How do you structure 100% earnout agency acquisitions so founders actually win?

Jason Kirby (00:02.135) Everyone, welcome back to $100 Million Dollar Exits, the show where I interview founders, investors, and operators who have built and scaled hundred million dollar companies. Today I have Eric Huberman on with the show today, the co-founder of Hawk Media. Hawk Media has done over 24 acquisitions rolled up into Hawk Media. It's also done over 120 investments through their fund and has peaked or has reached 750 million in gross revenue. Eric, it's amazing to have you on the show today. Erik Huberman (00:31.33) Yeah, thank you for having me. Jason Kirby (00:33.392) Well, Eric, I want to start with the fact that you know you're a media media agency focusing on the lower middle market and kind of being the best go-to media agency for that that group, but you've also gone out and made twenty-four acquisitions and you know one just closing recently. Why are you buying companies? Erik Huberman (00:52.758) Yeah, so the the same reason I started the company is the same reason I'm buying companies. Like we found that or we, I I found that w when I was advising and consulting for a bunch of brands, when I was running my own brands, there's ninety thousand marketing agencies in the US and I'd say ninety nine percent of them are n don't know how to Be a great marketing agency. They're not a great partner, whether it's because they actually don't know what they're doing marketing wise, they don't know how to build a team. Like a lot of people fall into running marketing agencies because they're good salespeople and know it enough to be dangerous. They sell some clients and now you've got a marketing agency. And then you start hiring people to keep up, and all of a sudden you're almost a slave to your own business where you're constantly having to feed the beast and find clients for the you know employees you have, and you end up on this hamster wheel. And there's again a good a large portion of the ninety thousand agencies in the US fall into that category. And so what I found originally, that's why I started was I found that the few that were any good quickly went up market, only wanted to work with the Fortune two thousand. And basically what that meant was if you're not in the Fortune two thousand, good luck finding a decent marketing partner that has any credibility and the horsepower to give you that sort of Fortune five hundred marketing, but even if you're not in it and has, you know, the infrastructure, the capabilities, the talent, all of that. Like you're you're weeding through a sea of Crap to try to find that. And so that's why I built Hawk. And then you turn around and go, you know, I can look at this as we have 90,000 companies in our competitive landscape. But if you kind of turn it around, you go, well, wait, we've built all this infrastructure, we've got a process that works, we have a platform. Why don't we go look at all these agencies and see if there's some in there's diamonds in the rough that we can find because we know how to vet them and go, this, you know, this is a really talented group of people that just needs a little more. horsepower infrastructure, et cetera, to compete, and that we can f basically partner up and one plus one can equal three. We can get new talent, new skill sets, in new a new client base, new location potentially, while also bringing them all the infrastructure and everything we've been able to build to really differentiate and succeed. And that we've tested that over the years. It's worked really well. And so it's become a pretty core part of our strategy is finding incredible boutique agencies and bringing them in as a partner. Jason Kirby (03:09.006) And so is it only boutique agencies or do you look at technology or other types of acquisition targets? Erik Huberman (03:15.156) question. We've we have bought one piece of technology, but the it the t 23 of the 24 have been agencies. So we're open to it. It's just it's really easy on the agency side integration wise. Like we know how to underwrite it. We know how to do diligence. We know how to value it. Like we that part's easy for us. Technology is a very different beast. And now with AI, it's even further along because we have our own AI development team that there's very little software that is small enough for us to be able to acquire that We can't just replicate in a week. Jason Kirby (03:47.632) You just crushed so many founders' souls right now. like, I'll get a strategic exit. You know, like mm, will you? Erik Huberman (03:52.118) I'm so yeah, it's just Yeah. Yeah. I mean we've we've entertained it. The problem is like we can the way we can do agency acquisitions really can make sense both on both sides economically, but on software, software's not generally profitable. It's you know, they're like a a million dollar agency is a very small agency. A million dollar piece of software is seen as something actually marketable and we don't see it the same way because we're not treating software revenue any different than service revenue these days. I don't I don't believe it's be it's that different anymore. And so, you know, h has that that's brought down the multiples on software. I'm actually bullish on the multiples on services going up because that money has to go somewhere and great service businesses I think are gonna be more valuable going forward. Jason Kirby (04:37.273) Yeah, they've been depleted over the years 'cause everyone's been focused on SAS, but now as we see SAS get depleted, that's a good point. Where where does the money flow and when deals get more competitive? Erik Huberman (04:46.434) Well, it just makes sense. I think software is going to become service based where you're going to be building custom software per client. And so that you know, I think a lot of that's gonna go that way. And so software businesses are gonna be have to become more service businesses and have that service business ethos, which I gotta tell you, most of the big software companies I work with are terrible at that part. So it's gonna be interesting to see how that works. Jason Kirby (05:08.367) I do not disagree. And so what makes an agency worth acquiring? What do you look for and how do you value those deals? Erik Huberman (05:16.726) Yeah. Yeah. The the number one thing is a motivated founder, someone that really is like like our best case scenario and what we look for is a founder that is getting bogged down by the day to day. They're having to do HR accounting, legal, you know, recruiting, client services, everything. And really what they want to focus on is growth. And can we go in there, take all that off their plate, let them focus on growth and you know, have them run through a wall. That's the best case scenario. And that's what we look for is a founder that is very growth motivated, that wants to grow, that just can't find the time because managing these businesses is hard and they don't have the infrastructure, the executive team, to help them do it. And we do. Jason Kirby (05:57.902) And h ultimately how do you how do you value the business? Like do you look at cash flow you have feature for cash flow? Do you look at EBITDA? Do you look at revenue? Erik Huberman (06:03.723) Yeah. It we look at generally Ebita, but most of these don't have any debt, so it's EBITDA is generally cash flow. and so it's generally EBITDA. and and then it's yeah, it's EBITDA, but it's also what comes in that scale isn't a factor, the stability of that EBITDA. How how does it look the past three years? Like How volatile is that? What their retention is, what their concentration, client concentration is. There's a bunch of factors that we look at. And then that's that's just to get to LOI. And then diligence-wise, their culture is a factor, their again, their actual motivation, their trajectory, their you know, how complementary they are to us, like how much synergy is there here? Like there's there's so many factors into how valuable a company will be for us. Jason Kirby (06:56.739) And then when you structure these deals, like typically what what kind of multiple have you seen? Have you seen, you know, over the years of doing multiple transactions over the years, have you seen the multiples been shifting? What's been the typical range that you've been seeing? Erik Huberman (07:08.457) Yeah, multiples have come down the past few years. you know, they went from I'd say somewhere around averaging around like for that for the size we're playing in, like we're we're buying one and a half to five million revenue agencies generally. sometimes a little bigger, sometimes a little smaller, but generally that's a spot. And the multiples on that went from like, you know, averaging probably four four and a half to averaging three. and so no, EBITDA, EBITDA. Jason Kirby (07:33.897) X revenue or e bit cash flow. Yeah. That makes sense. Erik Huberman (07:37.58) Yeah. So and then yeah, it's not just a cash transaction. We actually don't do upfront cash. We do a a hundred percent of earnout based on how it performs. And so yeah. and because honestly, like and we pay better because what we do is we make it completely variable versus milestones. Like a lot of companies what they do is they'll give you twenty percent of the cash up front and then you have to hit milestones that are pretty much unreasonable in or or they Jason Kirby (07:47.364) wow. Erik Huberman (08:03.607) put throw some tricky language in there. So and the only money you ever get is that 20% up front. And I'm truly trying to partner with the founders that we're acquiring. So I just build it out more to be like, you win, we win. And you know, we win and lose together. And so we guarantee profit margins. We do a lot of stuff because again, we're taking over the operation. We do a lot of stuff to take some of the risk off the person. And they really get the benefit of the upside without that much downside. but in return, there's no upfront cash. We're we're mitigating that risk on our end. Because what I find is for an a buyer to be able to give you upfront cash, they have to mitigate that on the earnout part. And that mitigation ends up usually being really onerous for the founder. And you the stories are long about how people never hit their earnout. So I'm like, let's do the opposite. Jason Kirby (08:46.67) yeah. Yeah. Well I guess I I guess I'm having a hard time understanding the difference from how you described it. Like if I'm if I'm an agency and I'm getting valued at three to four X EBITDA or my cash flow is actually my income and I'm not getting any of that up front in the transaction, but I'm being asked to stay on and grow the this business, like what do I actually end up like how do you end up actually structuring that deal now that I can't control anything? Erik Huberman (09:13.557) You we we just structure it based on like if you maintain your business, you'll hit that three X EBITDA in three years. If you shrink your business, it'll just shrink as much as you shrink. It's directly winning. If you grow your business, we'll grow that Ebita multiple. So we actually give you benefit of the growth or the shrinkage and it and that tail is as long as you want it to be, as long as you we keep working together. So if you are able to grow like we have a guy that four X did business. So instead of selling for three X Evita, he sold for twelve and it's still paying out. Jason Kirby (09:48.458) so there's that kind of long term incentive, a little bit more stability, more resources. Erik Huberman (09:50.636) Yeah, you we give the founder the benefit of the synergy along with what we get. And so it's it's the long tail incentive, exactly. And so we attract the right seller because again, we're trying to partner with founders to really scale and grow these things. If someone's looking for some quick cash, like good luck. And there's two reasons people are looking for that. One, they want out, which again, don't want to buy you then. And good luck selling your agency if you just want out. Like most people won't buy that. Or Two, there's ego attached. Like they just can't comprehend, even though the numbers actually play up. Like we pay better than most buyers. Like we again, if you the thesis is if we take everything up your off your platebook growth, can you grow your business? Turns out yes, most founders can. And if you grow your business, you're gonna get a butter multiple with us than you get with other sellers. So if you don't believe in that thesis, then I definitely don't want to buy you. And so it ends up being a self-selection process. where yeah, if you're really stuck on this upfront cache, someone's someone's gonna get screwed by you. Jason Kirby (10:48.08) So by this time, twenty-four hour acquisitions in, you have a playbook. What can you share to our audience that might be interested in kind of buy side MA that they can learn from your playbook on what makes a successful transition post exit or post transaction? Erik Huberman (11:07.423) Yeah, I mean you have to be s like our goal the biggest thing is by the time you actually close an acquisition, both sides need to be very, very clear on what the next year looks like. So like so that when you kick it off again, this is for how we do it, which is our goal is growth. We're not just trying to we're not buying assets. Like at the end of the day, like Agencies aren't worth shit without the team. So we're just we're hi it's an aqua hire would be like in a nutshell. Any and I don't care if it's a hundred million dollar agency, it's still an aqua hire. You're hiring team with relationships to clients. Like that's what an agency is. And so you you need to build something that's gonna really incentivize that team to stick together, to perform for you. You need to be able to spot places where there's opportunity to accelerate that company in a realistic way. Everybody thinks they're so fucking brilliant, but you need to really understand that like a lot of these operators actually do know what they're doing and there's reasons why it hasn't performed and to dive in and really figure out are there opportunities? Where can you boost these things? Because it's kind of the cliche if you're not growing, you're dying. If there's not opportunities to build these businesses and grow them, they're going to end up d declining and quo and going down the other way. And then again, every strategy is different. We have a scaled strategy. So for us, we're able to do deals a lot quicker. We're able to do deals at scale, and we've built an infrastructure for it. And for us, we know that some are going to work out and some aren't. So we just march forward and go for, you know, quantity and not in a massive quantity, but we do end up, we've done 24 deals as opposed to doing two deals and having to make sure that those two deals go off of that itch. I just talked to a friend of mine that. was able to triple his business with one acquisition between the synergy and the other and the size of the business, but he spent two years on that one deal. Two years ago I did ten deals in a year. So you you know, it's just a d there's different strategies depending on what you want to do. We're going for the programmatic and A strategy. Jason Kirby (13:03.032) No, I think it's fantastic and it's really enlightening to to kinda hear the insides of how these types of deals get structured and for founders that might be on the selling side, what are the biggest mistakes that they make going into the sell side process? Erik Huberman (13:18.093) not being rational on the stuff they like I'm trying to think of like the ones like I mean and I I say that but sincerely we we walk away from a lot of deals where just like this person's all ego. Like we're not dealing with this. Like if you want to have a prudent conversation about like this works, this doesn't, that's where we do really well. And like, and I don't mean not being emotional on like concerns, like I just we're we're going under contract with a deal right now that the guys had some reasonable concerns to talk through. that let's let's talk through Let's see if what you know, we can cover those. And that's that's super normal. But it's more of like, you know, I've worked for twenty years on this and I'm I I expect twenty million dollars up front. I'm like for your one million revenue two hundred K EBITDA business, you think you're gonna get a hundred times EBITDA. Like it's those kind of things it's just like, come on, man, like I'm not Yeah, exactly. And it's like I I've definitely my my ammo is like I'm not gonna be the one to bear bad news to I'm gonna tell you good luck and go find someone to do that. Like Jason Kirby (14:06.896) Sounds logical. Erik Huberman (14:16.021) And so that's that's a good way to like you have to really understand, like it it sucks because we all have inflated views of the value of what we've created. It's just natural. You have to as an entrepreneur. And you know, you have to come to terms yourself with what it really is worth. It's kind of like every time I see an entrepreneur hire a PR firm and they think they should be on the cover of Forbes because everything they're doing is so exciting. And it's like, come on, man, like you you gotta be realistic with where you actually sit. And when we see people that are more realistic and have come down to earth and like go, and again, I'm not trying a lot of people, it's not about like deflating their self-view. It's just actually understanding where they sit in the market. I remember one of my I said I got quoted on this recently, and my wife's like, thanks for that, but I'm gonna do it again. I I when I hit 10 million in revenue at the company, I told I ran in, I was like, We hit 10 million in revenue. Holy shit, my wife's in private equity. It's like, Do you know how many companies do 10 million a year in revenue? Like, relax. It it's like you kinda have to have that realism as a part of it too. That's one. Also, most people in our target, and most people probably listening, haven't gone through the process. Don't try to act like you know everything. That's that's a really tough one too. It's like ask questions, get advice, like go get coaching from people that actually know what they're talking about. But we've dealt with that a couple of times where people are trying to tell us how this all works, and we're like, Know they're telling me, like, your model doesn't make sense, or da-da-da. I'm like, listen, if you don't like it, that's fine. But again, I've bought 24 companies and I also have invested in another 120 companies. Some of those have had exits. Like, I have a wife in private equity. Don't try to coach me on how MA works. Like, unless you're actually there are people more knowledgeable than me that I go to advice. But when I'm talking to someone that's literally never sold a company and they're telling me this isn't how it works, or they're we're dealing with this on one right now where it's like, Every little question, they like they're posturing as if they know everything. Like they're very, you know, they they're all buttoned up, they know everything, but they're asking questions that are make it obvious to the, you know, sort of sophisticated buyer that they have no idea what they're talking about. They'll use terms and you know that they don't know the meaning of those terms. It's like, don't put off, don't put on a front. I guess that's what I'm trying to say. It's like just be real, be authentic, be who you are, because again, you're Erik Huberman (16:32.223) Inlet, the only time I would say this is different is like if you're really trying to get someone to you're trying to fleece someone, like get someone to buy your company before it falls apart and get out, do whatever you need to do. But if you're truly looking for a partner, be open and authentic and real because they're gonna be a partner. You again, my goal at the end of a transaction is both sides know everything. And I mean that. I want the founder that we're acquiring, I there's nothing I'm trying there's no tricks I'm trying to pull. So it's really easy. I'm like, you sometimes founders be I don't know if it's okay to ask this, but can I see this or can I ask you that? Can I get more clarity into this? Please ask everything. I want you to know everything about our business and what you're getting into. I have them go talk to a bunch of the founders we've acquired, hear the good, the bad, and the ugly. That's super important. And so it goes the other way. Like the worst thing people do is tell us what we want to hear versus what they actually believe and feel. Because then at some point it catches up. Whether it's in the deal process, they start arguing about terms where you're like, you said you wanted to. Do this. Why the fuck do you care about this? Well, I don't really want to do that. Well, what the fuck are you talking about? Like, that'll happen. Or post-transaction. This has happened a couple of times. We do our deals where we really set up the founder to be the growth engine. And we'll get people that like do the deal, the entire thing, the reward structure, the earnout structure, everything is based on their growth. And then they go, I don't want to drive growth. Well, what the fuck did you do this deal for? This has happened a few times. So it's like, Jason Kirby (17:50.352) Yeah. Erik Huberman (17:55.148) That's the stuff that it's like now learning from that, we're very articulate about this is what you're going to be doing. Are you ready for that? Are you sure? Are you absolutely sure? And to the point that the founder's like, yes, yes, I get it. You've said that 50 times. I'm like, yeah. And then I'm again out of transparency, go, here's why I'm saying this 50 times, because this is the ugly side of what's happened. And so again, I think it's authenticity. And I don't mean authenticity of like what the way an influencer is authentic. I mean truly being honest and authentic with what you want. what you're trying to accomplish with that partner if you're looking for a partner is critical. Jason Kirby (18:29.648) Like I the fact that you kind of hit so many different layers there of a transaction. just shows like you've you've been through this multiple times. 'cause yeah, that's the thing, is like people think about the honeymoon stage of like, we're gonna get acquired, I'm gonna get this big, you know, like opportunity. Now granted you don't do the cash up front, so there's there's this kind of continuum that it really matters to the transactions you're doing. But you know the that expectation management in all transactions, like that's the biggest killer of kind of post exit. Erik Huberman (18:38.913) No yeah, just a few. Erik Huberman (18:57.623) Yeah. Yep. Jason Kirby (19:02.898) for for the sell side. It's just they thought something and they had something in their head and despite whatever was written down, they didn't actually click. and so you kinda mention Erik Huberman (19:11.265) Yep. And then it's gonna be a function of like I think also every transaction you're gonna have what you hope would happen and what actually happens. And it's like there's gonna be a delta. Like it might be a small delta, but there'll be delta. The ability to roll with it, like this is the reality now, like control what you can control and move forward, I think is a really important one too. Cause let's say even out through that all all that transparency, all that direct communication, you still heard something different than what happened, then it is what it is. I've seen different people sort of rise to occasionally be this is what I signed up for. Like I didn't quite get it, but now that I'm here, I get it. Here it is. Let's go. And other people that like get pissed off about it, get kind of, you know, almost grumpy in sometimes where it's like, well, I didn't think this is what it was. Like we tried to tell you, but okay, we're here now. And instead of leaning in and maximizing the opportunity, they do it begrudgingly, which just hurts themselves. That's the other piece too is like you you you it depending on your deal, but if you're in an agency, your earnout's probably gonna be a big part of that. Whatever deal you signed up for, maximize it. Jason Kirby (20:14.158) And so yeah, especially in that negotiation, like get those expectations cleared up in the beginning. What's a deal that ultimately didn't work out? You know, you did the deal, you closed. What's kind of some the details of of one of those situations where you thought you did it right but it still fell apart? Erik Huberman (20:29.695) Yeah. We tried to buy one international deal, but we didn't know how to read the tax returns and the guy had said he was doing twenty-five percent EBITDA and when we got into the business it was negative twenty-five percent. So we ended up saying we could either fix this for you or give it back to you, and we gave it back to him. So that was one. two, it was a guy that it's kind of what I was alluding to, a guy that came in and after like six months, like he was like, Yeah, I'm gonna grow the thing, da-da-da. And he's like, he basically told me, like, I just wanna sit at home and you gu you guys Jason Kirby (20:47.226) Yeah. Erik Huberman (20:58.669) Send me brands that want to work with us and I'll close them. I was like, You think that's a challenge for me to like a company that says I want to work with Hawk Media, I can't find someone that can give send them a contract. Like that's your job that's not a job here. And so we ended up giving him back like longer story, but we ended up after like six months of trying to work with a guy we just gave him back his business and went, Screw it, like we're out. So those the it's those. It's like when it's just like there's n this is a waste of my energy and yours, like I don't wanna deal with this and Jason Kirby (21:13.038) Ha ha ha. Erik Huberman (21:28.685) Jason Kirby (21:28.72) So do you preserve their brand so to be able to spin it back out to them, or is people kind of merging into Hawk ultimately? Erik Huberman (21:34.985) It's depends. It depends on the value of the brand and what they've built in the marketplace or if there's a reason to have it. And there's no ego on my end, so if it's gonna whatever's gonna drive more business for Jason Kirby (21:45.937) And so let's kind of switch over to your investment side. So you have this playbook of you know buying businesses for your core business, which is you know Hawk Media, the media agency, but for the investment side, so you started doing some angel investments and you know early stage investments, then you essentially raised a fund, multiple funds I think at this point. kind of gave the audience a quick history on kind of what led to becoming a an LP backfund. Erik Huberman (21:50.477) Yeah. Yeah. Mm. Erik Huberman (22:12.385) Yeah. yeah, so my original plan with Hawk was I never thought I was gonna big this build this big of a business. not out of lack of confidence, it's just not how I was thinking. And so I thought I'd build a cash flow business that would make great cash every year. I'd take that money and I'd put it into real estate and I'd build a con you know, a great real estate portfolio that was my conservative side, so I could take risk on this. But the idea was take profit for ten years, put it into real estate, and by the ten year mark, I'd probably be earning a decent amount in real estate was The way I was thinking, like invest my money conservatively. a year in, I had friends that were raising money and they're like, Hey, we're raising money, we want you to be an investor, you're coming in. How much can you write a check for? I was like, No, guys, I'm not doing this startup shit. Like I spend my time on risky, I'm not putting my money there. And they're like, No, no, we're not asking, we're telling you. You're gonna invest, you're gonna be on the cap table. It can be a small check, but you're in. Like I respect that. All right, fine. I wrote a small check and that Jason Kirby (22:43.216) Mm-hmm. Jason Kirby (23:05.998) It's that easy. You know you're investing. Jedi Mind tricked you. Erik Huberman (23:10.283) When I wrote it, it was a very small check, but it became a billion dollar company very quickly. And so I was like, I might not want to be so stubborn about this. Like I know a lot of operators, I know a lot of people, I have a good network. Maybe I should look at this more. And so over three years I wrote seven checks into startups and averaged 11x return on them and went, I'm this worked out pretty well. I should maybe invest more money. I I had a guy that I brought on to manage that. that's actually part of the story too. We're also doing a lot of sweat equity deals where we'd do services for equity. And it turned out most of the companies that wanted to give up equity for marketing services were undercapitalized or undermotivated to actually build a big company. They were too it was too easy to get equity out of them, which meant they didn't value their own equity. Which best piece of advice I think I've had for as an investor is invest in the ambition of the founder. Where are you trying to take this? Like, what are you trying to do? And if someone's willing to give me 10% of their company to do marketing, they probably don't value their, they don't think it's going to be a billion-dollar company because there's no fucking way they'd give me $100 million in potential value. so saw that. the sweat equity deals weren't going, you know, turned out to be a negative selection. And so the the investments went really well. And so the guy running that for me was like, we should write more checks. I'm like, I don't have unlimited capital. And he's like, you know, I was actually investing in real estate too, and still am. And so I was like, Why don't we and he's why don't we raise a fund? Said, yeah, let's look at it. And went out and raised a five $5.6 million fund. And that was between 2019 and 2021. So five years later, that's about a four X MOIC, which has been awesome. We're like top over well above the top five percent of fund managers during our vintage. And so then we raised a second fund two years ago. that's also going really well. starting to get like it takes a while. We're early stage investors, so we're starting to get the winners are starting to come out, the like real growth trajectories are starting to happen, and what we talked about before recording, like the market's been a weird four years. And so I'm I'm looking at the returns we've had in that period and been like, you know, if the market turns right now with how much we've had, like that four X on the fun one could go to eight X very quickly, given like just market multiples and increases and that kind of thing. So like Erik Huberman (25:28.683) Because now it's real you know, doubling it isn't crazy. We're already 4x, but to get a double out of, you know, to get a hundred percent growth out of the market shifting would is totally possible. And so we're really excited about what the next couple years look like. and yeah, we'll probably go out to raise our third fund this year. We're almost fully deployed out of fund two. but that was really the trajectory was some angel investing and then getting more focused on the fund. So the first fund we looked at doing like 70% future marketing, future commerce. And then 30% consumer. And then we realize pretty quickly like consumer's really hard in the really early stages. There's such an X factor in that early, you know, pre-seed seed round that I I don't think I'd be surprised if anyone can just spot it. I like later, like series A, series B, series C consumer, I think is really interesting. And I'm an LP in a fund called Family Fund that does a great job there. But on the future of marketing future of commerce, we know how that should look. We don't like it, doesn't need to have any traction. We can look at a strategy and go, yeah, fuck, we need this for our six hundred clients. Go build it. We will onboard. And that's been really fun because we've we that's where we've made a lot of great calls because we know where the market's going. Jason Kirby (26:39.92) So what are some of the kind of deals you're most proud of? Like the ones that really stand out, that you gotta put your name behind. Erik Huberman (26:46.029) Yeah, I mean Postscript was a really fun one. well, I guess let's go on the fun side. So, you know, we're also in Clavio and one of their first partners, and that's had an IPO, so that's a great one. Postscript, which is a SMS marketing tool, they're a they've built a massive business that's really made our first fund. And that was we knew we wanted to invest in an SMS marketing tool. We looked at all of them, we vetted all of them, and Alex, the president and co-founder at Postscript literally chased me down the halls at Shop Talk and was like, we need to work with Hawk. Like, all right, let's talk. And I really liked him. I liked how they looked at business. I liked the way they were thinking about it. And we invested and we called it right, and they've done an incredible job. So that's been a big winner. the one of most that I'm really excited about that, and that's still growing, but from a trajectory standpoint, we were in the famil friends and family round of a company called Tele, which was basically the a free television. Where they give you a free television as a sound bar and there's a little ad unit on it. And the founder's an old friend. He had a really big exit. If you know Pluto TV, he founded that too. And he called me that he's gonna build a television company. And I was like, like Pluto? He's like, no, no, hardware. I'm like, you're gonna build a hardware company. What the fuck are you thinking? And I'm like, you know what? It's you. We'll throw a check in. Like, this is one of those bet on the jockey. You'll figure it out. And I mean the the numbers were last year were public. They're on like a you know, they did they did almost they got to like a forty million run rate in their first year, thirty million run rate their first year, and the trajectory is insane. And so, you know, there that business I think is going to be probably end up being our biggest winner by far, 'cause it's already gonna be our most valuable company we've ever invested in probably next year. And it's been two years. So Jason Kirby (28:36.974) This is a T V that you get for free in exchange, like it's gonna project ads on you and through like a 'cause I look at it, it's like a second screen. Erik Huberman (28:40.524) And there's a It's just it has a sound bar in the corner of the soundbar has a little like ad screen. Not not sound, just video. And and then they have a bunch of integrations like if you're watching sports, I forgot which one they have, but like if you're watching sports, DraftKings or FanDuel will pop up and you can bet on the game. Like they have all that kind of stuff that they they literally you it's a media property that they partner with, you know, weather apps and all sorts of other stuff to create revenue and it's working really well. Their metrics are absurd. And so Yeah. Yeah. So that's an exciting one. And I mean, there's a ton though. I just invested our newest investment's a company called doe.do, so dough like breaddog.do. And this is an amazing site. You type in come up with on any product you ever you want to come up with. Like I I'm gonna launch my hot sauce company. I can't I just need to find a few hours to do it. Or not even a 30 minutes to do it. You basically type in the product you want to launch, they immediately generate, you know, using AI Jason Kirby (29:13.85) That is fascinating. Erik Huberman (29:43.49) renderings of the product, the logo, everything, and go, you know, and then you can talk to it and change it and update it. You get to where you want it, and then it'll immediately pair you with a Copac or a manufacturer, tell you the costs, set up your website, set up your ads, and boom, you're off to the races. And it takes like probably 30 minutes to get the whole thing done. And you've launched your CPG company or your product company. Jason Kirby (30:06.5) That's how kind of that was it, the the AI slop in reverse, postly or whatever it was that recently announced that's like more for like a software business, but now you're talking about like launching a consumer Erik Huberman (30:16.971) Right. It's it's it's vibe coding product companies. And it's like I you know, f everybody w has always wanted to launch their little product brand. Now you can. And it tells you the minimums, it tells you everything. So like I am keep I keep planning I'm gonna launch hawk sauce, you know, hot habanero, hawk media hot sauce. Jason Kirby (30:36.08) Just sell it to your employees. Give it to us kids. Erik Huberman (30:38.091) Yeah. Yeah. We'll probably have to hook them up. But yeah, I I I just see you know, like I I I like hot sauce. It seems fun. Like I'm like, let's just, you know, have fun with it. But like that's the idea is like it can create this long tail of like I I think that's a really interesting thing of like let's get rid like the drop shipping thing didn't work. Like the the the way these businesses like but there's still there's a massive market for people that want to run thousand dollar a month businesses just to make us you know their side hustle or their little product company or just Doing it out of a hobby. Like maybe it's not even to make money, it's just to have a little cool business. And I think like with AI and the way they've built their infrastructure, like I really like that company. So that's the most recent. We we wrote that check two weeks ago. So Jason Kirby (31:20.676) No, it's kinda fun. I haven't seen it that that looks super clear. I haven't obviously go through it, but it yeah has a pretty good narrative there. I guess what's some of the mistakes you've made when it comes to investing in in early stage founders? Erik Huberman (31:25.569) Yeah. Yeah. Erik Huberman (31:35.958) Yeah. the I for a while we really looked mostly at the so I always used to joke like everyone says bet on the jockey, but you can't bet on a jockey riding a donkey. So like we would look at the platform more. There's a lot of wisdom in bet on the jockey. Like we you know, when co we we started investing pre COVID, when COVID hit, like we had some some founders lean into it and maximize the opportunity 'cause like there's a great line I was told that's like what does this make possible? And Like looking at the opportunity they're like, Okay, this is how I'm gonna lean into this. You have other people that when it gets tough, they stick their head in the sand and fucking disappear. And we've had that a few times. It's really hard to gauge what a founder is going to do when things get tough, because things will get tough. But I've now watched a few founders that just fall apart and do not handle pressure well. And we live in a time now I would say not to get too philosophical, but I think people have a really hard time with grit. And like we have not like my generate the gen millennials and Gen Zs were not brought up with A lot of grit. And so when you get things get tough, you have a lot higher likelihood of people just collapsing under it. And businesses fail for two reasons. They either get underwater financially or the founder gives up. Or founding, I should leadership team, because sometimes you have a new CEO or whatever. But if leadership doesn't give up and you don't have a hurdle that you can never overcome financially, meaning like you're not underwater on debt, or you haven't raised at a pref stack you'll never overcome, you just can't give up. And so finding founders that are Jason Kirby (32:38.744) Yeah. Erik Huberman (33:07.179) not gonna give up is really important which is why like I've had a few deals I've looked at where the founder's like yeah we're gonna try this one and if it doesn't work we're gonna move on to the next one it's like no no no I need like this your entire soul to be tied up in the success of this business because I've been there like I've been to the point like thankfully I've made enough money now in the 12 years I've had this I don't need to fucking do this and when I say that it doesn't mean like it's worth enough I can sell it. It means if tomorrow I turned off hock media, I'm good. Like financially I'm good. So it's a great place to be but But I still want this to be the biggest, baddest fucking thing ever and I still work my ass off because I am motivated by the actual achievement of it and success of it, not by a paycheck. And so you need founders like that that are just committed to the goal and to the vision and to the you know, the finish line, whatever that might be, not you know, moment gets hard. Jason Kirby (33:57.297) How how do you pick that out? Like when you first get the chance to meet them, Erik Huberman (34:00.588) Right. You do what you can to pressure test it, to challenge them, to spend some time with them. You can't it's really hard. You try to a you know, you ask questions about when they have overcome that stuff. You talk about like why are they doing this, what's motivating them, what you know, and it's the the hard part is when you get the person who's like, Yeah, no, I want to build this for two years and then flip it. Like the own I tr when it's a founder that's done that four times, sure. We've had a couple of those deals where it's like they've sold their last three businesses for between nine and ten figures and this is their fourth one. Like, yeah, sure, you'll probably pull that off. But when it's a first or second time founder saying that shit, it's like, stop it. Like, why are you doing this? And you want to have them innately understand the challenge and the opportunity, meaning like they know what problem they're solving, they're really motivated by it. It means something to them. You know, I thankfully again. I resonate with that because the reason I do what I do is because there are 90,000 marketing agencies in the US and 99% of them are full of shit and the fewer that are good are really hard to work with. So why isn't there an agency that's the best at what they do but also easy to work with that can serve all the entrepreneurs out there that need help desperately and can't find decent help? Like that means that's why I do what I do. And so you need to like challenge founders, like why do you care about this? Is it just because there's a hype train on AI right now and you want to build this? Like why do you give a shit? Where is this coming from? And why when it looks like this isn't gonna make you any money and this isn't gonna end up sending your kids to college or buying you a big house, you're still gonna grind through it to make it fucking happen. Because that's going to probably happen. Jason Kirby (35:34.254) See that often. And sometimes they don't they don't get on the other side. Erik Huberman (35:35.649) yeah. Yeah, you know. No, exactly. Like that's why venture works the way it does. I mean people ask, you know, I think on our first fund we have like four winners, four losers, and ten we'll see. And it's like that's a pretty normal distribution. Jason Kirby (35:51.269) Yeah, what do you do with the ten you'll see? That middle of the bunch that doesn't make the fund or maybe, you know. Like how do you how do you think about those ones? Erik Huberman (35:58.156) Yeah, you it's a good question. the book says you spend your time on the ones that are winning. Like that's where your time's best used. And so I we definitely focus on the winners and try to help as much there. I do end up having conversations and ta like spending some some time on the other ones to see if I can turn them into a winner. Because if they're doing decently, sometimes there's a lever or and I can just be a sounding board like the nice thing is I'm an operator too. I'm struggling through the same things they all are. So sometimes that's where b as an investor I can jump in and be like, dude, this is what I'm doing, this is what I struggled with there. we solved that, this is how we did it, and just be another you know, peer in that sense, it's fun. I mean, our best investments are a lot bigger than my own business now. So It's you know, that they're they're as I'm at at the beginning of all these companies, what I've built is aspirational to my investments. At this point, some of them are aspirational to me. and so, but you know, these are people that are like even like there's a point where we're also the same size, and I'm like, that's how you're you just got to our size. Like this is what I did here, this is what you have to look at. HR function, this is how I think about it, like helping with that stuff. But a lot of times it's like trying to see if I can be creative with them as someone looking out in on like where there's an unlock, because again. We're investing in stuff we're strategic too, so I can look at it and go, this is why you're having problems. This is what I would change here. Can you do this? Can you do that? Because that would unlock it for us. And again, we represent a lot of revenue for these companies. Jason Kirby (37:25.828) And so how do you kind of pick out in those like need for improvement type companies or the ones that didn't hit the scale, that was anticipated, like and they need capital? What do you typically do in those situations or what do you recommend for them? Yeah, so they they didn't necessarily hit the breakout velocity that was expected. What happens then? Erik Huberman (37:43.915) That need more capital, you think? Erik Huberman (37:49.451) Yeah. Erik Huberman (37:53.058) That's a good question. it really depends. Like breakout velocity, like again, once you've done this a little while you realize like the the rareness of that true breakout velocity and why people talk about doubling down on their winners and stuff. Like it it's the the the true exponential hockey stick like holy shit we can't keep up with this is rare. And so can you still build a good business with normal, steady growth? Yes. Does it attract the biggest VCs? No. And so you have to get more creative. And again it really depends on what the factors are, what that growth actually is. Like are they getting 10% Annual growth or 40% or 60%? Like, where is it? What is their break even mark, like do they have to get to a certain revenue line? Is there a way to run more efficiently so that they don't need that much capital and they can grow? Or, you know, and again, what are they spending on infrastructure and CapEx versus what are they spending on growth? And how are those how is that those how are those growth numbers penciling out? Because if they haven't got a great CAC to LTV ratio, that's an issue. That's hard to raise against. But a lot of times I see those companies, they're just investing in the wrong shit. It's a technical founder that won't stop investing in engineering and they're just not spending anything on growth. Which is why they're not fucking growing, but they can't get their head around that. And it's things like that just again, that's why it's super unique. Because sometimes it's an it's a structural issue that you have to change the strategy of what they're executing. And sometimes it's an issue of their cacta L TV is an issue. And because if it's not an issue, then you raising money to go sc grow it shouldn't be an issue. But if that is an issue, then there might be a business issue there. Jason Kirby (39:31.31) Yeah, it's a it's a tough tough one to kinda assess and get into the weeds on and you kinda have to get into the weeds, they gotta determine what's what's ultimately gonna be the best path for them. 'Cause also some of them raise decent amounts of money, have a pref stack. If they didn't outpace the prep stack, it becomes quite the painful journey for that founder to be like, Is it even worth it? You know, to to preserve their ego of saying I at least delivered for my my investors just by nothing for themselves. Erik Huberman (39:48.373) Yeah. Yep. Jason Kirby (39:57.038) is unfortunate in some of these transactions. Like people raise a hundred million dollars, but sell for a hundred million dollars. It's like I sold for a hundred million, I made nothing. so when Yeah, you you've reached this level of success, you've now kind of dabbled in so many different areas from your own real estate investments to venture investments to just investing in your business and acquiring other companies. What would be kind of like the one direction or one piece of advice that you would give to founders that are kinda in that five to fifty million dollar range that, you know, need to kind of what's that are profitable that like need to figure out what they should work on? Like what how would you kind of help founders kind of narrow their focus when they have reached some scale, where should they be directing their attention? Erik Huberman (40:46.783) Yeah, I think the number one thing is get benchmarks so you know like what are the metrics that you're falling short on. So like You know, if you the example I give if like and it com completely depends on the business, but again back to Cacta L TV, if you're acquiring customers at a reasonable rate and your LTV is where it should be, and you know that you're benchmarking right and you're keeping customers like you should, and again, there's a good ratio there, then it's step on the gas, which is a lot of times a problem. People are just worried to step on the gas, because sales cycles can be a long time. So you you start spending more money on marketing and sales now, it might take a few months to see the results. And so you get committing to that and being confident in your business. I've always just believed like I am going to grow this. It's not if, it's how. And so I'm gonna I it ends up pushing me to take a lot of risks because I'm like might not work and we might lose some money, but I'm gonna keep fucking trying shit until we make money. So like we're gonna keep going for it and trying different things. And I'm incessant about that. And so if your desire now let's be clear, I know a lot of people that have run five million dollar businesses profitably for a very long time and don't grow and they're super happy. So you you that's why back to being an investor, you invest in the ambition of the founder. If your ambition isn't there to grow, I think that there's a little bit of undue pressure to grow where maybe it's not the best for you. Maybe you run a five million revenue one million EBITDA business, which is kind of standard, you make a million dollars a year. No no one if anyone complains about making a million dollars a year, they have no fucking perspective. Like that's incredible money. You're well above the one percent at that point. I think people forget one percent means one percent. Like 99% of people will never achieve half a million a year. So knowing that you're there, Jason Kirby (42:12.612) Yeah. Erik Huberman (42:26.497) You know, there's there's actually, I think, like take a breath if you want to. For me, I like the sky's the limit, I want to keep going. So in terms of like how to grow, I'm about like I really like KISS, keep it simple, stupid, like break your company down into like what are the main levers here. For me, I look at client retention, client growth, top of funnel sales. And conversion rate leading to how many new clients we sign. So how many new clients do we sign every month? How many do we lose? How many grow organically with us? And then what's the top of the funnel leading to more of that? And how are we converting it? And so then you look at those metrics and you go, okay, where do I think the lever is? And at the end of the day, if your lifetime value is good, your net revenue retention is good, your conversions are where they are, et cetera, the only lever you have is top of the funnel, which is why marketing exists. So if everything else is functioning like a should then you you you get that's when you go from middle of the funnel performance marketing and you open up like again it this is more of like the 30 to 50 million range is probably where you've done a lot of performance marketing and lead gen and you start to get into branding. You start building more of a top of the funnel strategy of like how do I just get our name out there so we can just attract more people inbound. And that's yeah that that's a fun stage to be in because the more you can do that, the more every every other metric looks good and the bigger you build and the better your retention gets because as you build a bigger brand, confirmation bias kicks in where it's like, well you're big companies, you're obviously not fucking up. So you're doing you make good product or you do good work. Like people believe in you more, trust you more. Every other your conversion rates go up, your CAC goes down. It's it's a fun part, but it's scary to just when you step into it. Jason Kirby (44:08.176) So what I want to do now is I want to ask you some some quick questions that you give me some quick hot takes on and kind of give me your quick answer. so first one I want to say is as an investor, what markets are you avoiding? Erik Huberman (44:24.251) I'm avoiding I wanna say avoiding, but I'm very, very, very cautious with just software, like straight software. Because if it's a because we invest in seed pre-seed, I think what later stage software has enough moat, data, et cetera, that they're actually probably gonna keep the business and be even harder to compete with. These early stage companies, like again, it's so easy to vibe code and to build shit now. I'm not saying that like a really good piece of software can't be built. And like the problem is the noise. Like I could replicate what you have and make it look like What you have in a week, and then what? So we're being really cautious on that side for the early stage because I think it's just gonna be noisy for a while. Jason Kirby (45:02.97) At what point should a founder consider inorganic growth and acquiring companies? Erik Huberman (45:08.651) When I don't know. Like the I I'm trying to think of like it's when the opportun like again, with inorganic growth you also end up acquiring a lot of the problems of the company too. Like you have to you end up fixing their businesses a lot of the time too. They're selling for a reason. And so I believe you have to be at a place where you can actually absorb that. That if it doesn't go well, that if it becomes a headache, you're okay and it's not just a huge distraction from your core business that shakes the whole thing out, that it's actually, you know, either not a big deal or additive versus we need this to go well. Because a lot of times it will not go well. Jason Kirby (45:48.57) Nice. And what's the biggest mistake a founder makes when considering buy side MA too early? Erik Huberman (45:56.716) That not having the the I think a lot of people I watch it like because I speak at a lot of MA conferences and stuff. Like you have these two million dollar agencies buying another two million dollar agency. I'm like, great. So if they lose half their revenue base, you've still got all their people, you're at now you're in a twenty-five percent layoff of your team, you can't afford to last through that. Like, what's the plan? Like we, you know, we're in a place like I mean, we've bought we bought a company that, you know, it was a small business, and about a month later we get a surprise. We have this bill we owe for $300,000 we forgot to mention. And I'm like, cool, that's on you. Like, thankfully, we have reps and warrants, like, we're not worried about that. They're like, yeah, but we don't have the money to pay it. And if you don't pay it, we'll lose all our clients. It's like, great. So we are all basically the the smart thing to do right now is actually give you a $300,000 loan that we didn't expect. And we can afford to do that because of how big we are. Small, a two million dollar agency cannot do that. And so, you know, people get really excited about the upside of MA, but like, yeah, we waited a little while. waited until we had some infrastructure to really lean into M<unk>A and thank God we did because it still cost us a ton of money. Jason Kirby (47:03.601) Yeah. I think that's a huge mistake a lot of founders. They love the idea of potentially like skipping a bunch of steps and getting bigger faster. or because, hey, if this guy wants to sell to me, I should do the deal. It's like you should you should shop around a little bit. You should see your options before you get into bed with that one guy who wants to sell to you. Erik Huberman (47:09.077) Right. And that's that's the fallacy of it. Erik Huberman (47:15.723) Yeah. Yeah. Yep. Exactly. Yeah. Jason Kirby (47:23.983) Well, Eric, it has been awesome having your insights on the show today, you know, with over 120 investments, 24 acquisitions, and seven hundred and fifty million revenue. Your insights are true to your accomplishments. So I really appreciate you coming on and telling our audience about what you've you're what you've seen. So looking forward to to getting this out. before any before I let you go, what would be the best way for people to learn more about your fund and your ad hoc media? Erik Huberman (47:27.831) Yeah. Erik Huberman (47:37.421) First. Erik Huberman (47:41.589) Yeah, thanks for having me. Erik Huberman (47:52.235) Yeah, hawkmed hawkmedia.com, hawkventures is hawkventures.com. really easy. And then I'm just at or slash Eric Huberman on any social. Jason Kirby (47:59.971) And why like who should come to you for money when it comes to the investment side? Erik Huberman (48:04.883) Where our client base is a strategic advantage probably. So like again, future of marketing, future of commerce, w the kind you know, the the small and medium businesses we work with could be great potential partners to it, and they're trying to reach that market and through from a marketing or commerce lens, that's probably Jason Kirby (48:24.028) Perfect. Well, if you're listening and you'd like an intro to Eric, feel free to to reach out to me or leave a comment down below and I'll be happy to consider that intro for you. again, Eric, thanks for coming on and talk soon. Alright, so we will stop the recording. Erik Huberman (48:35.521) Yeah, thank you.