How do you turn a VC rejection into a $725M exit?

Jason Kirby (00:02.961) Hey everyone, welcome back to Fundraising Demystified. Today we have Dan Reich, serial founder, exited founder, and investor joining us on the show today. Dan, welcome to the show. Dan Reich (00:14.542) Hey Jason, good to be here. Thanks for having me. Jason Kirby (00:17.265) I'm excited to have you. You have an impressive story of multiple ventures, multiple exits, raising across over a decade of experience. Can you just give the audience a little bit of background on your first entrepreneurial effort and what that's evolved to over the last 15, 20 years? Dan Reich (00:36.238) Yeah, certainly. For me, it all started in high school. That's really when I started my first company. What happened was I got really into the internet and technology, thinking around with AOL and all of the things from that period of time. And this company called eBay popped up. And so I went down a rabbit hole trying to figure out what I could buy and sell. And I ended up buying bouncy balls wholesale. off of eBay and I would bring them to school and I would sell them at retail to my friends and people I didn't even know. Big bouncy balls were 50 cents, little ones were quarters and I made a good amount of money. I was selling them out of my backpack and locker. And then eventually I made a good amount of money for a kid in high school. I got tired of doing it. I would give them all away, created massive chaos in the hallways with bouncy balls flying everywhere. Ended up getting suspended for that, but that was my first foray or one of them into, let's call it hustling for lack of a better word. And a friend of mine saw this and said, well, Dan, you know, this thing called the internet pretty well, what we now call e -commerce in particular. And he said, my dad knows the guy that has urban apparel that he sells also wholesale. Maybe we meet with him and maybe there's a world in which you can do what you did with bouncy balls, sell them, but we can use him as a partner to get the problem. And so I said, sure, let's go take a trip to meet with him at the Jersey Shore, which is a foreshadow into where the story ends. And so me and my buddy hop in my car, we drive down to the Jersey Shore, we get into this warehouse. And in the warehouse, you have folding tables everywhere with clothing all over the place. So think rockwear jeans, Apple bottom, Sean John, et cetera. And we sat down with him and that was the conversation. He's like, look, I've got all of this product. I know how to do fulfillment and drop shipping, but I don't know how to do is that internet thing, but you do. Why don't you build a website and you deal with all of the sales and marketing and I'll handle the rest. It's like, great. So off we went. We created a partnership. We created a company. I built the website. I set up a computer, a credit card processing machine in my office or my house. I hired a customer service rep to Dan Reich (02:54.158) deal with all the orders and by customer service rep, I mean my mom. And I would get up at six o 'clock in the morning and I would run Yahoo ads and Google ads and I'd go to school. And while I was at school, my mom would deal with all the orders and customer service. And then I'd come home and I'd reconcile all of it, the orders, the ads. And I rinse and repeat that each day. And it was going really, really well until we started getting a bunch of customer complaints and issues. And After enough of them, I went back down to meet with my partner and said, you know, dude, what is going on? And he reassured me it was just all circumstantial and it was all fine. It would be better. And so back to work and to school, I went and play it forward a little more. The customer complaints kept coming in to the point at which I remember getting one very specific customer complaint that was pretty much like a death threat, which is like. We, if you don't do right by us, and by the way, we were shipping internationally all over the world. And it was something to the effect of like, if you don't do right by us, we're going to come after you and we know where you live in insert, very specific details here. So at that point I was like, okay, we're not, this isn't working. I'm going to shut the business down. So we, we shut the business down and I lost maybe rather, I should say my parents lost like $2 ,000 that they invested in that company. And a few months later, my father comes home with a local newspaper and he puts it on the table and he says, look at page six or whatever. And I opened the newspaper and lo and behold, the partner was in a giant photograph of him getting arrested by the FBI for grand theft, stealing goods off the back of trucks, like you would see in the Sopranos or something. And so. That was really my first lesson in business. And more specifically, I learned two really important lessons. One, man, what a fun game to be playing, building businesses. And I loved it. It was just addicting immediately. And the second piece is the most important business lesson in the world, in my opinion, is choose your business partners wisely. And so I was fortunate at a young age to learn that lesson the hard way. And so every business I've done since then. Dan Reich (05:19.918) That's the number one thing I optimize for it's who are my partners, my co -founders, my colleagues. Cause if you get that equation, right, not only are you set up for success, but you're also set up to avoid failure. And you're also optimizing for fun and engagement and avoiding kind of misery and you know, work. So yeah, that was my first company or legitimate company. Fast forward a little bit, graduate high school. I go to college. I study. electrical and computer engineering. And along the way, joined a frat. Our frat got kicked off campus for a huge, yeah, we got, we had a huge Halloween party. We got kicked off campus, which was a bummer because the college version of me was super sad that he had nowhere to go now to go out on the weekends. And so went to a local restaurant that let Jason Kirby (05:57.713) It was too good. Dan Reich (06:17.198) 18 plus year olds and where many of the venues there, you had to be 21 and up. And so I said, look, I'd love to throw a party here. My crack got kicked off campus. We'll throw a party here. I'll sell tickets. We'll donate the proceeds to the Red Cross. And he's like, sure, go for it. So we throw this party and it was a huge hit. People had such a great time. The next day was getting texts from everybody. Dude, that was amazing. When's the next one? And so I'm having this conversation with her with my friend that I was studying engineering with, and he goes, dude, that's amazing. We should do more and we should turn that into a company. and by the way, my father's an attorney. He could help do all the legal paperwork for us and get it stood up as a company. So I say no more, great, game on. And so we started a company called the Runaway Productions, which started as a party company, but then eventually evolved into an events and marketing company where we would throw these parties and events, but we would then bring in local and national advertisers to pay for the events in which we promote other brands and services at the parties to that college demographic. And we did a handful of those, not only in our college, but at other colleges as well, we franchised it out. And it was a ton of fun. I mean, I remember every year I would go to Las Vegas for the Consumer Electronics Show with my boss. I was building computers in high school. And I remember stumbling into this booth and I was just fascinated by this company. I was in there for an hour and they were making speakers and speakers and backpacks, crazy cool headphones. And the founder of the company was like, Dan, why don't you come and work for me? I was like, dude, I'm in college. I can't, my parents would kill me. I cannot drop out of college. but it's like, I'd love to work together. And I was like, well, look, I have this events and marketing company. Why don't you send me product and I'll like promote it and give it away at a party. He's like, we haven't done that before. What else do you need? I'm like, I don't know. Can you make a banner or something? I'll hang it up behind the artists. He's like, sure, no problem. So I get a bunch of headphones shipped to me in a cardboard box and we threw a huge party. I hang this banner up and that was the first live event that Skullcandy had ever done. And since that time, that became a huge part of their marketing plan. I remember years later, I was at a big concert in, I think it was Pennsylvania. Dan Reich (08:38.222) huge skull candy banners. And I was like, I remember day zero for this. So that was my second company. It got to the point where my college roommates who were helping me promote the events and sell tickets, they were kind of like, well, we want to do this too and compete with you. Which as you can imagine, we were four people in one room, two of us promoting one. event and then the other two competing with us would make for an awkward and weird dynamic. So we were like, look, why don't you just become partners with us? I'll give you half the company. We'll be partners. You do all the heavy lifting and then I'm going to go on and build another company with my friend that I was doing engineering with or two friends that I was doing engineering with. And so that's precisely what we did. And we started another company called the campus Atlas .com and the campus Atlas. Vision was to create a student portal. so that any college kid under the sun would have everything they need in one place on this website. Everything from class schedules, professor ratings, drink specials, kind of weather, email, like you name it all in one place. We rolled that out to about eight college campuses. And at that point we were in fundraising mode. That was like, okay, we're gonna make this a real startup with institutional venture capital and go for it. Like it was right around or shortly thereafter the Facebook phenomenon was happening. And we're like, we can be Mark, like we can do that. So we started to run at that and graduation was coming around the corner. And I ended up connecting with somebody that was working on another startup in the advertising space, online advertising space. And he's like, look, I helped build a company called advertising .com. We sold that for $535 million to AOL. I'm working on a new next generation version of that company with Jason Kirby (10:04.977) Ha ha ha! Dan Reich (10:32.974) people from that company and others. For example, one of the early partners of his was the number one very first sales guy at Yahoo. Like the founder Jerry Yang would sleep on his couch when they were inventing display ads and the way the internet makes money. So that was just too intriguing to, like not do anything with. So I put that startup, my campus Atlas on hold. and then Became an intern at this company called low to me. and we went from maybe 10 employees. And by the time I left, we were maybe over a hundred sub, you know, million in revenue to many tens of million in revenue. And I got to see what a high growth venture back company looked like. And it was incredible. And that was the point at which I was like, okay, I got to get back to really what I wanted to do and build my own company. So I left and. Reconnected with two buddies from college. We started to work on this company called Spinback and the idea for Spinback, remember this is Facebook era. Everybody, every brand knew they needed to be in social media, not Facebook in particular, but they didn't know how or what it meant for their business or how much money they were making. And so we solved that. We helped online brands and retailers measure how much money they were making from Facebook. And we raised money on a convertible note from friends and family. embarrassingly little money, we effectively bootstrapped it and got it to the point at which we were going to raise venture capital. There's a crazy story in that whole process. We were pitching people, we were told no, we ended up getting a yes from someone that told us no. Specifically, I remember we pitched first round capital, that was the firm we wanted to work with. And the feedback they gave us was like, You guys are too young to be doing B2B enterprise sales. If you're going to be doing B2B sales, you need a real enterprise sales expert like John Doe. Like they gave us a specific person that did sales, I think at PayPal who lived in the Valley. And you don't have any enterprise customers. And so we're like, okay. So over the next month or two, we tried to do all the things we said. Jason Kirby (12:34.353) Yeah Dan Reich (12:58.542) They said we could not do. So we actually flew that guy, John Doe, out to meet with us in New York, took him out for dinner, told him what we were up to, what we were doing, got him incredibly excited to the point that he wanted to work with us, but also told the investors that actually they do not need, they don't need me. They've got it kind of figured out. We also ended up signing enterprise customers like QVC, which will become an important player in my next business. And, The other thing we did is we ended up getting another term sheet from another fund. So one day we just, I remember my partners just showed up at their office and knocked on the door and we're like, Hey guys, we know you said no, but we did the things you said you couldn't, we couldn't do. And also we have another term sheet from someone else, but we still want to work with you. What do you, what do you think? And they're like, we'll call you back. And so they call us a few hours later and they're like, okay, we're in. So they sent us a term sheet. We signed it and meanwhile, we turned a no into a yes and we were stoked. I mean, we only wanted to work with them as our lead because we knew of them. We knew them through our other friends that had worked with them. Chris Sprelik and Josh in particular, as like the e -comm wizards out of Philly with the previous experiences that they had. Jason Kirby (14:01.585) Turning a no into a yes. Impressive. Dan Reich (14:25.134) And so we signed the term sheet, but in parallel, we had also been having partnership conversations with other players in the space that we felt were complimentary to us. And in particular, there was a company called Buddy Media that at the time we felt was the largest B2P company building on Facebook, effectively making publishing tools for brands for Facebook. And they had an incredibly large customer base and they had massive distribution, amazing publishing tools. What they did not have however, were what we had, which was hardcore analytics that showed the ROI of Facebook. So it was very obvious very quickly that there was a one plus one equals three scenario. However, we had just signed a term sheet with FirstRound Capital. And so very quickly, Mike Lazaro, the founder, co -founder and CEO of Buddy Media was like, look, forget the financing. Why don't you come partner with us? We'll lock in value now. And together we'll add fuel into this rocket ship and we'll go for it. And so there we were faced with effectively two term sheets and we locked ourselves in the room for like three days straight, literally. Like, I don't think we left the office for those two days debating what we wanted to do. And ultimately what we concluded was the following. We felt like, wow, Facebook is going to go public probably in two quarters. And when they do, it's probably going to be. around $100 billion valuation plus. And when that happens, we're like, man, won't the market look around and say, okay, who's the leading B2B platform on Facebook? And if that question was asked, the answer would have obviously been Buddy Media. And then we're like, okay, through that lens, what's Buddy Media worth? Is it like 1 % of Facebook, 2 %? But either way, like those numbers were pretty big and we're like, and there was that unique window with the Facebook IPO. So we're like, you know what? Let's go for it. Let's literally, and we did, rip up the term sheet with First Turn Capital. And we called them back and said, sorry, but can we say no? Yeah. And they were really cool about it. And then we ended up merging with Buddy Media. And then 13 months later, we sold Buddy Media to Salesforce for, I think it was like $725 million, give or take. So that was a really, really amazing, amazing ride. Mike and Cass built. Jason Kirby (16:30.545) We wanted you, not anymore. Dan Reich (16:52.686) such an incredible company. We were so fortunate to be a part of it. But when the deal was coming up and we were targeting a close, what I realized is I still didn't get a chance to build my company. Like I was super eager to do that. And I could just see the writing on the wall that if I stuck around at Salesforce, which is an amazing company, I probably would have been in a situation where I would have done a good job. Hopefully got a promotion and more money done a better job and, and on and on and on. And that to me scared the shit out of me. What was less scary was actually not having a job and being unemployed and free to go chase a new idea. And so I left the same day we closed the Salesforce. I didn't actually go over to Salesforce and I went back into the wilderness for about a year and a half, trying to figure out what I wanted to be when I grew up and what company I wanted to start. And about a year later. I said, you know what, we actually had so much white space to run at with SpinBack. We never got a chance to see it through. I'm going to effectively reboot a version of that, but with a few different changes. And so I went back and I reconnected with all of my old customers from SpinBack, or many of them, companies like La Satan, Under Armour, QVC, and more. Dan Reich (18:26.99) Yeah, I can hear you. Dan Reich (18:35.726) It says. is uploading. Dan Reich (18:50.222) Okay, yeah, no worries. Dan Reich (19:01.198) dope. Dan Reich (19:13.07) Damn. Dan Reich (19:17.166) Yeah, yeah, no rush. Jason Kirby (19:43.251) Looks like we're back in live. Hopefully the computer can handle it. Jason Kirby (19:53.555) Thank you. Dan Reich (19:56.462) Gotta build out your London podcast video. Jason Kirby (20:00.563) Well, yeah, I have all this cool shit to put up, but if you looked around my office, it's a complete disaster with like my wife's clothes on the floor and my office and like all these things. I'm just like, I'll take the clear, clean background for now and then I'll, you know, throw my cool stuff up later. I got like my thunder logo and like the, you know, kind of like the panels that throw up on the wall and everything, but having a two -year -old, you know, so when I'm finally done for the day, I got to take care of her and then I don't have anything to do. Yeah, one kid. Yeah. Dan Reich (20:08.206) Nice, nice. Dan Reich (20:18.51) Dope, yeah, that's great. Dan Reich (20:26.062) Do you have one kid? Yeah, yeah, I have a five and a three year old, so I can empathize. Jason Kirby (20:33.139) you get it, you understand the priorities. I'd rather spend time with her than putting up stuff on my wall, so, it is what it is. But hopefully one day I'll have an inspiration and have remaining energy to just take care of it, but until then, we'll see. All right, so let's pick up where we left off. My editors will be able to kind of cut it together, but. you know, I think it would be cut off kind of shortly after your decision that you're not fit for corporate life and you like the freedom of being an entrepreneur. so let me, let me kind of tee that tee that up. actually I'm curious actually what's going to be the best transition. Probably me asking a question. so let me ask the question and we'll, we'll cut from there. All right, so Dan, we've covered quite a bit as far as your early career and getting to the acquisition, buddy media, the Salesforce Live. It sounds like Salesforce is, or I should say the corporate life is maybe not your life. It'll be as cushy as it could be. It wasn't the path for you, which I completely resonate after Walmart acquired my company. Walmart wasn't the place for me, even as cushy as they might've made it. So looking beyond the Salesforce acquisition, you kind of started realizing you never really truly got to build your true vision. So kind of continue telling us like what led to the next company, which ironically was not. a SaaS company, but actually a CPG. So tell us about that. Dan Reich (22:06.67) For sure. So I left Salesforce. I knew I needed to get back to building my own company. I wasn't sure what it was. I had a few ideas in the healthcare space, which I ran out for a little bit. Didn't work out for a whole host of reasons, but eventually realized and concluded that even though he had just sold our company, that ecosystem that we now call social media was still only beginning. And in particular, e -commerce was going to really benefit from that wave. And we hadn't, again, we hadn't even seen the full effects of that. So I felt like there was still a lot of opportunity to build a software company in that space. And so that's what my plan was. I reconnected with a handful of my old customers, companies like Binobos, QVC, Lacetan, Under Armour and more. And I pitched them my new software idea. And most of them were in and very excited in particular. QVC was really, really excited about it. And then they said, Dan, actually, can we get your thoughts on a strategic initiative that we have? And I said, sure. You're the third largest retailer in the world. I'd love to hear your strategic initiative. You do 10 billion a year in sales, go on. And what they told me was interesting, but not surprising. Certainly won't be surprising to you or anyone listening. What they said is they realized the world is changing. and moving away from traditional media, television, radio, print, to digital media, i .e. the internet. And for their business model, they have finite shelf space, I use an air quotes, where their shelf space is limited to 364 days a year minus Christmas 24 seven selling products. But they believe that rightfully so, the internet had infinite shelf space. You could sell products anytime, anywhere to anyone in the world, but they had never done that before. And in addition, beauty was the fastest growing category. And so in short, they're like, what do you think about launching a beauty company with us as a digitally native launch? And so for them, it was a business model they wanted to prove. And potentially for me, it was a brand I would be building. Problem is, although I knew their business well and I knew digital pretty well, I didn't know anything about beauty, but I knew somebody that did. And so I suggested we all get lunch. And so when I came back to the office that I was working out of at the time, Dan Reich (24:32.558) firm called Great Oaks Capital founder is also a Wisconsin guy where I went to school. They lit their offices a couple of blocks away from where I lived. So incredibly convenient. We were co -investing in some deals together. When I came back to that office, there was another person that I had become close with as a function of working out of the same office. He was doing his own private equity investing as a result of starting and selling a company called Bobby Brown Cosmetics. So I got to hear his story and hear about the beauty industry. And so looped him in, sounded very familiar in a way to how he started that company with his partners. And lunch became several meetings later with their executive team. And lo and behold, we realized, wow, we have the third largest retailer in the world for BATEM telling us they must make this successful. And we feel like we've got all the pieces to be successful. And so I decided to take my software business and put it on the shelf and go become a beauty entrepreneur. and try this crazy, crazy idea. And so that's precisely what we did. We started a beauty company. We knew that unlike tech, it was a CPG company and therefore knew we didn't want venture capital, knew we didn't want to raise money like a tech company, evaluations like a tech company. We wanted to try to build a profitable company and finance it accordingly. And so we self -financed it. Me and my two co -founders Ken Landis and Dr. Roshini Raj. We all put in a little bit of money to start the company, to start initial product development. Things were going well. We then put in a little bit more money and then a little bit more. And then I got to the point where we're like, okay, this is working, but we still need more money, especially for working capital. When you're building a physical products company, unlike software, where the product is made up of ones and zeros in the physical world, the products cost real hard cash to make before you can sell anything. And so we needed more cash. So we did a friends and family round on a convertible note with an angel round with literally my friends and family, like my brother, my sister, my parents, my partners, niece and nephew, et cetera, et cetera, at an embarrassingly low valuation. But I figured there's no way this is going to work. I've never done beauty before. Dan Reich (26:54.766) mind if they get an amazing deal because this is super risky. And we did that for the initial part of the company, small friends and family around and we launched with QVC. We turned on our econ site. That was going well. And very quickly things started to work. We built out a team and along the way I realized in a product development meeting, as we're staring at eight lab samples in a conference room, deciding if we wanted like citrus or lavender and the creams, I was like, what the hell am I doing in this room and with my life, despite the fact that the company was doing well and it was on its way, I need to not do this. I need to like get back to technology and software. And so one of the folks that we were working with, Julia Strauss, the deal was like, You're going to become CEO. I'm going to not be CEO anymore. I'm going to go do software and you are going to build this business. And so we made that transition. Fast forward a little bit more. The business was really working. We needed growth capital because we were about to roll out into Ulta. And so we got connected to a private equity firm called Elkatterton and they ended up investing in Tula leading our growth round of financing. And that was the last round of financing we did for that business because we built it profitably and scaled it. And at the time of exit, I think it's reported we were doing about 150 million in sales when we sold to Procter and Gamble. And so that's how we thought about financing for that business. But as I mentioned, I hit the eject button along the way as a full -time employee of that company to go start another venture -backed software company. And so that's exactly what I did. Along the way, I started a company called Troops .ai with three partners, Scott, Greg, and Will. And the thesis there was, an idea was, you have all these salespeople in the world that have to go out into the wild and build relationships and convince those people to buy their products, goods, and services. And they need to manage that process. And the category that we know of that is managing that process, we call CRM, customer relationship management. We know Salesforce to be the leader in the space. We also know that the product is not Dan Reich (29:19.662) always easy to use when you think about having to input data into a bunch of fields, forms, buttons, and boxes all day long. When salespeople are inherently relationship people, they're not data entry monkeys. And so at the time, six of the top 10 most used apps in the world were messaging apps. And we're like, what if you can talk to your CRM, much like you can text or chat with your mom or buddy? Like that'd be pretty sweet. Like what, what if. like Jarvis from the movie Iron Man. What if you had Jarvis to aid and assist you with all things sales and commercial job functions? So that was the thesis. We took a very contrarian point of view on what effectively database products and relational database products look like. We ended up raising money, ironically from First Stern Capital, who let us see round to financing. So I finally got a chance to work with them, which we were stoked about. Jason Kirby (30:16.275) Finally brought to bed. Dan Reich (30:18.222) And we started to build a product that effectively looked like a messaging interface that sat on top of these database products. And in particular, we started building on top of Salesforce because they're the 800 pound gorilla that everyone uses. And we're building this product and along the way we see another startup building a very similar chat product. And in about one week, they announced their open API developer platform. They announced their growth rate in terms of users, which was insane. I never seen numbers like that. Rather the last time I saw numbers like that was from Facebook. And the third thing they announced was an $80 million corporate venture fund. And at that point we're like, hmm, this company looks a hell of a lot like Facebook, but it's not a social network for the consumer. It's almost like a social network for the enterprise. We should probably go all in on this company called Slack. And so we were, I think the first venture -backed company to go all in and build on top of Slack as an underlying platform. And we ended up raising money, not only from First -Round Capital, other great investors like Vandor Collective, Felices Ventures, NextVee Ventures, Aspect Ventures, Great Oaks Capital and more, but also Slack Fund. So we were their first series A and series B and follow on investment. Part of why they invested, Jason, I remember Spinell who ran the fund said this to me, he's like, look, This is so obvious where the world is going. Either we're going to need this or Salesforce is going to need this or someone else is going to need this. This is a no brainer. And so we built the business. We ended up working with some of the most amazing companies in the world, like Slack, like Salesforce, Shopify, Spotify, Twilio and more. And for the majority of the company, it was like chewing on glass because we try to convince the world that you should use CRM products in this crazy new modality when that was not at all how people were trained. And so it felt very much like swimming upstream. But then all at once Salesforce by Slack for almost $30 billion and the whole stream and tide shift. And then shortly thereafter, we got acquired by Salesforce and Slack to help add fuel to the fire and accelerate that vision and de -risk the integration. So, for that business, it was Dan Reich (32:44.206) We knew we were doing something crazy and kind of in the camp of research and development -ish. And so we knew we needed some outside capital to accelerate that. So we raised venture capital pretty much from day one. And so, yeah. Jason Kirby (32:57.363) So good question here. I just want to come back a little bit. So you've raised multiple rounds for Troops .ai and Slack leading the, or participating in the series A, but you already sold the company to Salesforce through Buddy Media. And what was it like kind of coming back after that, selling again to Salesforce? Dan Reich (33:23.598) What was funny is when, when it became obvious that the Salesforce Slack deal was happening and that we were going to, our posture might change from kind of antagonizing Salesforce and trying to keep people out of their system to perhaps aiding and assisting with their new vision as well. I was able to reconnect with former colleagues that I worked with at Bloody Media. In particular, there's a guy named my friend Patrick Snokes who at the time at Buddy Media was the chief product officer who literally came to our office and sat down at our desk with us to look at product together and help do due diligence for Mike and Cass before they ultimately acquired us. But Patrick had been running platform at Salesforce and was a key executive there, very instrumental in everything. And so we were chatting with him about what does a partnership scenario look like? And he was like, look, clearly publicly now, you know, this is a priority and yes, certainly there's a way we can. be helpful to one another. And in addition to that, after Slack went public, which by the way, it was amazing. We were invited to go to the New York Stock Exchange for their direct listing, which was such a cool experience. Yeah, it was super cool. But leading up to that and after on their earnings calls, I remember Stuart Butterfield, the founder and CEO of Slack, he would pretty much always mention troops in the earnings call as Jason Kirby (34:33.843) That's a pretty fun experience. Dan Reich (34:50.062) almost like exhibit A for the power of the platform and how Slack can progress from not just the messaging interface, but really power, meaningful, mission critical business processes, not just for developers and IT, which is historically where Slack was winning, but also for commercial users, for sales users, for revenue leaders and so on. And that's what we were doing. And so we were in a situation where both Salesforce and Slack, obviously they did the acquisition. They both knew we can play a role. there. So the partnership conversation quickly evolved to, hey, maybe we just go do this together. And it was really, really fun and exciting for me because at that point, unlike Buddy Media, we had already been working with Slack as a close partner. They were investor, they were a customer. We were powering their entire revenue team globally for four years up until that point. And with Salesforce, we knew a lot of the people over there already. And at that point, they had also become a customer. We were also a channel partner of theirs. So we had already built a great relationship with both companies. And so by the time the acquisition conversations came along, it wasn't like a cold start. It was just a natural progression of the relationship to date. So it was a very easy and natural conversation to have with. Jason Kirby (36:09.075) And then kind of that post exit, you know, you're now multiple exits in and what was your kind of tenure at Salesforce thereafter? Were you just post acquisition? You were done. Did you kind of keep building troops? Yeah. What was that experience? Kind of the, the post accidents and correct me if I'm wrong, but also it sounds like this is what you, you built the company you wanted to build. You wanted to have that experience. Did you feel that's what happened with this transaction? Dan Reich (36:36.238) Yeah, yeah, totally. It was, it was such an incredible experience. We, you know, looking back on it when we were doing the things we were doing, many people thought we were crazy. Again, it was a hyper contrarian point of view to take. And then when Salesforce bought Slack, you can imagine how validating that was for us. At a moment when years before everybody thought, or many people thought what we were doing was kind of, kind of insane. So very validating. And I think helped play a role, a key role in how even enterprise software at work exists today. And so after the deal, I was really excited to kind of roll up my sleeves and work closely with leadership at Salesforce and Slack. But also there was still massive change happening at Salesforce and Slack. some of the key leaders at Salesforce left and then shortly thereafter some of the key leaders at Slack left. And, you know, there were conversations for me on what my future role would look like and were presented with opportunities that while bigger in nature and in title to me felt like would not have been as fulfilling as the mission that was building the troops product and that. And that focus. And so I made that very clear, very fast to my boss that I don't, I wasn't interested in a bigger role. I just wanted to do what I wanted to do. And so fast forward, they do a bunch of layoffs. I get included in the layoffs probably because I made it very clear. I wanted only what I wanted. And, and it was totally fine and amicable and in fact, kind of thankful for the exit. And, and so left, but, but I also knew that I could not sit on my hands and do nothing or play golf all day. I needed to be building companies because I just love, I love the game. I love the journey. And so at that point I had funded and incubated another beauty company, which now is called dibs beauty. Also private equity backed Elk Haderton is an investor there as well. And I get to help build the company and work with my partners that are running it full time, Jeff and Courtney and doing an amazing job. And. Dan Reich (38:58.158) You know, now I'm in this mode where I'm trying to build and start more companies with amazing people and act like turbo fuel to the co -founder and CEO. Jason Kirby (39:10.163) So that's an incredible experience that you walked us through in terms of the journey from, you know, selling bouncy balls to getting, you know, wrapped up with some shady characters to having a SaaS exit to a CPG exit back to SaaS. And then now back to, to CPG and your next venture. You know, it's an experience and a journey that obviously is very bespoke and unique to you. And I would say most founders are lucky to have one successful business and you're now trending on multiple. When we look back, and this show is all about fundraising and capital raising, exits, things of that sort, and you touch on a little bit of the numbers, but it'd be helpful to share with the audience, across the different businesses that you've built, how much have you raised in an aggregator across each entity? Dan Reich (39:59.374) Yeah, so for SpinBack, I think we raised in the few hundreds of thousands of dollars before we exited to Buddy Media. For Tula, I think we raised, let's call it north of $10 million. And with troops, I think we had raised about 23, $24 million. With Dibs Beauty, I'm not sure it's public, I think it's confidential, but. I can say Elk Hatterton invested, so do with that information what you will. And then I'm launching another beauty company later this year where we did a seed round of financing to the tune of a few million in an early round of financing. And so those are the ones that I have a heavy hand on. But then if you factor in other companies that I was... Jason Kirby (40:45.491) Figure checks. Dan Reich (41:10.99) Not the guy or running a show or just like a smaller player like Buddy Media, for example. I think Buddy Media raised, Mike and Cass raised, I don't know, maybe like a hundred million. I might be wrong, but much more. And low to me at the time, I think maybe at that point I'd raised 30 or 40 million or something like that. So I had seen the movie before and lived it in terms of raising capital. And what I'll say is, especially over the past few years, what I think most founders get wrong, and I've been guilty of this too, is they think the fundraising is the end game. Like, you go raise a lot of money at a big valuation and that's the thing to celebrate. And by the way, the reason you're raising a lot of money at that valuation is to get X number of months of runway. And I just think that's just completely the wrong framework to think about it. I think the right way to think about it is you're raising money. because you feel like there's a milestone you need to hit. And the only way you can hit that milestone is with outside capital. And you just rinse and repeat that. And historically, you think about those milestones. We forgot this, I think, but like pre -seed is you have an idea and you want to kind of cook it and bake it to get it something tangible. Seed is you want to get it into market. A is it's a market and you want to prove that you can scale it to sufficiently finite group of customers that you know it's repeatable. Your series B is, you know it's repeatable. Now you want to scale it. Your series C is, now you want to scale it so you can be in a position to IPO and then maybe you IPO or maybe you need to introduce another skewer or whatever in a D or whatever. But like, those are really milestone days. And I think the past few years when money was free, most people forgot that. And it was just, let's just raise as much as we can. the biggest valuation we possibly can because by the way, they were optimizing for dilution and ownership. But I think what many people forget is the goal is not to raise a lot of money at big valuations. The goal is to build an amazingly successful company that's profitable so that you could sell it, period, either privately in an acquisition or sell it publicly in an IPO to retail investors. Like that's the goal. If you're taking outside capital, you have to give that money back and more to your investors. And there's only really two. Dan Reich (43:32.686) effective ways to do that. And so what you then really need to be doing is optimizing not just for you, but also your outside capital investors so that you're always treating that round of financing fairly so that you always can have an honest conversation together and say, okay, it's now the time to sell or do we need to keep going or do we want to keep going? And if you raise in a way that you get ahead of your skis, you create a broken incentive structure with board, which makes it really, really hard to run the business or exit or hire great people. And so I think many, many founders just lose sight of that and forget like you're in business to build a great product and service, sell it, do so sustainably, which means being profitable. So you can take the profits and reinvest that to create better products and services and rinse and repeat that model. And so I think every company are as unique, all the circumstances unique. I don't think it's a one size fits all. And so how I think about the world today, especially in software, to me, I think there's clearly emerging two different camps that I think are interesting. One camp are the founders that are building software companies that know they can go really far with really little and don't need a lot of outside capital. It would look more like spinback. It's a few hundred thousand dollars. family round, they can launch, they can get profitable and control their own destiny and build a great company. And I'm an investor in a few of those companies and I see the updates and they start with, we're profitable. We have runway all the months. Like that's incredible. And I think those guys are set up for success. I think there's another bucket, which is you need, and this is really where venture capital was born, but it's the bucket where you need a ton of capital to get to market. So think semiconductors. Jason Kirby (45:12.083) Thank you. Dan Reich (45:29.838) or the fiber cables, or increasingly today, the humanoid robot category or cars or genetics, like deep tech, deep science needs a lot of capital. I think that is perfectly justified to raise meaningful rounds of financing at meaningful valuations because then once you're live, you have a sufficient advantage over the competition because you've hopefully got a deep mo around tech or IP. And then there's this middle bucket, which could get really easy to get really, really wrong, which is you raise a bunch of money to build a SaaS company, and now you've got 30 copycat competitors because you've got all the other VCs throwing money to copy the leading company. And now there's a race to the bottom with price, and there's feature copying and end to end. And that is a world in which it's very easy to become a zombie company. where you're not growing, you're not dying, you're kind of just floating along. And to me, that's worse than dying. Like it's almost better for founders to quickly decide and see if they're going to win or die and move on to an idea or a new business that has a much bigger and better opportunity. So in short, I think... Jason Kirby (46:48.499) I wish founders would take advice sooner rather than later. There's so many of these companies where founders just, they feel like they can't give up and that they keep going and keep fighting even though the signs are very, very clear that they should probably give up. Dan Reich (47:02.606) Yeah. And what's tough is there's companies where there are those signs, but there's also signs that point to the contrary and suggest that if they keep going, that you'll have a big, big win. Chris Freilich at first time would remind me all the time at Troops, you'd be like, dude, Roblox was flat for like eight years. Like he would show me the data. It was like literally flat. And then in one year, just parabolic through the roof. And for a period of time at Troops, we felt that way, but we would get indications often that like, actually this is really working like our net dollar retention expansion, the customer feedback, like very clear. This is the future. And there's always, there's often a timing dimension with these companies too, but, but more broadly. Yeah. I think too many founders are optimizing for the wrong things in these financing scenarios and are not thinking about first principles and fundamentals of what it means to build. a successful business. Jason Kirby (48:06.547) some sage advice and I agree wholeheartedly as I see hundreds if not thousands of companies that you know the focus is give us more time you know we'll figure it out or you know not so much like we're gonna build a profitable business when that should be the path for many businesses and venture is not the the vehicle to to use but Venture is sexy. Venture is validation. Venture is like, I've made it checkbox. I'm worth way more than I probably should be on paper. And that usually is the kind of false flag or kind of false North Star that they pursue for more of a vanity approach as opposed to head down, build something valuable that customers truly love. And around it, it's the companies that do what you're talking about that actually get the venture capital, have VCs chasing them because it's a more sustainable business. may say they want the next shiny object but in reality they do ultimately throw money at the better built businesses by in your case, serial founder of multiple exits. So one thing I would like to answer, have you answer is just when it comes to first run capital, you brought them up multiple times. You said no to, you said, please come to me. They said no. And then you came back to them and then they said yes. And then you change your mind. And then next venture you come back and it works out. Maybe first round or other invest relations. How do you manage your relationships? How do you stay in touch with them over such an extended period of time to where when you're ready, the money's there? Dan Reich (49:42.19) Yeah, I mean, with all of these, with all of the businesses that have worked, I found that the ones that have worked well work because there was just a great relationship within the team. And by team, by extension, I also mean investors. So, you know, first time, for example, Chris is I consider him a good friend and just like a great guy and independent of working together. That's just somebody you want to stay in touch with. from a work perspective, but because they're just a good person to keep in touch with. And like, it's impossible to do that with everybody, but yeah, certainly there are a handful of people that you just want in your life. And it just so happens that sometimes some of them can be the point guard to your forward or wide receiver to your quarterback, investor to the founder. And that's really it. It's just, you want to stay. contact with great people. And it just so happens that sometimes some of those great people may also be your business partner, partners again. It also helps if you've had a win, like let's just take Tula and Elkatterton, for example, if you have a big win with investors, they'll also want to work with you again, which was also the case most recently with Elkatterton and Tula to dibs beauty. Jason Kirby (51:08.339) It's great to hear and I'm glad you shared that. And I think it's important for everyone just to keep those relationships vibrant and have a reason to have those relationships other than the hope of them giving you money. And I think most investors can sniff right through that when you're only around when you want money, it's gonna be a much more difficult relationship to maintain and add value to over time. So speaking of investors, you've had success, but I think you've also had success on the capital allocation side of making angel bets and making investments into funds. Can you tell us a little bit about what it's like kind of being on the other side? You're still building, you're still a founder, but you clearly make time to invest in other things. How do you think about that when it comes to making investments into funds or into companies? Dan Reich (51:58.414) Yeah, I remember when we were building spin back or any of the companies for that matter where I was raising money. I just remember sitting on the other side of the table. In many cases, wishing praying that I would get a yes and I would get an investor to lean in and invest in my company. And I also know the majority of the time, the answer was no. So I know that feeling all too well. And it's exciting to me to be able to. kind of give back and be not all the time, but for the sometimes be the yes for those founders and try to help them because yeah, I was once in their shoes before and in a way I'm still in their shoes. And it's really exciting to think about helping people go after their dream and being a small part of that. So for me, angel investing is actually less about the money, although Yeah, these are really ultimately all lottery tickets, hopefully some work and you make more money. But to me, it's just really a great way to continue to be part of the ecosystem and give back, hopefully make a few good bets that work, but also help create a foundation for some of these new startups to win and for founders to hopefully be successful. Jason Kirby (53:19.571) And if founders were listening to this podcast, what would you tell them if they wanted to reach out to you or they're looking for an advisor or investor that brings as much experience to the table as you do? How would they approach you? Dan Reich (53:40.782) The advice I used to give and in a way still do to people raising money is if you want money, ask for advice. And if you want advice, ask for money. And it kind of goes back to the relationship thing, which is if you want to build a great company, you want to work with people that aren't overly transactional. I think often you'll find if you work with people where it's incredibly transactional or there's deadlines and expiring dates and term sheets and it's hyper competitive, like It might feel good in the short term, but in the long term, you might find yourself in a really shitty marriage, ultimately. And so what I say is you ask for advice is because it's a good way to like mutually date people that may or may not be your partner and truly get a sense of A, are they good people? And B, can they add value and is it a mutually beneficial relationship? And so, you know, with me, what I love is when people don't email me, with the ask of, hey, we're building company A and we're raising money. It's much more interesting when it's hyper personalized and thoughtful. There's an interesting discussion that can be had because in those moments, that's when I get to see if there's a way where I can truly be value add and not just a check. Because I really only want to invest in companies where it can be some help. Otherwise I'd rather just keep my money in the public equity market and not say or do anything and have it be liquid. So I want to be able to know that there's even a small set of unfair advantages I could potentially bring to the company. And the only way that can happen is through a kind of introspective dialogue between the two people. So the advice I would give is like, be very personal with the outreach, not just to me, to anybody. And at least for me in particular, you can find me on social media. I'm just Dan Reich, I think are most of my handles, if not all. Jason Kirby (55:40.147) We'll throw those on the show notes for people to check out. But yeah, I think you say it very, very simply in the sense that like make it personalized. I feel like the cold, the spammed cold email or, Hey, we have mutual friends. Here's my company. We're asking for 500 K and yeah, it's just like, it's just so easy to say no to that when there was clearly no effort put into it to you know, ask for me, you know, ask for, you know, my experience, my background, like, okay, if I have that value, because that's ultimately what a lot of angels care about. If they're looking for transactions, they invest in funds, and they do follow on with all the researches, you know, done and stuff like that. But if they're, you know, going to write that individual direct check, they want to add value. And that's very much my sentiment as well. It's you, okay, you Dan Reich (56:22.318) Yeah, totally. And they still might get a no, but at least it's like a real honest conversation and not a cookie cutter, copy paste email to 4 ,000 investors. Jason Kirby (56:38.003) I will, I usually will respond, you know, with mostly a no, but I'll at least give you a response. If you, if I notice that you put the effort into acknowledge me, you're not trying to use AI to skim my, you know, LinkedIn profile and make broad assumptions about the connection or whatever. And it's actually like something very specific. I will usually get a response, give a response. And sometimes it's a meeting, but sometimes it's just a quick note. Dan Reich (57:05.646) I'll still have people, if you can believe this, that will send me emails inquiring to invest in troops, for example. It's like, do your homework, you know, like do a little research before you start. And there's a spectrum of that, but yeah, like be thoughtful, be engaging, be deliberate with why you're reaching out and who you're reaching out to. Jason Kirby (57:33.459) can make a huge difference. So, Dan, this has been a great podcast. You shared some insightful stories, just your journey overall. Again, very unique and incredibly successful across multiple different avenues. So, appreciate you being on the show, sharing your insights, and you'll look forward to getting this out to our audience. We'll make sure to have the links to your socials down below. Dan Reich (57:58.894) Thanks Jason. Thanks for having me.