The Big Exit
The Big Exit

Episode 2 · 2 years ago

A Big Exit and A $150MM Mistake - Dave Borden and Selling Too Soon.

ABOUT THIS EPISODE

Dave Borden, who sold his first business for $19MM tells his story on what it takes to be a serial entrepreneur, selling too soon, and the definition of what "entrepreneur" really means.

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Dan Daugherty

Welcome to this episode of The Big Exit. I'm here with Dave Borden who sold his company in 2006 for $19MM. I wanted to structure this episode a little bit differently and actually get into the psyche and the mind of serial entrepreneurs and Dave has built multiple companies throughout the last couple decades. Some have been successful and some have failed, but we will talk more about his story. Dave, thank you for joining me.

Dave Borden

Thanks for having me Dan, we'll talk more about the success hopefully, but yeah, there's probably a lot more to learn from the failures but the successes are obviously more fun. So..

Dan Daugherty

Well, let's start at the beginning, even in childhood, you grew up in Colorado Springs, correct?

Dave Borden

Yeah. I grew up mostly in Colorado, but yeah, probably from about sixth grade on I was in Colorado Springs.

Dan Daugherty

And did you always want to start a company, or were you influenced by your parents? Were they entrepreneurs?

Dave Borden

Yeah, from a very young age, I always wanted to have a business of my own and I didn't really know exactly what it was, but both my parents were, they were entrepreneurs and they still are. And so I grew up from about the age of five where my family never worked for anybody else, and they always were able to provide plenty of income and do well. So I guess I was never scared of starting a business and I've only worked for, other than my time in the army, in a very brief stint in corporate America, I've never never worked for anybody other than myself.

Dan Daugherty

Did you, you know growing up, even my mom actually ran Daugherty Construction and she also built pools. But one of the things I remember is that she was always stressed out about money. Did you see that at all with your family?

Dave Borden

Okay, a couple rare times? Yes, I will say, my dad. I love him to death. He's also one of the most frugal guys I know. So, he never had a desire for fancy stuff and he was always very good at saving. However, we did have a pretty rough time and I think it was early eighties, like eighty one, eighty two, we used to live in Steamboat actually and it was before the big ski boom. So they had, they owned a bunch of property in real estate and they've always been into real estate and investing but the market really went sour, nothing was selling and even though I know we had some good savings, I know it dried up pretty quickly and that's the point where we pretty much moved.

We were forced to move to Colorado Springs just because there wasn't any income there. I think my dad actually took a job at a hardware store for about six to twelve months just to pay some bills. We didn't really have many bills like I said, my dad was very frugal. That was a pretty rough time and I think they just decided that we needed to pick up and go somewhere with a little more opportunity.

Dan Daugherty

Subconsciously, do you think that helped transform your ideas, your ideals, and your thoughts about starting a company?

Dave Borden

Well, I think I was pretty young at that time. I'm 48 now. I think at that time, I was under ten, maybe eight or nine, maybe ten. Well. I don't know, sixth grade whatever that is, ten, eleven, twelve, something like that. I did see you can feel the struggle, even though my parents never talked about it, but we were okay and I don't remember ever a time with my parents that we, you know, had bill collectors calling or we were late on mortgages.

Welcoming to the big exit, where we discuss startup acquisitions with the founders who lived it. Here's your host, Damn Doherty. I think the structure of the military was fantastic. For me, however, I am an entrepreneur and that's like the biggest corporation in the world. There's raising money when you don't have revenue and then there's raising money when you do have revenue. If you want to be an entrepreneur, you, I mean really, you have to have a cast iron stomach, and what I mean by that is you have to be able to function in life not knowing when your next paychecks coming, or if it's coming, or how you're going to get by, and just have faith that it's faith and confidence in yourself and it's going to happen. This is you know, make money's hard. It really is something. You see all these stories of people doing it all the time, so it looks easy, but it's not. It's it's for the hard. Welcome to this episode of the Big Exit. I'm here with Dave Borden, who sold his company in two thousand and six for nineteen million dollars. I wanted to structure this episode a little bit differently and actually get into the psyche and the mind of serial entrepreneurs. and Dave has built multiple companies throughout the last couple decades. Some have been successful and some have failed, but we'll talk more about his story, Dave. Thank you for joining me. Thanks for having me Dan. We'll talk more about the success, hopefully, but yeah, there's plenty of there's probably a lot more to learn from the failures, but the successes are obviously more fun. So well, let's start in the beginning. Even in childhood, you grew up in Colorado Springs. Correct. Yeah, I grew mostly in Colorado, but yeah, probably from about sixth grade on I was in Colorado Springs. And did you always want to start a company or were you influenced around your parents, where they entrepreneurs? Yeah, from a very young age I always wanted to have a business of my own and I didn't really know exactly what it was, but both my parents were. They were entrepreneurs and they still are. And so I grew up from about the age of five on where my family never worked for anybody else and they always were able to provide plenty of income and do well. So I guess I was never scared of starting a business and I've only worked for other than my time in the army and a very brief stint in corporate America. I've never, never worked for anybody other than myself. So did you? You know, growing up, even even my mom actually ran Dorty dorty construction and she also built pools. But one of the things I remember is she they were always stressed out about money. Did you see that at all with your family? Okay, a couple rare times. Yes, I will say my dad. I love them to death. He's also always one of the most frugal guys I know. So he never had a desire for fancy stuff and he was always very good at saving. However, we did have a pretty rough time, and I think it was early S, like e one hundred and eighty two. We used to live in steamboat actually, and it was before the big ski boom. So they had a they owned a bunch of property and real estate. He's Oh, they've always been into real estate investing. But the market really went so our nothing was selling and even though I know we had some good savings, I know it dried up pretty quickly, and that's the point where we pretty much move. We're forced to move to Colorado Springs just because there just wasn't any income there. I think my dad actually took a job at a hardware store for about six to twelve months just to pay some bills, and we didn't really have many bills because, like I said, my dad was very frugal. We never had that. So...

...that was that was a pretty rough time and I think that he just, I think they just decided that we needed to pick up and go somewhere a little more with a little more opportunity. subconsciously, do you think that helped transform your ideas and your ideals and your thoughts about starting a company? Well, I think I was pretty young at that time. I'm forty eight now. I think at that time I was I was under ten, maybe nine eight or nine, maybe ten. Well, I don't know, sixth grade, whatever that is, twelve, something like that. And I did see, you can feel the struggle, even though my parents never talked about it, but we were okay and I don't remember ever a time with my parents that we, you know, had bill collectors calling or we're laid on mortgages, and that I'm not saying that stuff never happened, but I certainly never felt it. So I don't. I don't think I ever had a fear of starting a business because I saw my my parents always seem to make it happen, even if it wasn't even if they weren't thriving. I just I don't feel like they ever had any stress and they may have just done a really good job of not portraying that to me in the end my brother, but I just felt like they always felt like they could make it happen and they always did. So I think that does factor into having confidence and starting a business and being able to make it happen. And then fast forward. You you you went to West Point. Correct, I did. And why did you choose West Point? Well, kind of chose me, actually. I was in I grew up in Colorado Springs, which the Air Force Academies Right in my backyard. I used to play basketball over there and we used to spend a significant amount of time at the Air Force Academy. So I was familiar with academies and while I did well in high school, I didn't really do well enough to get into an academy. So I actually went to see Su for semester and had a little bit too much fun there and and dropped out move back in with my parents and I was, you know, doing some delivered some pizza work for my dad's friend and I didn't really know what I wanted to do with myself, but I knew it wasn't that. So I joined the army and while I was in the army had a really good as VAB score and when I was in basic training, the drill sergeants told me that I was eligible to go to west point if I wanted to. And since I knew about West Point, I was like Hell Yeah, I'll definitely do that. So I got in. I did a year at the prep school and went to West Point and that was very challenging. I think what that probably taught me. It's funny, because that's a such a regimented lifestyle that honestly it's life. Life's life is a lot easier than attending west point. I don't know if that makes any sense, but sure, when we wake up at thirty and go to bed at midnight and your every hour's pretty much accounted for and you're always doing something physically, mentally, it's a it's a strenuous life, but you really don't know any better while you're doing it, but once you get out it's like, oh, this life stuff is really not that hard. So it definitely it definitely strengthened your resolve for taking on other other things in normal life that most people aren't used to dealing with. So a lot of structure, a lot of leadership. Did you did you know that you wanted to start a business when you were in college, or do you say hey, I want to I want to spend the rest of my life in the military? I told people in high school I got I'm going to be a millionaire some day. So I definitely had the business bug. I definitely wanted to start a business. Like I said, I had no idea what it was going to be. And when I was in the military, the military was don't get me wrong, the military was fantastic for me as far as developing selfdiscipline, leadership and just having the...

...determination to accomplish stuff. If you learn several things, number you learn mostly that you can do anything you really set your mind to, and there's certain things that you just are forced to do that you don't want to do and you have to do it anyway. So those are two really good lessons, I think, and I've carried those into my into my entrepreneurial life and with business. Is You know no one's going to do you learn that no one's going to do stuff for you and but you can also do pretty much anything you set your mind to if you really try. So I think the structure of the military was fantastic for me. However, I am an entrepreneur and that's like the biggest corporation in the world. So I didn't love the army. I didn't hate it or love it, but first opportunity I had to get out I definitely took so so I can get my feet wet in the entrepreneur a world, which I did joining my mom's property management company, and that's what led me into rent clicks, you know, my first business. So you you graduated from West Point. Then you started working for thirt five years food, flying helicopters. I flew chinooks. I got out a little bit early because I had bad feet. I owed like another year and a half, but they told me I could get surgery or get out, so I got out. So and then I joined my mom. I did a brief stint in the corporate world at a company called rhythms, which was a DSL provider in Denver. You probably are familiar with them living up there there. Come on now, but I think at the time I was during thecom boom and I think the CEO, I think her name was Catherine Hapga. She was the richest woman in Colorado for a while just because of those overinflated stock prices. But that company, I saw the writing on the wall that it was not going to make it and I had thought about joining my mom straight out of the army, but I wanted to scratch the corporate itch. So I did that. Was Not excited by it, and so I when did you know when when to work with my mom? Do you think if you had a really good experience working at a larger corporation that you would not have launched or not? I don't. So I really don't. Unless I obviously if I maybe of rhythm stock or if I would have been at Amazon or some thing like that, my stock was worth a few million bucks, I probably would have hung in there. But I just it's going to sound super arrogant, but I just felt like a lot of people in charge of me were not. We're not only and I think they were as smart as men and think they wanted to work as hard as me. I just felt like they were paycheck collectors and I didn't want to be around that. So I've always wanted to do my own thing and I went and, you know, kind of got my feet wet with my mom and she made me a partner in her business, which was very nice for she didn't have to do that. I worked super hard for her and that that led me into rent plex because at the time I was two thousand and two. There was nowhere to advertise rental properties online other than like craigs list, which was only in like two or three markets at the time, and Robert Fowler's company, Home Rental ads that you had a few markets to but we we just saw an opportunity and went for it and I had a ride a couple really smart business partners, one of which was really good at it, Jonathan Hartley. He was really, really good at the IT side. Jason worked his ASS OFF on the Sales Jason Warren, and we were really good team. We really pushed each other hard. We've got along and everyone was accountable, worked hard it was. It was really good experience. So now now back at back in two thousand, two thousand and one, two thousand and two, you did have multi family sites like apartment'Scom and others. But you're right, I didn't. I don't think there was any large scale single family home rental properties at the time. I remember a vast majority of property managers would actually post in the local classified of a noh, yeah, newspapers, and it was...

...very expensive. Yeah, it's three or four hundred dollars. We were thirty nine bucks and I think that we came about our pricing. I think it was like the average cost of one day in the newspapers, but we charge and it was a thirty day out of worked way better. And at the time there was really only the only national players like rentcom at the time, which was they were definitely an advertising but they were more of like almost an online locator. Ebay ended up buying them for a few hundred million bucks. I remember that, but there really wasn't much then. As we were growing, craigs will started growing a little bit more. Some other people started getting into the into the space. That made us a little nervous, but we were we were clearly the leader. So in the single family. I mean a lot of a lot of those other sites attacked the apartment industry. We were clearly the leader in the single family industry. So we that was a it was an extremely you were you were you remember because you were in that industry as well. We were very fast growing, very effective, very profitable company. It was a lot of fun. So you saw that gap because you were working with your mom at the property management company. You saw that that need within the market. Yea, all that camp and all honesty. What happened is the mark. It just kind of turned. Renal market was pretty good late, late S, early s and but a lot of that's when a lot of the crazy loans started happening and everyone could get alone and every everyone was buying home. So that, I think, the percentage of homes that rented dropped from like forty percent down to like thirty one percent. So vacancy rates were were high, like right now they're super low and the three, four five percent range. At that time there were markets including Denver and Color Springs and were fifteen to twenty percent vacancies. That's right. And we were spending a fortune of our owners money on newspaper ads and never hearing the end of it from them, with not much success. So I've literally was just looking for somewhere else to advertisement and in the Internet was emerging at the time and I was like there's got to be somewhere online to advertise this stuff, and there really wasn't. So we made it. And do you remember that first year? So two and two. Do you remember how much revenue you made that first year? Well, we see. It was funny because I turned thirty that year and I remember thinking when I turned thirty I was just pissed. It was like right after eleven. So I was a little depressed after that. And then I turned thirty and I was like I just am not where I want to be in life. I need to do something here. And then a few months later we started just in call or it was Colorado Springs, for rentcom and we launched it and we just it was toward the end of the year, like maybe August or September, and I think we only made about I think we only we probably only made about ten grand the first year and then I think we made about a hundred and eighty the second year and then the thirty, we made like three million, three million the third year and then and then Ye know your we were at about a five run rate when we sold. So you've got a five million run rate with what we were your profit margins seventy five percent easily. So do you have any regrets of selling? Timing time and you know, yes and no. I mean it's pretty nice when you're thirty. I think I was thirty three. You know, you get a five million dollar check. Was My share for the first portion, and then I got another million and a half year later. Or Yeah, you're later. So that's a nice chunk of change at that age. However, you know, if we when we like I said, when we sold, we were doing I think, about four hundred a month, which is about five, five million a year. Six or seven months later, from July of o seven to August of o seven, we grew a hundred and thirty thousand dollars month over month. So if we would awaited six or seven months, we would have gotten at...

...least double what we got in probably more so to say that there's regrets, definitely, because I think the company's probably made a hundred and fifty de million in revenue since I sold it and I would have at a seventy five percent margin. That would have been another thirty or forty million dollars for me personally. So there's that's a regret. But at the time you just really didn't know. Like I said, Craigslis was getting a lot bigger, Google was playing around with getting into the space. Yahoo was was still a big was a big company at the time looking at getting into the space. Classified dventures, who owns apart, who owned apartmentscom at the time, had entered the space. So we didn't really know how defensible our position was and looking back on it, it was really good and we really we feel like we probably could have done what Zillo did with the rental market had we had we stuck with it, but we didn't. So there's regrets there that that we've the companies made a ton of money and I think under our leadership it could have made two, three, four five times that. Think we could have been more like a Verbo type company and you know, I think they ended up selling a home away for a hundred some million. But so I don't he don't regret getting a big fat check like that, but when you look back on it. You could have done a lot better and we were young. We were worn out because we had gone and you know, it sounds sounds really stupid being worn out after three years, but man, we went hard as that. Every trade show is on the road fifty percent of my life. You know, Jonathan was programming twelve, eighteen, fifteen, eighteen hours a day and we took it really seriously and we worked really hard. We didn't have a ton of fun with it, honestly, we were just really serious. It's three West Point guys, so we're all just really working hard and busting our ass and it was great. But we probably should have hung on and let and wrote it out for another fifteen years. Would have been really interesting to see what happened. But we did what we did and we did really well at a young age. And you know, it's it's just one of those lessons you learn in life. And if the you know people are listening to this trying to get advice. Man, when you get a company like that, when you're thirty three years old, you're making seventy grand a month, you might you might be onto something, as they should. Probably you should probably think long and hard about selling it and there's so many other ways to exit. You don't have to sell it to someone. You can if you have great leadership, younger people in your company that we had a leader in our company, Dan Yeck out, that easily could have run that company for us and we could. He could have. We would not have skipped to beat and we could have just hung onto it and want and gone done some other stuff with our life and still owned it. There's so many other ways to exit. You can sell it to your employees. There's some serious tax benefits and doing so. I mean there's just so many other options that we didn't consider at the time. So regrets, yes, but ultimately, and I've learned so much during that and since that, that I just really can't complain. Yeah, yeah, yeah, I think so many of us would, would love that opportunity. It's it's interesting. Those sound like it was a combination of things. One fear of the unknown, even though you personally were making seventyzero or so, you know, a month as twenty. When you apply for a loan or something like, what's your income? You like, you're like, what's your monthly income? Like seventy grand the like. Know you're monthly, like yeah, there's my monthly, right, right, right. But you it was a combination of things. The fear, you guys just being over overly worked, not knowing what other competitors would do within the space, and maybe in the back of your mind you thought, well, maybe this opportunity won't come up again, and it's almost like the risk reward. So definitely nothing to be to be sad about,...

...for sure. But it's interesting to see a lot of different companies that have been acquired. Some are acquired and you know they made way more money than they could have if they continue to be standalone. For example, you know, when I was at Google, we google acquired Urchin, which is now google analytics, and you know, a standalone product probably would not have been super successful and they became a lot more successful being under Google. And if it was a stock option deal pre IPO, you can imagine what that ended up being. So for those that are listening in entrepreneurs, there's never a right answer. It sounds like well in, but not only that, it's like in. This is very, very rare in this world and none of us, not me or my business partners, had a mentor in our life that had been down that road before. Jonathan's parents were. We're successful, but in a smaller way. My parents were successful, but in a smaller way. Jay's parents were. You know, they were job they had jobs. So we didn't really have anyone in our lives that just said listen, guys, you guys are doing exceptionally well. Even our you know, even our bankers, were like, yeah, I'd probably sell it, which those guys would have shaken us and said, guys, hang on for two or three more years, you know, double triple your revenue once or one or two more times and then sell it. But you know, so that's I think that's really where it's really rare. The world's not full of people that have made hundreds of millions, tens of millions of dollars. So if you find somebody that's willing to talk to you, listen to those people, because that's I think that's what we lacked in our life at the time was just someone to say, guys, this doesn't come around very often and I have another business now. Are you know, our business now is doing about the same amount of revenue, but it took US ten years to get there instead of three. So it's just not. It's just, you know, making money's hard. It really is. I mean you see all these stories of people doing all the time. So it looks easy, but it's not. It's it's freaking hard. With the new company, are you looking to potentially exit or is this going to be more of a distribution plan for the rest of your life? We get, we get opportunities every week to exit and we are staunchly opposed. You know, we're making really nice money. The business is extremely defensible and we think it's going to grow at twenty, thirty, forty percent for the next ten or fifteen years. So there's no reason to sell that. And that's also a high margin business. It's not quite as high, but it's very nice, forty to fifty percent. So and not only that, but we, you know, we are launching another product, which I've talked to you about, our accounting software. That, I mean we have a built in customer base that that loves and trust and respects us that we can tap right into and in any product that we roll out. So it's it's it being armed with my experience is it's really incredible because we, I mean we could probably sell that business for more than I sold runt clicks for in a week. I know three or four people that are always wanting to acquire us. There's three or four venture capital companies that are always are contacting us. Like I said, pretty much every week they contact me or one of my business partners and they want to make significant investments and we're just not interested, and I think that that's extremely rare. You're going to you know, I see all these guys go out and start companies in the first thing they do is like how do we raise money? And and that's smart and it can work that way, but I think the first question always needs to be like hey, do we have something that someone will pay us one dollar for? Because if we do, then you have a real business. If you have a product or a software or whatever it is you're doing and you have customers that are willing to pay you for it, then you have a business. And doesn't mean it's profitable or that you're charging the right amount of money or whatever it is, but I mean that's really ninety...

...percent of the struggle is, do you have something that somebody else out there is giving you money for? And if that answers yes, then and preferably with some good margin. Then you can build a business around that. And you don't, and then then you've been down that road. I mean there's there's raising money when you don't have revenue and then there's raising money when you do have revenue. And it is a significantly different conversation when you are making a lot of money and you're in preferably if you're profitable. Then you're going to have guys begging you to give you money versus you begging them to get money at a at a low valuation. So any are any any others? Some enterprises out there? I mean I'm sure Tesla doesn't start with profits. You have to, you have to have some massive capital sunk into an operation like that, but if you're growing software or a little business or something like that to start with, you don't. You don't need someone else's money, and I think that there's just this oubsession with going out and raising money or getting money from people, and all that does is just lets other people mooch and Leech off of your efforts, which, if you have something for Real, then you want to you want to wait as long as you can to let other people have access to it and only if you absolutely need them. And what is your definition of an entrepreneur? Quote Entrepreneur. Entrepreneur is a it's a sexy term that people like to say. It's really there's a lot of entrepreneurs out there that don't do very well. As a matter of fact, most of them do not. So the term entrepreneur generally applies to a group of people that ninety percent of which are usually failures. So it's not as sexy as it may seem unless you have a successful company. I think what people have to realize before any of that other stuff, and the thing that I've talked to my business partners about, is if you want to be an on there's people out there that have jobs, and please don't take it the wrong way, that is absolutely admirable and worthy and awesome. And some people don't want to work. They want to work as little as they can to go skiing or fishing or have fun or whatever. And you know what, sometimes I think those people are wast smarter than me. But if you want to be an entrepreneur, you, I mean really, you have to have a cast iron stomach, and what I mean by that is you have to be able to function in life not knowing when your next paychecks coming or if it's coming, or how you're going to get by, and just have faith that it's faith and confidence in yourself that it's gonna Happen. And if you if you don't feel like you can do that and and if you don't have the persistence to push through the periods when it looks like you're not going to make it, because those are the times, those are the times when great companies are created. You ask anybody Amazon and Microsoft and apple and all those guys. They all had points in their experience where they were like this just isn't working and they powered through it. They persisted and they just kept on going. And, and I think that's the first question about entrepreneur before you raise money, is do I have that cast iron stomach? Because you know what, if you go to a venture capital guy and say yeah, me and my team are going to make a hundred fifty grand a year a piece, they're going to be like no, you're not. Why? Oh, because I have mortgage and three cars and some Nordstrom card. They don't care about any of that stuff. And if you really want to be an entrepreneur, you have to have zero debt. You have to have zero debt and live on nothing and be able to sustain yourself through those periods that are just going to get brutal, because they will happen. And if you and if you have tenzero dollars a month and expenses, second things get brutal, you're going to go look for a job. This was very insightful day. Thank you so much for taking the time and and talking to our listeners and giving them a device on even becoming an entrepreneur. Hey anytime, Dan.

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