Why We Sold Morning Brew

Alex: What's up, everyone? Welcome back to another episode of Founder’s Journal. I'm your host, Alex Lieberman, co-founder and executive chairman of Morning Brew. Founder’s Journal is my personal audio diary made public for the world. And for those of you that haven't listened to the last few episodes, as a reminder, for the month of April, we are gonna be doing one show per week. And all of these episodes in the month of April are gonna be around very specific important inflection points in the Morning Brew journey. So the last episode that I recorded was about going from zero to 10,000 subscribers for our newsletter and specifically how we did it. There are great tips in there for newsletter operators and entrepreneurs, but also just great organic growth tips for any entrepreneur in general. So I highly recommend you listen to last week's episode before listening to this one. 

Now, on today's episode, I'm going to be talking about the decision to sell our business, the context behind the decision, why we made it, and if I regret the decision at all. Let's hop into it. So for those of you that aren't familiar with the history of Morning Brew, first of all, let me just quickly tell you about the Brew. Morning Brew is a business media brand that makes the business world less shitty. We started with a daily newsletter back in March of 2015, and over the years we've evolved from single newsletter to portfolio of newsletters; from portfolio of newsletters to newsletters and podcast; from newsletters and podcast to newsletter, podcast and social; from newsletter, podcast, and social to newsletter, podcast, social, and YouTube. And now we truly are a multiplatform media brand. 

And so as I mentioned, we launched the company in March of 2015 when I was a senior at the University of Michigan. And my co-founder Austin was a sophomore, and we sold the business in October of 2020 during the pandemic. And so first of all, I'm just riffing right now. And so it really is kind of like founder story time. So we'll see what comes out of my mouth. But basically I think I wanna break this down into a few distinct parts. First, I want to give the context on how the deal for us selling our business even came about, because I think it's helpful for people to understand what goes into even having the opportunity to sell your company.

The second thing I wanna talk about is the decision to sell. Why we made the decision, how I thought about it, what was the rationale, and kind of how it also differed for myself and my co-founder. And then the third thing I wanna talk about is, now as I reflect upon selling the company, what was it, October of 2020? So you know, three and a half years ago, I wanna share my reflections three years later on the deal. Do I regret it? Would I have done anything differently? So on and so forth. And so those are the three parts and I'm gonna take you through all of them. 

So the quick context, we sold our business in October of 2020 to Axel Springer. Axel Springer was not the first company that we spoke to who wass interested in investing in or in buying a part of Morning Brew. I would say from 2018 until 2020, we were approached by many businesses or funds that wanted to take some level of ownership stake in Morning Brew. And the reason it started in 2018 is because from 2017 to 2018 is really when we hit an inflection point in our business and grew from a hundred thousand subscribers of our newsletter to a million subscribers. It was the year that we 10xd. And so I would say before we were approached by Axel Springer at the end of 2019, we had probably been approached by four or five different businesses or funds in the year and a half prior. We were approached by a few media holding companies that own a portfolio of different media businesses. We were approached by media growth investors who are well-known investors in the space that take stakes in budding digital media companies. We were approached by a family office or two, and all of the times that we had been approached in 2018 or 2019 to do some sort of transaction for the business, we said no. And the reason we said no is you have to understand, up to that point, we had only been working full-time on Morning Brew for anywhere between two to three years, right? I went full-time on Morning Brew in September of 2016. My co-founder Austin went full-time on Morning Brew in May of 2017. So when we started being approached in middle of 2018 into 2019, right? It was like literally one to two years of being full-time on the business. So it felt very early in that respect, that we just hadn't been full-time on the company for that long. 

The second big reason we weren't entertaining these conversations is because Austin and I always said that all of the criteria that we required to be really happy and fulfilled in our professional lives were being satisfied at the time; we were building something that we were really excited about. We were creating something of value for people, which was important to us. We had the freedom to make decisions and be kind of like the captain of our ship, which was really important. We weren't worried about money because by 2018 or 2019 we were making significant enough salaries that there wasn't a lot of financial risk living in New York City at the time. And we were working with really talented people that were allowing us to learn a lot and to get better every single day. And so what we always said to ourselves is like, if all of these things are being satisfied, why would we sell our business when we're potentially putting at risk any of these criteria that are really important for us to be fulfilled in the work we do? So that was kind of the answer we gave to anyone who showed interest in us in 2018 and 2019. 

So then we get to November of 2019, and in November of 2019, there's a friend of mine who at the time had been working at Business Insider as the COO of the company. Now he works at Axel Springer, which is the parent company of BusinessInsider, of Morning Brew, of Politico, of a number of other companies, especially in Europe. And we had just built a relationship over the last year to two years because our offices were close, we were both in the financial district, we would sometimes get beers on Stone Street. We would either play ping pong, we'd have like home and home ping pong matches. So sometimes he would come to our office and we'd play ping pong in our WeWork at the time. We'd go over to his office, play ping pong there. And at some point he brought up with me in November of 2019 that Axel Springer was expanding its portfolio in the US. It really wanted to be a big player in the US digital media world. And at the time it only owned Business Insider, it also owned eMarketer, which became part of Business Insider. And he said that he would be interested in exploring what it would look like for Morning Brew to be part of the Axel Springer family. And he asked if we'd be interested. And when he asked, you know, I said to him what I just mentioned, which is like all of these things, like all these criteria that are really important for us in our work are being satisfied right now. And so what I said was, I said it would really have to be a, I don't think I said a stupid price, but it would have to be a very compelling price if you were to buy some stake in our business such that we'd be willing to put at risk one of these five or six criteria that allow us to be happy in the work we do. And he said, well, let us know what that price is and we can have a discussion. 

Fast forward, email the price to the Axel Springer team. They say, this is something that they're willing to have a discussion around that, you know, it's not a deal breaker. And so that is what kicked off the conversations to potentially be acquired by Axel Springer. And so from, let's call it November of 2019 to October of 2020, so literally 11 months, that was the process of doing a deal and selling a majority stake in Morning Brew to Axel Springer. And what I would say about that process is that first of all, it takes a long time, like when you are in the process of doing any sort of M&A with your company, whether it's selling your business, acquiring other businesses, or even like just doing a traditional fundraise, it becomes anywhere between like 50% to a hundred percent of your job unless you have a dedicated corporate development or M&A team, which you wouldn't have unless you are a very at scale business.

And so this is just, I would say a recommendation for founders who are thinking about either fundraising, being acquisitive or being acquired, make the assumption that if you are going to get involved in that game, not that it is a right or wrong thing, but there's a huge cost trade-off and you have to be prepared that at least half of your time is going to be spent doing the thing. So we spent 11 months in this M&A process, let's say it was extended a little bit by the fact that we were selling our business during Covid, but even other entrepreneurs who I've talked to who sold their business not during Covid, it can take anywhere between six and 12 months. And so we ended up closing the deal, announcing the deal in October of 2020, and Morning Brew officially became a part of the Axel Springer family.

Let's talk for a second about why we did the deal right after we said no to many companies prior to doing this deal. Why was this the deal that we did? First I wanna say that selling your business is an extremely personal decision. So when I share my perspective on selling Morning Brew, that is just my perspective. I would say I have a good sense from talking to my co-founder and being really close friends with him of what motivated him in the decision. But if you wanna understand his motivations, you need to ask him, because it's a super personal decision. So I'm gonna talk about why the decision was right at the time for me. So I'd say there were really three contributing factors, and I've talked before about two of them, but there's a third that I was reflecting on as I was thinking about this episode.

So the first obvious decision or the first obvious reason that I did the deal was because the valuation that we were being offered for this business felt as though I would be an idiot for not saying yes. There's a kind of an old tale about a guy walks into like a marina where there's a bunch of boats, and he sees two boats. One is this massive yacht, probably costs like a million bucks. And then next to it there's a very small, humble speedboat that maybe costs like, you know, $10,000. The name of the boat on the right is “Sold too late,” the name of the boat on the left is “Sold too early.”

And I think it's just like such a good story to illustrate that far more entrepreneurs regret selling their business too late than entrepreneurs who regret selling their business too early. Don't get me wrong, there are entrepreneurs who regret selling their business too early. But I think more entrepreneurs have regret about getting greedy because they said no to a deal at the time when they felt like there was more value to be created for them. And so as we were talking about this deal, you know, at the end of the day I looked at it and I was like, with this valuation, with the amount of ownership I have in the business, very simply, I will have likely have financial freedom for life, assuming I live the life that I plan to live moving forward. And the life that I plan to live is, you know, having a family, having three kids, having one or two homes, one in the suburbs of New Jersey, another maybe a ski place, going on, you know, one really nice family vacation a year, sending our kids to college, having nice experiences on weekends. And that's kind of it. And so when I said to myself, this transaction could give me all of that by the age of 27, I felt like waiting for a a better opportunity would not only be greedy, but my marginal benefit of, say, getting an extra $1m, $5m, $10m, $25m, $50 million would have a very small impact on my happiness.

But if I was to hypothetically wait on a deal, and the deal in the future was me getting way less, the impact on my happiness on the downside would be way higher, because I would be taking myself out of hitting what Noah Kagan calls the freedom line of no longer being in a place where I have lifetime financial freedom for the life that I wanna live. At the same time, you know, context that I've given to my listeners in the past that I think is important for people to understand and it's why it's such a personal decision is when my dad passed away in 2013, a week before my junior year of college, he had had a stroke. By the time that I got to the hospital room, you know, he was already gone. There wasn't brain activity. But I went into the hospital room and I promised him that I would take care of my family. And whether or not that promise was rational, meaning whether or not my family needed to be taken care of, that was a responsibility that I felt was really important for me to take on. 

And so when I looked at this deal, having the ability to take care of my family, specifically my mom and my sister, in a world in which they need my support, that was something that I never wanted to give up because I said no to a deal, got greedy, the price of the business went down, and then I didn't have that opportunity anymore. So that is the financial side of the deal. 

Then the kind of strategic part of the deal was at the time in which we sold the company, Morning Brew, the newsletter, had gotten to over a million subscribers. It was probably at like 1.5 million now. We had launched our B2B newsletters. So we launched industry and job function-specific newsletters for you know, emerging technology, retail, marketing, et cetera. And we had just started thinking about getting into multimedia, things like podcast, really starting to create more social content, YouTube, et cetera. And so from a strategic point of view, there were kind of two big opportunities we saw in being purchased by Axel Springer and partnering with Business Insider.

The first was being able to work with Business Insider to take their traffic, because Business Insider gets a ton of traffic to their website, and being able to funnel that traffic to their website into Morning Brew subscribers, that was really exciting to us because that would allow us to not have to spend as much as we were spending on paid acquisition to get new subscribers for our newsletter at the time. And at the time, we probably were spending anywhere between $250,000 to $500,000 per month on paid acquisition, right? So we could potentially save millions of dollars a year by acquiring new subscribers organically through Business Insider's web traffic. And I would say the second is, historically, Insider was, their best content was on the social media side and on the video side. And so we thought there was a lot that we could learn from them as we were trying to build up these competencies. So I would say that's the strategic part of the decision. 

And then the third, which is the one that I've been thinking a lot about recently, is I think there was something that I was not conscious about at the time, but like my gut and my energy knew, and it sounds like kind of woo woo to say that, but I do believe oftentimes our gut and like the way our energy pulls or pushes us knows what is best for us before our head does. Because I think our head is tied up in emotions and overanalyzing situations, but I actually think our gut is the best arbiter of what is right for us. And so I think my gut was very committed to this deal at the time, because by the time we got to, let's call it November of 2019, I think my gut started to realize a few things: that I wasn't as motivated on building Morning Brew and running the day-to-day of the business as I once was. We were now at a scale where the job of a CEO looked very different than it looked from 2015 to 2018. I think my gut knew that, because I wasn't getting a lot of energy from what was now required of the CEO role, that I wasn't going to be good at it or I wasn't gonna be spending my time on the right things, which ultimately would lead to me one day not being in the CEO role anymore, because there's only so much time you can go not feeling a lot of energy toward something until you make a decision for yourself or a decision is made for you.

And so I think my gut was pulling me toward this deal because it was, again, I was unconsciously aware of the fact that it felt uncomfortable to have a lot of my equity tied up in a business that maybe a year from that point I wouldn't be running anymore because I wouldn't want to be the CEO, because I wouldn't enjoying be the being the CEO anymore. And so when you're not running the business and you're not in as much control of what's gonna happen with the business, it feels less comfortable to have all of your net worth tied up in the business. And what do you know, in April of 2021, so you know, five months after we sold the company, which was in October of 2020, I stepped down from the CEO role, which in a lot of ways had been, let's call it six to eight months in the making. 

And so I think that's actually the most interesting part of this decision, is I actually think a big piece of it was my gut telling me it was the right time. And I wasn't conscious of why my gut was telling me that, but I think the real reason my gut was telling me that is because my gut knew that I wasn't gonna be running this business for that much longer, because running this business at that point looked very different from running the business in the earlier days of the business and not controlling the destiny of the business moving forward, once I was outta the CEO role felt like a large risk to take if all of my money and all of my equity was still tied up in the company.

And so that is how I approached thinking about the decision of selling the business and why at the time I thought it was the right decision. So it was the financial piece, it was the strategic piece, and it was kind of the energy and gut feeling piece. And gut feeling, I think, gets undervalued, because we live in a world where you need to put metrics to everything or everything needs to be like quantified or has to be like super thoughtful. And by definition, your gut is not thoughtful, because it is not thinking. And I actually think more than ever before, I want to be drawn toward things that my gut tells me that I wanna be drawn towards. I actually think it is one of the best, best tools for decision-making, and it is one of the most underrated tools because it feels less concrete, which makes it feel less comfortable to people, so they don't make decisions using their gut.

Now the final piece I wanna talk about is how I feel about the decision today. The first thing I will say is I have zero regrets about selling our business. I feel incredibly grateful that we sold our business when we did for a number of reasons. One, because it was before I stepped outta the CEO role. And so I feel really good about the fact that as I had less control of the business naturally from no longer being the CEO, I de-risked myself by taking chips off the table and having money in my bank account versus having it all pent up in a business that I was no longer in control of. Now this is not to say that I don't trust my co-founder Austin. I of course trust him a ton, but anytime you are not actually the person pushing the buttons, you have less control than you did the day prior when you were pushing the buttons. So that's the first piece. 

The second piece is, I think, you know, in the last few years we have seen, for a number of reasons, an economic pullback, and with that economic pullback has also created a tougher market for media businesses, for driving meaningful advertising revenue. And so I think in a lot of ways, like, you know, at the time when we sold our business, a lot of people said, you know, it's too early. Like we're in such a good advertising market, you guys still have a ton of room to grow. You know, your business is still in the early days, you're doing this too early. But I think, you know, one of the best times to sell a business is when it feels too early. Because unless you are incredibly lucky, you're not gonna be able to time a market perfectly, and you'd rather be like a year or two early than a year or two late. And so I think in terms of when we sold it in the economic cycle, I feel extremely good about that. And I feel extremely good about the fact that I can go to sleep at night feeling really good that I have taken care of my family, which was such a big priority to me. And Morning Brew today is creating better content with a better team than ever existed prior.

And so, you know, I think a lot of companies have fear about what happens to their business after they sell. And at least what I can say is three and a half years after selling this company, I have never felt more bullish on the team that we have in this business, which is a huge testament to my co-founder Austin. And we've never had better content and more diverse content across so many different channels through which you can create content. And so I don't have any regrets around selling the company. Now will I say that there's a part of this that is bittersweet? Absolutely. Like there's always kind of the entrepreneurial romantic in me that dreams of building a company that you own and run with no investors, no buyers for the rest of your life, for the rest of your career. I look at stories like Jason Fried, who is a mentor of mine, and I look up to, you know, building Basecamp or 37Signals and doing it for the last 25 years and never has an intention to sell the business or to take investor money and just keeps brick by brick building this thing linearly. And just like the most important thing he's optimizing for is building great products for customers, having a great time with his team. And that's all that matters. The romantic in me loves that, and maybe one day I will have that story too, but that doesn't make me regret this decision at all. I feel very at peace with the decision that we made. 

Now, I would say, as important of a decision for me as selling the business was stepping out of the CEO role five months later, right? So October of 2020 is when we sold the company. April of 2021 is when I went from CEO of Morning Brew to executive chairman of Morning Brew. And I would actually say, very interestingly, the move out of the CEO role was far more difficult and far more emotion- and identity-provoking than was the decision to sell the business. And so next episode of Founder’s Journal, I'm gonna talk all about my decision to step outta the CEO role, why it was made, what the proceeding six to 12 months was like, why it was one of the hardest periods, if not the hardest period of my life, and what were the things that I did to kind of work myself outta that trough, and what are the biggest lessons I learned going through that really difficult period.

So next episode, I'll talk about that. I really hope you enjoyed this episode on the decision to sell Morning Brew. Remember to check out the previous episode on how we got from zero to 10,000 subscribers, and stay tuned for the big updates on Founder’s Journal that will be coming in May. As always, thank you so much for listening and I'll catch you next episode.