Mac Lackey on How to Successfully Exit at Maximum Value
There’s a common misconception that entrepreneurship has to come at a cost; that in order to make a company valuable, a trade-off must occur. If your business goes up, your personal life must come down — and there’s no other way!
Well, today’s guest, Mac Lackey, would humbly disagree.
As an entrepreneur for over 24 years, Mac has started, built and sold six companies — all of which have achieved 7 or 8 figure exits.
What’s more impressive, is that he didn’t do it at the cost of spending less time on his family, his health, or living an exceptional life. As a devoted husband and proud father of two amazing girls, he found a way to do it all. He’s traveled the world, lived abroad, met his idols, had 50 yard line season tickets to his favorite team (FC Barcelona), and never missed a “Donuts with Dad” or a chance to carve a pumpkin with his kids.
Not only has Mac avoided the entrepreneurial grind that we’re taught is inevitable, but he’s developed a repeatable process to start, scale, and sell companies successfully — and is now showing others how they can do the same.
If you want to learn how to maximize the value of your business, build a solid exit strategy, and sell at a premium (without costly trade-offs), you won’t want to miss my conversation with Mac Lackey!
Key Takeaways with Mac Lackey
- Mac shares his story, from playing professional soccer and starting his first Internet company in the 90’s, to selling six companies (all with 7 or 8 figure exits).
- The family first mentality that allowed Mac to travel the world, homeschool his kids, move to Barcelona, and run his companies remotely.
- Why you don’t have to arrive at some financial destination before you start living the life of your dreams.
- Lessons learned from his first 8 figure exit — and how to avoid the financial mistakes that cost Mac millions!
- The risks of being overly concentrated in one asset class.
- So you’ve exited your company… Now what?
- Should you raise money to reach another level OR exit your startup today? Don’t let the numbers fool you!
- Why having the OPTION to exit is one of the most powerful aspects of your entrepreneurial journey.
- What are SPACs? HINT: a shorter, cheaper way to go public!
- Why you don’t have to choose between family and being a successful entrepreneur — Mac is proof that you can do both!
- Why getting out of the “critical path” is so important in order to successfully scale and exit a company.
- What is ExitDNA and how can it help you sell your company at a premium — just like Mac did with all 6 of his exits!
What Mac Lackey Learned About Investing From His First 8-Figure Exit
Mac Lackey Tweetable“You don't have to arrive at some financial destination before you say, ‘Now, I'm going to live my life, travel the world, spend time with family, pursue passions.’ I made that decision consistently, regardless of net worth.” -… Click To Tweet “Do the math before you get overly excited about merging companies or raising capital, because in many cases, the math is a lot better if you just sell it early.” – @MacLackey Click To Tweet
- Mac Lackey on Twitter, Facebook, LinkedIn, YouTube, Instagram
- Exit DNA
- S3 Ventures
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Read the Full Transcript with Preston Smiles
Justin Donald: Mac, it is so great to have you on the show. I just had so much fun catching up last week and I can’t believe we’re already here recording so soon. So, thanks for joining.
Mac Lackey: Thanks for having me. Yeah. We had a great conversation and I was very excited to get back on with you.
Justin Donald: That’s so fun. Yeah. You know, there’s so much that I’d love to unpack in this episode with you, and there are just so many things that you have done such a great job with and that I’ve been able to learn from on the sidelines. I’m so excited for what people are going to learn from you. I’ve already learned a ton. So, I wanted to just kind of get things started with people finding out a little bit about you. Who is Mac?
Mac Lackey: Yeah, sure. So, I think of my life in a couple of really big buckets from birth through, gosh, post-college, my life was all about soccer. That was my passion. I played. My goals and dreams were all soccer-related. I wanted to be an all-American. I wanted to play professionally like that’s all I ever thought about. And I was very fortunate. Soccer took me through college. I did achieve a lot of those goals. It had me traveling the world to some degree. And then when soccer came to an end for me, it is literally like I picked my head up and was like, “Okay. Now, what am I going to do?” because that’s really all I had thought about. And I was fortunate that I met an individual playing soccer that was a part of a small tech startup and I got a job working for this tech company. Candidly, was not qualified to do much else so I joined their marketing department because they just needed a warm body, I think. And I fell in love with the energy of the startup from day one. We were taking out the trash one day, making cold calls the next, writing code the third. And I just thought, “That is such a good fit for me.” And long story short, I very shortly thereafter convinced an engineer at this company to resign with me to start our first company, which was the first quarter of 1995. We started an Internet company so really early, right after Netscape launched the commercial web browser, I was in the Internet space. So, yes, I as sort of talk about my career, the highlight reel would say over the last 25 years I have started, scaled up, and exited six companies. So, I became a huge startup fan, pursued a lot of businesses I was passionate about, but that’s the journey that I’ve been on now for a little over 25 years.
Justin Donald: I love it. There’s so much there. I mean, first, I’d love to just state the, I don’t know if this is obvious, but a lot of people don’t know how good you are at soccer. So, if soccer, back when you had the opportunity to play professionally where what it is today, you would be a professional soccer player. You could make some really good money. You know, back when you were a professional soccer player, it was a different time, a different era, not like today. And so, in some ways, I’ve got to imagine that like in the moment, what a letdown, what a bummer, but in the whole scheme of things, what a blessing and what it turned you onto and who it turned you into it, I just think it’s exceptional.
Mac Lackey: Well, no, I appreciate you saying that and it is interesting how dramatically different it is. And I would say, in all fairness, I am jealous from afar of young, talented US-based players that are coming through the college system now and seeing the opportunities ahead of them playing in Spain or Italy or Germany or playing professionally in the United States and making a very good living doing something that you’re incredibly passionate about is awesome. And I’m excited for them but, yeah, that was not a realistic opportunity for my generation and that’s okay. Like you said, it really was a great chapter. Soccer has been a big part of my life, even post my playing career. It’s been a constant thread that I’ve pulled on as a business owner and as a fan. And some of my most amazing life experiences have been soccer-related, meeting my idols, and traveling to some unique situation, but you’re right. It’s a very different era than the one I grew up in.
Justin Donald: I got a good laugh out of this. I feel like we got to bring this up again because you and I, we can relate on many levels where we love a sport so much, we love a thing so much, and we’re just hoping our kids may, in fact, love it as much as us. So, how’s that working out for you and your kids?
Mac Lackey: That’s right. Yeah.
Justin Donald: For you and your girls.
Mac Lackey: Yeah, my girls. Exactly right. I had amazingly high hopes that soccer in the United States, particularly for girls, has a very nice trajectory. And I was like, “Alright. Perfect. I am a massive fan. I have girls. My daughters both had soccer balls in their cribs.” And I’ll tell you a ten-second story. The first time we met with a preschool teacher for my oldest daughter, they’re doing their little analysis of how she was performing. And everything was very good, except they said she cannot throw a ball. And I looked at my wife and I was like, “That’s by design. I told her to kick a ball. If you hand her a ball, she puts it on the ground and kicks it.” But, yeah, it didn’t last long. Both of my girls decided to pursue other sports or drop out of sport. So, they both played soccer and then they stopped. And so, yeah, I am now just a fan.
Justin Donald: Yeah. I hear you loud and clear. I still have a little bit of time, a little more time than you have, and my fingers are crossed but I’ve also come to the realization that I’ve got a lot of friends with kids and if I need to just coach their sports teams, I can do that and that will be fulfilling as well.
Mac Lackey: That’s right. Yep.
Justin Donald: Yeah. So, you have had a really cool experience of traveling all over the world and at one point in your life, I believe you lived in Barcelona, right?
Mac Lackey: That’s right.
Justin Donald: I’d love to hear what took you there and how long you were there and what you thought of that experience.
Mac Lackey: Yes. So, it’s really an interesting set of things that happened. I grew up, my wife grew up as sort of middle-class public school kids, just kind of normal, hard-working families. Because I had some success financially at a relatively young age, I wanted my girls to have opportunities that I never had. And so, we put them in private schools and we tried to do lots of things for them. And there was a very distinct moment when my oldest daughter, who was very academically driven, came home one day and started talking about the stress of a test. And the reason that she was stressed is because they had a talk about what you needed to do in terms of grades to get into the right college, to get into the right training program at a job. And it’s literally like I saw this conveyor belt in my mind of my daughter going from at the time she was in like seventh grade to working at Bank of America in Charlotte where I’m based. And I was like, “Wow. If that’s the choice she makes, I’m incredibly supportive,” but my path has been so different that I don’t want them to feel like they’re on a conveyor belt. So, the point of that story is to say, my wife and I literally that night said, “We have to pull our girls out of school. They need to see the world. They need to see there are other approaches, not the bubble that we’re sort of living in.” So, we literally pulled them out of school, hired a teacher, and started traveling. We did 14, 15 countries. Best experience of my life.
I mean, the time with my daughters seeing their eyes open to the world, how that infuse their education, I mean, all of it was just really amazing. But it also had my wife and I sort of saying, “You know, we could actually live outside of the United States.” Not only do we want to travel, we really are drawn to this kind of international market and how different it feels and the culture. And so, we decided of all the places we traveled, Barcelona was our favorite. And as a soccer fan, I thought, “Alright. This is my chance to get season tickets to the best club team in the world.” So, yeah, we traveled for about a year and then we basically decided to pick up and move dogs and all to Barcelona. So, yeah, it was an incredible experience. I continued running my US-based company from Barcelona. It allowed me to live one of my very, very core sort of values, which is kind of this family-first mentality without giving up on my goals and aspirations as an entrepreneur and it really tested that. Can I do it as a nomadic absentee founder? So, it’s a really good stress test for that whole theory as well.
Justin Donald: That’s amazing. And I want to honor you for having the courage to pull your girls out of the system. That was the only thing you knew at that time and say, “You know what, we can do things differently.” This is something that we’ve been experimenting with as well, where instead of outsourcing education to someone else, it’s choosing what that education is going to look like and who’s going to deliver it. And in your case, bringing in a teacher, I think that’s incredible so we’ve brought in some teachers and my wife is a former teacher. And so, sometimes she’ll say, “Well, I was a high school teacher, so I’m not as equipped for younger,” but she’s incredible as a teacher and I think she doesn’t even recognize how gifted she is at any age. I just think that when you make the decision of where your priorities are and what you’re going to teach your kids, and you can come up with some curriculum, that’s powerful. So, congratulations there. I just love hearing that.
Mac Lackey: Yeah. No, I appreciate it and I completely agree. I think there are lots of situations in life that you need to stay, you know, as one of my mentors used to say between the ditches, “Stay on the road, kind of follow the path.” But there are a lot of other situations. There’s a lot more to the world than the current school system, the current corporate environment, the current mentality of work. So, yeah, I have tried to some degree to at least challenge some of those theories that you hear out there. And most of them, most of those decisions have been some of the best ones I’ve ever made.
Justin Donald: That’s so cool. And so, you came back. So, at this point when you were in Barcelona, you’d already had your first big exit, right?
Mac Lackey: Yes. So, my early career, I actually had two eight-figure exits before I was 30. So, I was relatively fortunate to start companies, exit them early in life. And so, I had already sold my first probably three companies before we moved abroad. But, I mean, I also think it’s really important for people to understand, I mean, if you looked at my kind of balance sheet and net worth over the last 25 years, despite the fact I have been successful by most measures, financial measures, my sort of personal balance sheet was pretty dramatic. I mean, I would make a lot of money, roll it all into the next company, put it all at risk, buy a house, do whatever, and then all of a sudden I was in a point where it’s like, “If this business doesn’t work out, I’m not a wealthy guy at this point. I put it all. Chips are down.” And so, I’ve had a lot of variation. And at the point we moved abroad, it was not because I was even at that point, I wouldn’t have considered myself financially retired as much as the overarching desire for that experience with my family and what it meant to me far outweighed any financial decision. And so, I would have risked it all and I did risk a lot just by kind of picking up and moving. So, I only point that out to say it’s not like you have to arrive at some financial destination before you say, “Now, I’m going to live my life, travel the world, spend time with family, pursue passions,” like I made that decision consistently, regardless of my net worth.
Justin Donald: I think that’s fantastic. It makes the story that much better. And you’re not doing it because you have this surplus. You’re doing it because this is the thing that you want to do. You value it so much. I remember earlier in my investment career, there are certain seasons that I’ve been in. And one season was when I was making some really good money as an entrepreneur and I saw a lot of my friends who basically their lifestyle would equal the amount of income that they were earning. And to me, it didn’t sit right and I didn’t want that. And so, I was at a point in my life where I was investing about 50% of what I earned. I was very aggressive and the investments weren’t necessarily aggressive but to save and invest half of what you make I think, to me, I felt like I was being aggressive on that front. And because of that, because of having dollars in different places, many times it would feel like I didn’t have much money. And it’s so funny. Like even my wife and I would have conversations and I’d be like, “Oh, I’m not sure if we could do that based on cash flow today,” and she’s like, you know, it’s almost like, “How does that make any sense?” It’s like, “I just want to explain to you, I have put all these in this investment, in this, and the other investment.” And so, it’s really funny like so many times of my career, especially early on when I could have had lifestyle, I chose not to but that has really paid some huge dividends, literally and figuratively, moving forward and in the future. So, it sounds like you’ve experienced a lot of that, too.
Mac Lackey: Yeah, absolutely. I have been successful primarily. I know you have a unique skill set that I don’t have and I’m drawn to. Most of my success has been sort of avoiding conventional wisdom of investing in asset allocation because I knew I wasn’t smart enough or sophisticated enough to create investment streams for myself. Basically, I ran I used to call it a barbell strategy for 20 years where I was a little bit of cash and all chips or in my companies. And so, depending on the point in time, if you just took a snapshot, I might be very wealthy net worth on paper but it’s all wrapped up in an illiquid private company I’m building. At other points. I’ve just had a liquidity event and I’m very cash-heavy but I don’t have any other assets or any other revenue streams. So, I’m very drawn to and I think you’re very helpful in terms of helping entrepreneurs and founders think about creating these cash flow alternative revenue streams because they really become valuable over time. And that’s something that I did not do a good job of and I made some pretty big mistakes early on with investments and things like that. So, I learned the hard way.
Justin Donald: I would love to get into those. In fact, we’ll for sure talk about some of that. So, you bring up a few things that are really important. Number one is I feel like most entrepreneurs, I mean, to even have one exit is like this is such a small minority of people that actually have one exit. It is hard. It is hard to sell your business. It’s hard to scale it to a point where someone else wants to buy it. It’s hard to scale it to a point even if someone else wants to buy it without you, where you’re chained to it, right? And so, I mean, seriously, so many congratulations all the way around that you could do it six times. Now, let’s think about this here for a second because most people don’t have that. Most people have their money tied up in a company or they rolled into another company. And so, we call that paper money. They’ve got paper money. They are asset-rich and cash-poor so meaning they’ve got a lot of assets but not a lot of cash flow. They don’t have the dollars. Their money’s locked up. There’s not a lot of utility. Now, if that company goes big, then that’s big for them and if it doesn’t, then they lose it.
And so, it’s a lot of risk inside of one investment vehicle. It’s kind of like the people that put all their chips in the stock market or all their chips in the next company. Now, when you’re smart enough, when you’re connected enough, when you have the skillset, when you can see patterns and trends, that kind of thing can make sense but to most people, it doesn’t. I love that it worked out for you so much so that you could do it over and over and over again. You’re a total unicorn in that regard. But what I’d love to do is unpack this first exit. So, you had an eight-figure exit and you were 20 something, young 20s, I think. And so, how old were you?
Mac Lackey: Well, let’s see. Sold in ’98 so I was 27.
Justin Donald: Okay. So, imagine being 27 with the most money you’ve ever had, maybe even more money than you ever thought you would have at any given time the rest of your life, and you do this at such a young age. Now, I’ve got to imagine and I know a little bit of the back story that there were some financial blunders, some mistakes. I’d love to get into that so people can learn vicariously through you and not make the same mistakes.
Mac Lackey: Yes. Well, I tell people a lot. I’ve been very fortunate because of the six exits, which is unique that I learned a lot each time and I got better over the years. But, yeah, that first exit I literally did go from one-bedroom apartment, peanut butter and jelly. At that point, my wife and I, now wife, we were new in our sort of marriage. We were married in ’96, so we’d been a couple of years in marriage. We were making a lot of sacrifices literally to keep our heads above water. We had no money and the business was growing, but we were using every dollar to hire new talent and grow. And my business partner and I would literally have these meetings where there were often like tears so meetings like, “Can you make it another couple of weeks without getting paid because we’ve got this engineer we want to hire?” I mean, we’re really, really running tight. And then the next thing you know, we sell the business and you’re kind of liquid seven figures and you have all this net worth, the stock and all these things, and it’s like, “Wow.” It didn’t even make sense to me. It was literally like a number on a statement that I didn’t understand. And I was excited, I was proud, I was happy, all those kind of things, but the two big standout mistakes were, one, because I had made my money and been successful in what was effectively a tech startup, I had an enormous concentration because the company that bought us was now public.
And so, I held this big public security which was technology-oriented and did not diversify really at all. I thought this company is going to go to the moon and that’s what the analysts are saying so why would I sell one share or diversify? And the idea of any other asset class made no sense to me because why would you pick a bond or real estate or something that I don’t understand and seems like it gives a lower return? So, I basically was heavily concentrated in one security and then the only other securities I held were also technology stocks because that’s what I understood. And so, mistake number one pre-the-Nasdaq-crash, most of my net worth was tied up in tech stocks. The other mistake is just really not thinking about what I wanted my life to look like and again, rely on other people. Not to blame anyone. I was naive but I had stockbrokers and people around me saying like I wanted to buy a house, a nice house for my wife and I, and I found this house. And it was expensive certainly by our measures and I thought about paying cash for it because to me it was like, “Hey, I could pay cash. I’d have no mortgage and it would be nice to own a house.” They immediately talked me out of it like, “That’s crazy. Don’t ever do that. You know, you have so much net worth. Borrow the money.”
And so, I ended up kind of overextending myself because people made it sound like I had such easy access to money that why not get loans for the cars I bought and everything. And now, I mean, which I still don’t do a lot of what I would call crazy stuff, but if I wanted an exotic car now, I’d go out and I pay cash for it. I mean, I’m like it’s my car, it’s in my garage. I don’t owe any money for it. So, that was a couple of things that when the market shifted, I realized very fast how upside down you can get. And luckily, I didn’t have a lot to lose other than the actual watching my accounts drop really quickly. And I did have cash but it was a tough lesson to learn. I watched millions disappear really quick out of my control.
Justin Donald: And that’s a really good point that you hear this and some of you are watching this and you would say, well, tech stocks are crushing it right now, but they have seasons just like any other stock and there are dips. And if you’re over-concentrated in one area, you lose net worth fast. And it’s not like they rebound immediately. It’s not like that net worth comes back. And then the other thing that I think people don’t get is that if you lose, let’s say that your stock goes to half what it is today and then you go back to the same number you were over time, you’re not at net zero. You have lost money. You’ve lost net worth. So, let’s say the Nasdaq or these tech stocks, they lose all this money and then it takes five or ten years to get back to where it was. That five to ten years you’re not growing what could have been growing somewhere else. And then in addition to it, when you get back, you’ve got 25% or 30% less than what you started with.
Mac Lackey: So true.
Justin Donald: So, it’s a fascinating thing.
Mac Lackey: Yeah. I didn’t understand that and I think it’s easy to look back in long-term hindsight and realize how naive I was. And I was around smart people. I mean, I was definitely surrounding myself with very smart engineers and investors and I didn’t have anyone explaining that stuff to me. And I thought, “Gosh, yeah, so what if it goes down a little bit in stock market?” Stock market brokers are showing me it always goes up over the long term. And so, I just didn’t understand some of the nuance or the fees or some of these other things that are really, really now like my top considerations. So, I learned the hard way.
Justin Donald: Nothing like losing money to teach you a lesson, which I have done and any investor has done, any entrepreneur has done. All of us have experienced this. And if you allow those lessons to make you smarter, wiser, better at your craft, it’s amazing what it can do because the pain of losing like that is one of the best teaching moments that exist, and I know you’ve learned a lot of lessons.
Mac Lackey: Absolutely.
Justin Donald: Yeah. So, here’s another thought that I have. You’re young. You’re 27 years old and you have the most money you’ve ever had, and some of this is tied up. And for those of you that don’t know, when a public company buys your company, you can’t even take your stock off the table anyway. There’s a period of time, generally six months, maybe longer, where you can’t touch it. And so, hopefully, they perform well. They might not perform well but you’re kind of locked in with them and how they do so it’s not like you can just take it all. And it’s very common when these public companies buy you that it’s a stock option type of transaction. So, you get a little bit of cash and then you get a lot of stock in that company, and hopefully, it goes well. But what if they don’t know how to run your company as well as you did? And sometimes there’s an earn-out and you as the entrepreneur have to remain on for three, four, or five years. Sometimes you can have a clean break but often I find that that’s not the case. And so, a lot of the exits that you hear about are not as grandiose and sexy as you might think that they are and it’s not like you all of a sudden have cash in hand eight-figures. It’s paper money plus some cash. Alright. So, that said, what’s the mindset around like having this exit?
Because what I’ve experienced and I’ve got to imagine it’s similar for you but you can tell me is every major success that I’ve had, if it was an exit of a company, if it was another round of investment on a company that I started, if it was an investment that came through and went full circle, a real good return, whatever it is, it feels so good to experience that. Like, to me, it’s the self-satisfaction of finding a deal or starting a company, doing whatever you needed to do, and then there’s validation that you made a good choice, that you did things well. But then it’s almost like, “Okay. Well, that’s done. What’s next?” So many people think you can just live in this destination but the destination is only sweet, in my opinion, for a moment. And I’d love to hear your experience.
Mac Lackey: Yeah. It’s a really interesting insight because in what I do now, I work with a lot of founders who were on the exit journey, most of which are going to have their first exit and how they maximize that. And one of the things we always talk about is one of the biggest predictors of not only the outcome but the likelihood you kind of get the deal done and you’re happy about it is if you already know what’s next. And if you don’t know what’s next or you think what’s next is playing golf, unless you’re 70 or something, you’re probably going to be disappointed. And I’ve seen that happen quite a bit. Now, for me, my scenarios have been a little bit different because I am almost always really ready to start the next thing even before the first one or the one I’m working on is done. So, I’ve got two or three ideas I’m really excited to pursue, a new company I want to launch, and I also believe that I’ve probably outrun my capabilities within the current one. So, a big part of you could easily accuse me of selling early, if anything. When I got to sort of a certain size and it felt like I could find the right exit and I was excited about something else, I was ready to sell when my first business we actually sold prior to the IPO, so we sold into a roll-up that subsequently went public. I literally resigned the day after the IPO to start my next company and I left another couple of million dollars in stock option kind of handcuffs on the table because I was so excited to start my next thing.
You could not have paid me enough to stay. And so, I’ve been, I guess, fortunate in that way that I’ve always had something else I’m really excited to lean into. That next business, for me, business number two, was a really, really interesting one, probably the most fun for me to kind of look back on and talk about because it was my first opportunity to pair my passion for soccer with my love of business and everything I learned in my first company. So, I had kind of a tech media-oriented soccer business that was such an incredible passion-driven business and a big opportunity. But the reason that one was really interesting in the exit was we had a term sheet from a big New York venture firm in March of 2000, and we’re literally smoking cigars like we’re getting ready to raise this big round and take this to the moon, and then the Nasdaq crashes. And we have this really interesting moment where we’re like we might have 30 days of cash in the bank. I’ve got 80 people on payroll or something crazy. And we’re thinking, “What do we do?” And the reason it ended up being so interesting is the math was really simple. And I never understood this before but now I’d say it all the time to founders, if we would have raised around a venture, even a small amount, instead of raising 15 million, maybe we would raise five, we would have had to grow the enterprise value of that company well north of 100 million for me to get the same amount of money that I got when we decided at that moment, “Let’s just sell the company.”
So, we sold the business for $15 million and split it between me and my partners. And so, instead of raising money and having to get to an entirely another tier, I got the same outcome right then, de-risk immediately, sell the company. And a lot of founders, I can tell when I’m talking to them, don’t understand that math. To your point, I mean, the exit sounds amazing. Someone sold for 100 million but maybe they had to clear 90 million of investor preferences before they got $1 themselves. So, I always encourage founders do the math before you get overly excited about merging companies, raising capital, because in many cases, the math is a lot better if you just sell it early from a bootstrap perspective,
Justin Donald: There’s no doubt. I mean, you struck gold in this comment. And for all the entrepreneurs that are tuning in here, this is powerful because when VCs come in, they cobble up 20%, 25% of your company and you’re diluted every step of the way that more money comes in. And in many cases, you don’t get tag-along rights. I mean, it all depends on what’s negotiated into a contract and whether you can invest when they invest and what does that look like? Is there anti-dilution? I mean, the VCs are very hard-core about their contracts and they’ll often not go into business with you and invest in you if you really push back on their contracts. And so, I’ve experienced this firsthand. By the way, we had a VC that was going to invest in us and they tried trading terms like within hours of closing and we just walked and they said, “No one’s ever done this to us before. Just make an offer,” and we said, “No. We had a term sheet. This was a done deal and you’re trying to lowball us and trade at the eleventh hour. We’re supposed to be closing. Dollars are supposed to be in hand and we’re dealing with this baloney.” And so, we ended up walking and they claim that we’re the only group, the only company that’s ever walked on them.
Mac Lackey: Well, I’ll tell you what, it’s something I say almost every day now but what you, I believe, what you want as a founder is you want the option to exit, and that just means you want someone to want to buy your company, want to pay you a lot of money for it, want to invest in it, but you control if, when, how, and why. And that option is powerful because you have leverage. So, you were literally able to walk away in the eleventh hour only because you had the option and you had leverage. If your back was against the wall and you were going to run out of money unless you sold, you were basically going to take whatever terms they gave you. And a lot of founders find themselves there. So, my entire focus at this point is to help founders create that option so that they have this maximum value scenario but they’re not back against the wall because you’re exactly right. They’re venture capitalists and private equity firms. I have a lot of friends that are in that world and are some great ones. But like anything, there are some that are disingenuous and they’ll re-trade you, and if they know they have leverage on you, they will put their foot on your forehead as they close the deal. I mean, it’s just the reality of who has the leverage. And so, I always think that option is one of the most powerful components of this whole journey.
Justin Donald: Yeah. There’s no doubt. And there are definitely those VCs out there that, I mean, they’re banking on the fact that you are backed in a corner. And luckily we weren’t and major shout-out to S3 Ventures here in Austin, Texas, the largest Texas VC because they came in and did exactly what they said. Quite frankly, we had a couple of VCs that we were looking at, at that time, and so we knew we had other options. And this firm was helping us even when they knew we are likely not going with them. And I think that’s very classy and we felt really great about working with them and they’ve got a great track record. But part of the reason that SPACs are so important and not even important, let’s call it so exciting for a founder is because it preserves their equity. They make a lot more money having an exit via a SPAC, going public that way, just like an IPO would, versus getting a VC involved. And so, I don’t know what your experience is with SPACs and I know they’re really hot right now. There’s some scrutiny with SPACs as we sit today but I just made a pretty cool investment into a SPAC or a pre-SPAC, one that I think is going to be pretty exciting. And then I’ve got another part of my portfolio that is being managed by a team that basically trades SPACs on the open market.
Mac Lackey: Yeah. No, I think it’s really exciting. I’ve been a sort of I’d call it a retail investor in some SPACs so I’m certainly not on the inside but I think the opportunity for SPACs and direct listings and really these innovative strategies to access the public markets, access investors in a larger way is really significant. And like anything that’s innovative, I mean, SPACs have been around technically for a long time. They’re having kind of another hot moment because they’re solving some real problems. It’s similar. I was talking to a founder this morning who’s on this exit journey and I’m kind of mentoring them and we were talking about how if you have a lot of leverage, you can actually get liquidity in a deal or in a secondary market or you can take chips off the table. That didn’t really use to exist. I mean, pre-Facebook, Peter Thiel, I think is probably credited for helping structure Zuckerberg shares in a way that changed the whole industry, founder shares, but that’s still only if you have enormous leverage. I mean, if there is a lot of demand for your company and you have a lot of options, then you start creating these opportunities for yourself that wouldn’t exist otherwise. And I think the same thing is true in terms of how do you become a public company with SPACs, direct listings versus the traditional IPO, which is long, very expensive, reasonably risky. And SPACs can de-risk a lot of that.
Justin Donald: That’s right. And for those of you that are unfamiliar with SPACs, it would be a Special Purpose Acquisition Company is what that stands for. And it’s just a shorter, cheaper way to go public to have a company be able to buy your company. So, it’s kind of the craze right now. I mean, maybe it slows down. I don’t see it slowing down much. I mean, the regulation is for sure going to change around it but I think it’s here to stay and it’s going to be pretty popular. The last two years, though, there have been more SPACs than I believe the previous decade combined so it’s been hot.
Mac Lackey: Yes. I’m sure.
Justin Donald: And you mentioned another thing that I’d like to expand on, because you talked about maybe expectations, not meeting reality when you have an exit and what retirement looks like. And I can relate because when I was 37, I took a year off and that year was such a great year. I’m so glad I did it and I was able to recharge the batteries and regroup and figure out what kind of the next chapter in my professional life look like. But I had a really hard time taking off. I mean, like five weeks, that was great. Six like this whole idea of a sabbatical I think is a tremendous idea and I think people should take more advantage of it. But it’s hard for a hard-charging person, entrepreneur, investor, go-getter, achiever, and when I say achieve or even just from the standpoint of self-satisfaction, it’s hard to not have something you’re working on for an extended period of time. I know that you experienced that.
Mac Lackey: Yeah. My journey probably like a lot of founders, entrepreneurs, what made me successful I think early on, that early formula was I was working hard, I was putting in the hours, and really I think just the way I’m wired. I didn’t know how to turn that off. And I think you’ve heard me tell the story that really changed all that to some degree, which is I sold that second company I mentioned in July of 2000. My first daughter was born in August of 2000 and I basically went into what I think of as depression. Because I’m such an upbeat, optimistic person, I have never felt that before. And what I was depressed about was this challenge in my mind between the things that made me successful as an entrepreneur and the way I literally defined myself was a tech entrepreneur, like hard-charging, putting in the hours, sleeping on the floor in the office, traveling. Whatever I needed to do, I was that guy. And here’s this new daughter that I’m so excited about and I’m imagining being the kind of dad that coaches the soccer team and has dinner with her and carves the pumpkin in her class. And I was thinking that that can’t coexist like everyone around me is telling me, “You have to choose, Mac. You can be that dad. Thankfully, you’ve been successful. Maybe you can just kind of slow it down.” And I thought that’s not a trade-off. They both feel bad to me. I’m clearly going to choose my daughter but I don’t want to be the kind of entrepreneur that peaked in my 20s and that was the end of the line. I just didn’t see myself that way.
So, anyway, long story short, I literally made a decision in August of 2000 that I didn’t know how I was going to do it. I knew that conventional wisdom and everybody around me was telling me I couldn’t do it but I said, “I’m not going to accept the trade-off. I’m going to be there for my daughter every day. I’m not going to miss a thing. And I’m still going to be a scale entrepreneur.” And again, I didn’t know how I was going to do it but as I sort of tell the story now, 19 years later, I dropped that little girl off for her freshman year at college and I know in my heart I didn’t miss a thing. I carved every pumpkin, went to every play, coached every team that I could, but during that time, I started, built, and sold four more companies like I didn’t trade anything. And so, I know so viscerally that it’s doable and it’s worth doing. So, the idea of retirement, as people describe it or time off doesn’t even register with me like I sort of tell people I work seven days a week and I play seven days a week. I for sure am in my home office on Sunday because I find it quiet and a good day for me to work but I’m also having lunch with my wife on a Tuesday and taking my daughter to school on a Wednesday. So, to me, it’s very much about fluid making those things work where I’m really energized and passionate
Justin Donald: And I admire you so much for that choice. One of the big reasons I wanted you on the show was because of that, because you chose family first and that is a priority to both of us. And I just love the way that you have chosen to live but you broke through the lie, the and/or versus the and/both, and you crushed it on both sides of the equation. And I just think that that is so cool, especially when that wasn’t the mold. I’m excited for investors and entrepreneurs and people that maybe you’re not an investor or an entrepreneur, but you want to be to learn that the sacrifice that you’re making, it doesn’t have to be at your family’s expense as long as you’re very intentional about setting up the boundaries that are going to make family the priority. And you did a great job with that. That’s so cool.
Mac Lackey: Well, what’s crazy to me is I was buying into it just like most people do and I assume that there was a trade-off. And what’s crazy is the decision and the guardrails and the boundaries that you were just talking about are actually the things that made it work better and bigger and more scalable. Because my companies knew, I mean, it was literally a known fact that at 5:00 we could be in the middle of a board meeting. I’m going to stand up and walk out because I’m going home for dinner. And what happens as a result of that after the first time or two, when people are at first shocked and like, “What is he doing?” Then they’re like, “Oh, well, the meeting has to go on anyway. And how do we run a meeting in Mac’s absence?” People rise to the occasion. People plan better. People make smarter decisions because they know Mac is dead serious, “I am going to leave when it’s time to go home for dinner,” and so it’s crazy how that actually enabled bigger outcomes than if I would have had to easily call my wife and said, “Hey, sorry. I’m going to be late tonight or I’m going to have to miss dinner. I’m going to stay out of town an extra day.” I just didn’t do that. I just didn’t do it. And as a result, my companies became more capable without me. People got smarter and better and learned faster. And so, I actually think it is a catalytic way to grow a better business and it’s counterintuitive for a lot of people.
Justin Donald: Yes, certainly counterintuitive, but you have forced leadership, forced growth. And the reality is for anyone that has scaled a company and has really worked hard at building and growing, you recognize that you want to do everything and you feel like you’re more equipped to do most things but the reality is when you get more people doing as many things as you can, even if they’re doing them not as well as you, the combined sum of all these people doing something 70% as well as you is so much greater as a whole than what you can do.
Mac Lackey: Exactly right. Exactly right. I still feel it often. And because of what I’m focused on now in my little Exit DNA program, I can easily say to a founder, “I know you’re fighting this. You don’t want to let go. But if you don’t, not only is it going to hurt your exit value, you’re going to be locked down for five years because you’re in the critical path of everything that happens in your company. The best thing you can do is get out of the critical path because the company is going to do better. But when you exit, they’re going to recognize that your team manages the business. It’s not all relying on you, and you can never maximize value if you are the value because people can’t buy you.” And that’s a really unique scenario when it comes to exits that help people that have been hanging on too tightly realize, “Hey, if we continue to do that, it’s really going to hurt what you thought was a great option or exit in the future.”
Justin Donald: Yeah, there’s no doubt. And I’ve got two friends that recently started a financial company, a new company, and they were talking about how they had to be the first people to the office because they had to set the stage and set the culture and this and that but it was at a sacrifice of not getting as much family time, not getting the workout in. And so, I really kind of pressed them and said, “Do you really have to be there? Are there other people that can create culture? Are there ways that you can create culture without being the first person there?” And in fact, if you’re always the first person there and you’re working harder or longer than everyone else, do they look at what you’re doing as desirable? Or is it better to paint a picture where you can get the right people in place to set the culture? You can even rotate who comes in or maybe certain people on the team are in early and you show up when it makes sense. But there are things you can do to influence your organization when you are there and that way you have the lifestyle that is also desirable, that makes people want your job and want your role long-term.
Mac Lackey: Yeah. I experienced that the most extreme way, which would make sense, all of these dials I was turning over time. My very last business from inception to exit, I was the largest shareholder. I had all of the things that would have said, “Mac is sort of driving the ship,” but I never had a schedule or office hours or anything which made my even being in the office so unpredictable that the assumption had to be made, “Mac is not going to be here and so someone else needs to put together the agenda. Someone else needs to run the meeting.” Now, if I show up and I want to participate, sure but it was so unknown in terms of what my involvement was going to be, literally, the company just happened without me. And so, it’s just funny. I mean, people have it, I don’t know, sometimes it’s ego, it’s other things, but they really feel like they have to do it, set the tone, and be the first, and run the meeting. And sometimes that’s true but oftentimes it is actually preventing other very capable people from stepping in to run meetings. And so, you’re in this vicious cycle of, of course, you can never not be in the meeting because no one else has learned to run it in your absence. So, I’m sort of a fan of just a forcing function like I’m just not going to be there so we have to do it anyway.
Justin Donald: I love it. I think that’s incredible. And I love that you’re teaching entrepreneurs to do this because you are the founder whisperer or the entrepreneur whisperer. That’s what I’ve dubbed you and I’m so thrilled. So, I really want you to talk about Exit DNA, which is the program that you run for founders and entrepreneurs. But before I do, one of the things I think is really important about your exits and you’re so modest in so many ways, I feel like I got to like drag all these cool things that you’ve done out of you but one thing that you have not mentioned that I think is really important is that you sold every single one of your exits. All six of them were at a premium. And I think that, first of all, it’s hard to get a premium for most people at any point in time. You are able to do it on all six and I know you teach this. So, I’d love to hear about Exit DNA. I’d love to hear what you do to sell at a premium and teach your entrepreneurs how to do this as well.
Mac Lackey: Yeah. Well, I appreciate your comments and I do, yeah, I recognize actually one of my members of my Exit DNA program literally said that to me yesterday. He was like, “You’re so humble, it’s hurting you.” They would be incorrect. It’s pretty funny. But the reality is I didn’t realize as I was building my companies and having various exits that I was doing anything that unique or different. I was just doing what felt right and intuitive to me. But one of the things that was very clear to me, a couple of exits in, is we had hired some investment banking advisors and brokers to help us sort of think through things. And I found myself sitting in the meetings with them as they’re talking to prospective buyers and I’m kind of in the room but really letting them run the show. I found myself just constantly thinking, “I don’t like the way they phrase that or I don’t feel like they’re selling us the way that I would want to sell us.” And I just kind of bit my tongue, bit my tongue, and ultimately fired them and said, “You know what, what they’re trying to do is they’re trying to fit my company into a box that is a financial box. That is a revenue multiple, it’s an EBITDA multiple, and that makes sense to these buyers.”
My approach was 180 degrees different. I would literally use my hand motion and say, “Yes, we have revenue of X and EBITDA Y, and I would sort of put it over here. But the reason you want to buy us,” and I would tell what I now call an irresistible exit story like, “You have to buy us because proprietary this, unique that, all these things that are strategically valuable.” And I was again, in hindsight, I guess I was pretty good at lining up where my strategic value was and how that really was going to make something powerful for the buyer. So, that process, when I was talking on stage, October of 2018, I sold my last business. Shortly thereafter, I’m speaking to a group of entrepreneurs. I’m sharing stories. I don’t have a program. I have nothing to sell. I’m just talking. And as soon as I walked over to stay off the stage, several of them kind of ran up to me and said, “I need your help because everybody is telling me that I can sell for six times EBITDA or seven times EBITDA but I feel like there’s more there, and you basically have made a career out of that.” And so, at that moment, I realize I can really draw from my experience and help founders focus on strategic value where EBITDA matters, revenue matters, but we’re stacking things on top of that, that oftentimes when my whole business partners used to call it The X Factor, jumps off the spreadsheet like it doesn’t even fit in the same valuation framework that most bankers are using. And that’s not a guarantee but it’s sort of what’s happened, right?
And so, that was really an eye-opening moment for me and I’ve kind of dedicated my time to doing that now through this program, Exit DNA, where I get to work with founders that really want that. They don’t want to look back and say, “I sold for six times EBITDA and I left millions on the table because I didn’t understand how to talk about intellectual property or distribution or something that’s even more important that gave me six times EBITDA. That’s why I’m generating a lot of EBITDAs because of this powerful thing but my banker didn’t even talk about it.” So, that’s kind of where I’m focused.
Justin Donald: That’s awesome. I hope that those of you watching and listening get a chance to check this program out because it just is an incredible opportunity to learn from one of the best of the best. So, check it out. In fact, where can our audience check out Exit DNA?
Mac Lackey: So, yeah, I have two websites, my personal site at MacLackey.com, which is kind of a blog and talks a little bit about my thoughts and ideas and what I do. And then ExitDNA.com is a little bit about the program. Kind of the premium part of that is application only because I really try to focus in on founders that I can help really turn the dials and create great outcomes. So, the other thing that happens in this program, not only do I do a lot of the teaching and sharing my frameworks, you’re surrounded by 50, 70 other founders on this journey, some of which will have nine-figure exits or eight-figure exits or whatever. So, you’re not only learning from me but getting the feedback from others on the journey, which has been really fun for me.
Justin Donald: That’s so cool. Well, Mac, I have just so thoroughly enjoyed our time and I want to thank you for joining us and carving some time out of your day to spend with us and with our audience here. I just think the world of you and what you’re building and the things you’re doing in the world and the impact that you’re having on one of my favorite groups of people, which would be entrepreneurs and founders and investors. And so, I just want to thank you for demonstrating how to run a very successful high-level business while putting family first, but yet still having huge impact on the world. So, great job. Thank you for joining us and really appreciate it.
Mac Lackey: Well, thank you very much. I’m a huge fan of yours and it means a lot, the nice words you’re saying, and I’m honored to be on your show, so thank you so much.
Justin Donald: Well, thank you. And just I want to leave everyone with this parting message which is take some form of action today. Move towards financial freedom one step. It can be a small step but the mission is to build the life of your dreams on your terms by your design and not falling into default or just reaction mode but being proactive and doing it the way you want to do it. So, thanks for your time and I’ll look forward to getting another episode out next week.