Editor’s note: James Altucher is an investor, programmer, author, and several-times entrepreneur. His latest book, is “Choose Yourself!” (foreword by Dick Costolo, CEO of Twitter) about how to make, lose, and make back millions. Follow him on Twitter @jaltucher.]
First I totally gave up. I thought there was no way to sell my web services business.
It started when I was in the offices of Loud Records, run by Steve Rifkind. My company, Reset, was doing websites for the Wu-Tang Clan and other Loud artists. It was 1997.
Ol’ Dirty Bastard would call me on the phone sometimes. Mobb Deep would stop by. Trent Reznor would hang out (we did Interscope’s artists as well).
Steve Rifkind’s dad, Jules Rifkind, was a music mogul from the 50s, signing acts like James Brown. He was infamously (supposedly) portrayed in The Sopranos as the character Hesh Rabkin.
And the rumor was that Jules Rifkind’s father used to handle all the details whenever Meyer Lansky threw a party.
When you walked into Loud Records these huge beefy older Jewish guys would pat you down to make sure you weren’t carrying a gun. They looked like they were about 70 years old but you had to have a suicide impulse to disagree with them.
Someone said to me, “Steve needs you in his office. He’s got some guy in there pitching BS.”
So I went in there.
This guy, Justin W., was saying, “Steve, let’s do a rollup of all urban businesses. We take Loud Records, combine with SRC, combine it with five-star basketball camps, maybe get The Source magazine in there. We take it public. You could have a billion-dollar company! This would be hot on Wall Street. Rollups like this are fucking sexy.”
Steve was sitting in the center of the room and everyone was sitting around with him. “A billion dollars. This is too much for me. I gotta go to the bathroom and jack off.” And he got up and left the room.
Justin introduced himself to me. He was a banker at [big investment bank].
A few weeks later Justin called me even though we hadn’t exchanged cards or anything.
True to my style, I didn’t pick up. I don’t like talking on the phone very much.
The next day he called. The next day he called. The next day he called. The next day he called.
Finally I picked up.
“Why do you never pick up?” he said.
“Sorry about that,” I said, and that was that.
“Listen,” he said, “you’ve got a hot company. I know people who want to buy it. Go to this address.”
So I went to the address he gave me. It was a huge empty room about 10,000 square feet with one desk in it. It was the soon-to-be offices of a company called Rare Medium. The CEO, Glenn Meyers, was there. “I like your company,” he said. “I want to buy it.”
But I didn’t understand anything then and his company wasn’t public yet. It would later merge with an air-conditioning company that was trading for one dollar, and then it went up to $300 at the height of the boom and then it went bankrupt. Someone recently told me that Glenn pulled $200 million off the table and relaxes now.
So I didn’t return Justin’s calls for a while more. Finally he got me on the phone. “Listen,” he said, “you have to pick up when I call. I’ve got other guys who want to buy your company.”
He sent me to two or three other places. Everyone made offers. They were all complicated, though. Like, $X up front and then $Y over five years.
I had to practice going to places and saying, “I want to be a part of a larger team” and other BS. But all I really wanted was money.
Independently, for the prior year I had been sending updates to the person who bought companies for Omnicom, the big ad agency, Felice Kincannon.
After a year of meeting her and sending her emails of our updates, we were finally big enough. She started introducing me to other agencies within the Omnicom family to see who would want to buy us. Everyone did. And I started sending ad business to Omnicom agencies.
But again, the deals were all too complicated for me. Deals should be simple. Because they always get complicated later. They should start simple.
Honeymoons are meant for love-making.
Finally, I got tired of it. We wouldn’t get acquired. I called Justin, “Just forget it. I appreciate your help and we’ll figure it out some other time.”
“No wait,” he said. “One more try. These guys will be at your place in 20 minutes.”
Twenty minutes later two guys show up. A tall, older, suited, German guy with a thick accent. And an Orthodox Jew.
They took the tour of the offices. I made sure everyone would be working hard, even if they had no work to do.
When we got into the “map room” (which was also the kitchen), Werner Haase pointed to the map and said “What is this?”
I said, “This is where we have clients,” and there were pins all over the world.
“I find New York City is big enough to have plenty of clients,” he said in his thick accent.
About an hour after they left, Justin called me. “They fucking loved you. They want to buy the company.”
“Ok,” I said, “but everything has to be up front.”
“Give me a number,” Justin said, and I said a number, and he said, “wait for a call from them.”
Ten minutes later they called and offered the exact number. Werner even said, “I look forward to playing chess with you.”
Handshakes don’t always mean a deal is closed.
The closing of the deal took too long. I was stressed every day. Lawyers stopped calling back. Everything was going slow. But Justin and Yitz, the Orthodox Jew, kept telling me to keep my cool.
But I wasn’t cool. I couldn’t focus. I was going to go out of business because I was so anxious.
One time Werner offered to lend the company money. “If you need it,” he said. I said no. I felt like it was a trap.
Meanwhile the Asian Financial Crisis happened. Werner was having second thoughts. The deal was already taking six months.
Finally, it closed.
I called my sister. “It’s closed!” I shouted into the phone.
A woman passing me by on the sidewalk yelled at me, “Who fucking cares!”
Justin wanted his fee. I drove up to his house as soon as I got the money so I could hand-deliver his fee.
Four years later the company that bought us filed for bankruptcy. The chairman of the company, Scott Mednick, produced the movie “Superman Returns” and is now in the movie business. Werner went back to being in the travel agent business. Yitz has a company that cures irritable bowel syndrome.
Justin still does deals. Steve Rifkind never did his urban rollup but kept putting out platinum albums. Every web agency that Omnicom bought went bankrupt or near bankrupt.
With the money I made I bought a 4,500 square foot apartment in Tribeca and I played poker every night at private clubs and in Atlantic City and in Las Vegas. Even the night my first child was born I played poker all night.
Four years later I was broke and had to sell the house, and I moved 80 miles away and didn’t leave my new house for three months because I was so depressed.
The story never ends. This is just a chapter.
Lessons learned:
Get all the money up front. As much cash as possible. This applies no matter what you are selling. A service, a product, a company, etc.
Some people are good deal-makers. Recognize who they are and pick up their calls.
Be honest about what you want. You don’t have to lie to get acquired if you have a good company. This works no matter what you are selling. People pay a premium for authenticity.
Send constant friendly updates to the people who are rejecting you. This works for all sales. Water ultimately dissolves rock.
Stay focused on your business, else you have nothing to sell.
Werner was right. You don’t need to be worldwide. NYC is pretty damn impressive.
As we all know, the stock market has fads. Eventually your company will be part of the fad because all industries have their day in the sun. But make sure you are profitable so you can survive it.
Corollary to the above rule: Sell all of your stock the second you can. Usually it’s restricted at first. Never be fooled by people smoking crack. Sell Sell Sell the second you can. The reason is: chances are your company got bought for an inflated price anyway.
Don’t change your lifestyle for at least two years. You have to let new money marinate your soul. I didn’t do that and my soul exploded and leaked over all the people I loved, hurting them all. The closer someone was to me, the more they were hurt. I felt really bad about that for many years and only recently made amends.
Always be loyal. I never said a bad word about Werner no matter what. If someone helps me feed my family, they are a friend for life. If someone takes money out of my pocket, they are out of my life. Never break this rule.
Always be loyal. I pay my fees the second they are due.
This was the first company I ever sold. First of too many.
Sixteen years later Justin W. and I still do deals together. It was together that the two of us screwed Yasser Arafat out of two million dollars.
