From Design Agency To $419 Million Holding Company In 8 Years

Summary

In this podcast episode, Jeremy, an early employee of Tiny, shares his experiences in building a business empire from $5 million to $500 million in equity by acquiring and scaling small cash-flowing businesses. The discussion delves into the early days of Tiny, the first deals, negotiation tactics, and the importance of trust and community in business. Jeremy also reflects on the lessons learned from successful and failed deals, emphasizing the value of due diligence and the art of creative deal-making.

Takeaways

• 🎙️ The host highly values Jeremy's insights, having pursued him for six months to appear on the podcast due to his impressive performance on a previous show.
• 💼 Jeremy was the first employee at Tiny, which transformed $5 million in starting capital into approximately $500 million in equity by acquiring and recycling small cash-flowing businesses over a decade.
• 🌱 Jeremy's early involvement with Tiny began informally, working alongside founder Andrew Wilkinson in a shared studio apartment that served as an office space.
• 💡 The concept of Tiny originated from the excess profits of Metalab, an agency that generated significant cash flow, which they decided to invest in buying other businesses.
• 🔑 Jeremy emphasizes the importance of having a concrete business idea or deal as a starting point, rather than abstractly planning a fund or holding company.
• 🤝 Trust and relationship building are critical in business acquisitions, especially when dealing with sellers emotionally attached to their businesses.
• 📈 The initial business model of Tiny was simple: use the free cash flow from an existing agency to bootstrap the acquisition of other businesses.
• 📊 Jeremy discusses the limitations of financial models and the importance of understanding the underlying business and market potential rather than relying solely on projections.
• 💰 He shares that Tiny often did not offer the highest price for businesses but won deals by offering other valuable elements like speed, trust, and a good working relationship.
• 🤔 Jeremy reflects on the importance of recognizing when not to pursue a deal due to red flags, even if the potential upside is attractive.
• 📧 He advocates for the effectiveness of cold emailing as an approach to networking and business development, provided one is prepared and capable when the opportunity arises.

Q & A

What was Jeremy's initial role at Tiny?

Jeremy was the first employee at Tiny, and he was there before they even had a name, playing a crucial role in the early days of the company.

How did Tiny turn $5 million into $500 million?

Tiny achieved this by buying small businesses that generated cash flow, recycling the profits, and growing their portfolio over a period of about 10 years.

What was Jeremy's background before joining Tiny?

Jeremy had been working on another startup and shared the same studio apartment as Andrew Wilkinson, the founder of Tiny, which is how he got involved with the company.

What was the initial business model of Tiny?

The initial business model involved using the excess profits from their agency, Metalab, to buy other businesses and grow their portfolio.

What was the first business that Tiny bought?

The first business they bought was Dribbble, a social platform for designers, which turned out to be an amazing investment.

How did Tiny approach deal negotiations in the beginning?

In the beginning, Tiny's approach was quite informal. They would use online resources like Legal Depot to draft LOIs (Letters of Intent) and were not afraid to make aggressive offers, learning as they went along.

What is Jeremy's view on the use of financial models in business valuation?

Jeremy believes that while financial models can provide a sense of comfort, they often involve a lot of assumptions and can sometimes be misleading. He suggests focusing on more fundamental aspects of the business.

What was the worst deal Jeremy was involved in, and what was the main lesson learned from it?

The worst deal involved a dishonest partner, and the main lesson learned was to trust instincts when something seems off, even if the deal appears to be very good.

What is Jeremy's advice for cold emailing potential contacts?

Jeremy suggests that cold emailing can be very effective, especially for young people or students, but emphasizes the importance of being prepared and having something valuable to offer when the opportunity arises.

What was the most unique or weird deal that Jeremy recalls from his time at Tiny?

One of the most unique deals involved buying a business unit from a Fortune 500 tech company that was being divested quickly, which they were able to acquire for almost no money down.

What is Jeremy's perspective on the importance of the 'soft' aspects of a deal?

Jeremy believes that the 'soft' aspects such as trust, speed, and the ability to get a deal done are often more important than the price, especially when dealing with sellers who care about their business post-sale.