The Genius of Spotify Wrapped and How to Copy It, and How to Sell Your Business for 9 Figures

Jesse Pujji: Just imagine every phase of the business is getting looked at with a microscope and a fine-toothed comb—which, by the way, if you weren't prepared for that or you didn't have your numbers or your data, that alone could end the deal. They may go, "I just can't understand your business well enough, I can't do diligence, I'm out."

Alex Lieberman: Know what was very under the microscope, that microscope you're referring to during due diligence when we did our deal? I'll give you guys each one guess.

Jesse Pujji: Your email deliverability?

Sophia Amoruso: Your fitness as a leader?

Jesse Pujji: Damn.

Sophia Amoruso: I'm kidding.

Alex Lieberman: Wow, no, I was questioning my own fitness. What's up, everyone? I'm Alex Lieberman.

Sophia Amoruso: And I'm Sophia Amoruso.

Jesse Pujji: Yo, this is Jesse Pujji.

Alex Lieberman: And this is The Crazy Ones. All right, everyone, welcome back to The Crazy Ones, a show that is quickly becoming an entrepreneur's best friend. I am pumped to be back to our normal programming with Jesse Pujji, aka Baby Buffett, and Sophia Amoruso, The Dean. I'm Alex Lieberman, The Mailman. Also, if you didn't listen to last episode, you should. I spoke with the founder of a $700 million garbage business and he gave away all his secrets. But also, you missed that we came up with a nickname for you all. So you all, the audience, our fans, our friends, are officially The Misfits. And, my amazing Misfits, I have one ask of you before we do this thing. If you're listening to the show, please rate and review The Crazy Ones on Spotify or Apple. And if you're watching on YouTube, make sure to click Subscribe and leave a comment below with one topic you want to hear us talk about on an upcoming episode. Okay, housekeeping...

Jesse Pujji: Only five stars work. So four through one just don't work, so don't even try to click them.

Alex Lieberman: Exactly. Great point. I missed that. Housekeeping officially done, so let's do this damn thing. Today we are talking about Spotify Wrapped: what it is, why it's a genius campaign, and how to create something similar for your own business. Then we're talking about selling your business: when to do it, how to crush the process, and what the feeling is like after you sell. And we're going to close out this episode with a totally new game that's going to have a ton of hot takes and strong opinions. You're not gonna want to miss it. So stay tuned.

Let's start with Spotify Wrapped. It is a campaign that has become more anticipated by some than Black Friday or Cyber Monday. Quick history for you on the campaign, and then I have a surprise to share, so stay tuned. Every year since 2016, Spotify has come out with Spotify Wrapped, which tells a story about users' listening habits for the year. So it includes things like listening minutes, most-listened-to songs, most-listened-to artist, listening personality, and more. And Wrapped has turned into this marketing behemoth, and there's a ton to learn from it. Now for the surprise: Crazy Ones production team, let's pull up Jesse's Wrapped. And Jesse, I want to get your initial reactions.

Jesse Pujji: I have kids...

Sophia Amoruso: I'm gripped.

Jesse Pujji: That's probably my initial reaction.

Sophia Amoruso: Gripped. Oh no.

Alex Lieberman: By the way, this is the excuse that every parent makes, is that my Wrapped is what it is because of my kids. But now looking at your Wrapped, I am assuming that your five-year-old and...how old is your other kid?

Jesse Pujji: Seven-year-old.

Alex Lieberman: That your five- and seven-year-old are not bingeing Meek Mill.

Jesse Pujji: They are...well, so in fact, this one is my son's favorite, favorite song, and I'll find a video of him. We got a call from his second grade teacher and he's like, he didn't bring something for show and tell so he said, "Can I rap "Going Bad" to the class?" And he freestyle rapped "Going Bad" to his whole class, and I have a video of him doing it. So he heard a song I like, obviously I played it. We play clean versions only. And...

Alex Lieberman: Wait, when do you make this switch as a parent from clean to explicit?

Jesse Pujji: I don't know if you ever...you know, our kids have told us they know the F word. They said it to us. And they both learned it the same day at the same pool from two different people. I don't know what the chances are of that; it just went around.

Sophia Amoruso: At the pool. At the pool. So this is your Spotify Rap.

Jesse Pujji: Yeah, yeah, it's rap. Drake, I mean...

Alex Lieberman: That was good.

Jesse Pujji: We love Hamilton.

Alex Lieberman: Lin Manuel Miranda. I love that.

Jesse Pujji: He owns it. And then there's some religious music, so that's my life.

Alex Lieberman: I was going to say, Dya Singh. What exactly is that?

Jesse Pujji: It's just like religious hymns.

Alex Lieberman: Nice.

Jesse Pujji: Like prayer and meditation prayer, and that kind of thing.

Alex Lieberman: 

I was going to say, the range on your Wrapped between Meek Mill, Broadway music...I guess there is the tie there because Hamilton is quasi-rap, and then the religious hymn music. I love it. Okay. Enough of you. Sophia, let's see your Wrapped.

Sophia Amoruso: Oh man, I don't know what this says about me.

Alex Lieberman: I'm rating for Wheels on the Bus.

Sophia Amoruso: This is a band called Mercyful Fate. Apparently I listened 1,045 minutes and I'm the top 0.5% of people listening to this band.

Jesse Pujji: Wow.

Sophia Amoruso: And this was a metal show that I went to over at SoFi Stadium, at the YouTube theater, SoFi Stadium a few weeks ago. And it was so fun. And the singer's name is King Diamond and I got to meet the King, which was very exciting. I have photos of myself and the King. We can check it out.

Alex Lieberman: What was your impression of the King?

Sophia Amoruso: The King's amazing. So these guys are from Copenhagen. Their peak was really in the eighties, and all their songs are basically about witchcraft and satanism, and it's so fun and funny to hear grown men singing about satanism and coming to the Sabbath and casting spell, whatever. It's my favorite. It's my favorite.

Alex Lieberman: It sounds like really light music. I can't tell if 1,045 minutes is a lot, or you're one of like seven people that listens to this band.

Sophia Amoruso: Yeah, I mean, and then the other one...

Jesse Pujji: Well, just divide it by four, dude.

Sophia Amoruso: I was dating someone earlier this year and this was on a playlist he sent me. So the top song is called "You've Got a Woman," and apparently I played it 115 times.

Alex Lieberman: Oh my god.

Sophia Amoruso: The most listens were on January 8th. I guess it was maybe a nice start to the year.

Alex Lieberman: Have you listened to it since the person you dated, or does it bring back bad memories?

Sophia Amoruso: No, it doesn't bring back bad memories. Yeah, this is...

Jesse Pujji: I feel like we're deeply invading Sophia's privacy right now.

Sophia Amoruso: Not at all.

Jesse Pujji: She seems super uncomfortable.

Sophia Amoruso: It's really, like it's very high/low. This is very, very...not high/low, but that's a very...

Alex Lieberman: Oh my god. Look at that next album cover. Oh my god.

Sophia Amoruso: Yeah. "You've Got a Woman" is a very chill kind of song, and this one's super duper heavy. So I really...

Alex Lieberman: If you're listening...

Sophia Amoruso: I've got range.

Alex Lieberman: If you're listening on the podcast players right now, I'm looking at this Mercyful Fate album cover that looks like some reincarnation of the devil coming out of the album, ready to grab one of the co-hosts from the screen.

Sophia Amoruso: Yeah, reaching his arm out, like "Come to me." Yup. Satan in flames.

Alex Lieberman: Really, really light stuff. Okay, let's quickly finish with mine and then we'll talk about Wrapped and the strategy. I don't even remember who mine was. Oh, Drake. Drake is great. I feel like you guys can't toss me any hate about listening to Drake.

Jesse Pujji: That was mine too.

Sophia Amoruso: No, Drake...who doesn't like Drake?

Alex Lieberman: I will say I'm very basic in my listening. My top five: Drake, Eminem, The Lumineers, Mumford and Sons, and Kanye.

Sophia Amoruso: That's pop.

Jesse Pujji: Kanye. Ooh.

Alex Lieberman: Yeah.

Jesse Pujji: Delete.

Sophia Amoruso: Through and through.

Alex Lieberman: I know. I will say I listen to most music these days, or not most, a lot of it, on a record player.

Jesse Pujji: Oh, wow.

Sophia Amoruso: That's amazing.

Jesse Pujji: How'd you get that habit?

Alex Lieberman: Carly got me a record player that connects to Sonos for my birthday. And so now when I do work in the kitchen, I'll just put the record on and it gives me an appreciation, more of an appreciation for Spotify and just digital. Because a record is done in like six minutes and you have to go turn it over and then keep turning it over. It's actually a pain in the ass. Okay, let's wrap that up, pun intended. And let's talk about just the campaign that is Spotify Wrapped. Any initial thoughts on why it's so genius, or what entrepreneurs can learn from it?

Jesse Pujji: I think it's one of the best growth loops out there, right? And a growth loop people talk a lot about is essentially something you do that allows, that wants people to share it to drive more and more growth. There used to be the concept of a funnel; it's still the funnel, okay? Awareness, consideration. So if someone becomes aware, then they buy it, then they transact. And I think in the new world it's all about loop. So it's like, someone's a Spotify listener, they see this content, they're craving it, they start sharing this content, makes other people want to share it, and then other people sign up for Spotify, and just sort of that cycle just keeps going forward. And it's just so shareable. And so I think that's the growth loop that has just tons of sharing involved in it.

Sophia Amoruso: I think it's amazing because it's a little bit of fortune-telling or taking a Myers-Briggs test, or understanding your Enneagram. It's like taking a quiz without having to take a quiz. And people love being told about themselves. I mean, that's really what just an astrology reading is. There's usually nothing surprising about it. It's just like, "Oh yeah, I am like that." And it's something they want to share. And for a lot of people it's just like, "Hey look, I'm cool, right? Look, this is what I've been up to." It's a way to share something with your friends that you may not otherwise. And I think, yes, it's using data, but it feels really personal. It feels like someone made a play...I got four playlists made for me from my Spotify Wrapped, and it's better than what most of my friends could make for me. And I haven't heard all the music on there, so it's even serving up something new for me, which, as you mentioned loops, I'm coming back now to listen to these four playlists, which is probably four or five or six hours of my time.

And what's also awesome about it, and this is what...and I'm sure you guys have also done this, it generates something that's called "dark social." So that's taking a screenshot and sending it to a friend. Yes, you can export it into an Instagram story. I tweeted at Mercyful Fate, it just pushes a button you can tweet at the band, which whatever, it's obviously something that's a template, but I did it just for fun. But that's also just, that's really, really personal, more than just broadcasting it on your social media, which isn't...I know what they are able to measure, but it's a brilliant, brilliant campaign. And also the art's really pretty, like I want to share. It doesn't look like some...it looks really good.

Alex Lieberman: Yeah, I mean at the end of the day, it's advertising that somehow people have become absolute cheerleaders of. More than just cheerleaders—they are the advertisers, right? It is something that has converted customers into salespeople. And when you can do that, it's incredibly powerful. I posted on LinkedIn yesterday about why I think Spotify Wrapped is really smart, and some of people's responses to it were fascinating. So this one guy, Joseph Gish, said, I post a photo of me hiking with a mountain emoji, maybe 14 likes, no comments. I post my 2022 Wrapped, I get 70 likes, 20 comments, and people post their top five, so everyone can discover new songs. So it's like, he's sharing for Spotify, he's getting social cred because of it. It's literally his best-performing content on social. And also artists are getting the benefit of it because people are discovering their music. It's like, it's a triple win, which is amazing.

There's another one, which I find crazy. Danielle said, "Spotify does so many things right. I actually think Spotify Wrapped is one of the reasons that I left Apple Music; I had FOMO." And three people said that on my post. And then the final one that was interesting is, someone said they present data in a way that's cool and not creepy, right? And I think in this world where data privacy is increasingly a thing, them being able to get away with using peoples' hyper-specific data to deliver them a picture, basically saying, "Hey, we have used all your data and now we want you to share it," they do it in an incredibly non-intrusive...or at least it doesn't come off as in an intrusive way. Something that I was thinking about as you guys were talking about your learnings from it is also, one thing I read is an intern in 2013 came up with the idea of Spotify Wrapped, and it was this intern...it was called Year in Review, originally. And actually, someone who posts about this said they're actually pissed because the intern didn't get any credit for it. So I don't know if that's true or not, but again, interesting thing to see. But I think what's also interesting is having a company that allows really cool and interesting ideas to actually be put into production relatively quickly, even if it's coming from an intern, building that into your culture. Kind of like this idea meritocracy that Ray Dalio talks about a lot, is actually a really powerful thing that I'm sure people haven't thought about within the context of Spotify Wrapped.

Sophia Amoruso: And Spotify, I think people don't really...and not everybody uses this, but Spotify was built to be social. You can follow people, you have a profile. I can see what my friends are listening to when they're listening to it. Mine's pretty private, and I think I've made some public playlists. It's also, people used to talk about music, people used to share records and make mix tapes for one another and that was really, really special. And it's a prompt to share music in a way that...this guy you're talking about on Twitter, I doubt that he's posting his favorite songs frequently. I mean, I'm not. I love listening to music, but now there's a season where it makes sense for us to do that, and we're prompted to do that and it's more okay to do it. And maybe if it's outside of the typical content that we create, it's something that we're able to share at the end of the year with people that allows them to get to know us on a more personal level than for those of us who are tweeting about thought leadership, right?

Alex Lieberman: So as you look at what Spotify Wrapped has done, how do you think about ways to apply some of the learnings from it in your businesses, whether it's business class for you, Sophia, or Jesse, any of your three businesses? What are some of the lessons you can take that you actually right now could brainstorm things to do within your company?

Jesse Pujji: Yeah, that's a great question. I mean, there was a couple other ones, by the way. Remember the Coke cans that had everybody's name on it?

Alex Lieberman: Yes.

Jesse Pujji: I was so dumb about that. And then someone realized, no, that's because people take the cans and take a picture and they post it, and they're so excited to see "Jesse" on a Coke can. And I fell for it multiple times. And then the other one I heard that's even crazier is I've heard, I don't know if this is true, that Starbucks purposely misspells people's name...

Alex Lieberman:  I've heard that also.

Jesse Pujji: ...because it also has a social element too, which is genius if it's true. The most obvious one for us is Kahani, which literally is, I mean they're using the stories format, so hell yeah. The mobile web is just moving more towards that format, which is a big part of our thesis. But we've seen the same exact thing. We share back with all of our customer what people are engaging on on their site. And it's actually a great data tool for them to know. It's way better than typically what they have on their e-comm site. We have talked about the opposite, which is, could you show consumers what they're looking at on these stories across the Shopify sites, the different things that they're shopping on or that are super popular. So we have lots of ideas around that, but it's a 1:1 almost. I'm trying to think of any of the other ones are interesting. I mean, we have some things where we share hours and stats and data about how someone's using their GrowthAssistant, so we'll have some versions of that.

Alex Lieberman: Out of curiosity, does Kahani, do companies who use Kahani, and just for people who are listening, Jesse, it's your business, I don't know why I'm explaining it, but basically stories format that makes the mobile shopping experience significantly better. So you can click on the circles like you see in stories, and it shows some of the best products that companies have on their mobile site. Do companies choose what go in those circles?

Jesse Pujji: Yeah, it's both. So there's some automation where they can say they want to show certain bestsellers or automate the product to price points or type of product, but then they can also literally just upload or edit the content any way they want.

Alex Lieberman: Yeah, because I was even just thinking in my head as a way to, again, use this notion of how do you use personalization and data in a really compelling way. Now you have this network of all these companies that are on Kahani, right? How do you learn, basically, what are the personas of everyone in the Kahani network and use that to actually decide what goes in the bubbles on certain sites? 

Jesse Pujji: That's right. Yeah. Yeah. There's crazy...I mean, you could have an app that's just discovery based on which stories are getting the most interest across the e-comm network.

Alex Lieberman: Totally.

Sophia Amoruso: I mean, for Business Class it's like, I think anything inherently shareable is gold, right? At Nasty Gal the clothing was shareable, right? That's not something that you have for a digital program for entrepreneurs. And so that's why I did the Flight Manual, this blue thing back here, which is this beautiful portfolio that you get when you join Business Class that you house all 300 pages of your worksheets in. And then it's an opportunity for people to share their own personal journey. And there's pictures of someone at their desk with their Flight Manual and they're sharing their personal workspace in the context of building their business. Or they take a screenshot or a photo of themselves watching one of our live videos. Alex joined me this week; it was a live call with students, which we do. And so then often they tag me and I repost that stuff. So it's not as granular as using data, per se, but it's an opportunity to create user-generated content for a digital program. That's really, really hard to do.

Alex Lieberman: Yeah. I also just think, you've done it in a different way, Sophia, but a big part of, I think, what makes Spotify Wrapped so successful is it integrates with people's behaviors, already existing behaviors, through the stories format, right? But also simplicity. It is so easy to understand; they don't overcomplicate it. And I feel like something that's so powerful about what you've done with all of your companies, whether it's Business Class, Nasty Gal, Girlboss, is the names were all so simple yet so powerful; they in some ways were literal...

Jesse Pujji: They're accessible.

Alex Lieberman: Yeah, they were literal, they were accessible, but they also had an edge to them. And I think that's such a powerful thing that you probably intuitively did with all of your companies.

Sophia Amoruso: I mean the first two, Nasty Gal was an identity, right? It was, "I'm a nasty gal." And then with Girlboss, it was, "I'm a girlboss." And there's nothing more peak for a brand than to build a culture where somebody is able to identify with it, and not just identify with it, but propagate that term publicly because they're proud of it, right? And that's like, yeah, that's free marketing.

Jesse Pujji: That's some genius, Sophia.

Sophia Amoruso: Thank you. Business Class isn't quite doing that, but maybe there's another one in me. Honestly, I don't want to play into people's identities anymore. I've played enough in that realm. I just want to be really good at things and build things that people love that aren't necessarily like, I'm a "blank," because...

Jesse Pujji: This sounds like a good Dave topic for your next Dave sesh.

Sophia Amoruso: That can get outdated, it can get played out.

Alex Lieberman: The last thing I'll add, and then I want to move on to the next topic about selling companies, is one lesson that...or there's two lessons from Wrapped that I absolutely will take with me within Morning Brew and anything else that I do. The first is just this idea of creating FOMO, right? And there are all different ways to create FOMO, but I think Wrapped has done it really well in two ways. One is by building in unpredictability. And what I mean by that is, Wrapped the last three years has come out the first week of December, but it has come out a different day of the year every year. It was December 1st one year, it was December 5th another year, it was actually November 30th, I believe, this year. And so you always know when it's coming, but you don't know exactly when, but they tease it out on social that it is coming. So I think building unpredictability into your products, into your drops, I think is a really smart and interesting thing.

The second is, involving the people that your customers aspire to be into your marketing is also super smart. So for example, they now have thousands of artists this year doing their Wrappeds and creating videos around their Wrappeds. They got professional soccer players on Barcelona to create videos around their Wrapped this year, right? So now it's not only part of your identity, it's also an aspirational thing, because you want to do it because your heroes are doing it. I mean, we could go on for hours, but super smart campaign. And you know that it's proliferated when my town's Instagram story, Hoboken Girl...I live in Hoboken...Hoboken Girl created a meme out of Spotify Wrapped specific to Hoboken. So pretty amazing.

To move on to the next topic, something that I get asked by entrepreneurs all of the time is the sale of the business, right? This is the North Star. Everyone feels like that is when they're going to feel true joy and excitement around the process of building their company. But there's so much that goes into it. And both of you had have had the experience of selling companies. So I just want to hear your perspective on what it's like, when it's the right time, and how it felt at the end once the process was done. Jesse, let's start with you.

Jesse Pujji: Yeah, it's truly probably multiple podcast episodes. From my perspective, and Alex, you've been through it also, I think that there's a...I'll hit on the kind of beginning and the end a little bit, but I want to spend a lot of time on the process, because I feel like that's the most unknown part that people don't think about or know when they talk about selling. You're building your business, you're not thinking about selling it. Maybe somebody pings you from Nav, someone in private equity or some investor person, or maybe a competitor or bigger company in your space wants to get to know you.

And I think one funny thing that oftentimes happens: Entrepreneurs meet, they're like, "Oh my god, they want to buy." They take it super seriously. And I always tell entrepreneurs, there's some guy in corp dev, in private equity, that's their job. Their job is to know who you are. It doesn't really mean all that much. And the flip of it is, there's nothing downside about building a relationship with them, but it's towards the bottom of your priority list. And anytime you get a business of any reasonable scale, we're tweeting about GrowthAssistant, Adrian's inbox is filled with private equity and other people being like, "I saw this thing and let's talk." And I'm like, "Hey, don't worry about that. That's just all low priority." So that's the first thing, is that it comes up from now, time and time again. Typically people sell because maybe they've been at it a few years and they want to try something different. Maybe the opportunity, they can see how the world is changing and they think that they'll be better as a part, strategically, of another company.

Back in the day with Ampush, Facebook ads were a big thing and we were becoming big, but we could see that you couldn't just do one of those things. You eventually would have to do Search and maybe Amazon, these other things. We're like, we either have to get into that by buying companies or building that capability, or we need to go sell and become part of something bigger, which is what led to the Red Ventures conversation. And so there's reasons, right? And those things come along and there's soul searching and there's a million other parts of it. So that's one piece, from my perspective.

The other piece is always just like, what do you want? Are you ready to take some chips off the table? Do you want to go for the gold? Do you want to find some hybrid? And what I always tell entrepreneurs, whatever you want, the world can kind of accomplish. And it's funny because entrepreneurs start these things, they'd do anything, and then they start to think very binary: I can either sell or keep going. It's like, there's always multiple options in that approach.

But I want to spend the time on, okay, then what? So let's just say you get approached with an offer or you decide you want to sell your company. What's that process like? Because I feel nobody understands it. So typically what happens is you'll get an offer, if you're lucky, but that's not often. Typically people just go, "No, we're ready to sell the company, we're going to go run a process." That's kind of the lingo. Or maybe they're raising money, and then during that process...well, the first step of that, and you guys know this, but just for everyone listening, you know, you think about, should I get an advisor if I'm a big enough company and find an investment banker? Did you guys use investment bankers? Alex, did you guys use a banker?

Alex Lieberman: Yeah, we used a boutique banker, largely...

Jesse Pujji: Yeah. So typically...

Alex Lieberman: I was going to say one reason was because honestly, we didn't want to pay the fee that some of these big bankers charge.

Jesse Pujji: Yeah. Typically if you're selling it for under a hundred million, you'll find a boutique bank who knows your industry. But if you're selling for over a hundred million, you'll call up Morgan Stanley or one of the big, big kahunas and they charge 1% or 2%. And there's a whole debate of whether or not that's worth it. I actually think it is generally worth it, which I'm happy to talk about. But then you gotta go build a deck, you gotta get all your financials together, you gotta get your numbers squeaky clean because lots of people are going to be running through them. You build this thing called a data room, which is a multiple-week exercise of literally putting every contract you have and everything you've ever...your whole life into one huge Google Doc, basically. 

And then you gotta pitch it. And what does that look like? It can be anywhere from...well, first you gotta reach out to a bunch of people. That's maybe what the bankers do or you do. If you're lucky, you reach out to, I'm making up numbers, 50 people, maybe a hundred people, and you get 20 meetings called management meetings. And those 20 meetings are, I mean they are three- to five-hour meetings. You're going through everything in your business, you're being asked a million questions. And at the end of that week or two process…and typically you try to keep it concentrated because you want competition to exist. So you can't do that over two months, of course, right? So you gotta go through that process and then you hope that one or two or three people go, "Hey, you know what? We're really excited about this." Maybe out of the 20, maybe seven or eight double click and go, "We want to know a little bit more," then you have another series of meetings.

Then you finally get to maybe two or three people who go, "You know what? We're gonna put something in." Then you gotta make sure, well, do they have all the information they need? Then if you're lucky, sometimes you go through that process, you get nothing, and then you scramble to go find more. If you're lucky, you may get two or three offers. You may get one, it just depends. Then you go back and forth and negotiate that, and then everyone's like, "Okay, it's this three-page document. It kind of highlights most of the stuff," and everyone's like, "Okay, sign that." And you're like, "Okay, can I breathe yet?" And you're like, "No, no, no. Now the hardest part starts." And this is just crazy. That's the LOI. You've agreed to the financial terms, you agreed...now you go through...and for anyone who's ever bought or sold a house, it's kind of like you get under contract, then you gotta get inspections, and they want to inspect every part of your business. They want to know, does your sales, is it really real? Can I talk to your customers? Let me meet the mid-level employee who you told me was really good and actually make sure they're good. And just imagine every phase of the business is getting looked at with a microscope and a fine-toothed comb. Which by the way, if you weren't prepared for that or you didn't have your numbers or your data, that alone could end the deal. They may go, I just can't understand your business well enough, I can't do diligence, I'm out. So it's a very intense process. It's usually 30 to 90 days, depending on the business.

Alex Lieberman: Know what was very under the microscope, that microscope you're referring to during due diligence, when we did our deal? I'll give you guys each one guess.

Jesse Pujji: Your email deliverability?

Alex Lieberman: Sophia?

Sophia Amoruso: Your fitness as a leader? I'm kidding.

Jesse Pujji:  Damn.

Alex Lieberman: Wow. No, I was questioning my own fitness. But no, my mom. Because my mom has been my chief of staff for the last five years. They saw another Lieberman on the employee list and they're like, what's happening here?

Sophia Amoruso: Oh no.

Alex Lieberman: Like, why is Alex's mom on the payroll? So that was where the most questions actually came about. It all was fine.

Sophia Amoruso: Why did you guys choose to sell your companies? I think we're leaving that out. Alex, why was that...because you guys continue to grow, right? It's a great business.

Alex Lieberman: Yeah, it's funny because, as you say that, I would say there are people today who would say, you guys sold too early, right? We sold for a reported $75 million. This year, the business will do around $75 million. People are like, "You clearly sold too soon." I mean, it is such a personal decision. I'll start by saying, just to kind of layer onto what Jesse was saying, what convention says are the reasons you should sell a business. So Elad Gil, who's a really successful angel investor, he has basically said there's five reasons to sell your startup. The first is, you're exhausted and you don't want to keep going. The second is that the founding team is about to blow up, not in a good way. The third is that the acquirer is willing to pay ahead substantially and you don't think that there's a likelihood that you will ever grow to that value that they're willing to pay. The fourth is that you're about to get massively crushed by a competitor. So an example he used is how Microsoft would oftentimes launch businesses or buy businesses that it would integrate into its operating system. It would have a built-in distribution of hundreds of millions of people on day one and it would crush competition just as a function of access to that channel. And the fifth was, you need financial security or regular cash flow like now, not in the future.

I generally think my view of when you should sell is, I agree with the you're tired, you no longer want to build the thing. But also on that, there's a caveat which is, there are other ways to even get out of, if you're exhausted, the business, right? You don't have to sell, you could move someone internally like your second in command to be the CEO, the day-to-day operator of the business. You could hire someone externally. Generally, I would say there's more risk pent up in that. It's the most important hire you could make and it's someone who hasn't grown up in the business. I also think a good time to potentially sell is you get an offer that's worth more than you think you're worth now, and you don't think the risk is worth it to see if you can grow above that value. And then the third one that Elad pointed out that I think makes sense is if you want liquidity, as in getting cash today. But again, I think there are other options, like taking distributions, selling a minority stake, or selling secondary shares, meaning your shares, not issuing new shares into the business. Or the third is a dividend recap where you take a loan in order to take a special dividend or distribution to yourselves as founders.

I personally, the reason I wanted to sell Morning Brew is twofold. One, because I had made this internal promise to my family that I wanted to take care of my family after my dad passed away. And I just couldn't get over this mental hurdle of just visualizing that the Lieberman household no longer had inflow of cash. Because my dad worked on Wall Street for 20 years, after he passed away, my mom had already retired from working on Wall Street. I just couldn't stomach this idea that we were all cost centers to this now fixed pie that wasn't growing at all. So I'd say that was part of it. The second reason is the deal we were able to do in my mind was able to give life-changing money. And one could argue, sure, but you could get 3X the life-changing money if you don't sell your business. For me, my view was, I didn't want to be greedy, and I knew it'd open up a lot of options for me in life at the age of 28. I also think your age matters a lot in when you choose to sell.

And I would say the second reason for me is in Business Insider, I saw a partner that could help us grow our newsletters, specifically, way faster because they get hundreds of millions of page views a month. So how could we convert any of that traffic, some amount of that traffic, to be subscribers to the Brew, so we don't have to pay as much for marketing. I'd say my co-founder did it for slightly different reasons, but for me it was a combination of money and growth opportunity.

Sophia Amoruso: And I think that's one thing that, you read Elad's, I think it was Five Reasons to Sell, and that's one that he left out, which is, there's a bigger, this is more proactive than "They think we're gonna eat their lunch," they need to buy this upstart...there's a more positive kind of proactive, elective reason to sell your company, which is like, this is an amazing platform, they offer shared services, we're not going to have to worry about HR or healthcare. They're going to take over that part of the business, we're gonna get to focus on our zone of genius. And when I sold Girlboss, my second company, I did it because Joe Marchese was doing a rollup of other media companies and had been the head of advertising at Fox Networks and had this huge portfolio of advertisers and relationships that he was going to be able to sell across in addition to Girlboss, and really blow it out in a way that it would've taken us a lot longer to, and that was why I did that. I wish I had sold, and it would've been for the same reason...an urban retailer of millennial clothing once offered over $400 million for my company, for Nasty Gal. I owned 80% of it; I would've pocketed $320 million.

Alex Lieberman: Oh my god.

Sophia Amoruso: And my investors...and I took advice, right? I controlled the board. This is on me. They told me to ask for more, and it went away. The chance of any deal happening is slim. So would it have ever happened? Is this urban retailer even acquisitive, would an integration with them have completely failed, right? You can sell your company and then fail to integrate it into the other company and end up with absolutely nothing. And another thing I think worth mentioning is, a lot of people sell their companies, don't take cash off the table. It's maybe an all-stock offer, they have opportunities for an earn-out, which is like, okay, if you hit your metrics then you'll get paid this year and then you'll get paid another chunk next year. It's a bit of like golden handcuffs, but if this acquire doesn't give you the resources that you need to actually do that or set you up for success, you're not even in complete control of your destiny, your company's destiny, because you've got a boss.

Jesse Pujji: I think one other reason I want to add—hold on real quick—that's not in that list is, you kind of said this, Alex, but entrepreneurs have careers also. I think people miss that, right? And getting an exit under your belt at a young age is a broad validat...to say that you're 29, however old, I've sold my company, it opens up doors. It opens up doors that otherwise wouldn't be open, even if your company was bigger and you were running it along. And I think people don't realize that there is...I always used to look at this with the, Zuckerberg is such an exception. Even Elon Musk, his first company was a little ad tech business that put ads in newspaper websites that he sold. And I always used to joke, I'm like, yeah, people work their way up to these massive, massive, insane bets. Very few people just end up and start there. And I think the rhetoric in the world is different. It's like, no, no, you gotta go all the way. You gotta go all the way. As opposed to, it's okay to have a small win, start a consulting business, sell for $5 or $10 million. That's a huge outcome and it will set you up for the next thing, and you can keep swinging bigger each time.

Alex Lieberman: It's funny. Andrew Gazdecki, who has MicroAcquire.

Jesse Pujji: Yeah, he's big on that.

Alex Lieberman: Proud investor. One of his best pitches for MicroAcquire is, yeah, if you're an entrepreneur who's just starting out, your first at bat should be, build a micro SaaS business that you can sell on MicroAcquire a year or two later, get a few million in your pocket, then take a bigger swing.

Sophia Amoruso: Yeah. I think what early entrepreneurs don't realize is that if they're a great entrepreneur, they're going to have many lives in them. It's easy to get attached to your first company and be like, "Oh my god, if this doesn't work out, if I just hang onto it and be overly optimistic and be like, well, what would I do next? This is my baby," be emotional about their business, which I don't think is completely healthy, but it's like, we've got many businesses in us, all of us, right? Jesse, you've done it. I've done it. Alex is going to do it.

Jesse Pujji: Will do it. He's got plungers against the wall.

Sophia Amoruso: He'll do it. He's like five years old, you got time. But I think you gotta like...sorry. It's a great thing, but there's a level of confidence to saying, "You know what? I've built this thing, I'm really proud of it, but there's more in me and it may not be this."

Jesse Pujji: And I want to go back to the process for one second, just because I feel like people don't see it and get it. It's a grueling process. There's tons of lawyers involved. You could spend a big fee, by the way, and if the deal doesn't close, you're stuck with those fees, which happens to people. And Sophia, you said this in passing earlier, that even once you signed that LOI, it's probably maybe a 60/40 shot, right? And so that's another thing for entrepreneurs. When you're in that zone, manage that process very carefully.

The easiest way, by the way, I would tell anyone to think about it is, it's really simple. Imagine you were spending millions or tens of millions or hundreds of millions of dollars to buy a business. What would keep you up at night? Just think, you gotta put yourself in the shoes of the acquirer. And that's what a lot of the legal stuff is about. Are you telling me the truth? Will you promise you're telling me the truth? If you're not and I find out later, can I get my money back? And you'll spend tons of times with these things called reps and warrants and indemnifications inside of that agreement. Because if you are buying a company, if anyone's buying a company, they really want to know that each thing that they're saying, that is being said to them, is true in fact, or they have some recourse around it.

And then just last thing. You guys have all been through this, but I always think it's hilarious. The closing is like a Bond movie. At least mine was; I don't know for you guys. It's like, you've had these documents, you've signed them, some lawyer holds all of the documents in one central place, computer pops up and you're like, "We've sent the wire." It literally is a real time, "We've sent the wire," and you're refreshing your screen. It's like, "Holy shit, that happened." And then [inaudible] sends the wire and then the person distributes all the signatures and then it's like, you sold your company. You don't own it anymore.

Alex Lieberman: Yeah, yeah. I will say, I wish...

Jesse Pujji: Was it like that for you guys?

Alex Lieberman: I wish mine was as intense and cool as that. Mine was in my mom's living room during the pandemic. My mom and my fiancée in there with Champagne bottles and balloons, trying to pump me up. They're all excited. Austin and I are on a Zoom call with, let's call it 14 people, half of which are in Berlin, and it's nighttime there; half of which are people in the US. And they say, "We're going to initiate the wire; can you verify this information?" They verify the information and they say, "Wire initiated." And then they say, "Congratulations, guys." And Austin and I are just two schneeblies, just like, "Oh, thank you." And honestly, I was like...

Sophia Amoruso: Schneeblies.

Alex Lieberman: Oh, that's my favorite word. And yeah, I was excited...

Jesse Pujji: It does end up being very anticlimactic in that moment. I think, I don't know if you guys felt that too, because you've been grinding so hard and it's like you knew it was coming, you knew it was coming. And obviously you don't want it to not happen, and then you're like, oh, okay. It's relief more than excitement.

Sophia Amoruso: What was the first thing you bought? What was the first thing you bought?

Alex Lieberman: A dog.

Jesse Pujji: I got an M5.

Alex Lieberman: Wow.

Sophia Amoruso: I paid off my mom's car.

Jesse Pujji: Actually I told you guys about the Vinny's graduation present story, right?

Alex Lieberman: No. Is this...

Jesse Pujji: I was an expecting father, right? And my wife had a baby right around the time this deal closed, our son, Ricky, seven years ago. And I was like, I want to splurge on something. And I've been looking at JetSmarter, it's like the app where you can book private jets, and they had this amazing deal where for $10,000 a year you could hop on empty legs for free. And I would watch it every day and there'd be tons coming from San Francisco and I'd be like, I can just take private jets. How cool would that be? So as soon as the deal closed, I spent 10 grand on this stupid app. And I had a newborn. I didn't know what it'd like to have a newborn. It turns out you can't just jump on a random flight that pops up because you want to get on a private jet, right? This is not how it works. And so my younger brother who looks like me, the same height, I gave him my ID. That's probably illegal, whatever. But he was in New York City and he was 22 years old...

Alex Lieberman: Definitely illegal.

Jesse Pujji: ...working in finance and he literally would go every weekend with his buddies on a private jet somewhere. Didn't cost me anything, right? It was unlimited. And guess how many times I used it during the year, of the 10,000 dollars.

Alex Lieberman: Zero.

Sophia Amoruso: Two?

Jesse Pujji: Zero. I never used it once. And then I called to cancel...

Sophia Amoruso: I just tried to have a different answer, I just wanted a different answer.

Jesse Pujji: I called to cancel and I'm like, "I'm sorry, I'm not getting a lot of use." They're like, "Sir, you're one of our top users of the pass."

Alex Lieberman: You got brownie points with Vinny.

Jesse Pujji: My co-founder calls it Vinny's graduation present. That's what we...

Alex Lieberman: It is. That's amazing. Well, last question for you guys, then we're moving into the fun, final game where you guys are just going to go off about different topics, is, if you have one lesson or one thing you would do differently if you sold another company, what is that? 30 seconds max.

Sophia Amoruso: What would I do differently? Hmm.

Alex Lieberman: Yeah. Jesse?

Jesse Pujji: Just be as buttoned up as you can be and manage every day. Manage the process every day. Especially once you've signed the LOI.

Sophia Amoruso: I think pick a more established acquirer. So the company who acquired Girlboss was still a newish company. They had raised money, they were doing rollups of existing businesses, but they hadn't done it before. They were in the process of raising money. So somebody that really has kind of legacy doing that and has done it, has done it and done it, and done it over the course of years and understands what that looks like. That would've been nice.

Alex Lieberman: Yeah, for sure. Yeah. I think to your point, when you're acquired, sometimes we don't think about it kind of in the moment of, we're going to be making money, but it's like actually the stability of the partner you're working with. Because in some cases you're making a many-year commitment to them. It's important to have a point of view on them. I'll just quickly add, I think leverage is your best friend in the deal process. So having other offers in hand, not needing to do a deal, like the acquirer knowing that you would be very okay with just walking if you're not satisfied, and also performing really well while the deal is going on, which is why I think Justin Kan's advice of the best time to sell a business is when you don't want to or need to sell a business, is oftentimes kind of the best way to do it. So that's my thought there. Guys, we're going to do a final game to end the show, despite getting bullied by both my co-hosts, primarily one...

Sophia Amoruso: I'm sorry...

Alex Lieberman: ...who called me a five-year-old. But we're gonna go into this.

Sophia Amoruso: No, I'm saying you're like a baby. No, you have so much time ahead of you. I'm saying you're...

Jesse Pujji: Speaking of babies, we need to get rid of this Baby Buffett name, that's like what they call the Sam B-F guy.

Sophia Amoruso: I'm The Dean. I didn't go to college; I don't know what a Dean is.

Jesse Pujji: Can we call you something else?

Sophia Amoruso: Yeah, what's a dean?

Alex Lieberman: Wait, wait. A dean of a school. You do Business Class. You run this Business Class. Okay, we'll do a refresh, we'll talk about it off show and then we'll see what people think.

Sophia Amoruso: What's a dean? I'm sorry, I'm not qualified. I'm not.

Alex Lieberman: Okay. Composure. We are going to play a new game called Thumbs Up/Thumbs Down. So this is how it goes. I am gonna make a statement of fact and you're going to say, you're gonna show thumbs up or thumbs down, and then provide five to 10 seconds of commentary on why you gave the thumb you did. Okay? So we're going to start from the top. I'm going to go Jesse, then Sophia, and I guess I'll give my answer after you guys. Jesse, Elon will get revenue of Twitter from $5 billion to $26.4 billion by 2028, which is what he promised investors who invested in the deal.

Jesse Pujji: I'm going to go thumbs up. I don't think he'll quite get there, but he'll get good enough.

Alex Lieberman: Sophia?

Sophia Amoruso: I have no opinion here. I don't know enough about Twitter's business and I'm gonna just be honest about that.

Alex Lieberman: So thumb to the left.

Sophia Amoruso: Yeah, left.

Alex Lieberman: Okay, left thumb.

Sophia Amoruso: Neutral, neutral.

Alex Lieberman: I'm going to go thumbs down. I believe in Elon, I just think that it is going to take more than, let's call it five years to 5x revenue, given they haven't even really proven that they can scale one revenue stream, let alone what I believe will need to be multiple to get it to $26 billion in revenue. Okay, next one. Jesse, it is a good time to start a company.

Jesse Pujji: Double thumbs up.

Alex Lieberman: Why?

Jesse Pujji: People don't...I mean, the competition when everything is hot, it's hard to hire people, salaries and compensation is crazy out of whack during those times, like really bubblicious. It's hard to find and get people. I think there's a lot of money out there, but there's a lot of noise, also. And it's just hard to operate in the noise sometimes. I think when it's quieter, there's not as many people. I think starting something, whoever you get at that time comes in with the expectation that this is a risky venture and that's actually great, versus there's almost stability in the risk, if that makes sense, versus a big company who no one knows when the next layoff's going to happen and they're constantly worried about that. It's a very different orientation. So rent is cheap. Yeah, I think it's a great time. Your expectations are low. You don't have to become the best business every five months and raise another round every five months.

Alex Lieberman: Yeah. Sophia?

Sophia Amoruso: Yeah. I think it's a great time to raise a business for a founder who isn't looking for a valuation that's gonna be like it has been over the last few years, for a founder who's going to be really honest with themself about, okay, maybe I'm going to raise money, maybe I shouldn't raise money quite yet. It's not a great time to do it. But the investors who come in are going to be investors, they're going to be people who have a lot of conviction because there's less money getting thrown around, and will probably be more helpful because they have a lot more to lose in a market like this. And in the same way that it's maybe a good time to be investing in the market because things are down, it may be easier to fundraise in some ways, again, if you are conservative and kind of mirroring that advice onto yourself as a founder and being really honest with yourself. Like building it for the right reasons. If you're in it for the right reasons, it's a good time to start a company.

Alex Lieberman: So is that a thumbs up?

Sophia Amoruso: It's a thumbs up.

Alex Lieberman: Okay. Thumbs up. Perfect. A few more. SBF, Sam Bankman-Fried, will go to jail.

Sophia Amoruso: I hope so.

Alex Lieberman: Jesse?

Jesse Pujji: Feels weird to thumbs up that, but I guess I'll thumbs it up.

Alex Lieberman: That's a yes; you're not endorsing him.

Jesse Pujji: I feel bad for the guy, but yeah.

Alex Lieberman: So you think he will go to jail?

Jesse Pujji: Yeah, definitely.

Sophia Amoruso: I can't believe he's tweeting. I'm just like...

Alex Lieberman: So Sophia, what's your...

Jesse Pujji: I think his defense, I think that I very much buy the defense people are talking about that he's doing. It's genius. Apologize, "I made a big mistake. I'm sorry, I'm a little baby."

Sophia Amoruso: It's so far beyond that. It's so far beyond that.

Jesse Pujji: But it's so genius, if you're him.

Alex Lieberman: But why is it genius?

Jesse Pujji: Because just like anything, it makes people less upset. You're saying sorry, versus Elizabeth Holmes was just like, "I didn't do anything wrong. I don't know what you guys are talking about." Not taking ownership and responsibility, it pisses people off and lot these things are driven...we like to think that justice is not driven by the media or whatever, but it is, it's driven by how upset some prosecutor gets, how aggressive people want to get around something like this. And it's a good strategy. It's also like incompetence versus shadiness or fraud. And I think it's a just a good angle, but he is going to go to jail.

Alex Lieberman: Yeah. So Sophia, thumbs up or thumbs down?

Sophia Amoruso: Thumbs up. It's one thing to lose investor money, it's another thing to lose the money of investors that you're managing. And anybody who invests in any market, especially crypto, should expect to lose all their money, possibly, right? If anybody of us have crypto, it's obviously worth a lot less than it used to be. But that's not something you expect from the company who's managing it. We don't really see that with traditional banks. And I just think that's really messed up. And I think he had a responsibility way bigger than pretty much, I mean, almost anyone out there. Yeah. And I think the punishment will fit the crime.

Alex Lieberman: Yeah. I'm going to give a thumbs up because fraud is still fraud even if you act like a baby. Even if you act like Alex Lieberman and you're a five-year-old and you...

Sophia Amoruso: You're not a baby.

Alex Lieberman: Well, now I'm comparing myself to SBF. I'm not like him at all, guys. But no, I think, yeah, it's still fraud. Even if he's acting like he made mistakes, it's still fraud. Last one for you guys before we wrap up the episode. I think this is going to be a tough one. You can build as successful of a business 100% remote as 100% in person. Jesse, as someone who is doing it right now?

Jesse Pujji: Ugh. That's a really tough one. I'm going to aspirationally give it a thumbs up, but I don't know how yet. I have my own sense of skepticism. And I think successful is one question. I think fun and enjoyable is a whole 'nother...those are kind of two different questions, but...

Alex Lieberman: Well, that could just be your definition of success.

Jesse Pujji: Yeah. I think aspirationally, yes, I'm going to say, but it's not obvious to me and I feel worried about it.

Alex Lieberman: Okay. Sophia?

Sophia Amoruso: I mean, are you a retail business? Are you a digital business? It's like, some people have to go to work. And I once saw a meme that said, introverts rejoice in the comfort of your own home. So remote work for an introvert is a dream. It's like school. Not everybody learns the same way and not everyone works the same way. And I've done my best work behind a computer. I started Nasty Gal, I wrote Girlboss and I built Business Class almost completely behind a computer. And while I'm very public and I've employed a lot of people, I'm very much an introvert, and working remotely is something that is a blessing to me. I mean, I could leave the house probably more and I could not eat at my desk a little bit more. But what I've built has been in a pilly bathrobe. I haven't had to put on a show for anybody or rah rah, you know, teams, walk into the office like, "Good morning, guys." It's not natural for me. I've done it. It's not my favorite thing. And I do my best work as an introvert from behind my computer.

Alex Lieberman: Yeah, I'm going to go thumbs down. I just think it's impossible to build the connection that is necessary to have people have enough affinity for a company to stay there for a long time. So I think retention becomes really difficult, beyond other things like communication and creativity. Okay. We are done with the show. Jesse or Sophia, one of you guys want to do the sendoff? Anything to say to our listeners before we go?

Sophia Amoruso: Thanks...what are they called? What are they called?

Alex Lieberman: I've enjoyed this.

Jesse Pujji: Have a great week. Keep grinding.

Sophia Amoruso: Keep staying misfit.

Jesse Pujji: Misfit...

Sophia Amoruso: Keep missing the fit.

Alex Lieberman: Keep misfits. And yeah, keep missing the fit, guys.

Sophia Amoruso: Other than product market.

Alex Lieberman: Anything else, Sophia?

Jesse Pujji: Very good.

Alex Lieberman: Last thing before we go, everyone. We would love for you to rate or review the show on podcast players, but as Jesse said, only five stars. If you have four or below, just don't bother rating. And subscribe or comment on YouTube if that is where you watch The Crazy Ones. Plus, if you want to say hey and introduce yourself, shoot us an email at thecrazyones@morningbrew.com. But we can't wait to see you next week for the best show on planet earth for entrepreneurs. Take it easy, everyone.

Sophia Amoruso: Thanks, everyone.