Don't Freak Out
Don't Freak Out
Episode 3 - The Lingualcare Story Part III
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What’s it like to get a company over the finish line and get a transaction closed? Lea and Wendi talk about what got Lea to the point of being able to sell her company and the nail-biting months between making the decision to sell and closing the deal.

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Show Notes

Don't Freak Out
Don't Freak Out
Episode 3 - The Lingualcare Story Part III
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(pictured above: Lea in Germany)

Lea A. Ellermeier 0:03
There’s so much rejection that goes along with starting a company. And you just you want to say, “Oh, I’m immune to it” at certain point that I never was. I never was.

What does every startup company have in common? Chaos! Welcome to “Don’t Freak Out Today, Freak Out Tomorrow.” I’m your host, Lea Ellermeier. Each week, we’re taking a deep dive into what it’s like to start a company, manage the chaos, maybe freak out, but not lose your mind.

Wendi McGowan-Ellis 0:38
Well, Lea after last week’s episode number two, I know that episode number three, here, we’re getting into even more story about your amazing journey.

Lea A. Ellermeier 0:48
So, there’s so much rejection that goes along with starting a company. Yeah. And you just you want to say, oh, I’m immune to it at certain point. But I never was. I never was. Even today, when I walk out of a meeting and someone says, Hey, this is not a good fit for us. I take it personally. Yeah, not to the extent that I did back then. Right. But I still take it personally,

Wendi McGowan-Ellis 1:11
Right? Because they took the meeting in the first place. And you thought they were qualified. And you thought that because now you’re at the point of expertise, where you’re where you’re only having meetings that you think there’s a 90% chance that this is going to happen? Exactly. Yeah. Yeah. So besides that, what do you think are the most difficult parts of being a startup CEO?

Lea A. Ellermeier 1:36
I think that it’s very difficult to manage all the competing demands that are coming at you and prioritizing, because, for me, whoever’s yelling at me the loudest is usually getting my attention. Yeah. Even though what they’re yelling about might not be the best, biggest priority for the company. Yeah. So I really struggled many times with what I was prioritize how I was prioritizing, and letting the squeaky wheels get the oil. I didn’t love managing people at that time. Yeah, I would, I would probably say that I still don’t, but I’m better at it. I wanted everybody to come into the room with the same passion that I did, to show up with that same level of expertise for what they did, and attention to detail. I can’t tell you how many times I rewrote marketing copy even from ad agencies. And I would tell myself, Well, you know, I can’t afford the best, which was true frequently. But I needed to teach more and do less. But as an entrepreneur, you know, I had this high standard of perfection. I’ve since heard other people say things like, wow, if somebody can do it, 80% as well as you can, you should pay them to do it. And you should keep focusing your time on those bigger priorities. Yeah, I struggled with that.

Wendi McGowan-Ellis 3:05
Yeah. Because 80% probably for the entrepreneur personality is not quite good enough.

Lea A. Ellermeier 3:11
It’s not good enough. Yeah. At the end of the day, nothing was ever quite good enough. Yeah, for me. Yeah. I always knew what could be better. And it was hard to let it go. Yeah. I still struggle with that today. Yeah, it’s not so much perfectionism, because I think I have gotten past that. But it’s like this thing that I love deserves the best possible shot. Yeah. And I want to give it that best possible shot. Yeah. How do I do that? How can I trust other people to do that? Now my business partners, Thomas and Ruedger, we’re both very good at that they were they shared that…

Wendi McGowan-Ellis 3:46
same level and because they probably had the equal level of passion, and love for it.

Lea A. Ellermeier 3:52
So the other thing that is difficult, is in the middle of our venture we’re about 18 months in, and Thomas, our third partner… So we’ve divided the the equity of the company equally, okay, the founder stock, okay, between the three of us believing that we’re all in this, right? 18 months in Thomas says to me, I can’t do it anymore.

Wendi McGowan-Ellis 4:16
Tired? Other?

Lea A. Ellermeier 4:19
His wife decides to leave. I would also add that by the end of this thing, the four people who were the principals, the German doctor, my two partners in me, all married in the beginning, divorced by the end. Yeah, that’s not a statistic most people want to hear. I believe that there are so many people that are better at managing this than I am, but that that was kind of our thing. So Thomas was the first to though, okay, and he felt like he just couldn’t. He was he was heartbroken. Yeah. He felt like he’d given too much to the business and not enough To his personal life and his personal well being, and routine, and I are sitting there going, Well, wait a minute, you’re gonna make the same money if this thing successful and you’re not gonna do anything from now on. Yeah, that’s a problem because we hadn’t made a provision. I do that now. Right that time, it was a hard lesson. We hadn’t made a provision that if somebody left early that some of their founder stock would go back into the pool. Yeah. And so we did talk Thomas into signing something after the fact, which he he did. And not everybody would, but he was a very ethical man. Yeah. But then it left us with a big hole. Yeah. You know, Thomas was our manufacturing guy. He really understood all the software integrations and technologies and had been managing software development. That’s definitely not my forte. Right. Rooker could manage it, but we needed some more help. So it opened up this vacuum, but again, the people that you hire in who aren’t those early days, don’t share the passion. They don’t share the love for them. It’s a job. Yeah, they don’t want you to call them at 10 o’clock at night, say, hey, I need this.

Wendi McGowan-Ellis 6:04
Right. Right. They’re both out. Yeah, yeah, they don’t have the same level of buying that the founders do. So what’s the best part?

Lea A. Ellermeier 6:13
The best part for me was having options. When I worked for somebody else, I would spend the hours between 4:30 and 5:00, almost always fretting, that someone would call me or pull me into a meeting because I had to leave at five to make it to daycare and time to pick up my son before they started charging me $5 a minute. Yep, or my son standing there feeling like no one’s coming. So really, it was control over my time. I didn’t work less. I worked more, but I figured out when I was going to work. Yeah, it freed me up to do things like he was in a Montessori school to go cook lunch at the Montessori in the middle of the day. Yeah, I might have to work hours after he went to bed. But that was okay. Yeah. It gave me that freedom to go in and do things. And I think that that’s one thing about entrepreneurship that is very appealing to a lot of women is it gives you an ability to create a life. Yeah, that you can determine how you’re allocating your time and when Yep. It’s very demanding, right. So there are definitely other trade offs. But to me, that was the best part. And I also really loved watching the people who worked for me, blossom and grow. I hired people that didn’t come out of dentistry that didn’t have any background in orthodontics, and taught them and watch them become experts in their field and go on then to work at other companies and build a career in a space that they didn’t have any intention of being in until they met me.

Wendi McGowan-Ellis 7:52
Do you think it’s different for men?

Lea A. Ellermeier 7:55
I think it is different for men. I think, for men that I know, in, in entrepreneurship, there’s a lot more ego wrapped up in it. It’s, I think many times more about the money. I wasn’t not about the money, because at the end of the day, we start something because we want to grow it and we want to make it valuable for ourselves and for our investors. But I didn’t measure myself on the money the way I know, some of my male counterparts did. And for me, it wasn’t about, you know, being able to say I had made more or I bought a bigger car or a better house. I mean, I yeah. It wasn’t about the stuff as much for me as it was about having an opportunity to own my future. And be there for my son.

Wendi McGowan-Ellis 8:44
Yeah. And all the while making a difference in the marketplace.

Lea A. Ellermeier 8:48
I believe I believe we were making a difference. Yeah. And I enjoyed some of the customers, you know, going into their sites and seeing patients who likely would not have gotten regular braces or and weren’t candidates for Invisalign. That’s something I should say the product treated the most difficult cases, aesthetically. So if you were an adult, and you wanted braces, and you were, you know, a lawyer, or there was one guy, we treated him as a genealogist. And, you know, out in speaking, you want to look good, yeah, but you don’t want to go around with braces on right. And if you can’t get aligners which were very fashionable at the time, and early on, those could only treat about 25% of the problems. What were your options? Yeah. So we created you know, there was an Academy Award winning actress who wore our braces, whose name I can’t mention, because, but she made two movies with them on Wow. Hmm. I traded a bunch of the Dallas Cowboy cheerleaders, which was also really neat. Yeah. Because, you know, they are doing public appearances all the time and people know them from being down on the field, but I want you to know, those. Those ladies work hard. Yeah. And they go out on us. Oh, They do a lot of they do all kinds of charity work. Yeah. They’re one on one close with people. They’re one on one close with people. They’re talking all the time. Yeah. And we had a wonderful relationship with them.

Wendi McGowan-Ellis 10:12
That’s great. That’s wonderful. So what made you decide to sell the company at the time that you did? And what did that process look like?

Lea A. Ellermeier 10:21
So we didn’t really have a plan to sell the company at that specific time, I was looking at having to raise more money, we had kind of gone through the 5 million that we had. But to get any real growth, we needed more sales reps, we needed people on the street. So I was contemplating having to do a much larger round, probably $20 million, that would effectively end my control of the company. Right? At that point, the stock would have shifted in a way where we would still have a substantial amount, but we would not own our destiny. So as I’m contemplating that, a friend sends me an email one morning in October of 2006, that says, three, purchased this company for $97 million. And it was a startup company that I had never heard of, they were making an intraoral scanning device, similar to what we had made at our prior company. I’m thinking, how did these guys get $97 million? for a company? I never even heard of? Yeah. Do they have a product? Yes, I go online. And look, they don’t have a commercial product.

Wendi McGowan-Ellis 11:31
So they just bought the R&D,?

Lea A. Ellermeier 11:33
They bought the R&D, the technology. And so I thought, I wonder if we could sell the company. And I looked up the banker who did the deal. I found out who represented them. And I contacted him and I said, you know, gosh, how did you get $97 million for company I never heard of, he was good enough to take my call. And he said, Well, I can’t get into specifics. But basically, we ran a competitive process where we had all these companies in the space bid against each other. And they took the highest bid. said, Okay. Fortunately, throughout all the years, we were running legal care. I made a habit of every tradeshow going to the booths of the big companies, and talking to the senior people talking at my company. I love the fact that every time you ask an entrepreneur, Hey, how’s it going? The pat answer is fantastic. Yeah, everything’s great, even when it is absolutely not. But you have to have that answer. We’re doing so well. And you’re talking about all the things that are going well, yeah, even though…

Wendi McGowan-Ellis 12:46
There are things on fire in the back.

Lea A. Ellermeier 12:48
That’s right, nevermind that, that stuff going on over there. But I made a habit of talking to all these folks. And so I knew them. They knew the status of our company. We had customers in common. And so when I went to the banker, I said, Oh, so who was in that process? Can you tell me? He said, Well, you probably know the players. So I make a list? He said yes, yes, yes, yes. And I said, What would you take for you to sell our company? What do you think that could look like? And he said, everybody that was in that process is still in acquisition mode. So I think we could sell your company pretty fast. And we would have the same universe of players. So I went back to my board, some of them didn’t want to sell the company. They thought, Well, you know, we’ve put this money in, you guys are on a good trajectory. We had been, you know, doubling more than doubling our revenue every year. And they said that, it’ll be worth more in three or four years. So why would we sell now. At that time, my personal relationship with my husband had fallen apart. And I was in the middle of a divorce. And I really wanted to not have him as a shareholder of the company. Because I was going to have to relinquish half of my ownership to him. Yep. And that was one of the big reasons. So those things combined, I went back to the board and convinced them that we should do it. So we did run a competitive process. We started at a trade show, and invited all these companies in to see where we were at. The banker was very expensive. Yeah, but I would tell anybody thinking about it. Bankers legitimize a process. Yeah. And they will get more for the company than you will Exactly. And that amount will cover their fee will more than cover their fee.

Wendi McGowan-Ellis 14:42
Right. It’s like having a set the base set for sale sign in front of your house versus for sale by owner.

Lea A. Ellermeier 14:49
Yeah, that’s that’s a great analogy. Yeah. They totally legitimize a process. They know how to get you through the process. Yeah, they know how to help you manage yourself through the process, which can be pretty daunting. It times, dealing with, you know, when you’re a company with 20 people dealing with a company that has 25,000 people, right, and you’re getting dinged every day by Oh, we need you to talk to our accounting people and our, you know, legal people and our regulatory people. And because they have so many boxes that they have to check that it can be pretty intimidating, right? But that’s what we did. And we went through that process, we took bids on the company and the end, we sold it to three.

Wendi McGowan-Ellis 15:29
That’s amazing. That’s so awesome. So as we start to wrap up here, what advice would you give someone who’s listening to this podcast and thinking about selling their company? What should they be thinking about doing and preparing in order for that to happen?

Lea A. Ellermeier 15:46
You need to identify, I think, from the beginning, who’s your buyer universe. I mean, there might be some people that come in that are a surprise. But if your buyer universe is other publicly traded companies, you need to make sure your accounting is done in alignment with the principles that they’re going to use, because they’re going to have to roll you in. That’s, that’s what I would say to everybody. Make sure you’ve got intellectual property assignment agreements signed by people in your company, you’ve got non disclosure agreements, that whatever you’ve done, that you can patent has been patent, whatever isn’t has been, you know, put together as a trade secret that you really think about, if I was a big company, what would I look like, right, and you take those steps, because ultimately, you’ll be acquired by a bigger company, and you need to have all of that stuff available and ready to go. We actually got very good feedback from everybody who participated in our process that our documentation was well organized, there was nothing missing. They were sort of shocked by that. But that’s kind of how we operated. We wanted to look from day one, like a big company. The other thing I would say is, just be calm about it. It’s going to take a while it always takes longer than you think. We were fortunate because we were driving the timeline with that competitive process. So they had to meet our deadlines for initial bid final bid, you know, responses, most people don’t have that advantage. So trying to find some way to drive the timeline is helpful. If you can get more than one in the process. You’re doing great, and absolutely hire a banker. It’s the best money you’ll ever spend.

Wendi McGowan-Ellis 17:39
Well, Lea, thank you so much for today. And thank you listeners for joining us. We invite you to download and subscribe to this – “Don’t Freak Out Today, Freak Out Tomorrow” with Lea Ellermeier podcast on iTunes, Google Spotify, wherever you like to listen. And please visit Lea’s website at www.DontFreakOutToday.com for links to all her social media resources for entrepreneurs, and to subscribe to her email list and stay up to date on everything in Lee’s world. You can also there on her site, find out more about Lea’s book, “Finding The Exit,” where you can hear and read all of the details about things that we talked about today and her journey. And check it out on amazon.com where it’s available for hardcopy purchase Kindle format or as an audio book read by Lea herself!

Lea A. Ellermeier 18:37
Thank you, Wendi, and special thanks to our listeners. This is the start of a unique path where each week I’ll be sharing my lessons learned and interview other amazing women with great stories to tell. Remember everybody… Don’t freak out today, freak out tomorrow!