"For me entrepreneurship is not a profession, it's a way of life. Being an entrepreneur means aspiring to build products that change the world. Selling businesses isn't nearly as cool, but sometimes it is the right course of action."
That’s Nokia’s chairman of the board, Risto Siilasmaa, talking about Nokia’s recent decision to sell its smartphone business to Microsoft for $7.2 billion.
The part about how selling "isn’t nearly as cool" caught my attention, since I’d been thinking about that experience lately. A small company called HomeSav.com, that appeared on Dragons’ Den last year has just been bought by Waterloo-based Rebellion Media. When I heard, I wondered what had happened. Did the team run out of money and sell out of desperation? Or was it always their plan to build to a certain size and happily cash out?
'The deal made sense, we took a year to go over it, but there is some remorse about selling a business we grew from scratch to a Fortune 500. You knew it wasn’t coming back'—Ted Hastings, Rebellion Media
Entrepreneurs sell for myriad reasons. And it’s often seemed to me that no matter what the circumstances, it must be a wrenching decision. Building a business is a tremendous undertaking. Founders pour their heart and soul — plus their money and energy — into their ventures. It’s not uncommon to hear them describe their business as their "baby". To break that bond for any reason has to be emotional.
As Mr. Siilasmaa notes, sometimes selling is the "right course of action". For Nokia, the deal with Microsoft was financially wise. His company lost the smartphone battle some time ago to iPhone and Android. The company has been losing value and haemorrhaging market share ever since. Plenty of pundits commented that the $7.2 billion price-tag was a type of victory.
But what about the little start-up closer to home, HomeSav? Just three years old, it was the brainchild of a pair of Wharton School classmates, Alex Norman and Allan Fisch, along with Allan’s sister Aliza Pulver, who had experience in the furniture business. All three came to the Den in 2011, pitching their online store that sells chic home furnishings at discount prices.
"We’re sort of like an online Crate and Barrel," explains Aliza. "We cater to the same demographic, the 28 to 55 year old smarter woman, who’s looking for fashionable home products at a discount."
The three had lived abroad, and when they returned to Canada to settle down, they didn’t have the time or interest to traipse around on foot or by car, to search out the right furnishings at the right price. They figured plenty of e-commerce aficionados felt the same, and created HomeSav.
"We want to build this company and make it huge," says Alex. "We’re really interested in changing the landscape the way people shop for furniture in North America."
Offered a deal on Dragons Den
In the Den, the trio wowed the Dragons with their business model (they don’t keep inventory, arranging for their 800-plus manufacturers and artisans and brand partners to ship directly to customers), and were offered a deal.
After the show was broadcast though, Alex, Allan and Aliza got a better offer from a private investor, and opted for that. About a year later, they were on the hunt for investment again, needing more money for marketing. The names of Ted Hastings and Rebellion Media were suggested. Hastings is a Waterloo-based serial entrepreneur, who’s building a stable of websites. A meeting was arranged.
"Our team went out to Waterloo and sat down with Ted, explained the vision and he went on to explain how he thought Rebellion would be very complimentary to our vision," says Allan.
But Hastings’ pitch was that Rebellion would buy HomeSav outright. The founders would become employees. It wasn’t what Allan, Alex and Aliza had in mind at the time.
"Let’s put it this way," Hastings tells me over the phone, with a little chuckle. "After we met I sent some follow-up emails. I don’t think they were all responded to."
A year of talk to reach a deal
It took a full year before a deal was struck, while the HomeSav team explored other options, and negotiated with Rebellion. In the end, they decided to sell their baby.
Hastings understood exactly what the HomeSav team was going through. He’s bought 13 companies in 13 months, but he’s also been a seller on several occasions. In 2006, 3M bought a software company Hastings founded called GBG.
"The day that the deal closed was November first, and when the press release came across my Blackberry at the time, the first reaction was ‘I’m not sure this was the right decision for me personally.’ The deal made sense, we took a year to go over it, but there is some remorse about selling a business we grew from scratch to a Fortune 500," he says. "You knew it wasn’t coming back."
Not surprisingly perhaps, he disagrees with Nokia’s chairman, that selling a company isn’t as cool as building one.
"Those that have sold a business at the right time, to the right buyer, for the right price will tell you convincingly, that experience is equally cool," he says. "It is something you will remember for many years to come, something that came with incredible sacrifices that only a few involved in the venture will truly appreciate."
If Aliza, Alex and Allan had doubts prior to selling to Ted and Rebellion, that’s not what they’re talking about now.
"Rebellion has this huge strength in marketing," says Allan. "They were also using mobile apps in a unique fashion, doing many things we wanted to do but we couldn’t do because we were so small. We weren’t sure we could take HomeSav where we think it can go, and now we can."
"We wanted to maintain our autonomy and grow on our terms," says Aliza. "We were very fortunate in that regard since Ted believes in the vision that we have."
They certainly sound more chipper than the Nokia chairman, lamenting his loss of mojo in selling to Microsoft. And after all, isn’t cool a matter of opinion?