Josh Abramson turned down a $9 million offer to buy his first business at just 18. Since then he has sold follow up ventures for tens of millions of dollars, and participated in funding other founders.
In an exclusive interview on the DealMakers Podcast, Josh Abramson shares his journey as a founder and some of the most important learnings he got during the process of building and scaling multiple successful companies (listen to the full episode here).
Everything Started in College
Not many 18 year olds in college would turn down nine million dollars for a fun hustle they started as a side job. Josh Abramson did. CollegeHumor.com was a bootstrapped site Josh built with a friend to make extra money while away at school. Long before Facebook or Instagram existed with all their memes.
Between ad revenues and product sales the venture really took off. Yet, wisely relying on the outside advice of others with more business acumen, Josh says he realized that saying no to a nine million offer couldn’t hurt. If the business was really that great it would make him more than nine million in a few years of revenues. If it failed, any stock he would have received in the deal would have been worthless anyway.
The Limitations of an E-commerce Business
Eventually Josh Abramson did sell multiple businesses for tens of millions of dollars. The most recent being t-shirt company TeePublic in a reported $41 million deal which was an all cash transaction.
Josh says that most retail e-commerce businesses, especially at a low price point are just going to hit a brick wall. There comes a point where you just can’t spend another dollar profitably. Especially when trying to scale customer acquisition.
With BustedTees Josh realized that while the company might be able to keep going at $10 million a year in revenue, it wasn’t going to be a $100 million a year company with that model.
Instead he took on the concept of leveraging the crowd, like Vimeo has done with user generated content, and became a marketplace platform for other t-shirt designers. The company recently sold for $41 million.
When we are thinking about one business vs. multiple businesses, one consistent trend we’ve been seeing more of recently is the M&A roll up of multiple companies and more consolidation. Especially in digital media. It’s a strategy that entrepreneurs can use themselves to create an even more valuable umbrella company ripe for an even larger exit. As Josh says, it’s a lot easier to build a $40 million company than a $400 million company. If you have a lot of interests and business ideas, embracing more of them may be a viable path to getting to those really big numbers instead of trying to force it all into one.
The Value of Being in the Right Environment
When Josh Abramson really started out as a founding entrepreneur his team moved out to San Diego. Only to quickly find it wasn’t the ideal environment for a highly successful startup.
On moving to New York City, Josh describes a city where you just meet a higher level of people who are passionate about business, have talent and who are moving at a fast pace. It was incredibly conducive to making things happen.
Just six months into being in NYC the New Yorker wrote an article about Josh’s business. He describes it as a huge inflection point that led to meeting all types of people, including VCs and the MTV team who flew them out to the VMAs and made an offer to buy the business.
Due Diligence is Hell & Doesn’t Always Lead to a Sale
Having gone through months of due diligence with MTV, the deal just didn’t happen. This is a part of the entrepreneurial life that most founders seriously underestimate. As Josh describes, it can be very stressful and a huge distraction. It can be worth it, but don’t underestimate how much of your life it will take up in the process.
As is common with many exit deals, Josh wound up with a multi-year commitment to staying on, after selling 51% of Connected Ventures to IAC in a reported $20 million deal. Connected Ventures owned the properties CollegeHumor, Vimeo, and BustedTees.
Unfortunately, after the acquisition was completed Josh quickly found that type of corporate life wasn’t for him. He was effectively an employee with no final decision making power. Going back to a 9 to 5 job for someone that has the real entrepreneurial spirit is pretty much the worst case scenario.
If you really love your business and care about the mission, take time to think twice before selling out. From Toys R Us to Tesla, we’ve recently seen more founders looking to buy back their businesses. Josh ended up taking back BustedTees when he left IAC.
Furthermore, his philosophy is that he actively tries to make his job as CEO become boring by delegating as much as possible. Frequently Josh has delegated work to people who are far better suited to do the job. From Josh perspective, not only does this result in a better job being done, but it frees him up to think about bigger opportunities, what other jobs he can create that will benefit the company, etc. Josh never came up with his next big move in business while deep in the weeds. As he states, having room to breathe is critical.
Summary
Josh recommends hiring as soon as you have an opportunity to delegate something to someone else so that you can focus on the next thing. See it as an investment to scale your own productivity.
Find out more about Josh and how he started Vimeo and a variety of other businesses, by tuning in to the full episode of this founder interview on the DealMakers Podcast (listen to the full episode here).
