The Man Who Sells Tech Companies

How do you build a company that others are eager to buy?

That’s the big question for this interview. Joining me is Sandy Kory, Managing Director of Horizon Partners. It’s a boutique investment bank that helps bootstrapped growing Internet and tech companies raise money and sell their businesses. Since he helps founders achieve their big exits, I invited him to talk about what he learned as he helped sell companies.

Sandy Kory

Sandy Kory

Horizon Partners

Sandy Kory is a Managing Director at Horizon Partners. Prior to Horizon, he was Vice President, Director of New Media & Technology at Media Venture Partners, a boutique M&A advisory firm in San Francisco. Sandy started and led MVP’s New Media & Technology practice.



Full Interview Transcript

Three messages before we get started.If you’re a tech entrepreneur, don’t you have unique legal needs that the average lawyer can’t help you with? That’s why you need Scott Edward Walker of Walker Corporate Law. If you read his articles on VentureBeat, you know that he can help you with issues like raising money or issuing stock options or even deciding whether to form a corporation. Scott Edward Walker is the entrepreneur’s lawyer. See him at

And do you remember when I interviewed Sara Sutton Fell about how thousands of people pay for her job site? Look at the biggest point that she made. She said that she has a phone number on every page of her site because, and here’s the stat, 95 percent of the people who call end up buying. Most people, though, don’t call her, but seeing a real number increases their confidence in her and they buy. So, try this. Go to and get a phone number that will make your company sound professional. Add it to your site, and see what happens.

And remember Patrick Buckley who I interviewed? He came up with an idea for an iPad case. He built the store to sell it, and in a few months he generated about a million dollars in sales. Well, the platform he used is Shopify. If you have an idea to sell anything, set up your store on because Shopify stores are designed to increase sales, plus Shopify makes it easy to set up a beautiful store and manage it.

Here’s the program.

Andrew Warner: Hey, everyone. My name is Andrew Warner. I’m the founder of, home of the ambitious upstart. How do you build a company that others are eager to buy? That’s the big question for this interview. Joining me is Sandy Kory, Managing Director of Horizon Partners. It’s a boutique investment bank that helps bootstrapped growing Internet and tech companies raise money and sell their businesses. Since he has inside access to companies’ true financials, I invited him here to learn about what he discovers as he helps sell these companies. Sandy, welcome.

Sandy Kory: Thank you, Andrew. Great to be here.

Andrew: It’s great to have you here. What’s the biggest sale that you made?

Sandy: I sold a business called WorldClass Strategy to EducationDynamics in 2007, and it was well over a hundred million dollar deal.

Andrew: Wow. Can you say exactly how much? You and I, before the interview, talked about the number. Can you say exactly?

Sandy: It was about $150 million.

Andrew: $150 million. How much money did they raise?

Sandy: They didn’t raise any outside capital.

Andrew: So, no outside capital. These entrepreneurs sold their business for $150 million. What was it? What was the business?

Sandy: Well, it is an online lead generation for education, and that’s primarily the for-profit education companies like the University of Phoenix.

Andrew: You said lead generation for those companies.

Sandy: Lead generation, that’s right. And that’s a form of online performance based marketing, online direct marketing. It’s about a billion and a half in revenue right now with online education lead gen. It’s just been a great market that’s seen a lot of growth in the past few years.

Andrew: So, tell me a little bit about how they launched, how they grew, how they sold. And then, I want to find out about this company and then the other companies that you helped sell, what you learned. Why is it that they did well when so many other entrepreneurs can’t get off the ground? And if they do, very many of them fail. What is it about the successes that makes them successful? So, tell me the story behind WorldClass.

Sandy: Sure. So, the guys involved in the business had been in dotcoms that went up in flames with the tech wreck in 2000. And so, they got together to start working really as the front end for some Russian programmers, and so they were kind of the U.S. customer facing presence.

I’ll take a moment to tell you that the guys that founded the company were two brothers, Rob and Scott Peyree, and then a guy named John Anderson, who is a childhood friend of them. And then, Tom Peyree, the father of Rob and Scott, was also a founder involved. So, you just couldn’t find a more tight-knit group of people to start a company, and it’s probably not a coincidence that it was those guys that managed to do such a great job of working together.

Andrew: How much business were they doing in lead gen at their height?

Sandy: Well, when they sold, they were coming off a year where they were making about $52 million in revenue, and they were on their way to about $100 million in revenue. You know, when they started out, they weren’t doing lead generation at all, but they were working with some customers in the U.S. One of their customers asked them to do some online marketing for them, and they realized that they could do that themselves and didn’t need to leverage the Russian technical resources.

And so, they started doing it themselves, and they just found that there was actually a market. A lot of companies that had relied on direct mail and other forms of direct marketing that could get great ROIs by buying leads, and a lead is just a person who fills out a form that’s saying they’re interested in some product or service. That person becomes a lead that can then be sold.

And so, you had, in education, a lot of growth in the for-profit education companies, and they’re really a part of the last decade. And so, the WorldClass guys got into education lead generation in 2003. It was funny though, at the time they were so eager to find new lead generation customers that they were actually taking their mail and taking the mail from their friends and their neighbors and just looking at whoever was sending the direct mail, because most of that direct mail is ROI based direct marketing.

And then, they were cold calling the companies that were sending the direct mail saying, “Hey, we can do this online. It’s an even better ROI.” And so, education was the sector that really took hold. There were a handful of companies that were growing like crazy, like the University of Phoenix and Kaplan. And they built great relationships with those companies, and they were very smart about buying traffic efficiently.

And so, back then it was mostly PPC, but they also had some other channels. They did some email marketing. They had some affiliates. They ended up buying some display media as well. As they grew, probably the most differentiating factor, they were using technology very smartly but so were other people. The most differentiating factor was that they built really good relationships with their customers and just had a lot of trust.

And this was at the time when a lot of the lead buyers were buying leads somewhat blindly. So, they didn’t really know where the leads were coming from. And if you were a lead generation company selling into education, your customers were telling you more leads, more leads. And so you, as the lead gen company, had to find the traffic that was going to create the leads.

Whether it was deliberate or accidental, inevitably you would run up into a wall where you didn’t have as much good quality traffic. And so, then you’d start getting lower quality traffic and selling that to your customers. It might take your customers a little while to realize it, sometimes many months, but eventually they would. They would be smart enough. Now, in the industry they’re much smarter, and they could probably recognize it instantly. But, in 2004 it took them a little while.

And so, just about everyone in the education lead gen space at some point ended up selling lower quality leads to their customers and burning their customers. WorldClass was just very conscientious. This was really a family and they came from a farm in rural southern Washington. They’re just really, really good people who wanted to do business the right way.

As they built a relationship with the customers, the customers basically volunteered to share data with them on conversion. And so, they started getting data back saying, you know, your leads are converting this much. And so, what WorldClass did is they then started taking that data and matching it to their traffic sources. So, they could say, this traffic source is converting to students better or worse. And so, they got very smart about managing traffic quality. And to my knowledge, no one else in the market had that data. No one else in the market was able to do that. So, when their customers said, hey, those were great leads last month, give me more, they were able to resist the temptation or the accident of buying poor traffic. And they were able to just bring in good quality traffic.

So, it was a lot of search. If it was an affiliate, they were very tight about managing the affiliate’s quality and other channels as well. And so, that just enabled them to have explosive growth. They did $3 million in revenue in 2003. They went to 10 in ’04, 27 in ’05, 52 in 2006, and they did the deal and it closed in mid-2007. They were on their way to doing about $100 million in revenue. And they kept the profit margin at over 25 percent the whole way. It’s hard to find a better business, particularly one that’s bootstrapped, than those guys.

Andrew: Education notoriously pays a lot. If I were to put a form up on saying, “Do you want to sign up to the University of Phoenix”, every time somebody filled out that little form with their name, email address, maybe, their address. I don’t know how much I would get, but it’s something like 80 bucks. And the user doesn’t have to pay anything, and I get 80 bucks because they’ll end up paying University of Phoenix thousands of dollars.

So, education notoriously pays a lot, and like you said, it’s notorious, too, because they pay a lot for tracking scammers, people who are going to offer all kinds of incentives or trick people or find any way to get users to fill out those forms so that they could get paid per lead.

There’s a lot in there that I’m curious about how they were able to get so many leads. There’s a lot in that fact that I want to learn. The first is, where do they get all their traffic? I’m sorry, actually, no. Before we get into where they get all their traffic, I want to know what they did to convert those leads because it’s not enough to just say, “Do you want to sign up to the University of Phoenix?” You have to come up with something a little more clever than that, don’t you, to increase conversions?

Sandy: Well, yeah. I would say though, in 2003, it was probably less competitive. Nowadays, if you try to buy traffic on Google for keywords like online degree, you better have a very, very good conversion process. The landing forms you have multi-variant tested the heck out of for years, and you’ve got technology that’s very sophisticated.

Andrew: So, what did they do right? What did they, after all this A/B testing and all the different experiments, what did they do that worked and increased conversions?

Sandy: So, I think just the mentality of every unique visitor who goes to your website and really in any business, it’s not just a potential customer. It’s also data to learn from. So, if you’re not running tests on traffic, you’re losing money really because there’s always room for improvement. And kind of a related dynamic, it’s just the mentality of knowing that when it comes to conversion and it comes to website behavior, your mentality is often wrong. Your intuition is often wrong.

Andrew: But everybody tests. Everybody tests the hell out of their site today. I know that in the beginning that people weren’t testing as aggressively, and we’ve all learned to test and test and test. I can understand that these guys might have been ahead of the curve on that and been testing before others and more aggressively and intelligently than others. But once they did it, was there something that they did, once they did all these tests, did they end up with some kind of landing page that offered an incentive? Did they end up with a landing page that partnered up with someone else that offered some kind of reward to get people to sign up or offered some kind of language or anything like that?

Sandy: No.

Andrew: Or maybe took in the data one time but figured out who was going to pay the most money for that data. So, if Andrew said that he was interested in business school, his lead might go to a business school that was willing to pay a lot for business students. And if Andrew said he was into gardening, his lead might go somewhere else. Was there anything like that? I want to understand more details.

Sandy: Sure. I think there’s, at least, a couple mini questions in that. First of all, they didn’t do any incentivized marketing. That’s really important, because that lowers quality. There certainly is a big market for incentivized lead gen even today. They didn’t do that, and so that kept their quality very high.

They did get very sophisticated about where to direct leads. So certainly they were buying almost all of their traffic. So when they’re buying someone from Google, they knew what the landing page was going to look like, and they knew exactly what program they were going to target. So they had a lot of programs that they could offer. So they were very good at offering to potential students compelling programs.

They were very sophisticated as well about showing the programs that paid them the most. And so, they were good at getting their CPLs or cost per lead rates. They never did it really aggressively in a way that would create conflict with their customers, but they would say . . . so, if somebody at the University of Phoenix went to their site and saw on the landing page Kaplan was showing up above them on the results page, they would say to the University of Phoenix, “Hey, Kaplan’s paying more than you. Kaplan’s paying us 70 bucks a lead. You guys are paying us 60. If you guys can get to 70 or 75, we can get you higher. We can get you to that position.”

Part of that was manual in that they worked those relationships, but part of it was also algorithmic in that they knew the programs that were going to monetize fast. So, they were able to show those programs and just constantly test and constantly shifting things because different schools have different needs.

Andrew: So, what they did was their landing page wasn’t one specific school. It was almost a search page result listing multiple schools, and then the user picked the one that they wanted. And the customer, the schools, had to pay to rise up in those rankings. That’s what they did?

Sandy: Yes. Generally, it was not for a specific school. Some people in the industry will have micro sites for specific schools. They would have micro sites often for verticals. So, their biggest site is You might have seen that around because they do a lot of advertising. They’ve got many other sites that are mostly targeted towards other verticals like nursing or criminal justice or health or teaching or IT.

So, but those mini sites, they would have kind of a results page that gave the consumer a choice of a bunch of different programs. So, each of the programs would have some copy on, here’s the program, here’s why it’s great, offers for more confirmation. And so, yes, they showed multiple programs on those listings pages.

Andrew: I see. OK. All right. So, what do you think it is about those entrepreneurs that worked? Why did they succeed? How did they get to a $150 million exit?

Sandy: First of all, they took the entrepreneurial leap. It’s always a lot easier said than done, but they were willing to put it all on the line and start the business. Nowadays, there’s probably more language online about entrepreneurial processes, but I think what we would say is that they pivoted probably many times as they were figuring out their business model in the early days to get to what ended up being the right horse to ride and that was education lead generation.

Once they found that, they were very smart about using technology. So, they didn’t build the technology first and then try to find a customer. But they found out what their customers wanted, and then they used technology to efficiently automate processes and just get bigger, stronger, faster.

They also just did things the right way. They had a great reputation in the industry with their customers, as I mentioned before. It’s just that they got that conversion data that no one else was getting, but even the competitors would acknowledge that they were just good guys who did things the right way. And that ascended into their organization.

They were able to recruit good people. They didn’t lose people. One thing that you see with a lot of lead gen companies, particularly some of the bigger ones, is that they lose people because people say, “Why don’t I just do this myself? Okay, I see how these guys are making money, so I’m just going to go do this myself.”

And lots of the big companies, QuinStreet is a good example. It’s a great company. It’s public. They’ve done very well over the years, but they’ve also had plenty of people move on from QuinStreet who just decided to do it themselves. And I think WorldClass probably had less of that in part just because they treated their employees really well, and people just really liked them.

Andrew: We’ve got to add more substance to this, because I’m writing notes as we talk because I always do. I’ve got recruit good people, do things the right way, pivot. If all we do is that, my audience is going to say we’re just giving them clichés. Let’s give them more depth so that they have more of an understanding of why this company did well.

So, when you say pivot, give me an example of how they pivoted to help me understand how they did it well. Let’s add some more meat to that.

Sandy: Sure. So, their original business model was taking Russian programming, Russian development resources and, basically, acting as a front and handling the customer service and marketing for them in the U.S. with U.S. customers. So, that was their initial business model. When they had the opportunity to do something that they could take internally 100 percent, they jumped at it.

So, they said, “Hey, we can do this ourselves. We’re going to build this. We’re going to do this ourselves. We don’t need what we had been using before.” So, that’s kind of step one. Then, once they started doing that, started doing the online lead generation, they were, I think, very open-minded about finding different customers that would work for them. So, yes, they ended up going into education, which was a big growing vertical. Like I said before, they were not bashful at all in the sense that they would take direct mail and cold call people left and right.

So, let’s talk about cold calling. It’s something that in many businesses a lot of people don’t want to do. It’s kind of getting your hands dirty. However, it’s something that has a lot of value. If you’re cold calling, you have to get used to people hanging up on you and telling you to go away and leave them alone. It’s kind of hard. It’s hard sales, but I think they were willing to do that.

And I think that just shows they had that mentality of yeah, doing it the right way. Is that a cliché? It can be. But in this case, I think, being willing to cold call and pick up the phone is a good example of something that probably most other people wouldn’t do. There are a lot of really smart and talented people out there who would shy away from cold calling for a bunch of reasons. And so, they did it. That’s an example of doing it the right way.

Andrew: Absolutely. I could see how going after the sale is not something that most people feel comfortable with. They might send out an email. They might make one attempt, but cold calling requires multiple attempts. It requires a little bit of hunting, and it requires some guts in order to ask for the sale. All right. I get that.

The pivot you’re saying is they started out by working with outside developers, and they were basically using those developers to do work for other companies. They were kind of a consulting firm with an outsource to a development department. Did they then move on to do their own development in-house, and then they focused on this one product?

Sandy: Yes, they did. So, the CTO of the company and the co-founder, John Anderson, was mostly self-taught. As an undergrad, he didn’t do anything in engineering. In a prior job, he had a little bit of programming, but really there was a lot of on the job training, which is just remarkable because they were doing some stuff that was hard, a lot harder back then than it is now. So, yeah, they were able to take it all in-house.

You know, I think it’s an example of doing harder things. And so, there’s always the tendency to take the path of least resistance as an entrepreneur or for any job in doing what you know. If you’re a developer, it’s writing code. If you’re a sales guy, it’s selling. But being willing to do things that are new and hard, you might call it a cliché, but it’s something that a lot of people steer away from, and the people that are able to embrace it will often find success in doing so.

Andrew: Okay. All right. And so, they were willing to do the hard thing which is bring the development work inside. Why is bring development work inside harder than working with outside developers? It seems sometimes that working with outsiders is the tougher track, the tougher direction, the tougher track.

Sandy: Well, that’s a good question. I don’t personally have experience with outsource developers. I have seen this though with a lot of companies, and there are some companies where outsourcing development makes sense. There’s some where it doesn’t. I think that when technology is core to what you do, it’s good to keep things that are core in-house, particularly if you’re a lead generation company. If you’re doing online direct marketing, you need to go rapidly and implement changes in your website. If you’re trying to do that with people that are outsourced, that’s just going to create a delayed feedback mechanism that’s going to cause you a lot of problems.

Andrew: All right. Finally, one more thing about this company. How did they get their employees to stick around? What did they do that got their employees to stick around?

Sandy: They paid high salaries. After the dotcom crash, a lot of people weren’t interested in getting options, and so they didn’t give options. But they paid good salaries. I think they created a work place that people found appealing. And so, they’re just good guys. Again, it’s also a cliché, but anyone who meets them says, “Hey, these are really good guys.” I guess if you don’t know how, if you’re watching this interview, there are other places where you can probably learn more about how to do that than here.

Andrew: Okay. All right. Fair enough. Let’s move on to the next company then. Well, actually, no. If you’ve got more specifics, I want to get to those, but if you don’t on that, that’s fine. Paying more just to keep people around. I understand how that helps. But in an environment like this where people inside of the company see that there’s arbitrage opportunity with leads, I can understand how they just would go off on their own and say, “We’re going to find just one channel, one way that WorldClass Strategy is bringing users in. We’re going to find just one landing page that they create. We’re just going to copy that. We’re going to make a lot of money on that, and then we’ll start adding the others and the others.”

It’s really hard to pay more money than that kind of business model would generate. Is there anything else that they did, or did they pay more than an employee can make if he became an entrepreneur who competed with them?

Sandy: It’s a great question, and I would love for you to get the chance to ask the guys themselves. I think that they paid, call it, above market salaries, and they gave their employees opportunities to grow and take on new business. It’s nice to be involved with a growing company. When you’re growing up with it, there are always tons of things to do. So for those employees there is a lot of room for growth. So I think all of the employees probably benefited just from a professional development perspective by riding that growth.

So, I guess those are some bullets. I’d also say there’s also some interesting things to discuss as far as how their exit materialized.

Andrew: Okay.

Sandy: Usually, an M&A process takes about six months. This one took quite a bit longer, a little bit longer than a year, and part of it was that they weren’t sure what they wanted to do. And so, when they hired us, our job was to go out and find the opportunities in the market, and that was potentially selling outright to a strategic buyer or doing a deal with a private equity firm that might buy a majority of the company but not all. So, those were some of the options. So, we went out there to look at that.

They didn’t have any obligation to do a deal if we found it. So, we went out there, and we found some compelling deals. But they just didn’t like the cultural fit, and so they walked from some things that other people might have found compelling. They ended up deciding that they wanted to do a deal that would give them the ability to leave the company a year after the deal.

In some cases, that’s a big problem because when a buyer buys a growth company, they generally want management to stick around for a long time because if it’s growing, the buyer says, “Hey, these guys are important. I want to keep them around.” If, on the other hand, the management says, “Hey, I don’t want to stick around,” that sends a bad message in two parts. It says, first of all, I don’t want to stick around, so you’re going to have to find someone else to run the company. Second, it’s a signal that maybe this company isn’t all it’s cracked up to be. Maybe there’s a problem there.

And so, they decided though that they didn’t want to stick around, and so that actually limited the buyer pool considerably. But we were able to find a company that was already in the market. And so, they could say to themselves, “Well, we don’t need that management team quite as much as someone who is not in the market.” So, that was the company that is now EducationDynamics.

The deal also was structured with an earnout. Earnouts are an interesting deal component that you see in a lot of cases. An earnout specifically means that when there is a deal there is a chance to make the deal pay more to the seller if they hit certain performance goals. Sometimes, in an earnout, it’s years. Sometimes it’s months. Sometimes it’s based on revenue or profit. There’s all different variations.

In this case, we had a deal that closed in May of 2007, and the earnout was based on the 2007 performance. And they just crushed it. We had a range of outcomes for the earnout, and they just crushed even the highest possible outcome. So, it was a great example of a company taking advantage of an earnout opportunity to max out on the deal proceeds.

Andrew: You know, I’m so fascinated by your business. I kind of wish that we would have done an interview before this one about how you just built Horizon Partners up. I don’t really get to interview people who run your kinds of company, who run boutique investment banks, about how they built them up. Maybe we’ll have you back on to do that.

Sandy: Sure.

Andrew: Let’s talk about the next deal, Investopedia to Forbes Media. What was Investopedia? Let me clear that up. Investopedia is a company that you helped to sell to Forbes Media. What was Investopedia?

Sandy: That’s right. So, is a website, and you can find it today if you do a Google search for a lot of things related to investing and financing. You’ll often end up at their pages. So, you can think of it as an encyclopedia of investing with just a lot of great content for investors.

The story behind that company is just a classic Internet bootstrap growth company. The two founders of the business, Cory Janssen and Cory Wagner, graduated from the University of Alberta in Edmonton in 2001, and they had been excited by the dotcom opportunity. And so, when they graduated they said, “We’re going to do a startup.”

They were investing junkies. They just loved investing, and so they said, “Why don’t we just do a startup involving investing, something we’re really passionate about.” And so, they were online all the time, and they realized that at the time there wasn’t really something that they would consider a good encyclopedia of investing.

So, they just, by hand, starting writing articles about various investing terms, things like stop loss trade or EBITDA or just GAAP accounting or pick your investing topic and articles about Warren Buffett or other famous investors and what they did. And so, they put this content out there. They made good content that Google and other search engines just gave natural SEO to. So, they got good organic traffic.

One day, after six months or so of just the two guys doing the business out of the basement, they got a call from, I think it was someone like eTrade saying, “Hey, can we put advertisements on your website?” They said, “Heck, yeah. That sounds good.” That began somewhat of a flood of financial advertisers calling them and offering to put up advertisements.

They are a good example of a market that has great monetization opportunities in that if you’re doing a music website, the advertising potential is just a little bit more limited. But if it’s financial, there’s just great endemic advertising that advertisers are going to pay a lot for. So, they were fortunate in that respect.

Andrew: I see. That’s right. There are certain industries that if you go in the advertisers have a ton of money. You’re at home today, by the way.

Sandy: I am. That’s my roommate.

Andrew: Cool. What city are you living in?

Sandy: We’re in San Francisco.

Andrew: Oh, cool. And today is Friday, so that’s probably why you’re working from home?

Sandy: Well, actually, I’m working from home because I am in between offices. The office that I thought I was going to move into on October 1st turns out it’s ready on October 22nd. So, I’m a bit homeless here for a couple of weeks.

Andrew: All right. Great. What else is it about Investopedia that worked? They picked the right industry. They picked an industry that has deep pockets and is willing to spend money on advertising. What else did they do?

Sandy: I think the business started with great content that had great SEO, which means free traffic that had great endemic advertising. So, it was free traffic that monetized really well. And then, they also built a network of writers and contributors so that ultimately they didn’t produce most of the content internal. And so, what happened was that a lot of people involved in the finance industry realized that getting published by Investopedia was a good thing for their career. And so, they had lots of people who would volunteer to write for them, some struggling portfolio manager or investment banker even.

They had this access to really smart people willing to write for nothing. They ended up paying a small sum, five bucks an article, because they wanted to make sure that they owned the IP. They had this low cost, very scalable content production network. And so, that enabled them to massively scale up their content.

They were also smart about designing the site, so they got a lot of email addresses. The site had some very long form content that you had to give your email address if you wanted to get access. So, a typical one pager anyone could see it, but the eight pager on how Buffett’s career came about, you’ve got to give your email address.

They also had an investing simulator that a lot of students would use. If you just basically wanted to have like a fantasy portfolio, you could use it. So, you had to give your email for that. They were able to build a big list of emails, and then they were able to do targeted advertising to that email list. That was a great way to make money. When they sold, they were actually making more advertising money from the emails than they were from just the regular display advertising on their home page.

Andrew: Wow. I see that a lot with email. I don’t think of it when I think of successful businesses. I didn’t think of it when I was even looking for interviews, for entrepreneurs to interview here. Who would have thought that guys who are running email based businesses are building a profitable company? But the more I’m interviewing them here, the more others in the audience are introducing me to them, the more I realize how much money there is in email.

Tell me about their sale. What kind of sale did they get?

Sandy: I cold called the company one day after just being impressed by using their website, and they were pretty small at the time. They actually didn’t even want to share with me their financials because they thought they were just so small. I liked the business, and it seemed like they had a good model that was going to scale well. I built a relationship with them over a couple of years. And then one day, this was the summer of 2006, I got an email and they said, “Hey, we just had an offer.” I think it was from, which I think since has been bought themselves. I think the offer was, maybe, 10 or 15 million bucks with some stock. And they said, “We just got an offer. We’re not sure what we want to do, but it looks like it might be a good time to sell. Let’s talk.”

That’s usually the catalyst for hiring someone like Horizon Partners, or my prior firm where I was before, in that opportunity is knocking and there’s a buyer at the door. Sometimes, there are many buyers and you realize that if you want to get the best possible price, you can maximize value by maximizing competition.

And so, they had one company knocking at their door, and they realized that we could bring them other companies. So, that was a general value proposition, and the company was just operating unbelievably well and that attracted a lot of good attention. So, when we went out to the market, it takes you about a month to get from starting a process to getting onto the market with materials describing the company, financial models, things like that. So, we went out to the market, and it was just perfect.

Every big financial media you can think of was interested, CNBC and MorningStar and Time Warner which has CNN money, BankRate, everyone was interested. That’s just the best scenario for maximizing value. You want to have somewhat of a competitive auction. Not necessarily a true auction, in that often if you’re an entrepreneur, you’re not just going to sell to the highest bidder because you care a lot about who you’re selling the company to, what’s it like to work for them, how will they treat my employees, and so forth. But you still want to get the best price you can from whoever you want to deal with.

So, we ran that competitive process, and we got a bunch of really good offers. Forbes made a great offer, and they also had I think a great cultural fit in that they basically said, “Hey, we love what you’re doing. We just want you to keep doing what you’re doing. We’ll help you on the advertising side.” Because at the time Investopedia’s display CPMs were pretty low. Forbes said, “Hey, our CPMs are five times what you’re getting. We can just take that over and leave you to the fun part, which is the content and all the other stuff.”

And so, they thought that was a great value proposition and did the deal with Forbes. It worked out well for Forbes, and it worked out well for Investopedia. They reported directly to the CEO, so they weren’t stuck in any type of bureaucracy. Ironically, two years after the deal, Forbes still hadn’t taken over the advertising themselves. I don’t know exactly why. There’s probably a good reason. That synergy that they imagined wasn’t realized for what it’s worth, but all in all it was a deal that paid out to the entrepreneurs fantastically and it met all their goals.

Andrew: Did my camera just freeze on you? Are you able to see me?

Sandy: Yeah. It froze on me.

Andrew: Oh, weird. I’ll bring it back up now. How do you find these companies?

Sandy: Sorry about that. Can you see me now?

Andrew: Yeah. Let me bring my camera back up on you. Where is it?

Sandy: Oh, here we go.

Andrew: Do you see it? There it is. All right. Great. How do you find companies like WorldClass Strategy or Investopedia or we might talk in a bit about Reliable Remodeler? How do you find these guys?

Sandy: Sure. Well, I certainly have a network that I’m always talking to, and I’ll find some companies that way. Usually, it’s a cold call. There are companies that you hear about, but it’s often the most interesting company that’s the one that’s under the radar, and the only way to find that company is to just look in the trenches and pick up the phone and call. To this day, I’ll still cold call. It’s fun to find companies off the beaten path in places like Edmonton or Portland or Seattle, all over the place, as they often are.

Andrew: How do you know even who to cold call to figure out where they are? Because what I like about the companies you’re talking to and the companies that you do business with is they’re not the ones that we read on TechCrunch or see in “The Wall Street Journal” every day. They’re the hidden gems. They’re the guys who are quietly building up their businesses and being quiet about it because they’re making money, because they’re building real companies. And they don’t want the world to know about it, because what do they need with the copycats and the adula that comes from being public.

I never know how to even find them here to do interviews, and here you are finding them and getting them to do business with you. How do you do it? Are you talking to each other?

Sandy: That’s my secret sauce. If I told you, I’d have to kill you.

Andrew: Is that really it? You’ve got a secret technique for doing it, and that’s the key to finding the businesses.

Sandy: It’s not a secret. Actually, I’d be happy to talk to you about it. It certainly helps in our business to have a good eye for those businesses. So, I think it starts with having a good instinct for markets that are profitable. You hear a lot of talk about market sizes. Market sizes are always talked about in terms of revenue.

Guess what? More important is profit. Some markets have more profit than others. And so, education lead gen not only has a big revenue number, it’s a very profitable market, too. So, having an eye for profit I think is important and then being able to quickly find companies that are doing well.

For example, type into Google “online degree” and whoever is top in the organic results, I guarantee they’re making a ton of money. So, that’s a good example. There’s just all sorts of things that you can do, LinkedIn. There’s high growth lists that people call. There are actually, mostly private equity firms, but there are dozens of private equity firms that have young associates who are cold calling, trying to find successful entrepreneurs. And this is the stuff that they slave over. It’s how do you find the companies, and there’s just all sorts of creative things that people do, and there’s probably no one right answer. I’ve been doing it for a long time, and I probably spent enough hours such that I’ve got a pretty good eye for it.

Andrew: I think that’s also one of the challenges for entrepreneurs that you want to get into a business where you know there’ll be money, you know there’ll be growth, you know that there’s an interesting opportunity in. But how do you find out about it? It’s hard because all you read about is iPhone app, iPhone app, location-based software, over and over and over, and the same five web-based businesses over and over. And those aren’t necessarily the businesses that are going to make money. Those are the ones who are already established leaders.

I can’t go and create a Yelp tomorrow. There isn’t a huge business in creating a Yelp. But in the lead gen space, what do you think? Do you disagree?

Sandy: Yeah, I agree completely. I think that aspiring entrepreneurs reading TechCrunch to find entrepreneurial ideas, it’s akin to a retail investor watching CNBC and thinking based on that they’re going to be able to out trade the hedge funds out there. It’s just not the right approach.

So, I would say TechCrunch is interesting to read, and everyone kind of reads it in Silicon Valley and tech. So maybe you’ll still want to read it. But don’t rely on that as a source of information, not to take anything away from it. It’s a great site. It’s fun to read. But once it’s on TechCrunch, everyone has known about it for a long time. So, I think that’s not the right place, and so you have to be creative.

There’s a lot of really interesting businesses that you’ll find in verticals that you don’t even think about. I ran into a really interesting business the other day that is taking a really innovative software as a service approach to the textile industry. And so, there’s a lot of complications that big apparel manufacturers and brands have, and this entrepreneur has done a great job building a software as a service solution to that industry.

I don’t think that TechCrunch has ever about a software company targeting the apparel industry, but I guarantee you that company has a great market position and will probably have a very healthy exit one day if they want that.

Andrew: You know what? If I were to read just the popular tech business sites, maybe three years ago, I would have thought that Ning was the way to go, that you want to create a new social network, maybe compete with Facebook, maybe complete with Bebo. But I wouldn’t have found out about WorldClass Strategy. I wouldn’t have found out about Reliable Remodeler. What is Reliable Remodeler, the other company that we wanted to talk about, that you helped sell?

Sandy: Sure. is an online lead generation business for home improvement. It’s a business that I sold to QuinStreet back in early 2008, and it’s just a good example of a bootstrapped growth company that had a great exit and didn’t raise any external capital and did some hard things very well that put it in a position to get a great exit.

Andrew: Okay. Any outside funding there in that business?

Sandy: No. And it’s kind of funny that the main founder, Eric Doebele, he actually had raised a lot of money for his previous entrepreneurial endeavor which was doing something similar. It was kind of similar, home improvement, online advertising business, and he raised a lot of money from some great VCs.

He’s a really good guy, so he’s very backable. But they just hit some real tough sledding in 2000/2001 as the market turned on them. And so, he had to exit that business and then after taking some time off, said, “Gee, let’s do it again.” And this time he didn’t need to raise any money and was able to grow it very rapidly.

Andrew: That’s an incredible success story. I think I read that he’s in Portland and that he sold the business for $25 million.

Sandy: Yeah, that’s right. QuinStreet announced that in the public filing. So, yeah, I think it was a $25 million deal.

Andrew: Unreal. Why did it work that time for him?

Sandy: Well, Eric is a very charismatic guy and a very smart, great sales guy. And so, they did a really good job of building a distribution network among home improvement contractors. And so, in 2002 to 2003 to 2004, it was much harder. It’s still hard to sell anything to a small business today, but in that time lots of these home improvement contractors didn’t have websites. They didn’t know what leads were. They didn’t know anything about the product that Reliable wanted to sell them.

So, he did a great job of educating the customers and acquiring a lot of customers to build up a network. And the key to why the network was so important was that if someone does a Google search for “I want to build a new deck in Los Angeles”, the way to monetize that Google search is by taking that person and turning them into a lead that you can then sell to a bunch of home improvement contractors in L.A. But getting those home improvement contractors in L.A. as customers is really hard.

So, for them back in 2006/2007, they were able to, on average, take a kitchen remodeling lead in L.A. and sell it enough to make $280 a lead. But for a smaller market like Memphis, on average, they couldn’t even make 20 bucks from it because it was harder to sell it to the home improvement contractors.

They built the second largest network of lead buyers after Service Manager, and so that was just a really valuable asset. That’s what QuinStreet was most attracted to when they made the acquisition.

Andrew: All right. What about the failures? Without bringing up their names, what have you seen about the companies that didn’t make it? Did they have anything in common? Are there any big mistakes that you’ve noticed?

Sandy: Well, it’s a good question. I think for all the successes and all the failures, you have to say serendipity and fortune plays a role. You can’t really control that, so it’s hard. It’s hard to get judged for having good or bad luck. I think that there are a lot of companies that had a market turn on them.

So, for example, just thinking again about lead generation, and not just lead generation but more the digital media content businesses that were making money through lead generation advertising, people were making a fortune selling leads into the mortgage industry.

Andrew: Into the what? I’m sorry.

Sandy: Into the mortgage industry.

Andrew: Into the mortgage industry, right?

Sandy: Particularly sub-prime mortgage because if you think about it, at that time anyone, anyone with a pulse was qualified to get these crazy sub-prime mortgages that were super profitable to the bank. And so, those leads were worth a lot. And so, if you had an offer, it could kind of go anywhere. So, there was just a lot of volume. So, a lot of people were making money there.

Some people got out and got their exit. So, the biggest company in that space, LowerMyBills, they got their exit, I think, in 2005/2006. So, they sold before the market had turned. But there were a lot of people who didn’t sell when they had opportunities. In hindsight, 20/20, it’s a shame that that market turned, but I do think that if you go back to 2005/2006, there were a lot of people who were saying, “Hey, we’ve got a housing bubble.”

And so, if you’re exposed to an industry that is very cyclical, you’ve got to be asking yourself tough questions. If you’re like the company I mentioned before that’s selling, let’s say, into the apparel industry and I’m no expert on the apparel industry by any stretch. But I’ve got to think that the apparel industry is pretty slow and steady. And if there are changes, they happen over many years not overnight. On the other hand, the mortgage industry was just growing like crazy. And so, if you’re selling to an industry like that, you’ve got to ask yourself tough questions. And so, it’s easier hindsight.

But let’s take an industry that I actually like a lot, but it may be hazardous, this kind of local deal space. I think Groupon is great. I saw your interview with Andrew Mason. There’s a lot of competitors there. For example, there’s an open legal question about what happens to the coupons that people are buying that they don’t redeem. There’s a lot of breakage in that model. I don’t know but maybe there’s a big class-action lawsuit coming out because there’s a lot of people who haven’t redeemed their coupons.

This is real thinking out loud, but I think in just about every industry there are tough questions you should be asking yourself about the benefits and liability. It may indeed be that there is a zero threat for Groupon and those local deals with that breakage issue. But that’s just an example of, I think, tough questions.

I think a failure of some entrepreneurs is that they get very focused in their day-to-day tactics and operations. They’re probably really good at it, but they don’t take the time to look at what their competitors are doing, to look at the wider value chain that they’re participating in, and so they might get blindsided.

And the same thing can happen. If you’re buying all of your traffic on Google, you’ve got to be very careful about what Google’s doing. If they make an algorithmic change and you’re on the short end of the stick, you can really get hurt. So, those are questions that . . . it’s easy for us to talk about. I realize that it’s a lot more challenging to actually think about those questions and make the right decisions based on what you find. But I think that that is a common failure of entrepreneurs who don’t make it, not having a wide strategic perspective such that they end up getting blindsided by market changes, regulatory changes, things like that.

Andrew: Do companies come to you in that situation when they’re in trouble and say, “Help me get out of this business?” Do entrepreneurs in that situation come in and say, “Help me?”

Sandy: They do. And, unfortunately, we often can’t help them. So, the time when you want to sell your business, when you’re a highly motivated seller, it’s not generally a good time to sell because buyers are going to see that. People talk a lot about an exit and how do you plan for an exit. I think fundamentally you want to operate a business that you would want to buy. So, if you look at this business and you say to yourself, “Gee, I want to sell it.” Buyers are pretty smart, and they’re going to figure stuff out.

So it’s counterintuitive, but often the time to sell is when things are going the best. An entrepreneur might say, “Well, there’s all this low hanging fruit, so I’m growing so fast. I want to wait until I realize more of that potential.” But often if you wait until the potential is fully realized, the buyers aren’t going to be interested in buying it. Or if they are, the multiples going to come down [interference 49:54] the time.

But I do find that there’s a common mentality among entrepreneurs just to hold on because things have been going really well, just to hold on more and more. There’s a lot of companies that had chances to sell in 2006, 2007, and early 2008, and then when the market turned, lost that opportunity. Some have recovered, but many haven’t.

Andrew: Let’s see. Finally, what about the future? What do you see? Where do you see some opportunities? What should entrepreneurs who are new in the space, who are looking to jump into something, what should they be considering?

Sandy: Yeah, well, so besides the obvious things like find great people, take risks to heart, I think there are some markets out there that have big opportunities. There’s a big opportunity, I think, on Facebook. We actually have a blog at our website, where we just posted about this opportunity with Facebook Media Buying.

Facebook has just introduced the opportunity to target by social [inaudible 51:02].

Andrew: Sorry. You know what? Somehow, the connection is just getting worse here. I’m monitoring it as we’re talking. I’ll tell you what, before you finish that thought, let me hang up and call you right back and hopefully we’ll have a clearer connection.

All right. So, we reset the connection because we were starting to get a lot of latency and, hopefully, this will be better.

What you were saying was Facebook. There’s an opportunity on Facebook that you noticed. What do you think?

Sandy: So, I think that there’s a big opportunity on Facebook in media buying, and there’s a couple reasons. First of all, there’s just a ton of inventory there. It’s just growing like crazy, and Facebook has a social platform that is very scalable. So, it’s somewhat similar to the early days of PPC where you had search volumes growing like crazy and you had these self-service interfaces that would allow you to get in there and turn a campaign up. And that worked really well.

But I think the most interesting new opportunity in Facebook is that they have recently enabled [inaudible 52:06] social context, and I haven’t seen much discussion of this. I’m a little bit surprised because I think it’s a big deal. And so, if you’re on Facebook or if you’re at a site that has Facebook connect enabled, you’ll often notice the like button. And then, in some cases, you’ll see advertisements where it will tell you your friends like this product or service. And so, that’s what I’m talking about when I say targeting by social context.

Now, to my knowledge, Facebook still has [inaudible 52:37] you to do a lot of really sophisticated targeting by social context. For example, as an advertiser, you probably want to target certain friends that I might have. I think it’s kind of random right now as far as it shows which friends of mine might like a product or service.

That said, it’s a new ad unit and I don’t think anyone knows how to use it. I think Facebook is in the process of developing it. So it seems to me to be a little bit like the PPC when no one really knew how to do keyword targeting. Now, it seems kind of obvious. The best practices are pretty well known. But with Facebook, I don’t think anyone knows. So part of it is unknowable because Facebook is going to evolve their platform certainly in ways that might be hard to anticipate.

That said, Facebook right now, there’s over a billion dollars advertising on That number’s going to grow like crazy in the next couple of years. It’s also going to go off Facebook. I think the Facebook people have a plan about having a network off Facebook.

And so, there’s going to be a lot more inventory than just what’s on, and part of that is the social context drives conversion, drives through it in the same way as targeting a keyword. If I know that my friends like something, I’m more likely to convert. So, if you’re [inaudible 53:52] Facebook this inventory in the same way you’re going to get Google inventory [inaudible 53:58]. Inventory converts and makes money for you. The Facebook inventory is going to [inaudible 54:04] because the social targeting is going to have an impact on consumers and their behavior.

I think that’s a big opportunity. And if I was doing any type of online marketing, I would be looking at that. It’s a little bit challenging because I talk to a lot of lead gen companies that are struggling to buy media on Facebook. It’s hard, and there’s probably not a level playing field. But I think that it’s something that even if you don’t make money today, you still want to invest in it because there’s going to be a big opportunity there. If you were the first to figure out and build technology to automate the processes and figure it out, I think you’re going to make a ton of money.

Andrew: Yeah. I could see a day when Facebook starts putting ads on other sites the way that Google puts their ads on other sites. And then the user’s friends would pop up in those ads, and references to what the user likes would be included in those ads and who knows what else. They’re really in a great position.

Sandy: Exactly.

Andrew: All right. And you’re saying, jump in now, figure it out today, and keep on top of it as they evolve. That’s going to be potentially one of the next big opportunities. Someday, maybe five years from now, I might be interviewing an entrepreneur who built a company off of Facebook ads and ask him how he did it and why it’s not possible in five years but it was possible now.

Sandy: Exactly. And so, if you figure it out, give me a call.

Andrew: Right on.

Sandy: Either now or in five years, either way.

Andrew: We had a little bit of latency in this interview. If people want to go and read your ideas directly from you, especially about what you just said with Facebook, where is your blog? Where can they go?

Sandy: So, it’s a firm blog. It’s at And so, I’ve got a couple of great co-collaborators, Lou Doctor and Mike Firmage. So, they’re also contributors to the blog. Between us, I think we’ve got a lot of collective expertise that we want to distill in a blog. I think there’s been some great VC bloggers that have done a great job, and there’s some entrepreneurs, also. But I haven’t seen too many investment banks with good blogs, and so I think we might be the first. We’re trying to get good content up there, and we actually invite any of your viewers to reach out with questions, We love to get feedback on things to talk about, and there’s just a world of nitty-gritty details involved in transactions that is probably opaque to most entrepreneurs. So hopefully, we can shed light on that. So please feel free to check out the blog and let us know how we can make it better.

Andrew: All right. and the blog’s on there. The rest of the information about the company is on there. Sandy, thanks for doing this interview. And also, let me say this. Thank you also for all the great introductions that you’ve made.

Sandy has access to bootstrapped entrepreneurs whose businesses I never heard of. I didn’t realize how big they were. Thanks for making all these introductions. These guys are so secretive that very often they’ll say, “Sandy, thanks for the introduction. Andrew, it’s great to meet you, but we can’t talk about it.”

Sandy: [laughs]

Andrew: You know what? I completely understand. We’ll wait till they’re ready, and then I’ll be here for them. So, thanks for doing this interview. Thanks for all of those connections. I appreciate it.

Sandy: Well, thank you, Andrew. It’s been fun doing the interview, and I’ll keep the connections coming and, hopefully, we’ll get some who are willing to talk about what they’re doing to help out your audience.

Andrew: I love it. I appreciate it. Thank you all for watching. Bye.

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  • How badass was this! Here’s my reasons why having an outsider’s perspective on why a company crushed it is interesting and valuable:

    1. Objective
    2. Less selective of a memory
    3. This dude certainly talks our language, and did a sweet job de-constructing the companies.

    Granted, massive selection bias here, but if you keep that in mind this was a great addition to your normal schtick, AW. Good call on the interviewee, and thanks for kicking it with the community, Sandy.

  • Glenn

    Great interview. Learned a lot.

  • Anonymous

    I love the Investopedia story! And it’s good to know that there is a different profitability in each industry.

    I guess if we want to sell our companies we can just email Sandy. :-)

    Thanks a lot for the interview!


  • Nethyc

    Great interview. I would love to hear others on this topic, especially if they get right into the specifics and technicalities. What goes into valuation of a company? What makes a company easy/hard to sell? What are some companies that are easy to sell? Which are hard? Why? Is it size? Industry? Competitive position?

    BTW Andrew, you’re getting really good at this interviewing game. You’ve got a few behind you by this time.

  • Great interview, Mr. Kory is a sharp guy. It was interesting to get some insights on how these education guys built up a company worth over $100m.

    On the subject of testing, which is something that Kory pointed out as a key element to their success, I feel that a lot of business noobs out there are missing the gist of what testing is really all about. And how it can apply to not just internet marketing, but to product design & development – to create better customer experiences.

    Testing is the process of taking a snapshot of what you have (whether it’s a landing page on a website or the first screen of your mobile app) and then creating and tweaking new instances of that snapshot until you discover & identify (typically by split testing) a specific improvement. Whether it’s 10% more conversions, or 10% more user interaction – good testing involves the implementation of constant improvements based on solid metrics.

    Seems that their relentless testing, honest business principals, and bull headed determination were their keys to success. Good to see !

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