --> 00:14:12,790 Dan Shea: out a way to get the word out about their product through very modest means, but effective means. There's 167 00:14:12,790 --> 00:14:18,790 Dan Shea: trade shows out there. There's the old cold calling and just getting in front of decision makers with your 168 00:14:18,790 --> 00:14:25,150 Dan Shea: product innovation. And that's the way you start. But I think that, you know, in this day and age, 169 00:14:25,150 --> 00:14:30,930 Dan Shea: to actually get the reach you want, it costs money. So I think, I remember back to MBA school, 170 00:14:31,410 --> 00:14:36,810 Dan Shea: actually BBA school, when the professor said, you can go broke by growing. I'm like, 171 00:14:36,830 --> 00:14:41,050 Dan Shea: what do you mean? You're growing. Well, you know, it costs money to kind of get the word out there 172 00:14:41,050 --> 00:14:46,870 Dan Shea: through marketing and building proud of prototypes and all of that stuff. So I think that that should be a 173 00:14:46,870 --> 00:14:48,770 Dan Shea: part of the puzzle, too. How do you finance your innovation? 174 00:14:48,790 --> 00:14:53,390 Dan Shea: So that could be a topic for another day, but I really think that that's an important element 175 00:14:53,390 --> 00:14:57,670 Dan Shea: because there are many great ideas out there. You just want to make sure the market knows about. 176 00:14:58,170 --> 00:15:02,070 Kevin Mako: Absolutely. Getting to market is key. And the nice thing about today is that you have a global 177 00:15:02,070 --> 00:15:09,490 Kevin Mako: market. So especially if you have a hyper-specific niche product, it's really never been easier than now 178 00:15:09,490 --> 00:15:14,290 Kevin Mako: to get a very, very specific product out to that market. And if you've done a really good job with 179 00:15:14,290 --> 00:15:18,770 Kevin Mako: product, as you said, build a great product, then word will spread easier. And you look for those. 180 00:15:18,790 --> 00:15:25,050 Kevin Mako: modest methods forward to spread. So how can you stretch the marketing dollar further to allow your 181 00:15:25,050 --> 00:15:30,850 Kevin Mako: customers to start being brand advocates for you and get your product to more eyeballs that is very 182 00:15:30,850 --> 00:15:35,370 Kevin Mako: specific to a certain pain point or opportunity that you've created with product? Most little companies 183 00:15:35,370 --> 00:15:41,510 Dan Shea: are global companies in the hardware products space. Yep, absolutely. The need is not germane 184 00:15:41,510 --> 00:15:46,510 Dan Shea: to just one geography. It's a big world out there. Now, the last company I sold was last month, 185 00:15:46,510 --> 00:15:52,110 Dan Shea: then they had operations in Hong Kong, the Netherlands, in the U.S. And they sold their products 186 00:15:52,110 --> 00:15:58,510 Dan Shea: globally. They're an engineered component company in the flow meter space. And it's a big market out there 187 00:15:58,510 --> 00:16:04,110 Kevin Mako: and you might as well attack it. Well, that's the blue ocean, right? So get out there, go to that blue ocean, 188 00:16:04,110 --> 00:16:08,630 Kevin Mako: which is the relatively untapped market because you're creating an innovation. You're somewhat 189 00:16:08,630 --> 00:16:14,010 Kevin Mako: creating an industry or vertical. Even if it's an existing market, you have a new version or a new 190 00:16:14,010 --> 00:16:19,010 Kevin Mako: solution to that market. And therefore, that is the blue ocean theory, right? And continuing to 191 00:16:19,010 --> 00:16:23,650 Kevin Mako: innovate is a big part of that theory. So don't just plant your stake in the ground. Plant the 192 00:16:23,650 --> 00:16:27,550 Kevin Mako: stake in the ground to grow. Do something great with it. Dan, before I let you go, I just want to talk a bit 193 00:16:27,550 --> 00:16:34,170 Kevin Mako: about what you do for helping these companies as they get to that size. How do you help them actually 194 00:16:34,170 --> 00:16:38,610 Kevin Mako: go through that exit processes? They've made the decision at least to start looking into the potential 195 00:16:38,610 --> 00:16:43,690 Kevin Mako: of selling the equity that they have built over these years. Boy, it's a very involved 196 00:16:43,690 --> 00:16:49,050 Dan Shea: process. And, you know, rare is the case that we're introduced to a company when all the ducks are 197 00:16:49,050 --> 00:16:55,650 Dan Shea: lined up and it's time to just hit go and start a sale process. So we find ourselves investing a lot 198 00:16:55,650 --> 00:17:01,190 Dan Shea: of time, sharing a lot of time, helping businesses think about the things we're talking about today. 199 00:17:01,310 --> 00:17:06,470 Dan Shea: Maybe they're further on, but some of the issues are very evident in diversification of customers. 200 00:17:07,190 --> 00:17:12,010 Dan Shea: The diversification of product. If you have a product that's bound to launch, it doesn't make sense to wait until 201 00:17:12,010 --> 00:17:17,190 Dan Shea: gets traction so you can get paid for that product. There's a lot of stuff that goes on. And then there's 202 00:17:17,190 --> 00:17:23,310 Dan Shea: stuff unrelated to products. It's really more, do you have your corporate books and records in order? 203 00:17:23,410 --> 00:17:28,870 Dan Shea: Do you have your accounting? Do you have your legal structure all sewn up? Do you have your people 204 00:17:28,870 --> 00:17:35,330 Dan Shea: in the right seats on the bus? A lot of that stuff. So that happens before the transaction. And we just 205 00:17:35,330 --> 00:17:41,410 Dan Shea: consult people on that. We don't ask for any money. You just try to help them get ready. When it's time to actually 206 00:17:41,410 --> 00:17:47,610 Dan Shea: sell, we make a market for the business. That's our job. And this is a very specialized 207 00:17:47,610 --> 00:17:53,990 Dan Shea: process because it's done in a confidential and quick manner. It's not like selling your shares in 208 00:17:53,990 --> 00:18:00,590 Dan Shea: Apple or Microsoft. You can't call up your broker and sell them. You have to make a market. So we work 209 00:18:00,590 --> 00:18:07,570 Dan Shea: to prepare offering materials that describe the business and enough specificity that a buyer can 210 00:18:07,570 --> 00:18:11,390 Dan Shea: start to assign a price to it without even visiting the facility. 211 00:18:11,410 --> 00:18:18,790 Dan Shea: or talking to the owners. We spent a lot of time working to identify who we think the likely 212 00:18:18,790 --> 00:18:24,010 Dan Shea: buyers will be on a global basis. Like we talked a few minutes again, most businesses, even little 213 00:18:24,010 --> 00:18:30,570 Dan Shea: businesses have some global element to them. And oftentimes that translates into buyers that might be 214 00:18:30,570 --> 00:18:36,530 Dan Shea: overseas that would be interested in a U.S. business or vice versa. So we spent a lot of time doing 215 00:18:36,530 --> 00:18:40,570 Dan Shea: that. And then once we're ready to go, you've got your offering materials together. You've got your 216 00:18:40,570 --> 00:18:46,750 Dan Shea: buyers list together, we reach out to those buyers in a confidential way, get them to sign 217 00:18:46,750 --> 00:18:52,410 Dan Shea: NDA, share the materials, and then create an auction environment. And that is a really tricky thing. 218 00:18:52,410 --> 00:18:56,970 Dan Shea: As you think about it, all your listeners are thinking, boy, my business is complicated. We might get an 219 00:18:56,970 --> 00:19:00,982 Dan Shea: offer, but they're not going to close until they understand our business in its entirety. 220 00:19:00,982 --> 00:19:01,690 Kevin Mako: Well, 221 00:19:01,750 --> 00:19:08,990 Dan Shea: very true. It's called due diligence. So we facilitate that due diligence, educating a group of buyers to the point 222 00:19:08,990 --> 00:19:13,070 Dan Shea: where they get to the end where they're like, yeah, we know enough that you can rely on our 223 00:19:13,070 --> 00:19:18,970 Dan Shea: purchase price, and here it is. And then we help our buyer, our client pick the buyer that not only 224 00:19:18,970 --> 00:19:24,530 Dan Shea: presents the best economics, but other things that are important to entrepreneurs. Fit, legacy, 225 00:19:25,250 --> 00:19:30,910 Dan Shea: what's going to happen with the people. Do I as the entrepreneur stay on or do I leave? Can I keep 226 00:19:30,910 --> 00:19:37,370 Dan Shea: some money in the business to enjoy the proverbial second bite at the apple when some big private 227 00:19:37,370 --> 00:19:41,630 Dan Shea: equity firm buys it and you know they're going to triple the value of the equity in a short 228 00:19:41,630 --> 00:19:46,050 Dan Shea: period of time. Why wouldn't I want to participate in that? I can help in that as the selling 229 00:19:46,050 --> 00:19:52,430 Dan Shea: entrepreneur. So we create this confidential market and it takes six, seven months to fully execute 230 00:19:52,430 --> 00:20:00,910 Dan Shea: from start to cash in the bank. And we work with, you know, the other advisors to the company, 231 00:20:01,030 --> 00:20:07,170 Dan Shea: the accountants, the lawyers, the insurance providers, and all banner of consultant that may be 232 00:20:07,170 --> 00:20:11,510 Dan Shea: necessary at and around a transaction. And what's the name and the website of that just for the 233 00:20:11,510 --> 00:20:15,130 Dan Shea: listeners? Oh, well, my partners are going to be mad at me. I haven't even mentioned that. 234 00:20:15,470 --> 00:20:23,230 Dan Shea: Our firm is objective capital partners. We're based in California. And our website is objective 235 00:20:23,230 --> 00:20:31,190 Dan Shea: IBV, investment banking and valuation, ibv.com, objective ibv.com. And we've been in business 236 00:20:31,190 --> 00:20:36,910 Dan Shea: for 17 years. And almost all that we do is sell companies for entrepreneurs like you're 237 00:20:36,910 --> 00:20:41,950 Dan Shea: listeners are like they're going to be as they develop their business to the point where it's 238 00:20:41,950 --> 00:20:47,510 Dan Shea: time to think about, if not just a financial exit and an entire exit. Can I say one more thing? 239 00:20:47,550 --> 00:20:48,090 Dan Shea: Yeah, go for it. 240 00:20:48,090 --> 00:20:54,390 Dan Shea: Faster than your entrepreneurs think. The average age of our client is shifting younger and younger. 241 00:20:54,590 --> 00:21:00,410 Dan Shea: It's really surprising to me, but, you know, they can build incredible value early on and then they 242 00:21:00,410 --> 00:21:06,030 Dan Shea: become serial entrepreneurs. They do a deal and then they build another business and then another. And 243 00:21:06,030 --> 00:21:12,190 Dan Shea: And so it's an exciting time to be in the entrepreneurial orbit here in the United States. 244 00:21:12,730 --> 00:21:15,770 Kevin Mako: Yeah, definitely an exciting time. Dan, thanks again for your words of wisdom. And as always, 245 00:21:15,870 --> 00:21:20,050 Kevin Mako: I'll put the links below to anyone else to click through. They can click on the web links there. 246 00:21:20,410 --> 00:21:23,210 Kevin Mako: Dan, appreciate you being on the show. Look forward to talking to you again soon. 247 00:21:23,350 --> 00:21:24,910 Kevin Mako: Thank you, sir. Thanks, Dan. Take care. 248 00:21:25,370 --> 00:21:28,810 Kevin Mako: Thanks for tuning in to this episode of the Product Startup Podcast. 249 00:21:29,330 --> 00:21:34,350 Kevin Mako: If you found some value in the show, please do us a huge favor and hit the like button and subscribe. 250 00:21:34,910 --> 00:21:35,910 Kevin Mako: If you have any questions, 251 00:21:36,030 --> 00:21:40,730 Kevin Mako: guest suggestions or anything else, feel free to reach out to us anytime at our email, 252 00:21:41,030 --> 00:21:48,290 Kevin Mako: podcast at MakoDesign.com. This show is hosted by Kevin Mako, North America's leading expert on product 253 00:21:48,290 --> 00:21:53,810 Kevin Mako: development for hardware startups. And the podcast is produced by Mako Design, the original firm 254 00:21:53,810 --> 00:21:58,870 Kevin Mako: providing end-to-end consumer product development services tailored specifically to hardware startups, 255 00:21:59,090 --> 00:22:05,950 Kevin Mako: small manufacturers, and inventors. Take your product from idea to store shelves at MakoDesign.com. That's 256 00:22:06,030 --> 00:22:08,570 Kevin Mako: m-a-o-design.com. 257 00:22:08,770 --> 00:22:10,990 Kevin Mako: Thanks for joining and see you again soon.