Lessons - When Survival Creates Success | Ariana Pareja - 3x Serial Entrepreneur

In this lessons episode, explore the mindset behind building, scaling, and exiting a business without sacrificing control or fulfillment. Discover how to evaluate the real reasons for selling, understand how funding choices shape ownership and exit outcomes, and uncover the hidden trade-offs of venture capital that redefine entrepreneurial freedom. The last thing that you sort of spoke about is exiting your last business, and I think that's a, and we can talk about the growth and all the different things that you sort of teach over to people now. But I mean, that was the most relevant point in your life that you've dealt with more or less recently. So let's talk about your own personal journey in like growing, scaling, exiting a business. What are just some thoughts on how to prep your business for an exit? What are the things you should think about when you're exiting? Are you even happy with how you've gone through your various exits are the things that you would like do differently if you had the chance with any of the business you sold? Yeah, I think when it comes to selling your business, you really have to ask yourself three major questions. And the first one is, why? Why are you really selling your company? Is it because you're burnt out? Is it because you're bleeding money? Is it because your co-founders pushing you out? Is it because your investor wants you out? Is it because your biggest customer is basically saying, I'm tired of paying this invoice every month. You're too expensive. I just want to buy you and just own your tech. So figure out the why. And I know you've interviewed a lot of entrepreneurs, and I'm sure there have been entrepreneurs on this show that have said, you know, I regretted selling my company, because now I'm bored and I don't know what to do with myself. And after the event? Yeah, for sure. After the event. Exactly. Because the reality of it is you don't know what you're going to do after, and in that moment, you're so burnt out that you just start like, I just want to sell it. But if you have a good operating business and it is cash flowing and you're burnt out, that's not a good reason to sell your business. That's a good reason to take a break. That's a good reason to go. Maybe, I don't know, vacation for five, six months, find someone to run the day to day of it, add it to your, just think of it as your investment portfolio, give them whoever you hire, some equity. And that's a good reason. But the second thing that you want to think about is who, right? Who are you selling your company to? You need to always think about if you're going to exit. What makes the most sense strategically? A lot of people, especially with service based businesses, they'll get purchased by a competitor. And that's hard for an entrepreneur because the last 10 years they've been at war with this person. But if they look at who makes sense to purchase them, it's probably going to be a competitor. And that's hard to deal with your ego, but it could be. And then the other question of who is if you're going, like for example, you have a tech startup and now you want to exit, finding the right investment banker makes all the difference, right? Because you want to go after and find out and start to build a relationship with investment banker way before you even start to think to sell so that when you get to that process, they have your best interest. I mean, obviously, they're always going to have your best interest. They're professional. But you want to go after and find that investment banker that has sold companies like yours on a multiple that you want. That's smart. Now. And then when? Yes. And then, well, I was going to say one other point too because it's good advice, but it's counterintuitive to what a lot of people teach entrepreneurs, which is when you're building something build it to sell, right? And then have some sort of strategy in mind so that if you're taking on money at any point, an investor understands where your vision for the company is. So does that advice change if you're taking on investor money? No, that that. I mean, yes and no. Yes. I mean, obviously, if you're taking on investor money that and you have a growth-based business, your plan is to sell. Yeah, I'm of the mentality that I've done service-based and growth-based businesses, you know, small SMBs. It's a different kind of exit. But it plays into, it actually plays into your mindset about taking on money as well. Yeah. You're not even taking on money unless you are trying to transition into a growth-based business for your hitting monumental milestones. So that's the whole difference between everyone who there's it's so confusing because there's so much conflicting advice. Yeah. There's people, I mean, you listen to like the sharps on Shark Tank, which are all very successful entrepreneurs. They're on right. And I think Damon John is always about OPM like other people's money, other people's money, never use your own money. So you hear that and then you're like, shit, well, I have to find other people's money because I don't want to burn my own money. And then there's another there's another way to build the business. So I think it's it's it's hard because there's so much and entrepreneurship is already hard as hell like already and there's all these different conflicting ideas because you're right and he's right in different circumstances. And it's up to the entrepreneur to sort of figure out who's right when and who's right for them. And that is the most confusing thing. So if if you were going to if I was an entrepreneur and I was looking at all these different pieces of advice and you know Damon John on Shark Tank saying use OPM and then you're saying actually build an MVP and then take on money if you have to grow but don't take on money. How does that entrepreneur understand what what they need to do like what it was here at their goals? It depends on on on their industry depends on their business right. So for example, if you're going after consumers, you need to raise one because going after consumers is really, really hard, especially on a like a national scale, you're not going to be able to bootstrap that. I mean, you could, but it would be really, really hard. And then, you know, if you're going up against publicly traded companies, for example, like in our case, we could not we didn't have the luxury to bootstrap, remind like our competitors were publicly traded companies that were coming after us every single day saying that they're going to squander us. And so the only thing that set us apart was speed was just pure speed. That was the only thing that could really set us apart at that time. And so we needed to raise capital that we could hire the best of the best in the country and just deploy quicker and faster than everybody else. And, and what did you learn? That was the only business you ever raised for. Correct. Outside of outside of literally buying properties. Yeah. Okay. So what did you learn raising money? Oh gosh. That's the first thing that even like before we reported, I was saying how we met was at attack conference. And that's the first thing that you mentioned to me because I was going to raise myself, which I'm literally still going through and that like it's a testament to how long some of this shit can take because that was what like almost here and I was about. Yeah, that was an e-merge last year. Yeah, so it's been like an ongoing thing in my life. But then you mentioned like don't take on money if you don't have to. So obviously that comes from stress. Trauma. Yeah. It does 100%. So so what happened or what or what would you do differently? Oh gosh. Um don't take such a high valuation. Um the thing about VCs. Well, let me rephrase that. So the thing about taking capital just in general is that once you take on other people's money, um it's no longer your company. It's everyone's company now. You don't get to act like a dictator anymore. And and and and it's it's a democracy and I'm just um yeah. So taking on VC capital as well is is really tricky, especially if you've never done it before because you don't understand how things work yet. And a lot of times not all VCs, but a lot of times VCs what they'll do is they'll give you this ridiculously high valuation and they'll give you X amount of runway and they'll give you these milestones and they'll say okay well if you hit these milestones by this time then we'll fund you again. Yeah. Yeah. But they know that you probably won't hit those milestones. And so now it becomes this dependency that they've built, right? So you as the entrepreneur, you don't hit these milestones and then you have this value then then they're like oh well okay we'll give you money again, but we're going to take preferred shares. And by the way we want all the board seats and we want this and we want to end there in this position of power to negotiate whatever they want. And what are you going to do? What's your choice? You're either going to say no I'm not taking that term sheet and then you your lights go out then you go bankrupt or you just say okay I guess this is what we're doing and you just sign on the dotted line and you just move forward. So my suggestion would be if you have to raise capital, angel investors the way to go definitely angel investors because the thing about VCs they have so many people in their portfolio company and unless you're that one unicorn they're not going to pay attention to you and they're not going to care to help you and you know a lot of times founders think that oh if I raise venture capital the second I do it I'll be replaced and they'll get into CEO and they'll get really involved actually no that's not the case at all they don't really get involved at all. That's more growth and private equity they get more involved. And so you know if you're going to be doing it all on your own anyways you might as well just figure it out with the angel investors that will play friendly when it comes to raising again and yeah and and not everyone's experiences that but that was fine. No but yeah you have to be you have to be very careful because some like venture capitalists are professional investors yeah and I think the one thing that I pulled out of front you just said is they'll they'll play onto your emotions about a high valuation because you'll think as an entrepreneur I want to get a high valuation so I give up less than my company like that's that's the immediate entrepreneur mindset when it comes to raising money but then that screws you in the future because if you think about how much money you actually have to make to make those investors happy exactly so especially at I mean if you look at the different rounds right so I these are all like these are all guesstimates but I think for like a seed it's like they're looking for like 100x and then like a series a maybe like a 30x and then like a series BCD it could be like a 5x 6x 10x whatever it is but if you think about raising at you know if you want to make a 100x on on 10 million dollars like your company has to be like wildly successful yeah you have to be very very very you have to be like very very successful right so you have to be careful what you raise that and then there's then you have to do down rounds in the future and you have to have a huge total adjustable brackets yeah that's just to know the tam and then also if you think about it if you are raising that much and then like that that second term sheet is not as favorable well it's super time consuming to go raise money so yeah they're putting money right in front of you with shit terms but like if you are a founder and you're raising more money from new people that you think are gonna give you better terms it's like a full-time job oh it is and if you don't have money for an investment banker because you're trying to keep the lights on and pay salaries for another three months you don't have the 10 or 15k retainer for the investment banker they can go help you with at the same time right so it's just all around very stressful I've never I mean raising money has a place but the entrepreneurs that I know they're the happiest have never taken on money because they have all their equity yeah and they don't have the stress and they don't have the stress and they didn't feel like an employee in their own company that they built thanks for tuning in if you found this valuable don't forget to hit that subscribe button so you never miss an episode and if you want to dive deeper into this conversation check out the links in the description to watch the full episode see you in the next one