From: myfirstmillionpod
Sulman, a serial entrepreneur and investor, has been instrumental in several company sales, including Bebo to Twitch and The Milk Road, often serving as a “deal doula” to guide businesses through the acquisition process to a “happy ending” [00:00:00]. As an early guest on the “My First Million” podcast, Sulman’s insights span his entrepreneurial journey, investment strategies, and philosophical reflections on business and life.
Early Ventures and Milestones
Sulman’s entrepreneurial path began after leaving Microsoft, transitioning from a traditional job to building his own companies [00:01:42].
Facebook Apps and First Exit
Leveraging the emerging Facebook app platform, Sulman created viral applications like “Superlatives,” which quickly gained traction [00:01:46]. This venture led to his first significant sale, marking his “first million moment” around the age of 26 [00:02:06]. This early success provided a foundation for future endeavors.
Mobile Gaming with TinyCo
Anticipating the rise of mobile apps, Sulman founded TinyCo, a company focused on creating games for the iPhone App Store [00:02:20]. TinyCo successfully raised money from Andreessen Horowitz [00:02:40]. Despite initial challenges as the business economics shifted, a “Hail Mary” strategy to secure licensing rights for major intellectual properties like “Family Guy” and “Harry Potter” led to the company’s eventual sale [00:02:46].
Key Insights from Acquisitions and Sales
Sulman emphasizes the importance of strategic guidance during company sales, often drawing on his experience and insights from bankers like Dick Filippini, who advised on large transactions [00:05:05].
Transparency and Trust
One of the most crucial lessons learned in acquisitions is radical transparency [00:10:00]. Sulman advises proactively disclosing all “shitty things” or “skeletons in the closet” about the business to potential buyers early in the process [00:10:40]. This approach, though counter-intuitive for many entrepreneurs, builds significant trust and prevents complications during due diligence, as buyers will eventually discover these issues anyway [00:10:46].
Approaching Potential Buyers
When a buyer expresses interest, instead of flatly denying an interest in selling, Sulman suggests a nuanced response [00:13:11]. A good approach is to acknowledge prior interest, express satisfaction with the current business, but remain open to listening due to respect for the buyer [00:14:31]. This signals openness without appearing desperate [00:15:23].
Identifying Problematic Buyers
Sulman learned to identify “charlatans” or less capable buyers who often lead with flattery rather than substance, making it easy to “sniff out” those who are not serious or knowledgeable [00:16:31].
The AppLovin Anomaly
Sulman recounts the AppLovin deal, where a 30 billion [00:06:51]. This illustrates that sometimes, failed deals can lead to even greater success.
Business Ideas and Strategies
Sulman shares two main categories of business ideas: large-scale ventures and more accessible, “bootstrapped” opportunities.
”Robinhood for Real Estate”
A “big idea” Sulman favors is a “Robinhood for real estate,” making it easy for young professionals to invest small amounts in real estate through a mobile app [00:17:52]. Unlike existing platforms targeting sophisticated investors, this would focus on one-click, subscription-based micro-investing into income-generating rental properties [00:19:48].
Niche Agencies and Consulting
For those aiming for financial freedom with less capital, Sulman suggests creating a niche agency or consulting business [00:21:05].
- Targeting Profit Centers: Focus on a specific business function that directly impacts revenue, such as email marketing for e-commerce brands or conversion rate optimization [00:21:24].
- Thought Leadership through Case Studies: Build credibility by publishing “before and after” case studies, even by analyzing other brands [00:21:38].
- Service Offerings: Provide turnkey services that alleviate client headaches and outperform their internal efforts [00:22:18].
- Broad Applicability: This model can be applied to any industry (e.g., website development for dentists, efficiency playbooks for self-storage units) [00:24:35].
- Risk-Free Proposals: Offer risk-free engagements where payment is contingent on delivering results, demonstrating confidence and reducing client apprehension [00:26:06].
Content Creation: Business vs. Consumer
While consumer-facing content creation (e.g., YouTube channels) can be challenging due to high competition and low income for most, business-facing content is more reliable [00:27:54]. Creating content for specific business owners (e.g., self-storage unit owners, e-commerce store owners) can establish thought leadership and directly lead to clients [00:28:30].
Evolution of Entrepreneurial Mindset
Sulman reflects on how his approach to entrepreneurship has changed over time.
From Skyscraper Dreams to Blueprints
In his 20s, Sulman pursued “skyscraper” ideas like music and social network startups, driven by ambition without considering the high failure rates [00:31:41]. Now, in his 30s, he prioritizes “winning” and seeks a “blueprint” – a proven, replicable model for success [00:34:25]. If a blueprint doesn’t exist, he approaches the venture with “eyes wide open,” acknowledging the higher risk [00:35:34].
Prioritizing Success
Inspired by Bobby Kotick, CEO of Activision, Sulman emphasizes that “success is what matters more than anything else,” rather than the specific industry or product [00:33:01].
Startup Investing: A Shifting Perspective
Sulman has significantly altered his approach to startup investing.
Disillusionment with Early-Stage Investing
He dislikes the competitive nature of vying for small investment allocations in early-stage rounds, finding it “demeaning” [00:39:28]. The long wait times for exits (e.g., 10 years for a 2 million, as with Chartboost) and increasingly high valuations, combined with intense competition among startups, have made early-stage investing less appealing [00:40:44].
Shift to Majority Stakes
His current preference is to acquire majority or significant interests (30-40%) in businesses with existing revenue and clear paths to profit [00:41:26]. This strategy allows for quicker returns that can be reinvested [00:41:39].
Notable Investment Misses
- Coinbase: He missed the opportunity to invest 200 million at its IPO [00:42:50]. His skepticism towards “crypto Bitcoin” as “silly PayPal” led to this oversight [00:43:02].
- Facebook Secondary Shares: During the 2008 financial crisis, despite his father’s advice, Sulman paid 150,000 worth of Facebook stock when its private market price dropped [00:43:28]. A friend he connected to a seller bought 8 million [00:44:40].
Father’s Investing Genius
His father’s strategy during the 2008 real estate crash exemplified contrarian investing [00:48:04]. Despite prices continuing to fall, his father consistently bought houses at “below replacement cost,” eventually accumulating over 100 single-family rentals in Florida [00:48:38]. This demonstrated a deep understanding of market cycles and a long-term mindset.
The Next Big Swing: Acquiring Public Companies
Sulman is now exploring the acquisition of public companies to bypass the difficult “zero to one” startup phase [01:03:03].
Squarespace Example
He eyes Squarespace, a company he believes is undervalued at 10 billion in the private market [01:03:30]. His strategy would involve:
- Profit Maximization: Shifting focus from break-even to maximizing profits [01:04:41].
- Efficient Marketing: Cutting inefficient non-direct response ads (like podcasts) and focusing on direct response advertising [01:04:50].
- Headcount Reduction: Materially reducing headcount and relocating from expensive areas like New York City [01:05:40].
- Hostile Takeover Approach: Similar to Elon Musk and Justin Yoshimura, make a private offer, then a public offer with financing lined up, leveraging shareholder rights to pressure the board [01:09:00].
Lessons from Justin Yoshimura
Sulman admires Justin Yoshimura’s strategy of acquiring antiquated furniture companies and modernizing them through e-commerce and digital improvements [00:52:46]. Yoshimura’s approach, similar to Constellation Software’s rollup strategy for small SaaS companies, targets undervalued, lagging industries that can benefit significantly from a “digital glow up” and optimized customer data [00:56:05].
Personal Philosophy and Life Seasons
Sulman’s journey has also led to profound personal reflections on success, happiness, and the nature of work.
The Dental Practice Rollup
Sulman acted as a “deal doula” for a friend selling his highly profitable dental practice, which the friend ran for lifestyle optimization (working three days a week) [01:10:03]. A private equity firm acquired it, aiming to increase revenue by adding more dentists and hygienists, optimizing insurance claims, and leveraging a network of referrals [01:13:06]. The deal was a “huge win” for both sides: the firm gained a profitable asset to roll up into a larger entity with a higher valuation multiple, and his friend achieved financial independence, keeping the real estate and enjoying more leisure time [01:15:48]. This highlights the appeal of “winning the rat race” by opting out, achieving substantial wealth in smaller markets without the endless competition of Silicon Valley [01:17:25].
Life Limited by Imagination
Sulman believes his life is “limited by my imagination,” not by money or resources [01:27:31]. He recognizes his tendency to focus brainpower on business analysis and wants to consciously dedicate more energy to imagining and pursuing enjoyable activities [01:29:34]. This includes hiring a “chief fun officer” to challenge his work-oriented definition of fun [01:27:50].
The “New Prison” of Entrepreneurship
He often grapples with the idea that many entrepreneurs who achieve financial independence “keep building a new prison for themselves” by continuously starting new ventures, rather than embracing the freedom their success affords [01:24:40]. This reflection highlights the struggle to break free from deeply ingrained habits and redefine success beyond constant work.
Ultimately, Sulman’s entrepreneurial journey is a testament to adapting, learning from both hits and misses, and evolving one’s mindset to navigate the complexities of business and life.