Building a niche SaaS company from a client’s custom software request and selling it even when they weren’t looking for an exit.

.

01

Selling when not Planning To

How Dean built a great company and sold it versus focusing on the exit where there is a risk that you don’t build a great company in the process.

02

Finding a High Value Niche

How Dean built a niche SaaS company from a Custom Development request from a large customer.

03

Using PR to Scale to a $7M Business

How free PR helped them grow and get the attention of the market, which ultimately led to an exit.

President at Tech Coast Angels San Diego

Dean Rosenberg

Dean is President of the San Diego Chapter of Tech Coast Angels, one of the largest early stage investment groups in the US. He has been an active entrepreneur within the San Diego start-up ecosystem since 1989, raising over $30M in venture capital. His last software company, AIRSIS, Inc. was funded by TCA and acquired by a public company in 2014. Dean is now a “professional” angel investor and is active in over 25 companies.

Dean is the Founder/CEO of Venture San Diego which is focused on providing support, mentoring, and funding to early stage companies within the start-up ecosystem in Southern California. Venture San Diego assists early stage management teams with business strategy, operational execution, and financing.

Dean is an investor, advisor, and mentor to early stage founders, management teams, and companies. Seasoned CEO and CTO with an eye for execution and a bias for action.

Suggested Resources

What Entrepreneurs need to know about
Selling to a Private Equity FirmRead More
What Entrepreneurs need to know about
Using an Investment Banker or Business BrokerRead More
Suggested Article
The New Rules of Competitive Advantage to Grow ExponentiallyRead More

Full Transcript

Drew: Today we have Dean Rosenberg with us. I’ve known Dean, and Brandon, you as well, have known him for a number of years through the entrepreneurs’ organization here in San Diego. Dean has been active in the entrepreneur community for…I think since the late ’80s. So he has got a lot of experience. In fact, he created the first online restaurant order system in ’96. And he has started several companies. He’s raised money, done custom software development all under the guise of these harebrained schemes, as his wife calls them. So we’re glad to have him and learn from him today. Welcome.

Dean: Hey, thanks,

Drew. Thanks, Brandon.

Brandon: Thanks for coming on, Dean. Why don’t you tell us a little bit about what your last company did and how you started it?

Dean: Yes. So my last company was actually called AIRSIS. But we were more known in the industry we served for the SaaS product we had, which was called PortVision. And what PortVision did is that it essentially tracked the real-time location of every large ship in the world like maritime vessels, like boats and ships. And then we gave that information back to companies for them to solve business problems. I wanna say we captured something like 100 million individual vessel movements every day and maintained a data warehouse of billions of records and then gave them back to, you know, all different sorts of stakeholders who wanted to know about…information about the movement of those ships. It actually started as…we had a software consulting company. And PortVision really was a project that we were intending to do for a client that just got out of control and turned into a product. And that came with it all sorts of other challenges because when you’re set up as a software consulting company and you’re used to there being a price tag on every hour of your staff’s time, and then as you move forward, you have to do things like invest in R&D and tell people you don’t want their checks for work-for-hire. And there’s all sorts of sort of management and entrepreneurial challenges in kind of navigating that journey.

Brandon: That’s great. Can you tell us a little bit more about how you kind of converted those two, how long it took, you know, to go from a consulting to a product? You know, for people listening, you know, I know a lot of dev shops that have considered doing that. You know, what sort of advice would you offer to them?

Drew: Yeah. For us, we actually…we saw the writing on the wall around offshore, you know, developers and that programming was becoming widely commoditized. We were one of the first web development companies in Southern California. I mean, we started our web consulting company in 1996 probably. The web, as we know it, you know, started in ’94. So, since then, a lot of things changed. And so we sort of had a strategic interest in migrating from a consulting kind of labor-focused company to a product company. You know, as part of that journey, we actually identified something we thought we were good at around satellite-based tracking and developing kind of web-based portals to help track, manage, monitor, and control high-value assets around the world. We actually raised a million dollars in Angel investment to help launch that business. And a couple of years into it, we just realized we kind of sucked at it, that the market wasn’t adopting our product, that it was a pretty competitive space. And during that time, we were doing a separate project for a consortium of major oil companies around ship tracking. And I went to my board and said, “Hey, you know, what you gave us money for, you know, we’re not doing so good at. But this project we’re working on actually could be the next thing for the business.” And after a little bit of arm wrestling and such, we decided that that was going to be what we were gonna focus on to move the company forward and hopefully migrate it from a services company to a SaaS company.

Drew: That’s a pretty bold move to some degree. I mean, going in and basically saying, “Hey, I’ve raised money to build a company and it’s not working the way that we want.” Is that a fair assessment when you kind of said, “Hey, this is the future, it’s a different area than what you guys have invested in”?

Dean: Yeah. I mean, it was worse than that because, not only did we have to. And I hate this word because everybody’s using it. You know, not only did we have to [inaudible 00:16:59].

Drew: P-word.

Dean: Yeah, the P word is better. Yeah. I mean, now it’s funny. I’m on the other side of the table as a fairly active Angel investor, and now people wear pivots like a badge of honor like it’s a good thing. In a lot of ways, you know, the definition of pivot could also be failure. But not only did we have to, you know, use the P-word, but I also needed more money. So simultaneously, not only did I have to sell people on, you know, what we thought we were gonna do isn’t working, but now I wanna do another investment round because we found something better. And somehow, it worked because we did raise another million dollars, so a total of two million. And then that was enough to actually really launch the PortVision business. Fortunately, the customers funded the majority of the development for our product. And so the outside investment was exclusively for sales and marketing, which is actually a pretty good story to go to investors with.

Drew: Absolutely. And you know, I think we wanna talk a little bit about that. But before we do, was there a moment where you had maybe a sense of fear, or like, man, or this failed, like were you hit any kind of emotional wall or were you just like moving on?

Dean: No, no, it was literally…I came to my co-founder and my board and I said…you know, we had six salespeople at the time for the business model that wasn’t working. And I said, “This isn’t working.” One of my somewhat rose-colored glasses oriented board members said, “You’re too pessimistic. You need to give it some time.” And I looked him in the eye and I said, “We will be out of business in four months if we don’t take action now,” because we were burning cash and there wasn’t any evidence that it was gonna turn around. You know, I literally had to go into my office close the door, and all of my salespeople were remote. I had to make six phone calls and fire six otherwise, you know, good people just because my business plan wasn’t working.

Drew: And how did this consulting project come in that’s in a different space if you were focused on, you know, satellite and tracking?

Dean: It’s really the other way around. We were a software consulting company first. So we had lots of clients. We had local San Diego clients. We had already done a project for the port of San Diego. So we were exposed to the maritime industry and then they referred us out to some clients in Houston, you know, the Houston area. And so we were actually sort of already doing software consulting projects while we were trying to spin out this product, you know, satellite tracking business. The PortVision project was looking to be a fairly promising, you know, work-for-hire project. And then the question was could we transform it into, you know, a core part of our future business?

Brandon: Did your client become like an investor as well? Were they pumping money into this as well, or were they just buying the service from you as you were creating it?

Dean: Yeah. What we did was…we wanted to retain the rights to the product. So what we did is we sold it to the initial four customers as commercial off-the-shelf software. The only catch was we hadn’t written it yet. So there was no product to sell, but somehow we convinced them to move forward on that basis. We then, you know, developed the product. And it was ultimately relatively successful. You know, these were pretty large customers. I mean, we’re talking ExxonMobil and Valero and Shell. You know, they’re relatively large customers. The cool thing about that was after we delivered that product, we instantly had four multinational companies of reference accounts, which we were then able to leverage in a pretty aggressive PR campaign to spread the word about what we did to the rest of the world.

Brandon: Can you tell us more about that PR campaign?

Dean: So it’s just like with any other entrepreneur who’s probably listening. The object with PR is there’s really two things. One is you wanna get “free advertising” without having to pay anything, you know, from a trusted source. And then the second thing is you wanna really appear a whole lot bigger than you are. One of the tactics I used…when we started this thing with PortVision, I didn’t realize how connected sort of the oil industry was with the maritime industry. But it turned out that one of our, you know, first adopter groups for PortVision were these large companies that had a vested interest in knowing, you know, the movements of these oil tankers around the world or natural gas tankers, and whether it was a trader on Wall Street or whether it was somebody at a Marine Terminal that needed to know whether a vessel got through, you know, the Panama Canal or arrived at the sea buoy or whether it had left yet. There were all these different stakeholders in the oil industry. I didn’t know anything about this industry when we started. But one of the things we found was…I’m sure lots of listeners understand. And Brandon and Drew, I know you have been through this. Big companies do not typically allow you to cite them as references in press. It’s virtually impossible to get a company like ExxonMobil or Shell to agree to joint press with you. They just don’t do that. But turns out in the industry, there’s, you know, widely acknowledged group of eight companies, which are broadly known as the oil majors. And in the first year, we had about six of those companies. And then we had seven of those companies. So I called a meeting in my company and I said, “We need to find one user at Chevron, one user anywhere in the world to buy our lowest in $2,000 per user per year product. Because the day after that one user at Chevron buys our product, we can tell everybody in the world who will listen that every major oil company in the world uses PortVision.”

Brandon: Love it.

Dean: And so that became our rallying cry. You know, like many good small aggressive companies, we had the cowbell in the office that we rang whenever we, you know, had a successful sale. And when we finally closed that deal with that company, we hired what I would say is a transformational PR consultant who did some amazing things with us. And we proceeded to tell the world. And then suddenly, for your salespeople, things get easier because now you can meet with any customer and you could say, “Yeah. It’s weird that you’re not a PortVision customer yet because every major oil companies a customer.” And of course…

Drew: What’s wrong with you?

Dean: Yeah. We started to have a swagger, which was funny because, you know, our PortVision business line was probably less than a million dollars in revenue at the time. But just having that confidence in that swagger, you know, it’s also a mantra that the press likes. You know, a lot of people don’t like to invest in marketing and don’t like to invest in PR. They think of it as a cost. But I looked at it as a strategic, you know, investment. And I had a full-time marketing director and a full-time internet marketing director, and a fairly high paid public relations consultant. And that was a big part of my job, was working with all of them to make sure that the story was told properly. We built relationships with, you know, every major trade publication. When the Maersk Alabama was hijacked, CNN came to us and MSNBC came to us and, you know, we provided collateral to the news outlets. We just built a reputation where… I used to joke I would be…I would always pile up my trade magazines for my business trips on airplanes. The plane would take off and I would break out the stack of like 15 trade magazines. And I’d be reading and suddenly, I get to a page and it would say, “Ten trends in vessel tracking by Dean Rosenberg, CEO of Port…” And I was like, “Wow, I wonder what Dean said.” And I’m like reading about me. And then I’d pick up the next one and it was another story about like… You know, we built, you know, this persona around the company as an expert and, again, what was admittedly a very small niche. But we then, you know, started to own that niche. It wasn’t just all, you know, PR fantasy. We did some very heavy lifting to help the industry, whether it was, you know, the BP oil spill. We did a lot of work with the Coast Guard and with BP around that and, you know, around Homeland Security and other things. You know, we certainly did our part on the business operations side, but PR really helps use it.

Brandon: Every entrepreneur I know that I talk to about PR has a horror story of a PR agency that they hired. Is there any kind of advice you would offer to somebody that was looking for a PR agency because it kind of sounds like you didn’t hire an agency? You hired a consultant, anything that you would offer advice on around that?

Dean: Yeah. So what happened with us is…I’m not good at that many things, but I happened to be an okay writer. And I was a little bit frustrated in my company because they’re on a lot of my employees who weren’t necessary…they were great at lots of things, but they weren’t great writers. And when my marketing director mentioned that she worked with a PR consultant, used to be at a big agency, but she’s now working on her own. She’s an IT consultant, doesn’t know anything about maritime, but maybe I should talk to her. I was very skeptical. And after one sort of, I don’t know, 30-minute conference call, she asked really good questions. The next day she wrote a press release, and I couldn’t believe what I was reading. I mean, it was her understanding of the business after spending a few minutes on the phone with us. How she positioned it, I realized that I found somebody who could free me of the burden of writing all the content, you know, in the business. And then she also was quite good at building relationships, you know, with the press. What I would steer clear…now I’m involved, you know, as a mentor to early-stage companies. What I always suggest people steer clear of is particularly in B2B companies, is avoid the PR consultants who are what I would call cheerleaders. They have a great smile. They’re hype machines. They’re relationship people. But in B2B, you need more than that. You need strategy. You need really, really good writing. You need, you know, some cerebral thought around it. If you have a restaurant chain, maybe the cheerleader is in a local market makes sense. But if you’re doing something heavy in machine learning or in some hardcore B2B space, it makes sense to partner with somebody where, you know, IQ is as important as the relationship side of the agency.

Drew: With some of those startups that you’re working with, have you been able to repeat kind of that PR success?

Dean: I mean, I’ve helped some of the CEOs I work with move in that direction. I’m very careful to not operate the company for them or to exert undue influence but I certainly… In fact, I was working with one CEO this week where we had this exact same conversation where I felt the agency that he was interacting with was probably not the agency that was going to…he’s in a very niche…very tech space, tech-oriented space. And I just didn’t think it was the right fit moving forward. The final chapter on that one’s not written, but maybe I’ll come back next year and I can tell you how it went.

Drew: Nice. You’re moving along swimmingly and things are going well. You’ve got all the majors. You know, what then…like what goes on after that?

Dean: So just to be clear, we never felt we were moving along swimmingly.

Drew: Okay, fair enough.

Dean: You know, just like with any SaaS company, you know, the promise of software as a service is it’s a money machine once you get to a critical mass. But getting to that critical mass is sort of a non-trivial exercise. I don’t think there was ever a time up until we sold a company where we felt like we could relax. You know, sometimes it was the treadmill effect, which I’m sure, you know, the two of you appreciate and listeners appreciate where you close a big deal then next week you lose a big deal and now you’re back to where you were, or you expand a relationship with a customer and then the next week your other big customer contracts their relationship. And then as we’re just hitting our stride, a free side on the internet pops up doing 50% of what we charge people to do, and we have to deal with that. And then we got past that. And then a patent troll sends us a FedEx package asking for, you know, a whole bunch of money. And so we never quite felt comfortable. I think paranoia is an important trait of entrepreneurs. I don’t remember who said that, you know, the old saying about, “Just because I’m paranoid doesn’t mean there aren’t actually people out trying to get me.”

Drew: Get me. Yeah. You know, when I had a SaaS company, our product pricing was, you know, in the hundreds, you know, maybe a little bit higher per month. But I’m assuming that, you know, you had probably a lot less customers. But they were spending a lot more per deal. So gaining and losing was fairly significant.

Dean: Yeah. We had two primary subscriptions, if you will. One was $2,000 per user per year and one was $10,000 per user per year. You know, we did a lot of, you know, site agreements and, you know, regional agreements and such so that, you know, that became a little blurred as with many SaaS companies. One thing you asked about going swimmingly, one thing that caught me off guard in a positive way was one day I was with my CFO and he showed me the financials. And we like weren’t burning any money that quarter. And I said, “What’s going on?” He said, “You know, we’re kind of breakeven.” I said, “Really?” And then the next quarter, we actually like made some money. And the next quarter, we made more money. And so it was like that we passed that point for a SaaS company. I sometimes talk about four of our biggest customers. Just by coincidence, we landed in different years but in the month of October. And those four customers, I think he called a million dollars in annual, you know, subscriber fees. And so every October…and this is really the beauty of a SaaS company. Every October, we would get a million dollars. We put it in the bank. And the only service we needed to provide to these customers was not canceling their account.

Drew: That’s why we all love SaaS.

Dean: Yeah. So that was like really when I realized, “Hey, this thing, once we got past critical mass, this actually is pretty interesting.” You know, and then there are other dynamics of SaaS companies, you know, where we maximize profit. We had effectively, you know, no cost of sales on…sorry, no cost of goods on our product because we had an infrastructure that was fixed that allowed us to capture all these ship signals and then after that, just setting up accounts at effectively no cost. We maximize profit as a SaaS company by taking the largest check a customer’s willing to write regardless of what the size of that check is. So we maximize profit by taking $20 from one customer and a million dollars from another customer. But of course, there’s pricing, integrity, and other things that come up that make that not so easy to do. But it’s hard to find a salesforce that solutions-oriented that’s not just selling out of a catalog that understands that dynamic around value-based selling and providing, you know, the right products and services and value to the right client for the right price, right?

Drew: Absolutely. And you talk about it…you know, you’re moving along and then you said, “You know, until we sold the company.” How did that come about?

Dean: So we were building what I would call a nice company. I mean, we were in the, I don’t know, you know, $6, $7 million range in revenue and we were growing. Another cool thing about a SaaS company, we had, I think, 94% year-over-year retention of our customers. So, with that kind of retention, any new sale grows the company because you’re keeping all of your users from the last year. And so, you know, we were growing. I wouldn’t say we were growing at, you know, Facebook levels. But you know, there was modest year-over-year growth. And I just come out of a board meeting and we reached consensus that we were going to continue to execute for the next two to three years, not focus on M&A because we’d actually gotten a little bit of visibility in what we were doing. And people came calling, and we just felt like, you know, the valuation gap existed where we needed to have a meaningful exit for shareholders and founders and employees was probably different than what an acquirer would wanna pay. So we just agreed that we were gonna just keep executing. And then a friend of our companies who’s relatively well-established in the Southern California region and in our industry ran into a public company at a trade show, and that company…he was sort of an investment banker and he said, “Well, what are you guys looking for?” And they said, “Well, you know, we’re getting into this vessel tracking thing and we really need to strengthen our software team.” You know, 99.9% of people in the world would have no idea about what my company did at AIRSIS. And here was this company that basically described exactly what we did. So the investment banker called me and he said, “Dean, you gotta meet with these guys. They’re looking for you.” I said, “Totally not interested. We’re gonna keep marching for, you know, two to three years.” And he said…I wanna say he said something like, “Dean, don’t turn down an offer that hasn’t been made. Just have a meeting with the guy.” And so I did. They asked about our interest in selling the company. And we just decided we were gonna share what we needed up front because we didn’t wanna waste their time and waste our time. And they thought it was nuts initially and then we got to know each other a little bit further. And one thing led to the other. And about nine months later, we were acquired.

Brandon: Wow. I can’t believe it. It happened pretty quickly. And did you say you hired that banker or he was a friend or what was the relationship with the banker?

Dean: Yeah. We ended up engaging the banker just for that transaction. It wasn’t like we were starting a process and building a book and shopping it. You know, we did give him the opportunity to help us close that one transaction. You know, I joked with the banker because our transaction was pretty easy and it was a pretty good payday for them. You know, I wanna say they said something like, “Yeah. You know, you’re compensating us for the other 20 deals that don’t close.” It’s kind of like a real estate agent. It’s not the one sale. It’s the 100 things they did before the one sale.

Brandon: Absolutely. What sort of details of the deal can you share?

Dean: The actual deal terms were never publicly disclosed. You know, it was in the tens of millions of dollars. It was a transaction that provided a meaningful return to the investors in our company. I think I had 20 shareholders in the company because I raised individual Angel money. You know, we had staff. Most of our employees had stock options in the company, so they, you know, benefited from it, and it was life-changing for the founders. You know, I think I’ve shared with you both in the past. My career is peppered with a bunch of singles and doubles. You know, I, fortunately, have never lost it all. But I’ve had, you know, some singles. You know, I would call this a solid triple.

Drew: You said that the buyer initially thought you guys were nuts. Tell me about that moment.

Dean: Yes. So they typically would buy…they thought we were nuts for a number of reasons. They typically would buy more closely held companies. You know, it might be a family-owned business. It’s going to be a multiple of EBITDA. You know, we tried to present the deal as, you know, we wanted, you know, four times revenue. And they brought that to their board who’s coughed and said, “Four times of revenue? This company is not making any money?” You know, we then proceeded to share with them what we thought they can do with us because they were a $3 billion, 12,000 employees public company with 195 offices. And imagine, you know, the sales juicing of that infrastructure compared to our…I think at the time I had probably 50 or 60 employees largely focused in either San Diego or Houston. You know, we started doing some performance around what they could do with our technology, and then also the strategic value of having, you know, a software team that they were looking to build any way that we can just plug in. And then we reminded them what their PE ratio was on the public markets. They were a New York Stock Exchange company. And at the time, we were doing, I don’t know, a million and a half of EBITDA. And if you applied their P to our EBITDA, it actually was in a creative transaction for them in what we were asking. You know, it took some reframing of the deal. But you know, it was…at the end of the day, I think they benefited from the transaction as much as we did.

Drew: Yeah. I think you’re hitting on something that a lot of people who go to sell their companies don’t really, you know, understand how to do, which is, you know, you don’t wanna sell your company necessarily for what it’s worth. You may wanna sell it for what it’s worth to the buyer. You know, I know some people talk about that idea of post-acquisition economics where…you know, and you use the term, you know, “what they could do with us.” Talk to me about like how did you build and present a vision of why you were far more valuable than maybe they initially thought. You know, how did you come to that and present that?

Dean: I mean, they were largely an oilfield services company. They were the market leader in ROVs, which are underwater robots that help, you know, do things five miles deep in the water. And so they were used to, you know, executing a project for a price that involved hourly fees. And it was a very sort of traditional business model. We had to actually educate them on what a SaaS business model was. We had to educate them on, if we closed $100,000 deal, it’s not $100,000 deal. It’s a net present value of the future stream of $100,000 a year forever, you know, or nearly forever at 94% retention. And that fundamentally is higher value revenue than getting contracted to do a job to go under the water and, you know, turn a handle on a pipeline or whatever it was that they were doing. You know, that required a little bit of education. I think also it helps to not be desperate to sell the company because, you know, there were…like I remember one scene where I flew out to meet with them. I was in a big conference room. There were probably eight or nine members of their deal team, including their lawyer and the VP of corporate development. And we had done a whole bunch of stuff. We put hundreds of documents in a data room. We did everything they asked us to do. They had sent us a 50-page IT survey to fill out. And they asked me, “How’s that survey coming along?” I looked the guy who asked me in the eye in front of this room of eight people and I said, “We’re not doing it.” And then like the room fell silent. And they said, “You’re not doing it?” I said, “Yeah. We decided we’re not doing it.” They said, “Why are you not doing it?” And then I just went through all the steps so far. I said, “Well, you know, we have compiled hundreds of documents. We put it in a data room. We delivered this to you. We delivered this to you. We delivered this to you. We now need you to catch up.” And I stopped talking and the room went silent. And about 10 seconds, 15 seconds later, the corporate development guy he said, “Fair enough. I get it.” You know, even though they’re clearly the gorilla in the room, you know, at the end of the day, we needed them more than they needed us likely. But to be able to have a conversation where there’s productive tension on both sides and where, you know, there is a fear of loss, I think, on the buyer’s side, especially in a big company, because as the deal moves forward, there’s board-level visibility to the deal. You know, a career could be made or broken by the deal. You know, you get to a point where the deal starts to be as important for people on the buyer’s side as it is on the seller’s side.

Drew: Now, all the things that you’re saying…I mean, I think it’s more sophisticated than a lot of the entrepreneurs that I’ve talked to who have sold their company. I mean, that you’re thinking about, “Okay. You know, has the board, you know, have visibility into this?” You know, the idea that you can go in and create the productive tension or push back. I mean, all of those, I guess, take a level of either, you know, giant, you know, balls or just maybe confidence from having done deals in the past, I guess. Help me understand like, you know, how did you get to a place where you, you know, kind of saw all of these different things and were able to navigate that?

Dean: I think confidence comes from a combination of experience and reasonableness. If we know what we’re asking is reasonable and we have confidence that comes from either, you know, our experience or the fact that we can, you know, go on to live another day if the deal doesn’t happen, then it allows you to engage with somebody as an equal. Now that I’m on the other side of the table as an investor, you know, so many companies that, you know, are desperate to, you know, sell the company because they’re not executing properly and they just need to monetize what they can or they gotta close that $5 million round, and what’s it gonna take to do it will give them whatever term. You know, this is sort of negotiating 101. If you’re negotiating from a position of weakness, there will likely be a suboptimal outcome, right?

Brandon: Absolutely. Was there any internal pressure from either your board or your staff or partners on your side? If you can share, how much did you own of the company at that time?

Dean: Yes. So I owned, I don’t know, 25 to 30. So there wasn’t that much pressure because, quite frankly, I don’t think any of us thought I was gonna get to the finish line. So, you know, I gave updates, and then when it started to look like it was gonna get to the finish line, you know, then suddenly my board started to get much more interested, you know, in what was going on. I tend to be a fairly risk-tolerant CEO and an entrepreneur. So I don’t typically spend a lot of money on lawyers for business transaction…you know, for general sort of business contracts and such. But for an M&A transaction, you know, we…our company lawyer was Mike Brown. And he’s now at DLA Piper in San Diego. He was just, you know, a killer just…forget the lawyer part, just a voice of reason, you know, business adviser. And when we got to a walkaway point on one of the deal terms, you know, he could then speak up and say, “Hey, this really matters to Dean and his team and they’re prepared to walk away over this.” And so like be leveraging, you know, our advisers in appropriate ways but still making sure that at the end of the day, the buck stopped with me. I think was a pretty good formula.

Brandon: Who else was on that kind of negotiating in sale team with you? So you had the banker, yourself, and this lawyer/adviser. Was there anybody else that was really helping to put the deal together and push it forward?

Dean: Yeah. It was primarily I would say…I mean, the banker and their great guys. We felt more confident engaging directly. So we didn’t actually have the banker negotiating for us. So they weren’t really that involved. I mean, they were invaluable in bringing the deal to us, but they weren’t that involved in the actual deal once it was in process. It was really myself, my CFO, and my lawyer. And I think that was a small enough group that it worked and it was the right skill sets. Now, there were certainly others who helped. I mean, I can’t even tell you how many times there were, you know, staff with papers on the floor trying to just like get everything together to… Because at the end of the day, it’s Sarbanes-Oxley and it’s a public company. And sometimes we had to remind them that this was, you know, an 8-figure transaction, not at 10 or 11-figure transaction, right?

Brandon: Right. I guess, how would you state your emotions? I mean, was there ups and downs for you? Were you, you know, able to kind of maintain composure or at times was it difficult?

Dean: And it’s funny because my co-founder is a pretty, you know, level-headed guy. You know, people accuse me of being pessimistic. I always say I’m not pessimistic. I’m realistic. So I don’t think until we got to the finish line that…you know, we were always aware that the transaction might not get to the finish line. What I think was interesting about emotions was, so if we forward to like the last day where the transaction closed and the phones were wired, we held that meeting in my lawyer’s office. My board was there because we had to do some final resolutions. We had a final conference call with the deal term at the buyer. And I remember him saying, “Okay. It sounds like everything’s been executed. I’ll go downstairs and initiate the wire.” You know, my board, we all shook hands and such and thanked my lawyer. And they all left. And it was just myself, and Mike, my lawyer. And we’re in this sort of, you know, empty conference room. Now it’s just me and Mike. And I look at Mike and…sorry for the French language here, but I have to be accurate here. I looked at Mike and I said, “You know, Mike, you have a shitty business model because you…you know, I hired you seven years ago, pretty much never used your services until I sold the company. You did a bunch of work and then you lose a client.” He pointed at me and he said, “Well, you screwed it up, Dean. You were supposed to go public.” And so we had this sort of like, you know, shake hands, embrace, you know, and got the word that the wire transfer was made. And I went in the elevator by myself. I went downstairs. I got in my car. I drove. I don’t remember whether I made it out of the parking lot or whether I made it around the corner. But then I had to pull my car over and I literally just started crying, like bawling. And you guys know me a little bit. I’m not the touchy-feely guy. I’m not that. You know, I’m the engineer, you know, the stoic, cold, you know, low EQ, all of that stuff. And it wasn’t that I was crying with happiness. It wasn’t that I was sad that I lost the business. It was just the pressure relief, the pressure valve of what was arguably, you know, a 20 or 30-year career of entrepreneurship with some failures and with all the things I’ve been through and just like the finality of it in this transaction. It was just an emotional overload that I was completely by myself. Nobody saw it. And it was just something I had just never been through before. It shows what we go through as entrepreneurs and the ups and downs and the meeting payroll and customer challenges. To make it real how hard my business was, I always tell people, “The day I sold my company, I had over 800,000 frequent flyer miles.” And that kind of tells two stories. One is I did a lot of business trips and two is I didn’t take any vacations because if I did, I would have found something.

Drew: Yeah. It sounds like you worked your ass off to build this. So what was the significance to you? I mean, in the moment, if you’re even looking back now like when you see that moment, how does this kind of fit into how you see your story as an entrepreneur?

Dean: One of the realities, and I think my team probably started to see this too, is I was pretty tired in the final months of the business before we sold it. So it was like I was ready to, I think, sell the company. You know, the transaction allowed me to sort of finally like take a breath. And then the other thing it allowed me to do was…you know, I really, really enjoy entrepreneurship, but I really was tired. I’ve wanted to take a break from operating a company. And I think it allowed me to start a new chapter, which I was ready to do.

Drew: In that sale, did you transition and work with the acquirer?

Dean: I did. It was an interesting sale because it was an all-cash sale. There weren’t like earn-outs. They did treat us very well. They treated me well, and I made a commitment to them that I would stay on for a period of time. You know, I was there for maybe another 12 to 18 months. Actually, it was a pretty fun experience for me most of the time because I’ve always been, you know, the guy who had the small company who’s at a trade show pulling on the pant’s legs of the big guys trying to be noticed. And now, for the first time in my career, I was the big guy because I was now working for a multi-billion dollar company. And I was in strategic planning sessions where, you know, they’re trying to figure out how to generate another billion dollars in revenue. I’d never seen a billion dollars before, let alone try to figure out how to generate another billion dollars. You know, that was all learning experience for me. You know, it’s punctuated by a little bit of, you know, the Dilbert stuff that happens in a big company. But overall, it was a very well-respected company that treated us well. I learned a lot while also recognizing that long-term I’m probably not a big company guy.

Brandon: Did they consolidate your team into their team or did they…or you’re kind of just running on the side?

Dean: They had started to do some things around data and software. And so with the acquisition of AIRSIS, we created what we called the global data solutions group within Oceaneering, within the company. I was pretty jazzed about that because, you know, we had about 60 people. They had in their group about 50, 60 people. It was kind of like a startup within this bigger company. And so they gave us the latitude to kind of do some cool stuff. So we had, you know, 100 people. We were doing, I don’t know, when I left maybe, I don’t know, $15 million, $20 million in revenue in the group. It was a lot of fun. It’s a lot better than, you know, getting acquired to be dismantled or, you know, some of the other acquisitions that happen, you know, in the space.

Brandon: Yeah, absolutely. Did your team feel the same way or did they all stay on board? How did they feel about the experience afterwards?

Dean: I think most of them did. I mean, there’s definitely…like marketing was tricky because they just weren’t a marketing-focused company. So here, you know, I came from this intense focus on marketing and PR and such. And that was a little bit of a culture change. So that was a bit of a challenge. There was at least one employee who actually left like literally the week after the merger because he said, “I’ve been through this three times in my career. It always sucks and I’m not going through another one.” But I think if you talk to the other employees, I think, you know, the benefits were better, you know, the terms were better. I think the only bummer is, you know, we all know what happened, you know, in the oil industry. I think the day that we were acquired, oil was at $107 a barrel or something, and then over the next couple of years, it went down to $39 a barrel. You know, this company was very focused on that industry and, you know, that was painful. The other thing that was painful is in San Diego, you know, in California, we’re programmed to viscerally, you know, hate the oil industry. You know, I had to deal with that. But now, you know, we’re in an environment where many of us would prefer to be, you know, working on solar and wind and sustainable, you know, stuff. And I mean, the reality was we were in the maritime industry, but we were so close to the oil industry that you couldn’t kind of avoid it.

Brandon: Yeah, absolutely. You know, if you’re working for this big company, the multi-billion dollar company are learning all these things, it sounds like it didn’t really have any SaaS. So you probably could have, you know, continued to help them with their SaaS models. Why did you decide to leave?

Dean: I think it ran its course. You know at the end of the day…you know, I had a weird career because I effectively never had a boss in my whole career. You know, I had a great boss at Oceaneering, but it was still a different dynamic. You know, I described it one way. And this is not the company’s fault, but I describe it as so…there was one weekend I was working all day Saturday, almost pulled an all-nighter on Saturday to do a million dollar proposal. And I turned to my wife…this was after the sale of the company when I was an employee of the buyer. I turned to my wife and I said, “You know, I just lost a weekend. And if we win this, nobody will notice. And if we lose this, nobody will notice.” And in the past, you know, a million dollar proposal, you know, was relevant to my family. Losing it was existential threat to my family’s finances. And winning it could be transformation. It was a completely different adrenaline rush. It was a different activity, the urgency. And so I lost a lot of that, you know, getting kind of, you know, buried in the middle of, you know, a much bigger company.

Brandon: So where did you go from there? You put your notice in and…you know, talk to me about that transition and then even your transition into Venture San Diego.

Dean: I launched Venture San Diego, which is a…you know, we focus on mentoring, consulting, advising, and investing in early-stage companies. I also took a role at Tech Coast Angels, is one of the largest Angel investment groups in the U.S., if not the world. And I took a board position in that organization. I’m a little bit unique in that group because I think I’m the only member who was the CEO of a TCA funded company who then went to the other side of the table after the sale of the company and then joined the board, you know, as an investor. So, I feel like, in TCA, I’m the voice of the entrepreneur. You know, I try to make sure that the members behave and treat the entrepreneur properly. And Angel groups sometimes get a bad rap for being a lot of work for a small amount of money and for…you know, all that kind of thing. And so I set out to sort of fix that. I ran the due diligence process and made a commitment to every entrepreneur that we would go from the kickoff of due diligence to, you know, a funding decision in less than 30 days every time. So, I started to do things that I saw that were, you know, issues with how entrepreneurs had access to capital. And you know, I did my best, you know, to address that.

Drew: What do you think that you bring from your experiences that…you know, as you look to invest in startups, you know, how do you look at things differently now?

Dean: You know, one of the strongest aspects of sort of my experience that are my personality is I do tend to, you know, be sort of an optimist who is, you know, also tempered by the brutal realities of, you know, my current situation, whatever it is. I think if you google the Stockdale Paradox, Admiral Jim Stockdale had a similar outlook when he was a prisoner of war in Vietnam. I think it was Vietnam. You know, the idea of, you know, having sort of an overwhelming sense that you’re going to prevail in the end but also while confronting the brutal realities of your current situation, whatever it might be. And I think a lot of entrepreneurs, they just get the first part right. You know, they put on the rose-colored glasses and then they proceed to, you know, max out their credit cards or bankrupt their families or other sorts of things. And I think one of the things I bring is a really good balanced approach to evaluating all the data around, you know, a specific business opportunity and being able to interact with a management team and say, “Okay. Well, that’s good. Maybe that’s not good.” In fact, I was helping an entrepreneur raise money. And he was talking to a bunch of VCs. And he was wondering why I wasn’t moving forward. And I said, “Well, my experience is the ones that move forward are the ones where the VCS are calling you. They’re asking you what the status is. They’re constantly outreaching you. So of the VCS you’re talking to you, how many of them, if you never called them again, you think you’d never hear from them again.?” And he said, “All of them.” I said, “Then you don’t have any pending deals.” And so that’s a combination again of experience, you know, and objectivity and empathy and, you know, all the things you learned. And I’ve been doing this for, you know, almost 30 years. So I’ve made a lot of mistakes and I’ve seen, you know, good ways to handle things and bad ways to handle things.

Brandon: What type of companies are you looking to invest in and advice on how can they reach you?

Dean: Yeah. So I tend to focus on companies that have already demonstrated some level of product market fit. Perfect world that means they already have a product and they’re generating some level of revenue. But it might mean they have a prototype. It might mean that they’ve, you know, done some other work. I’m somewhat industry agnostic. If you go to my portfolio on venturesandiego.com, I think it’s mostly up-to-date, you’ll see that it runs the gamut from SaaS companies to chewing gum companies to life sciences. So I’m somewhat industry agnostic. You know, people can reach me through the website or at dean@venturesadiego.com. I’m also relatively active on LinkedIn. And I do spend quite a bit of time interacting with startup CEOs and, you know, where it makes sense, I’m happy to make the connections to help move them forward from a funding perspective.

Brandon: It sounds great. It sounds like a lot of fun. It sounds like you really enjoy it compared to the pressure that you had when you were running your company?

Dean: Yeah. I can’t say I’ll never do the startup thing again. But for where I am in my career right now, I think it’s the right fit of still exercising the same muscle but maybe without some of the stresses of the day-to-day.

Brandon: Absolutely.

Drew: Dean, it sounds like in this last exit, you know, you’ve hit a point where, you know, you get to work. You know, how has just even that psychologically, you know, changed your life?

Dean: So say that one more time, Drew. I’m not sure I understood.

Drew: So my assumption is you don’t have to go get a job to put food on the table today.

Dean: Yeah.

Drew: And so, you know, there’s something that changes in that dynamic where, you know, you know that, you know, that you’ve got enough money to kind of take care of yourself, your family, etc. Has that shifted kind of how you see things or do you feel any different as a result of that?

Dean: I mean, I’ve been, and maybe it’s because I’m the product of depression era of Jewish parents. My wife and I have always lived well beneath our means. So I’ve been fortunate from that perspective and my wife has been very successful in her career that, you know, we’ve always had enough money to live a life that we felt was fulfilling. But there’s no question that with financial independence comes, you know, a feeling that, you know, you have a few less worries. And I go back to sort of…I know Warren Buffett, when he was talking about leaving most of his money to charity and that his kids weren’t gonna get much, he made the comment. He said, “I want my kids to have enough money that they can do anything but not enough money that they can do nothing.” I’m not necessarily an ultra-high-net-worth guy. But you know, I really enjoy, you know, being able to take some of what I’ve earned through my work and be able to recycle that back through the local, you know, entrepreneur community and philanthropy. But I spend most of my time in fairness on entrepreneurship. You know, and maybe my investment alone is not super meaningful to a company trying to raise millions of dollars. But I now have a network of other individuals, and I can get 10 or 20 of them together to each put in, you know, 50K or 25 or 100K and now suddenly a company’s raising real money. I mean, that’s kind of rewarding. I enjoy being on that side of the table. And, you know, we all have egos. And I think it is interesting that I get invited to speak to a lot more classes, you know, business school classes and industry events because of, you know, the exit, which is interesting because I’m the same person. If the company didn’t exit, it’s not like I…you know, it’s not like anything changed, but I guess you get street cred that, you know, it’s more fun to have than not have, I guess.

Brandon: Absolutely. So this is always my favorite question. Now I’m scared to ask it. What’s one thing you bought or splurged on when, you know, the money hit your account?

Dean: I mean, if you saw about cars, you probably wouldn’t be impressed. But I guess one of them…you mentioned entrepreneurs organization and EO. I guess one of the things that happened purely by chance was right after I sold the company, I learned that there was a group in Atlanta of EO members that had a relationship with Richard Branson and they were going out Necker Island and the Virgin Islands to meet with them. So that was probably my one splurge where we actually spent five days out on Necker with Richard. And that was life-changing. I mean, that was an amazing experience so much so that we’re actually going back this December. So for a guy who doesn’t take vacations, that was a pretty epic vacation. You know, maybe the other thing is we did move to the beach. So I do feel like I’m maybe on vacation even when I’m at home now, which is a lot of fun. But otherwise, nothing’s really changed on a day-to-day basis.

Brandon: That’s awesome. I love that area. Did you go to Saba Rock?

Dean: No, uh-uh.

Brandon: I have to tell you about that later.

Dean: Okay. All right, cool.

Brandon: Yeah. As we wrap up here, is there one last piece of advice that you’d wanna give to somebody that’s kind of thinking about exiting their company?

Dean: You know, the biggest thing is build a great company and the exit will follow. You know, and this might sound contradictory. You know, you always wanna be doing things in your company that are going to lead to an exit. But if you’re exclusively focused on the exit, then there’s the risk that you don’t build a great company in the process. And it’s just a whole lot easier to sell your company when there’s something to sell.

Brandon: It’s great advice. Build a great company and the exit will come. We appreciate that. Dean, thanks for having us and we look forward to hearing about your new ventures.

Dean: Sounds good. Thanks, Brandon. Thanks, Drew.

Brandon: All right.

Drew: Awesome. Thanks, Dean.