From Design Agency To $419 Million Holding Company In 8 Years
Tiny Capital: $5M to 30 Companies - April 16, 2024 (12 months ago) • 32:07
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Shaan Puri | Alright, I've been chasing this guest today for **six months**, begging him to come on the podcast. I heard him on a podcast last year, and as much as this breaks my heart to say it, that was my favorite business podcast of the year—and it wasn't even our own!
He was so good that I asked him to come on. His name is **Jeremy Giffon**. He was the first employee at **Tiny**. If you've ever listened to the podcast, we've had **Andrew Wilkinson** on many, many times. They basically turned **$5,000,000** of starting money into about **$500,000,000** of equity just by buying businesses that cash flow.
So, they bought small businesses that cash flowed and kept recycling, recycling, recycling. Over **ten years**, they turned it into **$500,000,000**. I wanted to ask him what it was like in the early days. What were those first deals like? He was there before they even had a name—before they were even called **Tiny**.
We asked him about his best deals, his worst deals, and the weirdest deals he's ever done. We also discussed the negotiating tactics he learned. This episode is amazing; it's a **10 out of 10** for me.
Enjoy this episode with Jeremy!
"What's up, Jeremy? Welcome to the show! We figured we've had your mentor on enough times now—Andrew is probably the most popular guest on the show. Enough of Andrew! We gotta go to his protege. We gotta go to the young gun who was there from the beginning. Welcome to the show, man!"
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Jeremy Giffon | Thanks for having me, guys.
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Shaan Puri | Let's put Tiny into context because I think maybe somebody listening to this doesn't actually appreciate what we're talking about.
Tiny's simple story is that they had a services business, an agency, and then they had excess profits. I think you can correct me if I'm wrong, but I believe the numbers are something like they took $5 or $6 million of initial equity and put that into Tiny. They said, "Okay, we're going to try to buy a business with this."
They ended up turning that $5 or $6 million of initial startup capital into roughly a $500 to $600 million public company. Tiny owns maybe a portfolio of 30 businesses or something like that over roughly 10 years—around 8 years, actually.
So, it's kind of amazing. In 8 years, they turned $5 million into $500 million. I'm doing round math here, fuzzy numbers, but first of all, is that the right math? Is that roughly the right story?
Then, walk us through the beginning days of that because you were there at the very beginning, at 19 or 20 years old, as kind of employee number 1. Walk us through that.
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Jeremy Giffon | Yeah, so I knew Andrew because when he was starting Metalab, I was working on another startup. We shared the same studio apartment; our office was in a studio apartment. He was in the bedroom area, and we were in the kitchen. We would keep a blow-up mattress in case the fire guy came around, and we would just say, "Oh, you know, Andrew lives here, but I just have a lot of friends over, you know, working on stuff."
Effectively, Metalab, the short version is, Metalab was throwing off a fair amount of free cash flow. I think it was in that range of low millions a year. The idea was just to go use that free cash flow to buy a business.
You know, that's the thing with agencies, right? There's not a lot of reinvestment, so you gotta do something with the cash. If you're not gonna put it in the S&P, like that's too boring or whatever, then you gotta figure out something to do with it. So that's kind of what we did.
It's funny, like, a lot of people holdcos and stuff are really popular now. A lot of people ask, "How do I build tiny effectively?" The first step is like, "Well, you know, bootstrap a business that makes a million dollars in free cash flow, and then get back to me." The rest is pretty easy, and that's the first thought. | |
Sam Parr | And you said it took 8 years. In reality, I think Metalab, the agency, was already 8 years older. I don't know what it was, but it...
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Jeremy Giffon | Was, yeah, that's right. Metalab is probably 15 or 16 years old now, so it was a long slog. I mean, Andrew just started really young.
One thing that's really helpful is that Andrew, Chris, and myself, I mean, we're all big users and fans of Dribbble. Andrew really had that company in mind for a long time, which I think is another really nice thing to have. It's very good to start with a deal, even when you're fundraising or whatever, to actually have a concrete thing that you want to go do and use that as the jumping off point for building whatever it is.
I think it's always so much better to have that than to kind of be abstractly saying, "Oh, I'm going to start a fund" or "I'm going to start a holding company" or whatever. So it was like, Dribbble's really cool. We would love to be the right owners for that. Andrew knew the co-founders there, and maybe we could buy that, and that would be a starting off point.
It's all very real and concrete versus saying, "We're going to build a holding company of technology businesses" or something like that. | |
Shaan Puri | Now, you're three guys who've never bought a business before. Take me back to when you're sitting in the kitchen or whatever of your apartment, office, or hangout lounge.
Are you guys like, "Hey, can we buy 'Buying Businesses for Dummies'? How did you even figure out how to do it? And also, if this is a good idea, because it's a big risk, right?"
I think, you know, probably $4 to $5 million of equity went into that deal. That's a big deal; that's not like a couple of hundred dollars at that stage.
So, what were those conversations like at the beginning, as much as you can remember?
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Jeremy Giffon | Yeah, I mean, it was, you know, like anything, there's generally one way that you can categorize sellers: it's people who care about what happens to the business after they sell it and people who don't.
For those who care, it's a huge trust exercise. You know, "Are you gonna screw up my baby?" In their case, they've been working on it for a really long time. Their names are very attached to it, and there's a big community. Community businesses are really difficult; you know, the community can really turn on you fast.
So, yeah, there's that whole piece. Then, mechanically, it was literally like... I don't think we even had a book. We just looked it up online. I would literally go on Legal Depot and get a Letter of Intent (LOI) off there, edit it, and you know, for the first few deals, I was 19 or 20, and Andrew would be like, "Can you go get an LOI for this?" I didn't know what that was, so we would just go download one and write it up.
It's interesting because one thing that we didn't realize—this is an example of just the benefit of not having a lot of experience—typically, when you do an LOI, it's pretty far along in the process. We would just fire them out because we read them, and in an LOI, the only thing that's binding usually is the exclusivity, not the price or anything else.
So we thought, "Okay, this is a totally non-binding thing, so let's just chuck it out there." It's nice to have something on a piece of paper; it's kind of like a term sheet, although even term sheets are socially more binding. We didn't realize that, oh, in private equity, an LOI is like a pretty sturdy commitment or whatever.
You know, that was for better and for worse. On one hand, it let us move really fast. On the other hand, we learned quite quickly that, okay, you're not supposed to go back on what you changed in the LOI and that kind of stuff. There are all those little things where just not being familiar with the process really kind of let us move fast. It let us be friendlier, and that was the whole...
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Jeremy Giffon | Like we had both had these kind of bad experiences with buyers, and we thought, "You know, there's gotta be a better service to be done there," basically.
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Sam Parr |
I had a handyman come over yesterday. He comes to my front door and he's like, "Show me what you need done," whatever. And I said, "Great, that's what I need done."
He goes, "Here, before we start, I need you to do something." And he pulls out a notebook and he writes, "My rate is $50 per hour." He hands it to me and goes, "Sign this for me."
I just... I go, "Okay, cool. I'm aware of that."
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Jeremy Giffon | That's awesome.
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Sam Parr | He's like that way.
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Shaan Puri | Just fits in his hand, shakes it, and he's like, "This is now official."
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Sam Parr | I appreciate your style. That was like the tiny loi.
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Shaan Puri | Hey, real quick! You know, one of the cool parts about what we're doing is that people have reached out and told me that they've built actual $1,000,000 businesses and made their first million off an idea they heard on the show. That is crazy! That's wild! That's why we want to do the show, and we want to see more of that.
One of the questions we get asked over and over again is, "Is there some kind of idea database or spreadsheet where we list out all the different business ideas that we've talked about?" Well, the answer is finally yes! The fine folks at HubSpot have dug through the archive and pulled out 50+ business ideas and put them into a business idea database. It's totally free! You can click the link in the description below to get the database for you.
Alright, now back to the show. So, at the time, was Dribbble like an obviously good business? Because it turned out to be an amazing investment—probably like a, I don't know, what is it, like a 50x on your money there, right?
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Jeremy Giffon | Yeah, more than that.
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Shaan Puri |
More than a 50x? Amazing! What did you guys do, try to underwrite the deal? Were you in Excel, like dragging some 10% growth over 20 columns? How did you guys... What did the deal look like, and what did you expect?
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Jeremy Giffon | Again, it was pretty obvious that it was a great business. I think Andrew's told this story before, but there were some immediate Day 1 levers. A big part of the business was advertising, and we could find better advertising providers and things like that.
So, there were levers you could pull on Day 1 that were going to improve the business. But yeah, it just felt like this big opportunity. It was a top 1,000 website with millions of active users. It was very important. You know, when it launched, I think I bought my Dribbble invite on eBay or something like that. It was really hot for a while.
It was just this kind of cool thing that didn't really exist. There aren't a lot of independent social networks that have millions of users. We negotiated a pretty fair deal. I think the other Buffett line is, "Price is my due diligence," and that helps a lot.
But no, we never thought any of the deals could be, you know, 50+ times. We were always just like, "Can we make 20 or 30% cash per year from this business?" That would be great, and anything after that is just kind of upside.
Regarding models, you know, Andrew used to make me do discounted cash flows because it was kind of like the thing that you felt investors ought to do. And then at some...
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Jeremy Giffon |
I was like, "Here's your spreadsheet," but I'm just making up all the assumptions in the spreadsheet. I think it was like... so many of these things are just like comfort blankets or whatever. You just... it makes you... it's a big, scary thing that you're doing, and it makes you feel better that you have it so you can look at it and be like, "Yeah, we've modeled this out, you know?" But it's like... it's bullshit. You're just making it up.
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Shaan Puri |
You also had a great quote. You said something to me about quantitative analysis. It was like, "The more quantitative analysis, so the more numbers, numerical analysis you're doing about a business, the more you're commoditized in your analysis." What does that mean? Can you unpack that one?
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Jeremy Giffon | Yeah, my favorite anecdote here is about the Facebook IPO. Barclays put out this research report where they stated what they thought the business was going to be worth. The way they did that was through a discounted cash flow analysis.
A part of that calculation is determining the terminal growth rate—essentially, what is this thing going to grow at forever? They put it at 3%, which is what most companies are. This led them to a $200 billion valuation.
Now, in the next 10 years, Facebook grew at 30% a year, and it became a $2 trillion company. This is just an example of how, despite all the modeling and research, they were so off—like, they were an order of magnitude off.
So, what was the point of doing any of that? It would have been better to think really hard about how much Facebook could actually grow, using more fundamental principles. For instance, considering what percentage of the planet could use this service is a much more basic approach.
Additionally, a lot of the quantitative stuff is totally commodified. People know how to do this; you can learn it in school. Therefore, it may be a useful baseline skill, but you're not going to gain any edge that way because everyone can do it.
The real edge in quantitative analysis lies with firms like Two Sigma, Jane Street, and those with MIT PhDs. You're not going to create a better model for a company than the next guy and somehow gain an advantage there. | |
Sam Parr |
So then, when you're looking at a deal, when you're trying to evaluate a small bootstrap business - a business doing anywhere from $1 million to $30 million in revenue - what are you looking at to spot the opportunity? If it's not the... I mean, are you... How much do the financials and the cash flow statements actually even factor into that? Or are you just thinking, "I can make this bigger"? I mean, what part of the numbers actually matter to you?
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Jeremy Giffon | Yeah, it's pretty basic, right? It's like, okay, let's make up numbers. It's doing $5,000,000 a year in revenue and $1,000,000 in earnings. You think, okay, on day one, I could raise the prices by 30%, reduce headcount, or launch this new product.
Would you pay $1,000,000 for that? Yeah, of course. Would you pay $3,000,000? Yeah, probably. Then you can just kind of go, and I think where modeling gets important is when you're at the very edge of that. You're like, would you pay $10,000,000 for that?
Then it's like, well, a lot of things would have to go right, maybe, or whatever. But there's some number there where it's like, yeah, you know, I'd pay $3,000,000 for a business making $1,000,000.
So then the trick becomes, okay, can you get the business for $3,000,000? That's where it's like, you know, Tiny was in a lot of bids with other folks. I don't think we were ever the highest actual price, but we often won deals because we could offer other things.
So that comes back to, like, why you on the deal? You know, it's because the very common thing that would happen is we'd get pretty far with the seller, and then they'd say, "Hey, you know, we like you guys, but we've got this offer for 25% more, so we're gonna go take it."
Very often, I'd be like, great, go explore that. Then it turns out that offer was not as real as you thought, or it was six months of whatever. There's more debt, or they didn't have the financing.
Then you actually figure out that, oh, there are other things in the deal that are important: the ability to get it done, the ability to be honest, to be trustworthy, to do things fast—like all those other soft things.
So it's more like, are you able to get a price that's really a no-brainer? Or at least that's how I look at it versus, "I really think I'm smarter than everyone else and I can pay slightly more." I mean, that works for people; people do that. But it's just a totally different game.
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Shaan Puri | I'm always fascinated by the people behind these businesses. What can I learn? You know, Tiny is a great business, but it was created by people. It was created by Andrew, by Chris, by you. I'm like, how do they think about things? What do they know about what they're doing? What worked for them? Ultimately, what are their superpowers?
I asked you, "What's Chris's superpower?" Because forget Andrew; everybody knows Andrew. He's popular, he's out there, he talks, he's got a big following. Almost nobody knows Chris. I had dinner with Chris, and I was like, "I fucking love this guy!" This guy's dynamic, he's really engaging, and he asks great questions.
I've only known him for a couple of hours in my life. You've known him for a lot longer than that. What is Chris's superpower that he brought to Tiny?
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Jeremy Giffon | I mean, Chris' superpower is just being able to... Andrew is so high-paced and so high-energy that Chris is just able to modulate that and kind of be the sober second thought. You know, "We're not gonna do this," or "That's way too much," or whatever.
An interesting piece of the Tiny partnership, at least at the beginning, that I thought was really quite unique and interesting is that Chris and Andrew had Tiny as this vehicle that they would share together. But then they could also do things on their own, you know, investments, businesses.
That actually, like, I don't even know if it was intentional, but it provides this great release valve of, "Oh, okay." Like, all the time, Andrew would come up with some, you know, cockamamie notion about some restaurant or whatever, and he would just say, "Okay, I'm gonna go do that on my own."
Chris could have the same thing. Chris was great at investing in public equities, and he could go do that on his own. I know that doesn't directly answer about Chris' superpower, but it is this interesting structure.
I think one thing that can really go wrong in partnerships is if you're dedicating your whole life to this thing and everything you do is gonna be through it. It can really turn into this prison if you don't share the same taste as your co-founder. So having this release valve and being aware of that is really nice.
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Shaan Puri | People normally pick partners who are like them, right? But Andrew and Chris are not like that. You know, I guess, what did you learn from that?
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Jeremy Giffon | Yeah, I mean, I would also say that Andrew is really good at sales and creating this new vision. Chris is really good at being the negotiator and actually getting a good deal and structuring it well.
There are all kinds of things about negotiation. One interesting aspect is that I would often be the front guy on a lot of deals and would come back to them while they would kind of be quarterbacking it.
What was nice is that I would throw out an offer that I thought was really aggressive. It was kind of the most that I could emotionally stomach.
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Sam Parr | Aggressively high, aggressively high, low. | |
Jeremy Giffon |
I, you know, really low... really low. And so this is... I wanna be clear, this is back in the early days when we had no money and we were really trying to be scrappy. Tiny is not really like this anymore, but...
And then I would say, "Okay, like I've really got this down, you know?" And then they would just look at me, because they never talked to the seller, and just say, "I think you can do like 25% or less."
And like... sometimes I feel like I wanna throw up, you know?
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Sam Parr | Talk through that. When you have to present a **bad** offer to someone, I imagine that sometimes, maybe not a lot, about 10 to 15% of the time, they're like, "Okay."
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Jeremy Giffon | Yeah, more than that. And actually, what's even rarer is... at least I always have this fear that they're just going to lose it, you know? Like, how big?
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Shaan Puri | Is it? | |
Jeremy Giffon | And that almost never happens. It happens sometimes, but it almost never happens.
Another nice dynamic there is you can always say, "Well, hey, I'm on your side." It's the old car salesman gambit of, "My manager's killing me." It's the same exact setup, right? And that's super helpful.
Chris shared all kinds of tricks with me. One great one is that it's always best to just kind of, when you float an offer, to just not say anything else. People will immediately start negotiating against themselves.
So one trick that you can use, if you're on... I guess it probably doesn't work on Zoom, but if you're on just a call, is you can say your offer and then hit mute. You can start saying, "Oh, you know, whatever," but they'll just hear the silence. That's a thing as well because oftentimes you just need to let it float and sit out there. But it's too uncomfortable for you to actually do that.
Dude, I've got this friend who works in the CIA, and I was talking to him...
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Sam Parr | And he has to negotiate with people. You know, basically, his job is to convince people to become spies.
So if he goes to the Middle East, he's got to convince a guy who's loyal to some country in the Middle East to commit treason. When he goes to these negotiations, his tactic—because he said the same thing—is, "I say what I want and what I want to happen, and then I shut up."
His coworker was there, and he was like, "Dude, they do this to me all the time just at work. I'll notice they say something, and I just want to fill the silence. I want to keep talking because it makes me uncomfortable. I end up just talking, talking, talking, and they sit back not saying a thing. They always get their way."
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Jeremy Giffon |
Yeah, totally. I mean, one very cynical way of looking at negotiation is that it's just who can bear to be uncomfortable longer. And... like, that's certainly true. You can do that in a retail setting, you know?
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Sam Parr | Sean does that all the time. I think when he negotiates... | |
Shaan Puri | The king of the awkward silence.
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Sam Parr | Yeah, he's very comfortable.
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Shaan Puri | I have a condo on Awkward Island.
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Sam Parr | Yeah, he's the mayor of that area where he's just very comfortable being uncomfortable in the conversation.
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Shaan Puri |
Jeremy, you told me something else that Chris taught you that is less about the gamesmanship. I think when we think about negotiation, we often think about the gamesmanship - what do I say? And I think you already said one interesting thing, which is a lot of times it's what you don't say. It's to stop talking and let them talk. But another piece you had mentioned to me was like, it's not you versus them. Can you explain that? Like, how Chris taught you it's not you versus them?
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Jeremy Giffon | The way that I like to frame it is that the more mature approach you can take for your entire life, the less likely you are to be known as a "bastard" who's just relentless in negotiations.
I love this idea: in a traditional negotiation, you're sitting across the table from one another. However, I really like to reframe it so that you're both sitting on the same side, and what's on the other side of the table is the problem.
The problem can be, for example, you want $50 million for the business, and I want to pay $20 million. But it's still this: "Okay, this is a problem. Let's work together to figure this out."
It's a very subtle shift, but it makes a huge difference. I think that's how you start to unearth what's really going on. Maybe it's not just cash; maybe there's something else that's more important for you.
Why do you want $50 million? What is it about that amount that is so important? And why do I feel like I can only pay $20 million or whatever?
This approach works really well. I use it every day. You can apply it to relationship problems and everything else by making the problem external and then putting it out there, saying, "Let's work together on solving this."
There's just something so much better about that than the kind of negotiation where I'm going to hit mute, stare at you, and try to break you.
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Sam Parr | You know, like, well, see, Jeremy, the problem that we're trying to solve is I want the money in your bank account to be in my bank account.
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Jeremy Giffon | Yeah, exactly. | |
Sam Parr | I want that Chase account to say $50. Yeah, yeah.
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Shaan Puri | Now, it is true though, you know, one of the things my dad taught me—one of the best things my dad ever taught me—is that when you go into a negotiation, it's not us versus them.
He goes, "Make a table of your needs and basically your needs, and then your gives." So, like, what do you have to offer, and what do you need back? Then, what do they have to offer, and what do you need back?
They're never perfectly symmetrical. For example, some of the things they need are very easy for me to give; they cost me nothing, or I'm totally comfortable giving that.
It's actually their fear or their big sticking point that is something that's not so hard for me to give on. Or maybe I could go out of my way to give more than they're expecting in that area.
In this other area, I need something, and they're happy to give it. So that's usually the better way to do it. | |
Jeremy Giffon | My favorite question is, "What would need to be true?"
So, it's like, okay, you want to sell your business for $100,000,000. What would need to be true for me to pay $100,000,000 for it? You can just lay it out. What would make this a no-brainer?
You can do that in any situation. Sometimes it's impossible, but oftentimes it's far more possible than you think when everyone actually lays that out. Usually, there's some sticking point that you don't realize, or it's something that is kind of outside of the scope of things you've already talked about.
I'm always amazed by how much that works. It works, like, as I've been fundraising. It works there. Like, "What would need to be true for you to be like, 'Oh, it's easy for me to give you money?'"
Or, you know, for a trip, "What would need to be true for everyone to be excited about going on this trip?" It's just such a good question, and it really sets that up as, like, "Let's collaborate on..."
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Shaan Puri | This was my pickup line: "What's a guy like me gotta do to be with a girl like you?" And then she was like, "Do you have a friend?"
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Sam Parr | Yeah, what's up? | |
Shaan Puri | His name.
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Sam Parr |
You have this other thing on here where you talk about how... What do you say? A cold email is the most asymmetrical trade, and that you've actually cold emailed a bunch of people. There's one guy in particular who you listed that I want to ask you about, but it sounds like the cold email has done well for you. Explain more.
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Jeremy Giffon | Yeah, I think it's funny. I've been saying this a lot more publicly, in groups and stuff, and it's still like if everyone cold emailed, the ARB would go away. But I think it's just too scary or whatever, and people don't do it. It's still a huge opportunity.
I will say, like, the addendum to that advice is you gotta have the goods when you show up for the meeting or the call or whatever. I think, like, I don't know, maybe it's just anecdotally because I talk about this a lot. I get a lot of cold outreach, and you also, like, the second part is you gotta be really good when you show up.
But if you're good when you show up, like, it's just this incredible, incredible kind of hidden secret, which is there's always a scarcity of talent. No matter who you are and how much money you're worth, there's a scarcity of really awesome people.
So everyone has an infinite appetite to meet people who are interesting, talented, have a unique view on things, whatever. If you can present that, you will really kind of go a long way.
And the downside, I can't even remember. I'm sure I've sent 100 that have never been responded to. I've never gotten a bad response; it's usually just no response. I don't even remember the non-responses, but the ones that I've gotten responses from have been amazing.
So I definitely think more people should do it, especially if you're young or you're a student. That alone can be enough of a hook that most people will meet with a student if they seem switched on and interested.
Yeah, I'm still amazed that people don't do it, but I've started to see people do it, and then they show up and, like, they don't have anything to say or they don't have questions prepared or whatever, and that can be really bad. | |
Sam Parr | We already know your first deal, but that was the first one. I want to know: first deal, worst deal, best deal, weirdest deal.
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Shaan Puri | It's like the "Fuck, Murder, Mary" of probably.
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Jeremy Giffon | What we... | |
Shaan Puri | Did we do the first deal, Dribble? Which might also be the best deal. What's the worst deal that comes to mind? What's a big mistake you made?
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Jeremy Giffon | The worst deal.
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Sam Parr | And name names, and list their email addresses and social media handles.
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Jeremy Giffon | Yeah, the worst deal is actually the one that I can say the least about, which should indicate how bad of a deal it was.
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Shaan Puri | But give it. | |
Jeremy Giffon | Give it to. | |
Shaan Puri | The abstract.
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Jeremy Giffon |
Yeah, the worst one was just that the person was dishonest, and I should have known. I didn't... and I ignored it for greed reasons because I thought this was such a good deal. I could look past these things.
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Shaan Puri | When you say, "I should have known; I ignored it," what are some things people could look out for? What can I learn from that?
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Jeremy Giffon | Yeah, it was not this deal, but there was a friend of mine who buys similar types of companies. He did a deal where they flew in the founders to meet them in person.
The first night, the founders wanted to know where they could get drugs. You know, that in and of itself is not a strong signal, but in that context, in that situation, it's like, "What more do you need to know?" It turned out that they were doing a bunch of stuff that they didn't disclose or whatever.
It's always stuff like that. Someone who's really flashy is almost always a bad sign. All these little things...
In the case of this deal, I introduced the person to a bunch of different friends and experts, and they were all like, "This guy is really something." You know, I don't really know why you're dealing with this person.
It is funny how you just get the blinders on when something seems so good. I think we've all made that mistake.
So, yeah, that one just turned out that there were a bunch of things we didn't know about, and it went very badly. We lost all our money. It was a really small check, unfortunately, so that was like the one upside, but that one was pretty rough. | |
Shaan Puri | What's the most unique or weird deal?
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Jeremy Giffon |
The best one... I mean, it's kind of too early to tell. One that I really, *really* love is this company called **Mealime**. It's a meal planning app that Tiny bought in 2018.
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Sam Parr |
**Meal planning made easy**
So, 4... 4.5 million people, it says on the website, use this app. And what do you do? You say what ingredients you have, and it gives you a bunch of recipes to cook and lines them out for breakfast, lunch, and dinner.
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Jeremy Giffon | But it was just this really awesome app, made by this amazing technical guy who had built a great product. I remember the moment that sold me: you know how the iPhone turns off when you put it close to your head? He realized that you could use that sensor. If your hands are dirty while you're cooking, you could wave your hands over that sensor to go to the next part of the recipe.
All these little things have huge butterfly effects. It turns out when you do that, Apple thinks that's really cool, and then they feature you in the App Store. There are all these small details. We bought that business, and it grew a lot. We got all of our money back in the first couple of years.
This was the only business, tiny as it was, that we sold. Two major grocery retailers came along, and I guess in a boardroom somewhere, they had just decided, "We need an app." So they both became interested.
It was kind of funny because the company I was at before Tiny had sold to Workday, and it was a pretty difficult experience. I viewed it as my chance to get another go at selling a company to a public business. It was going to be my turn to get a good deal.
Then we sold it for a huge revenue multiple, making a lot of money—over 25 times our investment. It's still used today; if you look it up, it's this great thing. I think the original team is still there, and they were very happy with the outcome.
I just love that because it was this perfect little situation, this great little craft app—just someone who cared a lot about making a great product. I love those. | |
Sam Parr | And the weirdest deal.
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Jeremy Giffon | It was basically this company, a big Fortune 500 tech company, that bought a business. The business had two business units, and the big Fortune 500 only wanted one of those units. They basically had to divest a bit very quickly.
We were able to buy it for $10,000,000 of recurring revenue, but the business was shrinking because it was built on top of another platform that was becoming less popular over time. We were able to buy it for so little that we borrowed all the money and then paid back the loan in like 3 or 4 months. So, we basically got it for free.
We bought this out of a tiny fund, and we could write this great update to our investors saying, "Hey, you know, we didn't call any capital, but we own this new business. We're going to do a distribution soon." It was like small dollars, but it's cool to pay nothing for a business.
The interesting part is that we also got a domain that's probably worth $1,000,000 or $2,000,000, depending on how fast we wanted to sell it. It was kind of this fun little deal of like, can you actually buy a company for no money down?
You know, it won't be a business that will grow for 10 years, but we'll make many multiples of our money on it. It's fun! In the actual fund statement that KPMG does, they have to list the cost. The accountants listed it as a $36 cost basis, which is, I guess, like the actual money that went into the deal. Those are cool; you can be really, really creative. You don't have to put a lot of money down.
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Sam Parr | How did they find you, or you them?
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Jeremy Giffon |
In that case, we knew a board member, and it was a situation where, again, we made a bid. They didn't like the bid, so they went and tried to shop it around. Turns out, there's a very limited set of buyers for that kind of thing, especially ones who can do a deal really, really fast.
So it was kind of this... we understood why we had the right to win this deal. We understood that money was not the most important thing here, and so we were able to get it for this great price.
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Shaan Puri |
That's it for Part 1. We actually kept talking to Jeremy, and it was so good that we're going to turn it into a two-parter. The second part is all about what he would do today.
So, the first part was kind of like how they built Tiny, the deals, the lessons learned... that was the past. And now I asked him basically, "If I was going to do Tiny today, what would I do? What deals would you be looking at? What businesses do you think are great buys? What opportunities do you see?"
He tells us the single best investment opportunity he sees today in this next part. Enjoy! That's coming out tomorrow.
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