Ep 539 Deal Collapsed at LOI, Sold for 6x EBITDA Anyway

**John Warrillow** (0:07)
Hi there, and welcome back to another edition of Built to Sell Radio, the podcast designed to help you punch above your weight in a negotiation to sell your business. What happens when you mentally check out because your deal is about to close and then it falls apart? Today's guest, Jay Richards, founder of Imagen Insights, which is a qualitative research platform serving brands like Visa, Google, Amazon, found out the hard way. After five months deep in an acquisition process with an LOI in hand and holiday plans made, the deal collapsed when issues surfaced in his financials. Jay had to switch his brain back on, rebuild momentum and navigate a second deal that came inbound from a buyer who saw more in his company than he did. The deal closed at six times EBITDA. And in this episode, he talks candidly and honestly about the mistakes he made along the way. Handing out unvested equity too early, keeping the wrong people too long, nearly losing the second deal at the finish line because the accountant couldn't reconcile the balance sheet. This is the exit story of a first-generation founder who made every mistake in the book and still landed the plane. And what happens when the deal falls apart and you have to rebuild fast. Without further ado, here is Jay Richards. Enjoy.

**John Warrillow** (1:32)
Jay Richards, welcome to Built to Sell Radio.

**Jay Richards** (1:34)
Thank you for having me, my friend.

**John Warrillow** (1:36)
It's gonna be great. I used to own a market research business. I don't know if you knew that, but I have fond memories of my time in the research business, so I'm super excited about this interview. Imagine, describe the company.
What is it that you did?

**Jay Richards** (1:51)
So in a nutshell, we enable brands like Visa, Google, and Amazon to crowdsource qualitative insight from consumers within a matter of minutes. So you have thousands of consumers all around the world. Brands would type in their question, that would be sent to consumers, and they'd provide a qualitative response directly into the dashboard for the client. Wow.

**John Warrillow** (2:09)
Okay, so I've got a thousand questions. How did you do that?
What's underneath the hood of this engine? How are you actually delivering that?

**Jay Richards** (2:17)
Yeah, so in short, the main thing is all about the community. So our big focus was making sure that we engaged the community highly, making sure they were really engaged with who we are and what we were doing as a business. What community? There we go. Yeah, nice. Good. I knew you were going to ask that question, which is great. So the community are the folks that are providing the responses to the client. And we realized early on, if we built a traditional panel, it just wasn't going to get the types of responses, the in-depth qualitative responses we needed. We weren't going to get from a traditional panel because nobody really cares. They're kind of just hitting A, B, Z. They don't care. They're just smashing the quantitative buttons. But with qualitative research, you need rich, in-depth responses. And to get those, we need to have people that are engaged. So the first thing we did is make sure we paid really well. So for every response they provided, they get paid cash. And the longer they're in the community, the more they get paid. So that was that.

**John Warrillow** (3:06)
So, OK, so you recruited a group of people to provide qualitative feedback to specific companies. And in return, you paid them to be part of this community.

**Jay Richards** (3:20)
Exactly right. So every time they provided a response, they get paid. The longer than the community, the more they get paid. And then we just focused on making sure that we kept the community engaged. So doing events, inviting them to come speak at conferences with us, and just loads of different bits and pieces to make sure that from a qualitative perspective, we were getting the rich data that you needed for our clients.

**John Warrillow** (3:40)
This is really cool. I remember back in the day, this goes back embarrassingly, like 20 years ago, when we were trying to build like panels for customers. And oftentimes, we would get together face to face and discuss a brand and how people are feeling about Visa or MasterCard or whatever. This is something you're doing obviously online now, which is amazing. How big was your panel?

**Jay Richards** (4:03)
Yeah, so at the top end, we were up to about 35,000 globally. And the great thing...

**John Warrillow** (4:10)
Wait, how did you get 35,000 people to opt in?