How I Reverse Engineered A $100 Million Exit - Jason Lemkin

**Jason Lemkin** (0:00)
If you want to reverse engineer things, you have to have a model with economies of scale that gets you to $3,000 to $400,000 per employee, or your model is not real. It is not scalable.

**Sam Parr** (0:18)
What's going on, man? How are you?

**Jason Lemkin** (0:20)
I'm so excited to be here and talk about all my first millions, talk about the millions I lost, a few learnings on scaling, and whatever you want, Sam, it's great to be here.

**Sam Parr** (0:30)
I love you for many reasons. One of them is like, you're so catchy and you're so good at summarizing important things, but explain it in a very simple way, in simple to understand ways. But before we get into that, I need to talk about background because we have to the OG software guys, you are the guy. So if we talk to the founders of HubSpot or guys who run multi or tens of billions of dollars companies, they say, if you want to learn about software, Jason's the guy. But we have a bunch of sometimes 20 year old kids listening to this and I want to give a little background. And so I don't want to spend too much time on this, but basically what I know about you is you started a few software companies including EchoSign, which you sold for nine figures. I don't know the exact amount, but you've said nine figures.
Then you've been investing in startups as a VC for like since 2013, which you said, I think you said you 10 extra fund or something like that. Is that right?

**Jason Lemkin** (1:22)
That is about right.

**Sam Parr** (1:23)
And then what else did you do besides EchoSign before that?

**Jason Lemkin** (1:28)
Before that, I had a startup where I made my first million between when the internet died for a while, I actually founded a startup making implantable batteries from nanomaterials, which I knew nothing about, which is interesting. And we sold it for 50 million after 12 and a half months.
It is kind of an MFM story. And I learned a lot from it.

**Sam Parr** (1:47)
What was that company called?

**Jason Lemkin** (1:48)
It was called Nanogram Devices. And we did something that was thought to be impossible.
And we got bought by our competitor. It was a classic buyout after 12 and a half months when we took away one of their largest customers.

**Sam Parr** (2:00)
Did you raise funding?

**Jason Lemkin** (2:02)
We did. And it was hard. It was, I'm dating myself. This was one of the crummiest points. We raised 9 million in our seed round and sold 70% of the company in our first round.
And that was the deal. That was the deal. That there was no choice. There was no negotiation. It was a different time.

**Sam Parr** (2:19)
And that meant what you and the founder, you and your other partners, I don't know how many you had, had 15 million left over to share after the $50 million exit.

**Jason Lemkin** (2:28)
I'd say it was more like about 10 million or maybe even 8 million to share. So it was enough. Interesting for the first million, it was just enough to not work for the man.
I have worked harder. I worked even harder on the next startup, on EchoSign, which Adobe bought.

**Sam Parr** (2:41)
So EchoSign, was that basically like what DocuSign is now? You guys just sold earlier.

**Jason Lemkin** (2:47)
Yeah, a lot of learnings. Yeah, we actually, DocuSign believe, I mean, I'm really dating myself. DocuSign was basically a printer driver company when we started. We were the first web solution. I wrote it all myself in PowerPoint and crappy wire frames and we built it.
And we got to a million dollars a month burning 4 million. So we got to 12 million ARR, growing 100% with 110% revenue retention and cashflow positive.
So if we, and we sold it in 2011, and 2011 was a long time ago in internet time and in real time. It was just before we understood the metrics around recurring revenue businesses. And so even my board, my investors didn't, like they weren't sure we had a good business. If I said to you today, Sam, I've got a business doing a million bucks a month, growing 100% with 110% revenue retention and profitable, you would say, that's the ticket. That's the ticket. Now DocuSign was bigger. We had about 36% market share, but we were cashflow positive and growing 100%.
So, we only raised 4 million. So when you sell your company to make your second millions, sometimes the second one is, there's a certain logic in it. And the logic actually in its own way can be stressful. It can be stressful. That was a very complicated decision because it made sense on paper, given the team wanted to do it and part of the team wanted to do it and given how little we'd raised, right? But in my gut, I knew it was, emotionally I knew it was the wrong thing to do.