How do you fundraise through three different recessions?

Jason Kirby (01:29.337) Hey everyone, welcome back to the show today. Today we have Chris Gladwin with us, co -founder and CEO of Oseant, a serial entrepreneur who has raised hundreds of millions of dollars and has a notable exit to IBM for over a billion. Welcome to the show, Chris. It's great to be here Jason, looking forward to the conversation. Yeah, likewise. And I think you have a lot to share to our audience and you've seen multiple market cycles, you've raised capital and all of them. Chris Gladwin (01:29.902) Hey everyone. Chris Gladwin (01:46.382) Great to be here, Jason. Look forward to the conversation. Chris Gladwin (01:57.774) huh. Jason Kirby (01:57.817) And I think you're going to have some valuable insights to share and just to kind of jump right in and call for what it is. You're a serious entrepreneur. You've had success. You've made it. Why are you doing it again? And what compelled you to do it again and start OCEAN? Well, it's not just me. There's I think 45 of us who are... Chris Gladwin (02:01.742) This is gonna jump right in. you've had success, you've made it. Why are you doing it again? Do it. Well, it's not just me. There's, I think, 45 of us who are employees from the last company at this company. There's even a few from the company before that at this company. A lot of the investors are the same. A lot of the customers are the same. And, you know, it's kind of like we're a team. And, you know, the funnest thing you can do is like play. You know, it's like playing a sport as a team. And it's just it's a lot of fun. And it's just very satisfying. I'm on a day -to -day basis. It can be a bit of a grind, but overall it's really satisfying. I also feel that this ability to create value and wealth is really a social good. It's the thing that leads to civic contributions and changes people's lives. And it's what I know how to do. It's what I've trained my whole life to do. And I feel like this is my purpose to do this kind of work. Jason Kirby (02:48.665) I also feel that this ability to create value and wealth is really a social good. It's the thing that leads to civic contributions and changes people's lives. And it's what I know how to do. It's what I've trained my whole life to do. I feel like this is my purpose to do this kind of work. Now, it's great to hear. And it's not often that you get to hear these success stories of the teams kind of sticking through and staying with the company. Chris Gladwin (03:17.038) Mm -hmm. Jason Kirby (03:18.571) To give the audience a little bit of color, you know, tell them a little bit about your background from, you know music now to You know where you are today with OCN? Yeah, so I Started my career as a professional customer of the enterprise IT products. I worked for Chris Gladwin (03:29.23) Yeah, so I started my career as a professional customer of enterprise IT products. I worked for Martin Marietta, now Lockheed Martin, as a person that evaluated products and made the standard product list of what tens of thousands of people would use. So I learned how to be a customer for these kind of products. Then I switched to Zenith Data Systems, which was the largest portable PC maker in the world at that time. Jason Kirby (03:40.825) as a person that evaluated products and made the standard product list of what tens of thousands of people would use. So I learned how to be a customer for these kind of products. Then I switched to Zenith Data Systems, which was the largest portable PC maker in the world at that time, and learned how to make computer products, including software. And then I started starting companies. And the first one was called Kooz Technologies, which made wireless thin clients. And then we did a couple of Chris Gladwin (03:57.39) and learned how to make computer products, including software. And then I started starting companies. And the first one was called Cruise Technologies, which made wireless thing clients. And then we did a company called Music Now, which was made the first digital music services in the United States, maybe the world. And that was pretty exciting. And then did Cleversafe that you mentioned had a big exit with IBM. And now I'm doing Osean. Jason Kirby (04:10.731) And what is OCEAN? Chris Gladwin (04:27.214) So OCEAN is a software company and what our software does is provide, it's the software for the largest data analyzing systems in the world and our focus is missions or use cases that require the analysis on a consistent, always on basis of hundreds of billions, if not hundreds of trillions of records. Jason Kirby (04:34.873) It's the software for the largest data analyzing systems in the world. And our focus is missions or use cases that require the analysis on a consistent, always on basis of hundreds of billions, if not hundreds of... Chris Gladwin (04:54.126) in order to do what those systems have to do. So that class of data analytics is really the largest class in terms of how much data is being analyzed every time you do a query. And so we've built a new software architecture that's designed for that. And as a result, it's amazing. When we put it in the hands of customers, it's typically 10 times the price performance of anything else, or it does things that just simply weren't possible before. Jason Kirby (05:23.769) And this is an interesting story in the sense that as far as the timing of things, you had Collabrsafe, the company that you sold IBM, and it sounds like you were already kind of either working on OCEAN or you kind of had envisioned it. I really want to talk about just the acquisition and a bunch of other things at that point, but how did you kind of identify this new opportunity in the midst of an acquisition and how did you facilitate kind of bringing it over your team? Usually that's a pretty complex thing to do. Chris Gladwin (05:53.998) Well, in terms of identifying the opportunity, I think one of the things that we're really good at is listening to customers, typically large enterprises, and understanding what they need to do. And it can be very, very complicated. Often those will get captured in some kind of requirements document that'll be two, 300 pages long, but learning what the requirements are, why do they need to do it, how does it need to perform. Jason Kirby (05:54.393) Well, in terms of identifying the opportunity, I think one of the things that we're really good at... is listening to customers, typically large enterprises, and understanding what they need to do. And it can be very, very complicated. Often those will get captured in some kind of requirements document that'll be two, 300 pages long. But learning what the requirements are, why do they need to do it, how does it need to perform, that's a skill. And learning to do that, you have to have a trusted relationship, Chris Gladwin (06:23.79) That's a skill and learning to do that, you have to have a trusted relationship. And so at Cleversafe, which was the company before, we made software for the largest data storage systems in the world. And here at OCN, we make software for the largest data analytics systems in the world, obviously very similar. And at Cleversafe, we improve the price performance of massive reliable storage systems by about a hundred times. Jason Kirby (06:29.419) And so at Cleversafe, which was the company before, we made software for the largest data storage systems in the world. And here are those that we make software for the largest data analytics systems in the world, obviously very similar. And at Cleversafe, we improved the price performance of massive reliable storage systems by about 100 times. And got to know very well the thousand or so largest data storing organizations. Chris Gladwin (06:53.966) and got to know very well the thousand or so largest data storing organizations in the world. And they were the ones that saw us make this big improvement and they trusted us enough to say, hey, I have a similar kind of requirement in data analytics. And once I heard that five times from the largest computing. Jason Kirby (06:59.275) in the world and they were the ones that saw us make this big improvement and they trusted us enough to say, hey, I have a similar kind of requirement in data analytics. And once I heard that five times from the largest... Chris Gladwin (07:19.054) organizations in the world, you know, what that meant to me was like, this is this is gold. Because if they're telling you this, you know, this is like a trillion dollar tech company, a giant telco, a big intelligence agencies, folks like that. If they're telling you I really need this thing, and it doesn't exist, it doesn't exist. And that's an opportunity. So that's simply how we got OCEAN started is we just kept hearing this market need from these customers. And that's that caused us to realize, wow, this is an amazing opportunity to make that. to make something to fill that need. Jason Kirby (07:51.545) and When it came to the Cleversave, so you have a very clear transition in terms of product market fit with the team and everything going over and building the analytics after doing the data. But from the standpoint of, you know, one of the questions I really wanted to ask you, since you have so much experience in this, like when it comes to deciding when to raise money for a company versus when to sell a company, you know, you've kind of gone through a couple iterations. How do you think about a situation like that where it's, you know, Chris Gladwin (08:15.15) Mm -hmm. Jason Kirby (08:22.379) opportunistic to raise and build versus opportunistic to in the best outcome to sell. Chris Gladwin (08:24.302) Great. Chris Gladwin (08:30.286) Well, in terms of raising, it's really dictated by the business. Some businesses, like one of the challenges to businesses like CleverSafe and OCEAN is if you're going to make a fundamentally better platform for some general type of information technology capability, like storage or data analytics, that's not a couple of people sitting around over a weekend. Now that is hundreds of person years. of high -end engineering to build version one. And there's a lot of great things about that. You can come up with something that like blows people's minds. It's so much better than anything else. But if you're gonna do hundreds of person years of high -end engineering to build version one, that takes a lot of money. That takes at least $100 million or hundreds of millions of dollars. So if you're gonna build a business like that, like, You don't have a choice. You're going to raise a lot of money. So, and that's, you know, generally the business will tell you when you model it, like this is how much money you're gonna need. It's just that simple. So that's kind of the raising side. On the selling side, it's usually dictated by business circumstance. You know, in the case of IBM buying Cleversafe, IBM really wanted to buy Cleversafe. And they made us an offer that... that was just a great offer. And so we took it. In some ways it's just that simple. In early acquisitions, it can be other things. Like it could be like there's an inflection going on in the industry and it's just the right time to sell because once sold, the business is in a fundamentally better structure. That was the case with the technology, cruise technologies. With music now, similar thing, the industry was going through a transition. It was just the right time to sell. So usually it's kind of dictated by, the business and the circumstance of the business. Jason Kirby (10:30.777) And I think that's a good way to look at it. When it comes to the fundraising and deciding that you're going to build a company that's going to take hundreds of millions to get there. We were talking offline before getting started of just, albeit you have a track record, you have some experience doing this kind of stuff. You're raising money in some difficult markets, which coming out of 2023 and the recent markets that we've had in terms of raising capital. What's it What has it been like raising capital in all these different market cycles that you've had experience doing that? What are some stories you can share from that? Well, the toughest time to raise money for a company is always... Chris Gladwin (11:10.478) Well, the toughest time to raise money for a company is always as you're finishing early stage and beginning growth stage. And sometimes a company will have a, like the first phase will be like the research phase. And we had that at OCEAN because we're like, we think we can make something that's just fundamentally different. So now we're in the research phase where we need to fund that to prove that. And it's all about potential. And in some ways, potential is... kind of an easy thing to fundraise on. Like, look at this giant market, data is growing like crazy. Look at how smart these engineers are. They're gonna do something amazing. That's basically the pitch. And there's a lot of investors that like that pitch. And then you get into early stage and it's like, that's where you're kind of doing everything that's important in the business two or three times just to prove you can do it. And then it's also still about potential. You're getting these initial customers, look at the results. I mean, we're transforming their... their business efficiency or whatever it is. And it's not a lot of revenue, but you're just proving that we can sell into this existing giant market. So that's also about potential, relatively easy to fundraise for. Then you get into later growth stage, it's like, wow, look at this, my revenue is 20 million, 100 million, it's growing like crazy. That's just numbers. In some ways, that's easier to fundraise for. It's that in between where you've done it a couple times, but your numbers aren't that great because you've only done it a couple times with each customer. You're maybe doing a million dollars or five million dollars or half a million dollars or something like that, but you need this big pile of money because that's the time when the business most needs cash. If the market, let's say, gets really cautious in its fundraising, or it's funding. If you're in research phase, you just slow it down. If you're in early phase, you just slow it down and just like drop the burn rate in half and then have the product come out at the other side of that canyon of non -funding. If you're in growth stage, growth costs cash. So you just slow the growth down and just kind of wait it out. But if you're in that middle phase, you have to have cash because you don't have enough margin contribution to live off that. Chris Gladwin (13:30.35) And you have to have this enough investment in the product and sales and marketing to sell it because you got to grow it. You have to grow at that phase or you're dead. But that really consumes cash. So you have to have cash, but you don't really have great top line numbers. So that's the toughest time. And I think I'm the only person that I know of that I know I'm the only person I know of. I may be the only person who's had to raise. for three different companies in that phase during each of the last three recessions. The Silicon Valley Bank failure, and maybe that's what we'll call this recent one. The Great Recession was the one before that, and the one before that was the dot com crash. And each time I had a company like finishing early stage, beginning growth stage, those are really hard to finance. Jason Kirby (14:19.545) What was that process like? You say hard, but what was it actually like? Were you going on just like it was a million no's? What was your process? You obviously overcame and you had success. What was your actual process in each of those cycles? What's something that you can share with our audience? The first thing, if you want to raise money in a... Chris Gladwin (14:31.79) Yeah, yeah. Chris Gladwin (14:40.27) Well, the first thing, if you want to raise money in a time like the dot -com crash or the Great Recession or the Silicon Valley bust or whatever, we're going to end up calling that one. The business has to be flawless. There can't be any fundamental flaw in the business. You have, like everything that's important has to be going really well. So like your initial customer implementations have to be mind blowing. You know, the product has to be way better than competition. Your investors will call those customers and they need to genuinely say, wow, this is amazing. I've looked at everything else and nothing is as good as your product. So just go right down the list of everything important. You cannot have a flaw in the business. So part of what you have to do, you and the team is you have to make it flawless. And you're doing it at a time when you're resource constrained because you don't have a lot of cash. You're trying to make cash last. You know, money's not exactly pouring in. So that's a very, that's like a big part of the equation is there's no faking it. You have to make the business flawless. And that is just simply hard work on everyone's part of the company. Then in terms of the actual fundraising, you're going to, Jason Kirby (15:57.721) everyone's part of the company. Then in terms of the actual fund. Chris Gladwin (16:05.902) it's going to take some time. Like, you know, if you look at me at OSEAN, I mean, I was rolling out of Cleversafe, which was a very similar company. We raised a hundred million dollars total at Cleversafe, sold it for 1 .4 billion. So I had a little bit of, you know, goodwill, you know, with investors. And even then, you know, this was, that was not an easy fundraise to get through that phase, which we did at OSEAN, but. It's not like, my God, look at this last company. You did a unicorn. Let me just write you a check. No questions asked. I know for sure that I've pitched over 300 investors for that round. You know, the round that we just did at OCEAN and I ended up getting maybe 20 of them, 30 of them to invest. So my hit rate was about 10%, which is amazingly good for a time like that. But that's just what it takes. You know, you've got to do all that hard work. Jason Kirby (16:46.233) And I ended up getting maybe 20 of them, 30 of them to invest, so my hit rate was about 10%, which is amazingly good for a time like that. But that's just what it takes, you know. You've got to do all that hard work hundreds of times. Chris Gladwin (17:01.646) hundreds of times over of getting to investors, establishing a level of trust where they're gonna hear from you, taking a lot of them are gonna go through diligence. It's just a, it's a lot of work. There's no doubt about it. Jason Kirby (17:14.617) So when you're talking about like kind of buttoning up the business and not having flaws in order to stand out and down market deals get done, but not as many deals. It's only the best deals get done. What were you doing from a strategic perspective with your company to make sure that you were one of the best deals and whether it's music now, Clever Save or Oseant, you know, which, which one would be a good, good story to share. Yeah. I talked a little bit about Oseant. You know, Chris Gladwin (17:26.894) Right. Chris Gladwin (17:40.238) Well, I talked a little about OCEAN, you know, where we had to go to, and it was very similar at Cleversave because they're very similar businesses where, you know, we had to have every customer succeeding. You know, it's not just that we sold it to the customer, but the product was amazing. You know, it cut their costs. You know, one of our customers, we reduced the time it took to run all the analysis they were running, which had been a problem. We reduced that by 90%. while reducing their cost by 80%. Like you have to have stories like that. And this is a big, giant, sophisticated customer. Like you just have to do that again and again and again. And it's hard. And it means that every part of the organization has to be firing. The support group, development, everything has to be just nailing it. So that's the number one thing. If I go back to Music Now, Music Now was interesting in that, In the dot -com bubble, the digital music industry was wildly over -invested. At the time, the total market for digital music was generously $10 million in the United States. Like every form, download stores, music subscriptions, internet, radio, if you like, made very generous assumptions, it was a $10 million market. In the dot -com bubble, it was like every big venture firm had to have a digital music startup. There was 56 that had really well funded, 56 companies stacked on top of each other in a $10 million market. And the amount of funding, you know, those 56 companies varied from about 50 million on the low end to 750 million on the high end, which was liquid audio, you know, so $10 billion or something like that was like chasing a $10 million market. It didn't make any sense. And so, Then you get to this phase where, okay, we're gonna play musical chairs. There's 56 people and we're gonna end up with maybe three or four chairs. And companies were just going out of business every second. So that's what that was like. And I would say one of the ways I knew that we had a chance, because going into that, one of the problems we had was back then business models were getting funded that had no revenue. Chris Gladwin (20:05.966) The dot -com bubble was a little bit crazy. And I remember like trying to raise money in the bubble when it was like, wow, you want to make a company where you charge for music subscription services. Wow, how are you going to compete with people that give that away for free? Well, the answer is that's very difficult to do. People are going to just give it away for free. It's hard to sell something. And so in some ways, it actually worked to our benefit. When the market, the funding market crashed, then everybody had to have revenue models. And we were already there. And I remember going to one of our competitors and in our office, it was in Chicago. There had been a nonprofit before in that office that had moved out and they left whatever crappy furniture as a nonprofit they didn't want to take with them. And we just used it. We were just so cheap. And I remember thinking when I walked into this competitor's office, I walk in and they have Guinness on tap. They have foosball tables. And I remember thinking to myself, I got this. I know how to beat this company. I just have to wait. I just have to outlast them because I got the lowest possible burn rate. And I know what they're paying on rent. They're in trouble. So anyways, that's a little story from the dot com crash. Jason Kirby (21:08.849) I just have to. Jason Kirby (21:14.393) I know what they're... Jason Kirby (21:22.873) It sounds like what prevailed is good sound business. I think that's been a common theme across the last several years, even as tons of money were going into random startups in 2021 and similar situation music, everything was going into all these very similar categories that when the tide got pulled out and everyone's kind of left with their pants out, they're just like, the ones that actually had real businesses, real revenue are the ones that are still around today that were able to Chris Gladwin (21:25.998) Absolutely. Yeah. Yeah. Yeah Jason Kirby (21:52.779) to weather that storm and maybe down rounds or things of that sort. But speaking of which, given how many rounds you phrased, what would you say was the one where you came in with a certain expectation and then it was the complete opposite of what you actually expected, or if that ever happened? Chris Gladwin (21:54.606) Absolutely. Chris Gladwin (22:15.374) Well, you know, music now, the fundraising we did after the dot com crash confounded me. It was the first time I was in an irrationally conservative market. I had been in an irrationally exuberant funding market in the dot com bubble, you know, where it was just like, these are smart people. These are people with like, they go to the best schools. They're really smart. And yet they were. Jason Kirby (22:15.801) Well, you know, music now, the fun music you did after the dot com crash, confounds... Chris Gladwin (22:44.494) they were investing at a level that did not make business sense. They were investing in businesses that didn't make sense. And, you know, that, so that was kind of, kind of hard to internalize. Like there's this level of irrationality by people who, this is what they do is make good investments and they were making bad investments. So that was kind of hard to digest. And then we flipped to the other side, which was the, after the dot -com crash, there was a, going into it, there had been 56 well -backed, venture -backed companies competing in this little market. And then we had a three and a half year period where there was one equity financing in all of those companies. And that was MusicNow. We were able to pull one out. And then it switched to this irrationally conservative market. And at the time, MusicNow was growing its top line revenue by 20 % month to month. I mean, we were killing it. And I remember pitching people, investors, like, you know, smart people, you know, they had had, you know, track record of success. They got some fancy business school degree. And I'm like, I'm growing my top line 20 % month to month. Do you know what that means? And the market is this giant and we can go own this. And they're like, yeah, whatever. I don't want to invest in that. So that one confounded me for sure. It was just like, how can, how... The other thing that's interesting is if you look at the data on the vintage of venture investments by year and when they succeed, for sure what the data shows you in years when everyone is investing, you get the worst returns because everyone's over -investing. And valuations are high, companies that maybe shouldn't get funded get funded. Then you go to the other side, vintage years where like almost no one's getting funded. And the ones that get funded are amazing and their evaluations are low. And you would think that the venture community, I mean, the thing is they know this, they can articulate that fact. Yet you can be sitting there like in a year, like, I don't know, last year or the year before where it's like, this is one of those years. This is when you really make your money. The problem is they also, Chris Gladwin (25:05.134) for venture fund to make money, the money has to come from somewhere. And most of where it comes from is public offerings and acquisitions. And so when the market slows down, there just isn't a lot of money in the system. And, you know, so they even though they on the one hand, they know, my god, this is the best deal, you know, I should invest, they don't have enough money to invest in all these great deals. So it can be a little confounding at times. Jason Kirby (25:31.801) Well, I would say some of the smartest investors I've met over a lot of several years are the ones that kind of, you know, been around the block and they saw when things were getting greedy, took a little bit of money off the top. You know, we're able to capitalize on those peak markets, minimize their capital allocation and did distributions, generated some real DPI back to their LPs. And they were able to go and raise a fund in 2021, 2023, like many others couldn't. And now they'll probably have some of the best ventures. Chris Gladwin (26:01.742) Yeah, for sure they will. Because like those deals, you know, because the other thing you see in venture funding is there's these, there's metrics that people use, growth rate, margin, you know, and, and as years change, the, the, like, let's say the, the valuation divided by your revenue multiple will change. And it's a better investment when you're investing at, let's say, five times revenue for evaluation versus 50. Jason Kirby (26:01.755) Yeah, that that on graph. Chris Gladwin (26:31.374) It's just, it's gonna work out better. And those are, you know, that's kind of what happens in like exuberant years versus really cautious years. Jason Kirby (26:39.833) Yeah, let's talk about that actually, because I advise and coach countless founders and you know, when they come out of, you know, they've only been through one cycle and they don't understand how, you know, what happened in 2021 was an anomaly and that these, their competitors raised 20 million at a five, you know, 50 X revenue kind of valuation and all this stuff. And they're all dumbfounded by it and they, they expect it. They go to market and they're like, yeah, we, we should be worth a hundred million. I'm like, Should you? And from your experience, when you're kind of being now going through the boom and then coming into the bus and having to raise money, how did you structure your funding rounds? And when it came to giving up ownership or negotiating on terms, what were some of the things that you were, I would say, help important to you? And what were important to you when it came to getting deals done? Well, Chris Gladwin (27:11.246) Yeah. Chris Gladwin (27:35.822) Well, you want to obviously you have to get the best deal you can get. So that's that's important. But one of the things I've I've always shied away from is is in really exuberant years. Taking too much money, you know, if you take too much money at a too high of a valuation, it's eventually, you know. the clock's gonna stop ticking and it's gonna have to make sense at some point in the future. So if you go take a let's say a billion dollar round at a five billion dollar pre -money valuation and you're a pre -revenue company, at some point you're going to have to deliver a number. You have to deliver an increase on that. Investors have to get a positive return. So if you're kind of setting, your liquidation preferences and your share price at this crazy high number and then two years down the road, things get not, you know, just a normal. Well, now you've got to, you've got to now be raising future money or getting valued. If you're, let's say you're going to do a public offering at a rational number. But if you've locked in this super high share price, that's going to be a problem because either you're going to have to do a down round. which creates anti -dilution will kick in, which will dilute all the common shares of the employees and you the founder, or you're gonna have some very difficult conversations. Maybe you get replaced. There's all kinds of bad things that can happen. If you lock in a number that's too high as evaluation, just because the market's overexcited, and usually people that do that, they'll also lock in too high of a burn rate. They go off, they get a billion dollars and now they hire 500 people and they're just chewing through money. And you better deliver amazing results for that much money, which is hard to do if it's too much. If the business, the more you pour expenses and people into a company, the less efficient it's gonna be. And if you kind of oversize it, either on the valuation or the expense level, Chris Gladwin (29:49.102) It creates problems down the road. It's just not worth doing. So I've always avoided like those giant, crazy, irrational rounds. And instead, I think one of my specialties and one of the specialties of the group that I work with is we're really good at building these businesses in a cash efficient way. Like getting the same amount done with a lot less expenses. And that always ends up to your benefit. Jason Kirby (30:15.129) In your experience, have you had to face down rounds or those complicated conversations with any of the companies that you built? Chris Gladwin (30:23.758) I've never done a down round. And the main reason I've never had to do a down round is when markets are frothy, I didn't lock in a crazy price. Even in 2021, I think I could have gone to maybe second or third tier investors and gotten a higher price, a higher valuation for the company. Instead, I'd... Jason Kirby (30:31.289) When the markets are frothy, I didn't lock in a crazy price. Chris Gladwin (30:48.398) Like if you look at, you know, Greg Croft and OCA who led our series B round in January of 2021, and these are professional investors and I didn't push them to get the absolute highest valuation possible. I, you know, look, you know, what's fair, you know, you can get the high end of a good price, but you want to stay in the range of a good price. You don't want to get into crazy cause it's, it's not going to benefit you in the end at some point. it'll get rationalized and that rationalizing back down to a reasonable, you know, kind of what makes sense for business kind of price is ultimately going to hurt the founder and it's going to hurt the management team when that comes. Jason Kirby (31:29.657) Would you say there's any framework that you use or kind of rule of thumb that you use to kind of find that range, that good price range? Well, you can ask. And that's a really good question. Chris Gladwin (31:39.95) Well, you can ask and that's a really good question. A lot of people I talk to other entrepreneurs, venture capital firms and firms that underwrite public companies, they have a model for valuing companies based on metrics. So for example, the ratio of valuation to revenue, that's one they'll offer, or valuation to ARR or something like that. They have these models and if you ask them, they will be happy to tell you how it works. And it depends upon your category. So if you're like an enterprise software company, there's a very well established model for how these companies have been valued over the years. And they'll tell you how does growth, for example, your growth rate and your growth rate affect valuation. You can get the data and see like a chart of like a. how, you know, valuations based on growth rate, how does the, you know, what's the correlation. So you can get this data. You just have to ask for it. And then, you know, one of the things I've learned to do, having done this again and again and again, is to understand exactly what that valuation model is in your market. What is it for early stage investors? What is it for growth stage investors? What is it when you wanna go public? And those folks will all tell you, they'll be happy to tell you. And then you can use that to... to manage your business. And you know, look, I've got to deliver these results, but you know, like my expenses, I really want to keep them at this level in order to deliver those results because the expense as a percent of revenue or something like that, that's a part of what you have to deliver as a company, as an entrepreneur, that's part of what you have to build. And you're just much better off if you know. you know, here's the template. I mean, there's been hundreds of companies, I don't care what you do, there's hundreds of companies that have been similar to what you do in the past decades that have done that same thing. If you're a software or social network or a two -sided network or whatever, there's a lot of companies that came before you and you can just see what they did and learn from it. Jason Kirby (33:49.177) Did you ever lean in on price first or do you always kind of wait for a term sheet to kind of set the price? Or did you kind of shop multiple term sheets? Like how did you ultimately get to meet 300 investors? It's a lot to sit down with, give your pitch, give your information to, and then imagine multiple term sheets. Like how did you go about managing your process to get that good price? Chris Gladwin (34:03.758) Yeah. Yeah. Chris Gladwin (34:11.726) Well, I've had rounds where I've written the term sheet myself. And I've said this is, you know, and it's based on, it just saves a lot of time when you can do it that way. And sometimes you know, like, you know the ratio that you're gonna have to come in at. So typically, like, in early stage, the ratio of, like, in early, early stage, it's, if you know you have a high quality team and you know your market's big enough, like, you just know, like, Companies that valued on potential, if you've got this kind of quality of market, this kind of quality of differentiation, this kind of quality of team, like this is the range of valuation you're gonna see. You can get that information. With a growth stage investor, they'll tell you how they value companies. And so it's usually a multiple of revenue or ARR. With public companies, when you go public, in an IPO, the underwriters will tell you, like, this is how we value companies. This is how growth or margin or whatever affects the numbers. So once you know, you know what the answer is. You know, if you're going to raise money, it's going to be in this round. And so you can kind of skip a lot of steps. And like I said, I've never thought it's a good idea to get too cute, you know, where you're like trying to get like five investors and you're playing them off each other and you're trying to bid it up to this price. That's like, it's just out of the range. Yeah, you can do it, but I've rarely seen it pay off in the end. Because like I was saying earlier, if you get yourself locked in at too high of a price or too high of a burn, it's just not gonna end well. So you just stick with like, you know the answer, just use the answer and save a lot of time. Jason Kirby (35:50.905) So. So you just stick with like, you know, the answer just use the answer and save a lot of time. Yeah, I think that's a really good valuable point to kind of harp on a little bit more for our audience. Like I've seen it happen time and time again, like the founders that want to maximize price are often distracted and not focused on what actually drives value for the business. And they they spend too much time trying to optimize cap table and ownership. And the founders that do that often don't actually deliver much of a return or they're grateful to take any kind of exit that doesn't necessarily yield value to the shareholders as much. So I think it's interesting the way you kind of say that and just. trying to find what makes a good deal for everyone. You know, cause the other day investors coming in, but your partner for years potentially, and you want them to win just as much as you want to win. Cause they're along this ride and they have a lot of influence as well. So you know, creating win, win, win outcomes is I think something that a lot of founders, I say for like repeat founders, share entrepreneurs, you know, multiple, you know, post exited founders, it's much more of your mindset. Chris Gladwin (36:45.166) you bet. Chris Gladwin (36:52.878) Right. Jason Kirby (37:07.097) you know, just create good terms for everyone all around and use some basic kind of publicly available information and comps to kind of level set expectations. And it's usually the first time founders that are like, I'm worth 100 million, that like 1 million ARR. So when it comes to, you know, exiting a company and selling it, you know, we've been mostly talking about fundraising. Chris Gladwin (37:22.382) Yeah, yeah, yeah. Right. Exactly. Jason Kirby (37:36.185) What would you say is the process of getting bought versus selling your company? Do you have an opinion on that or any experience that you want to share? Well, it's definitely better to get bought than to sell. There's no doubt about that. Because what that means is the buyer. Chris Gladwin (37:47.406) Well, it's definitely better to get bought than to sell. There's no doubt about that because what that means is the buyer is the one providing the motivation. Like they're the one making an offer. They're the one that'll pay a little bit more because they want to buy. If you're trying to sell, it's much more difficult. And that they're, you know, you're trying to get them to, to, to buy what you want to sell. By in there, you're going to have to convince them it's a really good deal. It's not going to be a great price if you're the one providing the motivation and kind of pushing them to buy you. So with both Cruise Technologies and Music Now, we sold the company with CleverSafe IBM bought the company. And it's a much better outcome when someone buys. Jason Kirby (38:41.401) When it came to like being at the negotiation table and like from like, let's say the sell side, you know, and you're, you're trying to sell the company. Like you did music now. Yeah. Like what did you do to attract buyers to the table? Did you email every single person you knew at all these different companies? Did you kind of cherry pick a couple firms? Like what was your thought process when it came to creating a transaction? So with music now, as I mentioned earlier, Chris Gladwin (38:49.39) Yeah. Chris Gladwin (39:06.254) So with Music Now, as I mentioned earlier, we were literally growing 20 % year to year and we were just doing great. The problem was the market, the investment market had just stopped. I mean, it was way worse than the dot com crash that it was two years ago, or even in the great recession, it just stopped. So, you know, we were in a position where we had to sell, we were running out of money, growth costs cash, and we were growing like crazy. Had we had that business now in some kind of more rational time, it would have been amazing. We would have found investors who would have wanted to support that growth with their investment and grown it into a multi -billion dollar thing and it would have been amazing. Unfortunately, that wasn't an option for us, so we had to sell. I've never told this story publicly, but it's been long enough. We were running out of money, so we know we had to sell. Of course, then we began a process of like, Contact to anyone we think is a potential buyer and you know giving them the kind of the buy package with all the information and here's how amazing it is and all that stuff and one of the companies that we wanted to we had as a candidate was Circuit City and at that time Circuit City was amazing. They were in that book good to great I think by Jim Collins where they one of the best performing stocks in the past 20 years. They were they're on fire now subsequently. They they struggled. I But at that time, they were on top of the world. And we had sent them the bid package. And fortunately, at the same time, we were powering. What Music Now did is we made download stores, music subscription services, and internet radio services. And we made all of those for every company in the United States except one. So there'd be companies like Microsoft Digital Music or EarthLink. Jason Kirby (40:33.081) But at that time... Chris Gladwin (41:01.87) music or like we made the back end of everything they just just put some branding on top of it and one of the companies we made the service for was Best Buy. So we made the Best Buy download store and at the same time we were trying to sell the company the Best Buy download store launched and we were the cover of the Best Buy Sunday newspaper circular which went to what like 50 million homes in the United States. It was a giant deal. And one of those homes was the CEO of Circuit City. So he literally had got, he had heard about this bid package that like hit his desk that week. And then the newspaper hits his, his front porch Sunday morning and on the cover is the Best Buy Download store powered by Music Now. And he's like, I've seen these people on my desk this week. And that literally caused him to pick up the phone Monday morning and say, buy that company. So that is how that happened. And it was very fortunate for us. Jason Kirby (42:28.121) So. Chris Gladwin (42:29.846) lost your sound. I don't know what happened. Chris Gladwin (42:39.894) It's up. What happened? Chris Gladwin (42:52.626) Hmm on our back I suddenly maybe hit the mute button Jason Kirby (42:52.825) Why is it not working? Okay, sorry. I don't know. Yeah, that's me. Yeah, I hit the mute button. I thought I unmuted myself. All right, so cut back. I heard that it was great. Loved it. So I'm responding. So note for the editor, I'm responding to it. Yeah, sorry. So I love this story because you took a we need to sell narrative to we're going to get bought. Chris Gladwin (43:00.95) Okay, so you heard my Circuit City story? I heard that, it's great. Okay, and so, if you could start the response over, I missed all of it. Jason Kirby (43:21.273) in the sense that now the decision maker, the CEO has... Chris Gladwin (43:21.814) Yeah. Chris Gladwin (43:25.558) decision makers. Jason Kirby (43:27.065) seeing your material and that's what probably triggered the buy as opposed to just seeing another deal on the table. It's just like, here's another deal. And this is something that when appropriate, it's not every case for every company. But when I work with some companies, it's like, as much as you need to sell, how can you make it a situation where you get by? What's something sexy you can do? And PR is always kind of like a way to hack that strategy and get people to discover you and feel like they found you as opposed to you putting yourself in front of them. Chris Gladwin (43:35.35) Yeah. Chris Gladwin (43:51.574) Hey Jason Kirby (43:56.057) So I think timing and everything kind of worked out for you on that one and it's also a note for founders to think about, you know, how do you get in front of people non -traditionally, like sending a called email or having like a deck sent out and things of that sort. It's like, you know, kind of gets caught up in all the noise. But if you are being read in their most fam, you know, favorite article or, you know, favorite publication or something, it just... Chris Gladwin (43:57.11) So I think timing and everything kind of worked out for you on that one. And also, you know, for founders to think about, you know, how do you get... So it's like a call, email, or having like a deck of dao, or it's like, you know, kind of gets caught up in all the noise. You gotta get to the most favorite article or publication or something. It just hits different. Jason Kirby (44:22.297) hits differently and puts a completely different dynamic and perspective in deal making. So that's a great story. Thank you for choosing to share that with us. Much appreciated. Yeah, as we come to wrap here, Chris, what would be some of the advice to founders out there that are... Chris Gladwin (44:29.078) great story. Thank you. Chris Gladwin (44:34.038) Yeah. Jason Kirby (44:41.113) trying to figure out and navigate their own capital strategy in terms of going out to market and getting 300 meetings. I know it sounds exhausting. It's not, you know, get so many nos, but to get 300 meetings is a clear sign that you were doing something interesting because I know several other founders that would kill to get five, you know, so like, what would you kind of tell founders to that are looking to raise money? Well, the advice I always give people when they ask for. Chris Gladwin (45:04.214) Well, the advice I always give people when they ask for advice about how to successfully start a new company is to figure out how to last long enough to succeed. The number one reason companies fail is they don't last long enough to realize the success. They're almost always right about what they're doing, the value it provides, the competitive position, but they're almost always wrong. Jason Kirby (45:08.249) advice about how to successfully start a business. Chris Gladwin (45:33.078) about how long it's gonna take. And you can be very experienced at this and think, yeah, yeah, it'll take three years to do that. Like no, it takes four. And if you run out of money, you're done, it's over. And so the number one thing to do is to figure out like how to last long enough to succeed. And it's always gonna be significantly longer than you think. Jason Kirby (45:58.041) incredibly well said. I deal with this all the time. Every founder is like, we want to raise money next month. I'm like, or like, it'll be easy. We'll get to 10 million ARR in six months. I'm like, I don't think so. I don't think you will. Chris Gladwin (46:04.726) Yeah, it's gonna take 18 months. Jason Kirby (46:15.129) Well, Chris, it's been an absolute pleasure having you on the show, sharing your insights. You have an incredible track record. And I would say the steady, true, keep at it, keep going is what you've proven and stay level headed. Don't get your head in the clouds kind of thing is what gets deals done on your side. So really appreciate you coming in and sharing your story. Where's the best way for people to learn more and find out about you? Chris Gladwin (46:16.79) This is better. Chris Gladwin (46:22.71) I would say the steady, true, keep at it, keep going is what you prove it. Stay level headed. Chris Gladwin (46:33.814) Really appreciate you coming in and sharing your story. What is the best way for people to learn more and find out about you? Well, simply just go to OCNT .com, O -C -I -E -N -T .com. And if you're definitely, if part of what you want to do is to analyze extraordinarily large amounts of data in a really cost efficient way, that's what we do. Jason Kirby (46:55.897) Well, I think there's a lot of people out there doing that now with AI. We have a couple of AI companies we're working with, and data is the name of the game. So you're in a hot space right now. So I imagine you'll have options as you continue to grow and scale OCEAN. So really appreciate you sharing your insights and spending some time with us today. Thanks a lot, Jason. It was a real pleasure. Awesome. All right, go ahead and stop the recording here. Chris Gladwin (46:56.662) There's a lot of people out there doing that now. Chris Gladwin (47:13.846) Thanks a lot, Jason. It was a real pleasure.