From: myfirstmillionpod
Jason Cohen, a notable entrepreneur, has a track record of building and selling successful companies. His career highlights include founding Smart Bear and WP Engine, both of which achieved significant success [00:00:35].
Jason Cohen’s Entrepreneurial Journey
Smart Bear
In the early 2000s, Jason Cohen started Smart Bear, a company he grew for approximately seven years, bootstrapping it to millions of dollars in profit [00:00:50]. He later sold the company, which now employs hundreds of people and was sold in 2020 for $2 billion, operating at a 50% bottom-line profit [00:01:05]. This success demonstrates a model of building and selling a tech company that emphasizes profitability and strategic exit.
WP Engine
Following Smart Bear, Cohen founded WP Engine, which is recognized as one of the largest web hosting companies globally [00:02:54]. He initially bootstrapped this company for two or three years before raising between 300 million [00:01:33]. WP Engine is currently valued at billions of dollars [00:01:38]. His experience showcases different funding and growth strategies for building successful businesses from scratch.
Philosophy on Selling Companies: Rich vs. King
Jason Cohen’s blog post “Rich vs. King” discusses the decision-making process when considering selling companies and acquisitions [00:16:00]. He frames this with a “two-box problem” scenario:
- Box 1: Contains $10 million, guaranteed [00:16:47].
- Box 2: Is opaque, containing either $20 million or nothing, with a 50-50 chance [00:16:53].
For individuals who haven’t yet reached a “life-changing amount of money” (dubbed the “freedom line”), choosing the guaranteed 10 million for both boxes) is not the sole factor when personal financial security is at stake [00:17:52]. In real life, the probabilities of success are often unknown, adding to the uncertainty [00:18:13].
Cohen openly admits his motivation was to make money, especially through acquisition [00:19:03]. Achieving financial freedom allowed him to “work on any project I want for the rest of my life” without worrying about bills, debt, or providing for his family [00:19:15]. This goal is not incompatible with ethical business practices or creating valuable products [00:19:37].
The “Freedom Line”
In 2009, Cohen estimated the “freedom line” at around 20 million in the US for a “rich lifestyle” [00:21:09]. This higher figure accounts for maintaining lifestyle, taxes, inflation, and a balanced portfolio, allowing for approximately $1 million per year after tax for a truly affluent life [00:21:46].
The concept of financial freedom is illustrated by a graph showing diminishing returns for increasing wealth, where the ability to “never have to work again” or have “total control over your time” is a crucial threshold [00:22:22]. The “freedom line” can vary based on personal goals, age, and burnout [00:22:57].
Practical Advice for Building Companies
The Reality of Startups
Cohen states that “all startups are screwed up, including the ones that work” [00:24:22]. This perception arises because founders focus on problems within their own business while seeing a “varnished outside” version of competitors [00:24:57]. Successful companies succeed because they are “excellent at one or two things,” even if many other aspects are flawed [00:24:27]. The key is identifying those critical problems holding the business back, hindering growth, or causing cancellations [00:28:10].
Effective Presentations
Cohen emphasizes that “it’s not bad information, it’s bad presentation” [00:05:10]. To improve presentations, he suggests:
- Identify the main takeaway: Ask, “If people are going to remember one thing from this presentation, what should it be?” [00:06:40].
- Prioritize the message: Make the main takeaway the title of the first slide [00:06:46].
- Meaningful titles: Titles should convey the message you want the audience to take from a slide, not just label the content [00:09:17]. For example, instead of “Our Team,” a title could be “Our team has had three successful exits” [00:09:25].
Using AI for Clarity
Instead of asking AI for answers, Cohen suggests using it to ask clarifying questions [00:07:09]. For example, if you’re trying to achieve something, ask the AI, “What are some questions like ask me some questions so that I could start thinking about this the right way?” [00:07:11]. AI can also provide a “bland neutral summary” of a topic, which can help identify what not to say or what information is too obvious [00:08:11].
Selling Value, Not Time
Customers generally don’t value their time highly, so focus on selling value rather than time savings [00:34:01]. For instance, a product that halves marketing lead costs could also be framed as one that doubles leads [00:34:23]. Customers are willing to pay significantly more to double leads (100% of their spend) than to save half their costs (a percentage of the savings) [00:35:06]. The core principle is to “generate as much value as you can for the customer and then decide how to split it with them” [00:36:01], through pricing, retention, or advocacy [00:36:07].
Scaling Companies and Investor Relations
Evolution of a Company
The journey of building a successful startup evolves. Before product-market fit, founders are experimenting [00:31:14]. Once product-market fit is achieved and the company scales, the focus shifts to doing more of what works and introducing specialists [00:31:32]. Aaron Levy of Box notes that “starting up is the act of doing as many jobs as possible… and then scaling up is the act of shedding as many jobs as possible” to ensure survival [00:32:11].
Investor Relations
When considering investors, Cohen advises focusing on “who at X” firm rather than the firm itself, as the individual relationship and expertise are paramount [00:40:06]. He shares a positive experience with Silver Lake Partners, who are known for their deep analysis and insights, going beyond the typical “cutthroat” private equity reputation [00:38:50].
Optionality as Power
For a successful company, the goal should be to build optionality:
- The ability to sell at good terms, but not have to [00:37:26].
- The ability to raise more money at good terms, but not have to [00:37:31].
- The ability to go public, but not have to [00:37:34].
This power comes from building a good company that is growing, profitable, and has happy employees and customers [00:37:39].