E:35 Top M&A Entrepreneurs Podcast - Michael Liu - 2 Acquisitions Ecommerce under $1mm in Rev

Welcome to the top M&A entrepreneurs. Today my guest is Michael Lou from Erdo's Ventures. Michael, welcome to the show. How are you doing? Thank you for having me, John. I'm really excited to be here. Yeah, good. Well, let's talk a little bit about uh what Erdos does. First of all, Tell me who Erdos is and uh why you called it Erdos Ventures. Uh, Paul Erdos, uh, so he's a, he's a famous Hungarian mathematician. Um, one of, uh, one of the things that we actually want to do with this company early on is bring together this idea of, hey, you know, can we find these connections between these different companies, um, and interestingly enough, uh, part of, he's famous for a few things. So number one, there was the pandemic happening. Um, and so, uh, everybody started this business remotely. People are like crashing on each other's couches. Uh, we actually had this, uh, this, this idea, like, you know, crashing on somebody's couch, and Paulos himself, he's famous for writing these math papers, crashing on people's like couches that you just show up and like write these papers with you. So, Um, you know, he, he embodies a little bit of genius, also a little bit of madness, and I think like combining those two things together, uh, is a, is a good embodiment of where we're coming from, um, with, with Argos Ventures. Yeah, I mean, that's a good origination story where the name come up. Now, how did you, what, what did you want to build here? I mean, what is Erdos ventures? What is it? Yeah, so, um, we're, we're still in our early stages, uh, but we actually have a, a fairly, um, clear vision in terms of what we actually want to build. So, uh, my, a little bit about me, um, so my background is I grew up in Canada. Um, I spent my last 10 years in Asia, um, and before I actually came back to North America to start this business, I actually ran a business in Hong Kong called Studio Honto. Um, and we helped, uh, direct consumer and Amazon private label companies, um, manufacture quality control, and then ship products from Asia to North America. Um, a lot of these were small mom and pop, uh, companies. Um, they were direct to consumer or on Amazon, uh, usually run by one person or very, very small team. Um, and when the pandemic hit, they really struggle. Um, most of these, uh, entrepreneurs, they use their own financing, they use their own money from their own jobs, uh, from, from their own businesses to, uh, really bridge that cash flow. Um, and so, uh, uh, when they were struggling, they Try to find outside sources of financing. Uh, it was really difficult for them because of their sizing, uh, they eventually tried to sell their business, um, and what they realized is that they really can't. Um, and so what we're here building at Edos is very simply we want to build an infrastructure layer that closes the loop for these e-commerce entrepreneurs. So, uh, instead of uh going out and trying to rely on relationships, um, trying to rely on the largess of institutions, we want to build algorithms that are able to really look deeply into a company, um, even at its early stages, realize the value that's there, and then be able to give, uh, entrepreneurs the exit that they actually deserve. So, are you looking to help companies exit or are you acquiring these companies like in a fund? Yeah, so, so currently we are acquiring the companies ourselves, um, sort of uh put your money where your mouth is kind of situation. Um, it's still, it's still early days in terms of, uh, uh, institutions having a good understanding of what is the value of these smaller e-commerce companies. Um, I think companies like Therazio have really, um, Uh, clear the path for understanding that, hey, e-commerce companies, although they don't have any physical assets, still have a lot of value because of the relationship that they potentially have with their customers. Um, we see that not only existing for giant companies, but also companies at a very small scale as well. So this is what we're trying to do. Yeah. Now, speaking of Thorazio, they've raised, I don't know, a couple billion dollars, $3 to $4 billion I think it is to acquire Amazon related businesses. I mean, that's what your focus is on, just the ecosystem of Amazon? Really good question. Yeah, so we're focused primarily on non-Amazon businesses, uh, non-Amazon business, Shopify type. That's right. So non-Amazon businesses, uh, there's a benefit and there's a curse. Um, the benefit is that non-Amazon businesses, you had to start from square zero for most of these entrepreneurs. Um, you had to build the products yourself, you had to get the products, and at the end of the day, you had to actually find the customer to come buy the products yourself. So unlike Amazon where, you know, you, you go onto the Amazon platform, you play by Amazon rules, but they really work hard to get those customers in front of you. If you're doing your own store direct consumer from Shopify, you need to do that yourself and take on those uh customer acquisition costs. The benefit, however, is at the end of the day you actually own those customers. So unlike an Amazon shop where you're listing, um, Amazon uh doesn't really care if your listing disappears, somebody else will just take your place. Um, these, uh, shops on Shopify, uh, they actually own their customer base, um, and what that means is that they build a direct relationship with that end customer that You know, becomes a long term relationship for the ongoing future. Yeah, I, I'm not gonna say that's good or bad, because, uh, I, I just don't have the expertise in that, but I did look into it, uh, because I sold some products through Amazon for a while. And if you're selling really well, and Amazon, Amazon has, is the house, they will, you know, they look at the information and then just ask the question, should we get into this business? And they will get into this business because I, I started buying Protein Power and have it sent from the number one seller on Amazon is Amazon's product. Yeah. So don't get fooled to thinking, you know, to be an expert on Amazon, you're gonna have some operational success and deal with lower, smaller margins. And you do not own that customer, you are correct about that. Yeah. That's right. And I think, uh, don't get me wrong, tons of people buy from Amazon. Um, Amazon is still a wonderful channel. But for a lot of these small brands, especially the ones that we look at, um, it's really hard to differentiate yourself on that platform. Uh, Amazon, there's a benefit again, a benefit as a person. I'm not gonna say if it's good or bad as well, because, um, you know, going on to Amazon is actually really easy. Uh, you have your 5 pictures, you have your title, you have your football 4 bullet points, everybody plays by the same rules. So it's really easy to get into it. Um, but at the end of the day, how do you differentiate yourself? You only have that much real estate. Um, when you own your own store, there's so many things that you can do. You can do things through social media, you can do things through advertising, you can be creative. But you also have so many possibilities, so many options, um, and so how do you actually choose? Um, so that becomes a challenge in and of itself, and a lot of the, uh, entrepreneurs that we've seen, even at a small stage who are able to solve that problem, really create a lot of value for their end customers. Yeah, no, I, I, I, I like it because you own the customer. So are you solely res uh focused on Shopify? I mean, that's the big whale in the deal. I mean, Speaking of that, is, you know, Tim Wilkinson over at Tiny Capital talks about this all the time is we, you know, we placed a bet on Shopify because we were building templates for Shopify and it took off and we got kind of lucky and we went along for the ride. Yeah, so, uh, we are currently focusing primarily on Shopify businesses. Um, we, we do like the uh the the the quality of the business that we find on that platform a lot. Um, although, um, if we do find stores, for example, that are on WooCommerce, that are on BigCommerce, that are on Magenta. Uh, we do consider them as well. Um, so, uh, in terms of platforms, we are, uh, we are platform agnostic in service of consideration, but tactically speaking, we've been focusing primarily on Shopify businesses so far. So what are you looking for? Let's just say it's a Shopify store. What are you looking for in bottom line and top line revenue? Yeah, so, in general, we uh consider primarily stores that do under a million dollars in top line revenue. OK. So there's a, there's a very specific reason that we do this. Um, so companies within this range, um, have traditionally not been in the purview of a traditional investor, um, most of the time, and correctly so, um, Traditional investors such as search funds or PEs, you would normally look at companies that are uh much higher, at least past the $2 million linear way below the radar, um, and there's a reason for this, uh, well, two main reasons. Uh, the first reason is there's a cost to analyze each one of these companies historically. Um, if you use a much more traditional method of simply looking at a company using their P&Ls, um, it's, it gives you some kind of understanding, but But still, it's quite opaque in terms of what the quality of that business is. So you still need to go in, do a due diligence, a timely and costly due diligence process to try and get a good picture of what that company actually does. Um, is it worth your while to spend your resources to look at a $100,000 company? Or would you rather look at a $10 million company? Um, so this is one of the choices that they normally make and they will look at the one with the higher top end. Uh, the second reason is because, um, and rightly so, the higher top line often reflects a more robust, um, brand. So, um, you know, a brand that has achieved $10 million you can be sure that there's something there. Um, when you're under a million dollars, there's a lot of volatility. These businesses sometimes are very fragile. Um, and so how do we actually gain confidence in the quality of a brand at such an early stage? This is one of the problems that we actually solve for. Yeah. So what, what is that solving, because I can imagine anybody that's under a million dollars, it's usually just not a pop single operation, you know, a, a crafting type thing, or, or somebody that's reselling products for somebody else, and it's a lower margin. What, what do you, what do you bring into the table to the, to do that? Yeah, really good question. So, uh, so for us, uh, let me just set the stage, right? So, um, historically, mom and pop shops, um, they, I mean, they they've always been around, um, SMEs even on Uh, in much more traditional, uh, businesses that are brick and mortar, um, you used to have your local grocery store, your local retailer. Um, the main difference now is that historically, when one of these companies, um, existed, most of their files was in paper files, um, and so being able to go and access and actually meet the person and actually sign the documents, all of this had to happen in person and it was very difficult to scale. But now everybody is online. Um, what we've actually seen over the last decade is uh a digitization and commoditization of most of the operating stack for these e-commerce businesses. And so what that actually means fundamentally is that, um, being able to access that data and being able to um analyze that data is becoming easier than ever before. Um, so what we actually do is fairly simple, uh, we, we leverage technology to plug directly into the back ends of these businesses. Uh, we pulled the first party, uh, order data and then try and really get a good understanding of what is the current status of the business. Um, we then apply our own proprietary testing and evaluation models to see, you know, what is the not only the current status but also the future potential of the business and then whether or not uh within the hands of a different operator, that business would have uh even greater potential to grow beyond its current scope. So, um, it's very much, it's very much a data focused play, uh, it's very much leveraging the technology of that we that we currently have, and uh it's really a matter of building tests that really allow us to get a much clearer image of these businesses based on the data that we actually collect. Let, let's kind of go through a scenario. So let's say, um, you use that technology called Built with and say, uh, you know, there's 50,000 Shopify stores, but it doesn't really tell you what their volume is, um, on how much they're making. Only Shopify would know that, but you start reaching out to them and how do you, how do you first find a store that's a million dollars below with, you know, a list from built with, let's say. Yeah, really good question. So, uh, we find that there are two types of people that, um, that are interested in selling their stores. Um, a lot of entrepreneurs who start e-commerce, so they just want to run their stores. It's perfectly good. Um, so normally, uh, people who want to sell their stores are going through two types of transition points. Uh, the first transition point is a personal transition point. So, uh, you know, somebody's going to go start a family, their time starts to become super valuable, and so, uh, changing a job, something like this, right? Exactly. And so, uh, in, in that's the kind of situation, hey, you know, um, like I don't have time to run my business anymore. I love it. Um, but I, you know, I have, I have bigger priorities. Um, they know that they built something valuable, but it's hard for them to find somebody who sees that value. What we do in that case is we go and we say, hey, let me help to look at what the value of this company is, and then let's see if we can get to a fair value for it. Um, so this is one scenario. Uh, the second scenario is somebody who's going through a business transition. So specifically what I mean by business transition is they're transitioning from Their company being going through this searching stage, like trying to find product market fit, to a stage where they're looking to actually scale the business. And at that point, what they often find is that the tools that have been developed so far, a lot of the digital tools, the sasses, and all of the different plugins that you can put into Shopify, they help you insofar as uh literally now I can build an e-commerce store without needing to actually build an organization around it. So I can just leverage this technology and simply, you know, start something and start going to the market with it. Um, that's great. The only problem is, uh, where technology has moved very quickly to give people better access and more capabilities, um, institutions have moved slowly. And so what will happen is that although they're able to get to a point where they're, you know, able to find a product that people love, they're able to, um, get it into their hands, being able to actually grow that business, trying to find a loan for these e-commerce. Businesses trying to uh trying to uh build uh a scalable team without any kind of experience, then it becomes much, much more challenging. And so a lot of people that we talked to, they're innovators. They, they, their, um their superpowers, the fact that they've lived a life that gives them insight into a particular need that's not being met in the market and using the tools that are available out there right now, they're able to now plug that gap, but They are not experienced operators. So that's that's kind of what the value proposition is for uhrazio uh you know they. They'll buy these stores that are running and bring their operational, which are numbers and look at it and goes, how how can we either reduce costs or increase margin, either either way or increase profits. Right. That's correct. Um, the, the main difference here is that uh when Thorazio goes by, uh, goes to buy one of these companies, uh, they're already doing millions of dollars in sales. So the optimizations that go in from their side, um, can maybe increase the sales by 50%, 60%, 70%, something like this. Um, and part of that is because for the original owner to get to that stage, there needs to already be some kind of optimization that they've done for that business. But when we look at these smaller businesses, uh, There's a ton of things that are not done. Um, and the reason that they're not done is not necessarily because the owner doesn't want to do them, uh, but it's because the owner is very much constrained in the amount of capital, both technical capital as well as, uh, monetary capital to be able to actually actualize all of the ideas that they have. So they need to pick and choose, right? They need to pick and choose the thing that works the most effective to them. Um, but what it means is that there are a lot of paths that potentially are very fruitful that they haven't fully explored. So one of the things that we do is we look at how much optimization has already gone into that business. We see how much we can actually achieve with additional optimization, and then we're able to go and achieve that low hanging fruit for this very small businesses. Well, let me, let me ask you about that because once you're talking to somebody that's under a million dollars, sometimes it's, if you cut up the pie and say, hey, this is because it was an accidental entrepreneur, or it's a mom and pop that doesn't stay up on, uh, you know, how to market whether it's your own traffic, somebody else's traffic, or earned, earned media, uh, What do you do there when you're looking at a business like, OK, this is why they're selling, this is their motivation, but this is what we can do to it, to their traffic. Earned, owned and uh what's the, what's the, what's the third one earned, owned and uh paid for media. Yeah, yeah, uh, really good question. So, um, so there are, so there are two sides to this question, right? So one side is the supply side and one side is the demand side. Um, uh, the, the interesting thing is both of these things have to work really well, um, for the, for the business to do well. Um, so some things that we often see. So number one is Uh, when, uh, when stores are small, um, and, uh, people aren't scaling the business, uh, mistakes are easy to resolve. So, uh, one example is, let's say, um, I go and buy inventory. Um, I then need to do marketing to go and sell that inventory, very fundamental. Um, if I miss time my marketing, so for example, if I run my marketing without being fully stocked and This happens often with much smaller stores. Um, then what happens is I literally put my money out and, and did advertising for my cus uh, for my, uh, competitors, right? Um, I don't get those sales. They get those sales. Um, and then I need to wait until I replenish my inventory to be able to actually, um, you know, do any more sales. These are usually not problems that you have when you have a $4 million organization. Uh, right. Oh, supply chain, supply chain, all the stuff, it's done. It's already done. And that's how they get to the $4 million mark. But for a lot of these mom and pops, these are some real problems. We've met, uh, entrepreneurs where they have a problem trying to pay a, uh, pay a supplier, because they're trying to get an order in for like $20,000 of, uh, of inventory, but they have a $10,000 credit card limit that, that they won't be able to cross. And so they have a hard time paying because of that limit. So there are a lot of these, um, I don't want to call them simple things, but very real challenges that mom and pops uh face at a small scale that oftentimes um are quote unquote solved problems for these much bigger companies, but it doesn't mean that the products and the uh and the relationships that these mom and pops have built is any less substantial than the ones that these much bigger companies. The only problems like that is like the problems you face right now are are big as somebody running a multi billion dollar company to me. Exactly, exactly. And, and the only difference between them is literally 11 person has solved that problem, and the other one has not solved that problem, right? So we a lot of the times like these companies will go, gosh, I just need to go to Claco and get more money for uh financing financing. Are you saying that's not it, or is it that it? It's not it, yeah, so, so, so the problem is this, um, the problem is that uh once you get the money from Clearco, and I do think Clearco is absolutely incredible in what they've done to bridge that gap between small businesses and uh and the financial capital that they need. Once you get that money, you still need technical skill to make it effective. And so what we often see is that, yes, we, we have people who are able to now go and access this outside money to help them grow and solve part of the uh of the problems when it comes to putting in more resources into the business. But that money when they get it and they try to scale the business, isn't commensurate with the level of skill and the technical capabilities of the operators because of a lot of the simplifications that they've used historically using technology to bridge that gap for that product market fit phase. So historically, if I wanted to, for example, run an like run a retail store, I need to start from ground up, right? If I didn't know something, I would need to either go and hire somebody or I would need to go get a service to actually, you know, bridge that gap. But now I could just get a plug in. I got this cool. Shopify has got some really pretty templates. Let's just pick them and it's ready to go. The merchants ready to go set up and everything to go. And then then I go, OK. How do I bring traffic to it? We, you know. Correct. Uh, so, so I, so I, uh, so, so what actually happens is, uh, like, it's, it's actually incredible what you're able to do with Shopify now, right? I'm pretty sure like the, the, the, the cost, the time cost, and the monetary cost to start one of these e-commerce companies has gone down by like, uh, like 10 times, you know, it's 10 times cheaper now. Let me, let me bring that to the point. And the reason I was evaluating a platform to use, I used BigCommerce first, and then I was looking at Shopify and Magenta. And the reason I chose Magenta was because, uh, I, every time I wanted to add a feature on. Shopify, it was $50. By the time I got finished with my feature list that I wanted, it was, you know, a couple $1000 a month that I needed for this. But if I was on Magenta, I would just hire somebody from, uh, Upwork and do it once and I paid for it forever. That was my reason for going from Shopify to Magenta. Perfectly good, but for uh for the people who don't want to manage uh a process like I'm gonna build that, you know, that, that, that functionality into my store and they just want something that's plug and play, they would probably choose Shopify in that case, right? So. Um, so, so it's very interesting, um, like we see a lot of people, um, because of the how, how easy it is to, to make e-commerce stores now, uh, more and more e-commerce stores are being made. Um, I think last year on Shopify alone over like 700,000 new stores were like created, um, which is, which is incredible, right, which is absolutely incredible. And to us, the way that we actually see it is, uh, each one of those people who are um who are creating these new stores is literally creating a form of innovation. Um, uh, I often, uh, I often see, uh, in the marketplace right now, almost like a great unbundling of a more traditional, um, CPG brands. So like in the past, I understand, um, if I wanted to access the market, I would need to uh be a uh a giant corporation, um, capable of doing national level marketing, TV campaigns, newspapers, the billboards, you know, across the nation. Um, but now, I mean with social media and, and the internet, I can take a scalpel as an individual to a very particular audience, particular ethnicity, particular geography, particular, um, tastes, trends, whatever that they want, um, and then build products especially for them. And one of the exciting things that I found is that um once you create something that's special for that particular audience, they don't go back to the generic product anymore. Like they stick with that thing that is perfect for them. Um, and so, uh, what we see right now in the marketplace are like. Products that are very particular, you could call them very niche, but they're loved by the people who they're made for because those are the people that the original creator had in mind when starting out and building that product in the first place. I like like a mushroom fungus. I love it. I love it. OK, I never even heard. people are buying it, yeah. Exactly, exactly. Yeah. Yeah. So wait, so let's go back to this, the full circle. You're, you find this store doing $650,000 and it's a product you like, how do you say the ones like we're not gonna do this product, we're, we are gonna do this product? What, what does this, what does that look like? Yeah, a really good question. So, uh, when we actually look at products, we ask ourselves something very fundamental, um. Is does this product have a deep relationship with their customer base, um, because there are a lot of different ways that you can actually drive sales through these different channels. Um, some of them are ephemeral. Um, number one, we don't really do any drop shipping businesses. Uh, drop shipping has its place within the ecosystem, I think. It's a very good way initially when um you're not sure of what you want to do or if you want to test new products, to just throw something on and, and, and, you know, have something that Uh, that people can buy. But long term, I don't actually see it as being viable just because, um, I mean, Amazon has really shifted people's expectations when it comes to shipping speeds and when people get things and things like that, right? People want to know that um they can get things quickly, they want to know that the uh that the products have been handled well, that they're that they're here in the domestic market and that they have the right kind of checks and balances and certifications and everything like that. So, uh, so we don't do any kind of drop shipping businesses. Uh, this isn't what we do. We only do businesses where, uh, the person owns their own inventory. Uh, we love products where, um, it's very, uh, specific in terms of what they offer, almost like a Casper or like a Harry's kind of model, where they take like one. Product, really optimize it for their particular audiences, and then, um, you know, focus in on just making sure that that one product for that audience does as well as it can. Um, that's a favor. You don't have to name the brand, but just like uh yeah, yeah. Yeah, so, uh, so we looked at a uh uh a scented weighted blanket company. So it's very particular scented weighted blanket, yeah, so it's a weighted blanket, weighted blankets have, I mean, it's, it was all the rage last year. Exactly, but, but the interesting thing is, um, so I think the original uh use case for it was very much, uh, therapeutic. Um, but now it's, it's become more of a ubiquitous kind of product. People use it for all these different kinds of reasons. Uh, this product was very special because, um, for the most part, uh, with the blankets, they're, you know, if you want to be mass market, they can be for anyone. The product we looked at is for a very particular audience. Uh, it's for ladies, uh, in their later years. So the, the, the customer base is predominantly um women over the age of 65. So, so it's very interesting, right? So there are very, uh, very specific, uh, uh types of people who really love that product. And because the, the company optimized themselves to sell for that audience, um, it does very well in terms of being able to reach that audience in a very effective way. I mean it sounds like you're, it's like one of those products where the the direct marketers used to do like the uh collapsible hose, just one product, and then we get as seen on TV kind of deal. That's right. The, the thing is historically, I think, uh, if you had one of those products, it's hard to figure out uh who actually wants it, right? You have to put it onto the TV and hope that somebody is able to discover it through that channel. But now we have all these powerful tools um through social media, Facebook, Instagram, TikTok even uh where Literally, the person who cares most about that product will get a chance to see it. And so that level of audience targeting is actually the inflection point that we're taking advantage of. So all of those old products that would be on I Dragon's Den or like, you know, uh, QVC or something like this, uh, relegated into like, you know, the midnight, the midnight slot in terms of television. Now I think these like it's the time for these uh products to be up front and center because instead of having to wait for the largesse of, uh, you know, a retailer or um or uh you know, try to do it through television, you can just go directly to your end customer. The tools are available to do that, and people are doing that right now, uh, and we love it. Yeah, and beautiful Facebook marketing with their psychographics, demographics. Exactly. So you find a company like this, what's your offer to them? What's your first communications, email, phone, or whatever it is, you reach out to them on the website and or, or on their Facebook page. What do you say? What's that conversation go? Yeah, so, uh, so we usually reach out through, uh, through email. Um, sometimes they come and they speak to us, uh, through our website. Um, usually the first, uh, meeting is just to gather information. I mean, we want to understand the, the journey that the, uh, that the founder has gone through to come to the point that they are now. Like what do they sell? Why are they selling it? Um, why is it important to them? Um, and that founder story is actually very powerful for us because what we're actually seeing is that the, the reason that these products are so, um, are so effective and, you know, even, even for like a mom and pop, for example, as you mentioned, they're able to get $650,000 in sales. Which let's not forget, uh, if they want to get a 30% margin, they need to put up 70% of their own capital at risk to be able to get there. Um, I mean it's bootstrap and it's bootstrap. Exactly. So it's actually a very incredible feat. Um, the reason that they actually got there is because of some personal journey or some uh fundamental, uh, aspect of the relationship between themselves, uh, that they that they gained this unique insight into that, uh, custom. And so the very first phone call is all about understanding the the uh the company, its history, uh, understanding the product, um, understanding the founder and uh and why they're looking to exit, um, and then overall just trying to get a sense of what is, uh, the relationship and what is the problem that that product is solving within the marketplace. Yeah. Um, and then we go on from there. So what do you, what do you offer them? Are you buying 100% of their company? Are you keeping them in, and then 60% of their company, or what's that look like? Yeah, so, uh, for, for us in particular, as I mentioned, we find people who are in transition periods, uh, in their, uh, entrepreneurship journey. Um, and so these are usually people who are looking to transition fully out of their business. Um, so in general, uh, what we do is we do 100%, um, buyouts for these businesses, um, and then, uh, what that means is that the, uh, the the original founder gets fully compensated for their work, um, and then they don't need to worry in any, in any case about the, uh, continued operations of that company. So what are you offering as far as a multiple of a $650,000 company, it's probably, you know, maybe 1015, luckily, you know, 20%, even uh. What are you offering on that? Is that 234? Uh, multiple or what is it? Yeah, really good question. So, uh, it depends. So that's the, that's the short answer. Um, so one of the challenges about um doing um Shopify businesses rather than Um, then Amazon businesses is the wide variety of, uh, potential combinations that the, um, that the original owner has chosen. So I'll I'll I'll give you an example, right? So, uh, you might have a store where you're doing, you know, $500,000 with a 20% net margin, but The founder has built an incredible community around that product, you know, they have hundreds of thousands of uh Instagram followers, uh, who, you know, tune in and and check out their content every single day. So what is that? On the other hand, maybe instead I have a business that's doing $100,000. Um, they don't have any social media presence, but they have a 40% margin and they're, uh, they really like hypercharged their, uh, their, um, uh optimizations for like Facebook marketing, like they know that channel, like, like the back of their hand. So it's what is that worth in terms of evaluation, right? So, um it it's, it's pretty difficult for me to say exactly, you know, what each one of these companies is worth. Um, the complexity is also the opportunity here, because I think uh by building technology that is able to, uh, really get a deeper understanding of these businesses, um, not only from just P&Ls and balance sheets, but from, you know, the actual. Orders of the actual business itself. Uh, what we're able to do is really get a much clearer understanding of, OK, so, you know, this is what this metric actually contributes to when it comes to the ultimate value of the business and this is what this other metric contributes to, right? So we're getting closer and closer, uh, but for now it's it's still very much bespoke, um, uh, it's a, it's a deal by deal basis that we actually uh try to find the value of these and uh and. It, it could be. Where are you getting that, uh, advice from as far as, uh, you know, hey, Warren Buffett does that like that. I, I love watching, uh, uh, Andrew Wilkinson because he's a money monger, Warren Buffett, and that's what they'll pay. They'll pay, uh, uh, a fair price for a great company. I could see with your situation, he said, oh great, he's got a, he's only doing $500,000 in business, but he's got a community of $500,000 which means he's not tapping into that at all. I happily pay a little bit more for that to get the deal because I know I could pay for it really fast. Yeah, so, uh, it's exactly as you said, right? So, um, all of these things all add onto additional things that we can actually find value in for that business. Correct. Yeah, so, and you're paying 100% for the business, right? Now, is this a fund you raised or or you have investors to pay back or or is this your own capital or what? Or are you saying this is seller financing, so what's the mix? Yeah, so, uh, I mean, we started the company just bootstrapping it with our own money, um, it again, put, put your money where your mouth is kind of situation, right? Um, but, um, so we actually recently just graduated from TechStars, uh, Tech Stars LA. Um, and, uh, and, uh, we've actually been actively fundraising. So for us it's gonna be a combination of two main sources of capital. Uh, one is going to come from equity, it's gonna come from investors, um, and then the other side is going to be, uh, debt. So we're gonna be going out, hitting the capital markets, and then, um. Crafting the deals so that we actually have the resources to be able to acquire these companies. Um, one of the exciting things that we've actually found is that, um, for, uh, for e-commerce as a whole, um, the, the, the market is now, I would have to say in the best position that it's ever been. To be, uh, to be, uh, to be fundraising, um, within this kind of uh environment, um, especially for uh a business such as ours where uh acquisition of these e-commerce companies is is first and foremost, uh, just because of what's happening with like branded and perched and all these other companies. Um, so it's getting more and more unknown quantity and more and more known in terms of what to expect in terms of the economics, uh, what the standards are. And I think that this is a benefit for everyone because, um, that kind of normalization actually opens up the door for more and more people to be able to actually access these resources and then for more and more people to be able to get the benefit of the fact that, hey, if I need to sell my e-commerce store, there are options out there for me. Yeah. Well, we're in a different, uh, inflationary cycle, and I think the Fed has indicated they're gonna raise interest rates so that the cost of borrowing capital will go up. Um. Where, where are you at with this? I mean, uh, you put your money where your mouth is, how many have you acquired, how many are in your fund, and what, uh, you know, after you answer that, what's the end goal with this, uh, Yeah. You get 20 of them, to get 100, to get just 10, or what? Yeah, really good question. So, uh, so right now where we are at, uh, we just closed another deal like last week. Um, we're currently at 2 companies right now. Uh, we have 2 companies right now. We have, uh, another deal, uh, close to closing, um, probably within the next month. Uh, and then we have a goal of closing at least 5, by the end of this year. Um, we have a pipeline of around 25, 10 companies in late these discussions, 3 companies that we're sending LOIs to this week. Um, and so we're moving forward with this quite. Quickly, uh, for, for us at least, uh, the, the ultimate goal is, uh, is very simple. Uh, we want to actually build an infrastructure layer. So this comes full circle to the very first question, uh, that you asked. What are we building at Ados? Um, we want to build an infrastructure layer for e-commerce entrepreneurs. Right now there's an infrastructure layer for starting e-commerce companies, Shopify, you know, magenta eCommerce. I just hop on. I don't need to code HTML CSS. I just hop on and I can make something. There are more and more tools out there now, uh, more and more companies that actually help you, uh, grow and run these e-commerce companies. For example, you mentioned Clearco, um, who is able to, you know, help you bridge that gap in terms of financing. But in terms of exiting from a business, um, This is still something that is not easy. Um, for most e-commerce entrepreneurs, they don't really have an exit strategy, um, and then B, even if they want to exit, they currently don't really qualify, given their revenues, um, to actually go and find somebody, uh, that would be interested in buying. Their companies. What we want to do is actually close that loop, uh, to make sure that there are standards and that there are, um, uh, processes in place so that when somebody grows their business, it doesn't matter if you grow it to, you know, $100 million or $100,000 you have an opportunity to actually exit from the business. Um, if it's a high quality business, then what we can actually do is go and then run it and then actually allow it to reach its full potential. Yeah, there's always a bigger fish out there even in the billion dollar ranges, but, uh, let's say in this, another guest of mine, Michael Beroslavski, he, he would love, we talked about when to know, know when to hold them, know when to fold them. It's a really Difficult game to play because you're dealing with money and potentially losing money. Um, it's like, uh, you know, poker, you, you know immediately what your, uh, statistics are to win or lose, but You know, with him, he, he would look at it and say, hey, look, here's, here's how we're gonna make this decision. Uh, we know what we need to do to optimize the business. When we're finished optimize the business, we sell. Yeah, uh, so, so I think, I think, uh, I think this has been, um, the, the more traditional thought process around it. Um, and I think that there, there's a reason for that. The reason is because there is a cost to holding it. Um, you need to continue to operate these businesses, um, up to, like, I mean, as long as it's on your balance sheets, you need to continue operating these businesses. So, uh, what he described, and correct me if you, if, if I'm wrong, is, uh, he knows what value he can add, right? He knows the things that he can do to take that business from where it is now to where it can go in the next level, right, from A to B. Um, and so that's where he generates the value and so past that point, he let somebody else bring their knowledge and expertise. Look, sometimes my efforts don't, um, you know, there's no results to those efforts. We did it, but that's all we're doing. We, we did the 3 things out of the 4. If the 4th 1 didn't have any effect on the business, we still sell. Yeah, so, so I think, I think that that's a perfectly, um, uh, it's it's not well, I mean, it's not even a perfectly good strategy. It's a, it's a very smart strategy. Um, but for us, what we actually see is that um there's actually more value here by actually holding these businesses. So specifically, where does that value come from? So when we go out and we buy these small businesses, we see it as actually buying a wedge into a particular audience. So they've literally taken the time and the effort to build that strong relationship. It might not be a huge audience. But it is a very tightly knit audience that, you know, has that relationship between themselves and that product. And so what we let me kind of Please. Point because it sounds like one of your criteria for buying a business, and we don't buy any trending business, like like like like spinners or let's just an example that stain power that's invariably in the mind. Of consumers for the rest of like Coca-Cola. Correct. Well, I mean, uh, so, so I mean spinners and all that kind of stuff, uh, we do take into account tastes and trends and things like this, uh, but more importantly, um, what is, what is the fundamental difference between something that is a uh like a trend and a fad versus something that is, uh, has more staying power. Um, you could, you could say that it's the type of good, but I think more importantly is how much work has actually been done to go into, uh, understanding what is the real problem that that product is solving for people, and have they actually built the product, like, do they actually have a product on hand that really solves that problem well. And so if the answer is yes, then it doesn't matter if you're a huge company where, you know. You know, like you have millions of sales, or if you're small companies with $100,000 in sales, the product is still the product. It's just a matter of can the operator take it from $100,000 to a million dollars, or are they constrained right now, where as far as they can go, that's $100,000. Yeah. So when you've purchased two businesses, and was this before TechStars or uh LA Tech Stars or after Tech Stars? So we purchased one before and then we purchased one afterwards. Yeah, and what are your results on growing those businesses for both of those so far? Yeah, so the second one I can't really say because we just purchased it, uh, but the first one, we did our optimizations, uh, we, uh, increased the number of marketing channels, um, very simply, uh, we doubled the revenue, um, and then we actually tripled the conversion rates for that business. Um, but also very importantly, we also reduced the amount of time that we need to spend on the business by over 80% through automation. Yeah, yeah, I was told that by Empire Flippers when I sold my business. And they first came to him and he goes, Hey, how much time do you spend it? Like 40, 50 hours a week? And I go, Well, John, man, we got a business doing 400,000, uh, a year, and the guy only spends 2 hours. So yeah. I like, holy crap. So it's a good lesson. It's like, you got to use all the tools out there to optimize. Outsource delegate, yeah. Correct, correct. And I think, uh, and I think what that that's one of the hard things that a lot of these um entrepreneurs face as well, right? Because, um, when they, when they started, because they don't need a team, they can just use technology to go out and do all these different things. They feel, they often feel uncomfortable going out and getting people to help them. And so that actually is one of the big limiting factors for a lot of these people looking to transition out, because they don't really want to be people managers. They just love the product and they love the audience and that's all they want to do. Yeah. Now, how are you getting your leads? Are you in the tiny capital kind of ecosystem where they're saying, you know, that or how are you finding your leads now? Yeah, so, uh, so there are 3 main channels that we usually find them. Uh, the first one is, uh, we look at marketplaces. Um, so there's a marketplace that we love called Micro acquire. Um, they have a lot of, um, uh, I think, I think the most high quality deals that we've had come from, uh, that, that platform. I had a subscription to it, but yeah. a little bit too much. Uh, there's, it's a, yeah, it's, it's a negotiation at the end of the day, um, uh, but then we also look at, you know, uh, Shopify Exchange and Empire Flippers and Flipper and some of these other marketplaces as well. So it's, so that's the first one. the, the second one is through referrals, um, so from companies that we've spoken to, but and also from Uh, people that we know who refer companies to us, um, and then the third one is through partnerships. Um, so, uh, we have a partnership, for example, with Clearco actually, um, where, uh, they have a, uh, uh, a clear X program whereby, uh, for some of their companies if they're interested in exiting from their business, they'll refer them to us as well. Yeah, I, I have actually a conversation or I'm gonna do an interview with uh Mr. Fang from Clerco. Oh, incredible, excellent. Yeah. Well, that's great, man. Is there any way, uh, so what are you looking for right now? You're looking for just kind of get a summarize what that looking for because I'm running out of time with you, so uh. Yeah, um, so thank you again, John, for taking the time to, to speak with me today. Um, so we're, we're a fast growing company. Um, we're definitely looking for, uh, more, uh, connections into the ecosystem. Uh, so anybody who is, uh, uh, looking to sell their stores, um, that would be. Somebody that we would love to talk to, uh, to explore whether or not we would be a right fit for them. Uh, similarly, uh, we're also growing, um, so, uh, any, uh, investors, uh, or anybody who potentially is interested in our space, we would love to have an opportunity to speak with them as well. Yeah, you already have your offering documents ready to go and We, we already know what we want to do, yeah, but let's have a chat first, uh, and then, uh, and then I can explain more about what we do so that they actually get a better understanding of um how Ardos actually works. Yeah, well, that sounds great. And Michael, I want to wish you the best of success in this business. It's a niche. I haven't talked to anybody in this specific niche in this range, so that's a lot. That's a success. Thank you very much. All right. We'll be working hard. Good deal, Michael. Thank you very much for attending uh being a guest on my show. All right, thank you very much for your time, John.