How do you structure M&A deals without diluting family ownership?

We launched this product. We're probably about $400,000 and crickets. Absolute crickets. And you go, "Oh my god, what did I miss?" >> Why did you choose acquisition instead of building the technology internally? >> What's needed to be able to successfully launch products in the industrial and data center space? One, you need >> What's it like stepping into the leadership role of a successful family business? >> All the success you have is always credited to your parents or your family, and all the negatives are all your fault, right? So, you don't >> Everyone, welcome back to 100 Million Dollar Exits. Today, I have Drew Allen on the show, CEO of Grace Technologies. Drew, I want to just jump straight into it. You are taking over or have taken over the family business. Uh what's it like stepping into the leadership role of a successful family business? >> There's definitely a high amount of pressure. Uh I took over in January of 2021 uh after kind of leading the international side of our business uh after I came back from Hong Kong after college and and worked for 3M there. Uh and, you know, so there's always pressure when you're kind of on the sales side, but stepping up into kind of the CEO's shoes is a different is a different level because you're you're no longer just worried about your area of the business. You're worried about the overall business. You've got board interactions. You know, you're you're leading product development, and everything happens at kind of different cycles, and there's a lot more coming at you uh when you take that over. You're also worried about kind of the legacy that you're trying to kind of keep as your family. Um but, for me, it was most important to really figure out what what does the next generation of this business need to look like? What's going to make it interesting and unique? One of the things I've I've really come to believe is if you don't have a compelling vision that people are willing to bleed for, it's it's really, really hard to attract the type of talent that you need in order to grow. And so, if you're if you're kind of feeling like you're in a boring business, it's really, really imperative when you get into the CEO seat that you make sure that that business is no longer boring. Um and when you're doing exciting things, you end up getting you end up attracting people who are wanting to do exciting things and who are really wanting to push the envelope. Um and so that's been a you know, that's been kind of a a thing in the back of my head for a really, really long time. I also, you know, I think the other piece of taking over the family business is every you know, all the success you have is always uh credited to uh you know, your parents or or your family. And all the all the negatives are all your fault, right? So, you don't you know, you don't get any benefits for anything positive you do and everything negative is your fault. So, it's uh it's tough to kind of thread that needle occasionally. Uh and you know, it usually takes a while to get your feet underneath you uh when you're when you're stepping into those shoes. >> Yeah, so like what's that like when you know, you you've obviously grown up, you know, your your dad was building the business. Like was it always, you know, groomed to be groomed to take over this role or was it more of you didn't know it was going to be yours and you had to fight for it and earn it? Like what I'm just curious cuz this is not a common conversation that happens on this podcast. I'm always kind of curious to like hear what these journeys are like for for people in your position and how they kind of grow these successful family owned businesses. >> So, I love to caveat this by the fact of I am one of the luckiest family uh family CEOs uh that I know. Um I've uh I I joined YPO a number of years ago and so I interface with a lot of family businesses. My story is almost singular. Out of the hundreds of family businesses that I've spoken with, almost most of them do not have nearly as good of a situation as I have. My dad um was incredibly kind of willing to give up the reins. Um and um most most founders of businesses and most kind of family leadership in business stay on way too long and they end up really hurting uh their future CEO. And so my dad came at it with a very no pressure uh no pressure kind of policy. I mean, I remember walking into his office uh after college and saying, "Hey Dad, you know what you've built here is really great, but it's way too boring for a 20-something." And I promptly left for Hong Kong and did 3 and 1/2 years out there. Uh and you know, worked my butt off and you know, eventually my mom got sick and so it was time to move back to the family business and to take over kind of the international and then eventually kind of the sales operations. Um but my dad I never felt pressure. That being said, my dad was really great at teaching me everything that he knew, right? And my my dad is an avid reader. I mean, I think I still continue that uh that flame. Um my uh you know, and and we'd be walking around and my dad's curiosity I think it was, you know, zero to none. Um he we'd be walking around, you know, he's he's kind of an inventor entrepreneur engineer guy. You know, so we'd be walking around we'd see something and he goes, "Oh, how do you think that works?" You know, and you know, even if I was 10, he'd be asking me and I'd would "Well, I think it works like this, da da da da da, you know?" And so we would kind of like examine how how things work and it was just kind of a game that we played. Uh and then, you know, as I got a little bit older, I mean, I remember I think he showed me all the financials and the books probably when I was like 14. He started taking me over to China when I was 13 to negotiate with suppliers. Um I mean, I I I I have a It's just such a unique thing that I had that I have with my dad. He's still involved in the business. He has kind of his own little R&D team and continues to do product innovations. And so it's great to be able to work with my dad. We get along great. Um to be fair, it was not always like that. Um there's actually been less conflict since I became CEO than when I first came in the business. I think due to a number of factors, namely when I came back from Hong Kong, I was still quite young and I don't think I knew anything. Right? I mean, I was I was ignorant. I put uh and I moved in after moving back from Hong Kong, I actually moved in back with my parents as we were trying to get a house. So not only was I like working with my dad, but my wife and I were living in my parents' house, you know, for like 9 months. And there was all of this discord happening in business and and and we we finally just decided like we have to get we have to get some help. And so started looking at programs and things and we started joining some of these family business institutes. I ended up doing a a course at Loyola called the Next Generation Leadership Institute for family business, which was really, really useful. Um one of the other big pieces that we put in early on to to make sure that everything stays healthy is I put in a fully fiduciary board before I took over CEO. And putting a fiduciary board in place to push uh to push me to operate the business um professionally uh and to kind of you know it's not the the family managing the CEO, it's the board managing the CEO uh has been a really healthy step. >> No, I I think this is you know been an interesting kind of experience for you to share and for other founders to think about you for me personally like my business what I want is going to be business that I hopefully will have if I would choose to down the road be something they hand out to the kids and I think that's something that I think more founders are starting to think about as the kind of tech bubble evolves and see there like the go big or you know uh you know venture game or there's like just run a practical boring business. And a lot of businesses transitioning so I think it's an interesting topic but let's kind of transition into the Grace Technologies. Give the the audience a little bit of a review of what you guys do and then I want you to transition into like how you made the business not boring. Uh as you kind of mentioned and you how you were able to attract talent and opportunities in the M&A front. >> Yeah, so Grace is working to accelerate the industrial world's transition to zero downtime and zero harm and we have four main product lines that we design, manufacture and distribute that help us accomplish that goal. The first product line was Grace port and that was a pure invention kind of out of out of my dad, right? And so uh back in I think it was 94 uh he was working on a friction fit welder retro fit for John Deere. Uh by the way, if you want a little like Tik Tok uh uh industrial porn check out friction fit welding. It's really really cool, right? So they they spin you know they spin cylinders together and it it welds the cylinders together. It's a really cool process. It's just really fun to watch. Um anyways, there's a engineering manager at John Deere who's who's I'm really tired of reaching my hand around this bus bar in order to access uh the PLC. Can you put a port on the outside of the panel? Uh and my dad goes, "Yeah, we can figure that out." And so, that's kind of lesson number one. My dad always had a no nose policy. At the time, the business was actually uh engineering and system integration business. So, we weren't a product business at that time. So, that's kind of point number two is is always looking for opportunities and ways to transition your business based on kind of what your customers were asking for. Um and kind of going up the food chain. Uh and so, anyways, he goes, "Yeah, we'll figure it out." Uh delivers a prototype, you know, a week or two later. And then a couple weeks later, uh our company's name at the time was Grace Engineering and Integration. He goes, "Can I get another one of those Grace ports?" And that was like the birth of that product line. And we have 20,000 SKUs in that product line and, you know, have, you know, probably 60 or 70% market share uh in that space and we're kind of the world leader in that type of product. And we and the other really unique thing that my dad did is he figured out a mass customization model before it was cool. And also, he led a product startup in a time where people didn't call businesses like his startups. Right? And we we we we we've joked about this for years. He's like, you know, as as especially after like the social media boom and like the app boom and, you know, all this mentor stuff. He's like, "This was never an option when I was, you know, early on in the '90s." Uh and so, but he knew what was important for a product businesses. It's really, really hard to transition from being a one product pony to being a a a diversified products business. Um and so, he he really worked out additional product lines. Some worked, some failed. Uh but we you know, you end up your one success usually ends up making up for a lot of failures. And so, we added our permanent electrical safety device line, which keeps people away from voltage, and it allows people to do absence of voltage checking uh for lockout tagout without um you know, without putting workers in harm's way, and it also makes it a lot more productive. And then, uh we added a line of condition monitoring, which this is actually via acquisition. Um and then, last year we added a new product line called Proxy by Grace, uh which allows uh which is a wearable product that lights up, beeps, and vibrates as you get close to voltage uh to keep electricians uh from getting shocked and and away from the hazards of arc flash. >> How did you go about taking this business and identifying M&A opportunities? Maybe summarize kind of the the history and trajectory you guys have had on on M&A. >> A lot of early on, especially kind of under my dad's tenure, business wasn't really in a position to be able to do a lot of M&A. And so, we ended up working with a lot of private label relationships. We were looking for we were looking for ways for to be able to bring in technology that was low cost that we thought, "Hey, we have an opportunity to be able to sell this and take this through our channel." Um and then, you know, but we started to see some limitations with that type of approach. Namely, you can kind of never get fully in control of the product. And so, if you're the one who's interfacing with the customer, you're getting all these requests that then you're waiting on your partner to kind of be able to fulfill. Um and you know, they're never going to move as fast as you as fast as you as fast as you, sorry, um because they're not interfacing with the customer directly. So, they're not feeling that pressure. And so, we knew we needed to control our destiny. And so, So really put a concerted effort into expanding our product offering and being able to control it. So the first kind of acquisition that I led was with a company called Civionics which our CTO came from. That was introduced to us by a distributor out of Detroit and they had it installed at a Chrysler facility. But they were having they were having difficulty being able to expand this technology to other companies. And so we met and you know we ended up figuring out a pretty interesting um pretty interesting deal structure. So cuz we wanted our CTO to continue to be incentivized in the business but being a wholly family-owned business we didn't want to change the dynamics kind of in in the cap table. Uh and and so that kind of means that you know as far as the Grace entity is concerned we're not we're not going to have any non-family shareholders. So how do you incentivize someone without without being able to kind of offer equity in the company that's being that's doing the acquisition? And so we ended up actually setting up a technology holding business uh that Grace has majority control of um and with our CTO and another individual as a partner that licenses that allows Grace then to license the technology pay a royalty into that technology holding business that continues to incentivize um our CTO and and those team members. That's been a really successful structure and that that acquisition has led to an entire build-out of a digital uh a full-stack digital team. Uh I think one one important caveat here too is you have to develop capabilities uh and it's very very difficult to develop capabilities. I think most people severely underestimate how long it takes a team to become fully effective, especially a technical team. Um and you know, even Elon, I think recently, he just fired like almost all of his AI team at XAI uh because he put the wrong team in place, right? And he knows who the best people are. The And the best people want to come work for him. Uh but clearly something wasn't working in that in that team, and so he he let a whole a whole swath of them go. And it took us years to be able to uh get a team that was able to do full stack development um in-house. Um and by full stack, we have a really unique position. We do mechanical design. We do our own PCBA layouts. We do our own embedded systems firmware. Back-end cloud, front-end UI UX, um as well as all of our industrial protocols all happen in-house. And so, when we're talking full stack product development, it's really soup to nuts. And there's very, very few people in our space that are able to accomplish that, and that allows us to really um uh increase speed to market and also be able to iterate internally at a much more rapid clip than if we were using kind of private label partners in the past. That being said, incredibly hard, incredibly expensive, and full of misstep errors, and you know, blood, sweat, and tears uh trying to get the right team in place that is that's moving, especially, you know, we're in the Midwest, we're in Davenport, Iowa. It was really, really hard to get a uh embedded systems and electrical engineering team uh up to speed uh in the Midwest. >> Yeah, I imagine just talent in general out there is few and far between. >> Real quick, if you're a founder doing over 5 million in revenue and want to know what the best $100 million plus founders are doing to fuel their growth, then make sure to subscribe to our 100 million dollar exits newsletter, get the playbooks that are proven on how to fund, grow, and sell your business. I'll even give you a curated list of investors that want to invest in your business. It's totally free. All you have to do is click that link down below, subscribe, do it now. I promise it's worth it. You won't regret it. You got nothing to lose. Go ahead, subscribe now. Back to the show. >> Yeah, I want to go back to the deal structure a little bit. In terms of like, all right, you created this separate company to which, you know, Grace Technologies and the treasure all there gave some to the to the employees. What's the liquidity like for them? Is it a profit share for their contribution? Is it, you know, if the technology you sell off the technology separately? Like, how how how does it work for them on that front? >> The the main revenue source is revenue. It is royalties from Grace that you for products that utilize the technology that get paid into uh paid into that LLC. There are also is additional revenue sources that if there's not a fit between the existing Grace channel and uh a customer request. Like, early on we we got a request um to be able to do seismic sensing for large commercial buildings. Um and that's not in the Grace industrial wheelhouse. And so we, you know, we said, "Okay, well, those revenues are going to be able to go through that entity." Uh that entity uh that entity is called Perceive, by the way. Um and then additionally, we are also able to get grants written into that entity. Uh it's actually a pretty unique structure because it's nice because we have this Perceive entity and then we have a commercialization partner over in the Grace side of things. And so when they're evaluating like an NSF grant, it's always really important to have a commercialization uh partner. And so Grace is able to play that partner. Uh so we we have grants, the royalties, additional revenue streams from other, uh, other organizations, uh, that aren't aligned with Grace. And then if there is a if there is one day where we decide to divest the business, then that entity would go with that business divestiture. Um, and those founders would have the ability to, you know, monetize their stake in what they've built. Um, though we don't, you know, there is there is no time frame that we're looking to unload that out. And, um, you know, I think ultimately we would love for it to stay and we want those revenues to continue to flow. But it's an interesting, uh, it's an interesting deal structure when you kind of have the constraints that we have. >> Yeah, no, I think that's why I wanted to dive into it. You guys have done some other transactions, correct? >> Mhm. Our Proxy by Grace, uh, transaction, um, is also pretty unique. We're we were able to take over the the distribution rights for the product. Um, and, uh, so we we invested in an entity, uh, into the Proxy entity. Uh, we took over the distribution rights and then we also earn additional equity based on our sales revenues. Um, and so that continues get paid into a safe note that accumulates with a, uh, probably can't disclose the cap amount, but with a cap amount on that safe. Uh, and so that's that's a really interesting kind of deal structure as well, um, because what we found is that in the industrial space, cash isn't always king. Know-how is king, relationships are key are key are king, uh, as well as channel is king. And and so how do you just because you have $10 million sitting on your balance sheet does not actually mean you can accelerate things, uh, that dramatically. Um, from a when we start looking at this like really broad industrial channel. And I think there's been a lot of companies who in the industrial space that we've seen who do get some large funding round. And they blow it. Um you know, and but they they don't know because he you know, they don't have that scar tissue to know where there's you know, all the kind of the bones are buried and why things aren't going so well. Um but fortunately, you know, we have enough kind of expertise in the industrial space that we know like you know, if if you give us a dollar, we can probably get a return of 10 or 20, you know, on that dollar whereas maybe if you're an inexperienced founder in our space, I give you a dollar, you're going to get a 50 cent return. Um and you know, that's the kind of that's the kind of magnitude of difference that I think someone who knows what they're doing inside of a specific space uh can lend. Um we also end up usually taking advisory agreements or board seats uh with the companies that we uh that we work with. >> Um and I guess from the studio model that you guys have, how does financing those and like growing those, how do you guys think about that from your industry to be a perspective? >> So, those are all ad hoc agreements um based on kind of what the company what the company needs. At a very base level, they can just buy services off of us. Uh fractional CFO services, you know, they can come operate out of our out of our location. Um but if there's you know, additional design work that needs to be done, if there's if if they need an investment, we're willing to write a check. Um it's not required. You know, we're always looking for interesting companies and we we love the idea of kind of cross-pollination of having different companies in our space um, everyone kind of has a little bit of a unique angle or, you know, especially with AI right now, it's really cool to be able to see what a bunch of other types of companies are are doing and how we kind of benchmark against them and and learn best practices. Um, but usually all those deals, you know, especially being in the Quad Cities, we have we haven't found a a standard deal structure yet in the venture studio, uh, in the venture studio space. >> Hey, you said Say that one more time. >> We haven't found a uh a standard deal structure yet in the venture studio space. >> That's very, you know, usually studios I've worked with or seen, they tend to have these very strict, repeatable structures and it sounds kind of more with yours it's on the kind of ad hoc, opportunistic play. I guess what what would you say is kind of been the most successful, um, outcome or kind of more highest potential out of the venture studio? >> Um, there there's been a robotic integrator, uh, that was able to come in, use our space. Um, we did not take an investment cuz it wasn't, um, it wasn't aligned with our goals. Um, but my understanding, so they he he was able to use our space, use our resources, uh, actually use us a lot of trial case. Um, and then he he was able to use our, you know, be in the studio for, I think, a year and a half or two years and it was really able then to dramatically expand, uh, be able to move out, uh, of our studio and is operating very, very successful business. Uh, and ultimately one of the reasons that we did the the venture studio space was we wanted to cheerlead entrepreneurship and business startups in Eastern Iowa. Um, and so even if it's not fully aligned with us, we still want to be really supportive to that community because we live here. Right? We need We need companies that are that are pushing the envelope. Um and I just didn't feel like there was a lot of companies that were able to you know, be standard bearers for what entrepreneurship and scalable entrepreneurship looks like in Eastern Iowa. We've got a couple large companies here. Uh John Deere, um Arconic, uh Kone Elevator, um but there's just not as many kind of smaller scalable startups. Uh and that's what we were trying to really bring to the Quad Cities. I still think it's a work in progress. Um uh there's there's still a lack of deal flow in Eastern Iowa uh generally and the amount of new company upstarts, I'm not sure has ticked up in a substantially meaningfully uh meaningful statistical way. Um Des Moines is a different Des Moines is a different deal. Uh Des Moines uh they've got a whole plethora of insurance tech startups. Um and there's a lot more kind of capital and expertise in Des Moines than there is in Eastern Iowa. And so it it definitely feels uh a little bit it it it's it's a challenging location to try to do this, for sure. >> Uh I think uh before we got on the call, you were telling me about some of the expansion into Austin. I guess is there a correlation between what you saw in kind of the talent and startup community in Iowa and kind of leading to you to go down to Austin? >> We had significant struggles building out kind of the engineering team. And you know, I I don't want to say all of that was due to location, but there was a significant part of it that was due to location and I think even in the last couple of years, it's maybe even intensified a little bit. Um where we make offers and because of our location, we're not really able to get the type of people that we want, and that's fine on our software development resources. They can kind of be wherever, but when you're talking about hardware and firmware, you need to be in a location. It's just It's a tactile thing where you like you need testing equipment. You need to be able to 3D print stuff. You know, and and it's very very hard to kind of do that remotely, and you lose a lot of efficiency if you're not all under the same roof, which is just like really old school, but like I think it's true. Um And so, we decided we needed to start evaluating additional uh additional locations. I looked at Atlanta, Nashville, Charlotte, and Denver. Um and and Austin. Um and it Charlotte was probably number two on the list. We have an investment down there in a company called Atom Power, which is changing the way that power power distribution happens with solid-state circuit breakers. Uh and so, we were kind of excited about maybe, you know, looking at Charlotte, but the difference with Austin is maybe outside of San Francisco, there is not nearly a centralized of a location uh uh for capital and talent as Austin, Texas, currently is. Uh and the business-friendly environment in Texas in general um is incredibly helpful. Um but in Charlotte, everything is a lot more spread out. There isn't as much um critical mass in like critical mass in a singular location. Austin is super vibrant. All sorts of different types of companies. There's not really one that's like Yeah, I mean, obviously, Elon's companies are are probably the the largest uh uh you know, the the the the largest kind of tech companies there, but there's but there's tons of mean, there's defense tech, there's manufacturing, there's energy. Um you know, there's uh you know, all sorts of software businesses. Uh and so, we want to make sure that we're have our ear to the ground of where things are moving to. I'm also incredibly bullish on Texas. I was at a conference in the fall last year. And I don't think people really understand what's happening in Texas. So in Dallas, you have JP Morgan and Goldman moving 10,000 people a piece to Dallas. Okay? So we're talking 20,000 people just from those two companies moving to Dallas. They've got now I think three stock exchanges. And so basically Dallas is becoming the capital center, you know, secondary capital center outside of New York. Then you you have Houston which has always been the energy hub of the world at least the last 60 years or whatever. Um and then you have Austin which is manufacturing and tech. And this is all these are all three hour drives away. So you have capital, energy, manufacturing and technology all within three hours of each other. You have space, power, a highly educated workforce, you know, in a business-friendly environment. I the projections out of this this economist at this conference he's basically saying he's expecting almost all the GDP growth in North America to come out of the Texas triangle in the next 20 years. >> Going with that and what I'm saying and also the fact that I was >> Space I was I was just reading an article this morning about SpaceX when it goes public will likely mint over a hundred hundred millionaires. At least a hundred and sixty hundred millionaires from just the SpaceX like employees. >> I think a hundred cent Oh, just the SpaceX employees cuz so what I've read is there's going to there's 10 people that they've been able to identify they're going to walk away with a billion dollars a piece in Austin. There's another I think 30 to 50 who are going to be centimillionaires. >> I thought I thought I thought it was over 100. >> Okay, I I thought I Anyway, anyway, so it's a huge >> We'll we'll find that article and put it over there. >> Yeah, yeah, but it's a huge amount and then, you know, who else who else is going to walk away with, you know, more? >> Tens of millions. The economic boom there and the capital that will flow from them because they're like, "What the hell am I going to do with $100 million?" They're not going to spend it the day one. They're going to invest it and put it into their friends' companies, their next company, like the level of innovation that will come out of that. Yeah, we have >> And by And by the way, also the level of expertise. >> Yeah. >> So so So these these folks that work at SpaceX, we we do a lot of business with Elon's companies. SpaceX is one of my favorite case studies to talk about, um, because I I don't want Elon in the car business. Uh, I think the car business sucks, right? Um, the space business is totally different. And so there's there's a gentleman, uh, who we work with and, uh, I saw him at a recent event and I go, "Hey, so I'm just curious, like, how do you guys get so much done at SpaceX?" He goes, "Oh, we just work till it's done." And I go, "Okay, what do you mean?" I'm like, "When do you go into the office?" And he goes, "Oh, I'm usually in at 7:00." I go, like, "Well, when do you leave?" And he goes, "Uh, usually about 10:00 unless, you know, we're we're running behind." And I'm like, "Oh, so a normal day is 7:00 to 10:00, uh, 5 days a week?" He goes, "No, 7 days a week." And I'm like, "Okay. Um, and he goes, 'And if we run into a problem, we just text Elon's chief of staff and, you know, if we need more labor, they'll just fly the the private jet down, pick up a bunch of workers and fly them back.'" And I'm like, "Okay." And he goes, "But if we run, you know, if we run into a really challenging technical problem, we just text Elon. And then he gets on the private jet and he comes and helps us work through the problem." And I'm like, "Well, you know, what's your longest stretch you've gone with Elon trying to work through a problem?" He goes, "Oh, we were running up to a launch and we were having problems on some system. We did 48 hours with like limited cat naps underneath the conference room table uh with with Elon." And this guy, he's a relatively mid-level engineering manager. And just the fact that he goes, "Hey, we're having a problem." Elon gets on a plane and like goes no sleep for 48 to get this launch to happen. That's that's a a a business skill that like not a lot of other companies get, right? And, you know, and that experience and there's people with these stories at Tesla, SpaceX, and Boring all over the place. And I'm sure xAI is going to have stories. And so, I don't think you can discount how impactful that is to a region to have that kind of ethos, you know, burned into you of like how you actually make hard things happen. >> That then armed with capital to invest and influence the next phase of companies um into which, you know, so many have been brought into Texas. Like they will probably stay in Texas and continue to build and innovate in Texas. And Texas played the long game, got into Texas, and attracting some of the most amazing companies there. Um you know, so I I I believe the uh economists when they say, you know, "Most of our GDP." When you look at California falling apart and God knows what's going to happen in New York right now. Uh yeah, going to be an interesting uh you know, decade coming through, but >> I mean, you have to you have to think if you're an investment banker in New York making $3 million a year and you have an opportunity to go to Dallas and your taxes are cut so dramatically, I mean, and your cost of living you got to think that there's going to be a lot of investment bankers who are deciding, "Hey, I'm I'm done. Uh I'm I'm out of New York and hello Texas." >> I think there's still going to be for for the flow of finance, I think New York still plays an integral part. But I think for I don't know which jobs are actually relocating. I'd be curious to kind of understand cuz well, I know in New York stay in New York. Like New York still have a you know, taxes are taxes. You just make more money. And it's better to make. Um yeah, I love the vibe in New York. Uh but you know, going back to you know, kind of your experience, I I think it's amazing that you built a company that gets to work with you know, the the Elon consortium of companies and provide a solution that they you know, are using and and leveraging. When it comes to the future of your company and as you think about the legacy of your business, legacy of your family and how you future proof your organization. How do you think about that? >> I think about continuing to provide the best platform for innovation to happen on top of. Okay? So what what does what's needed to be able to successfully launch products in the industrial and data center space? One, you need great technical teams. Two, you need operational excellence across kind of all facets of the business. Third, you need an awesome sales channel marketing machine. Um and so if if I can really nail those three pieces um then I know whatever product we throw on top of that foundation, I can accelerate. Um and you know, and so I continue to build out aggressively build out and invest in resources uh that I think are going to continue to kind of notch up that level in all those areas and I'm not going to you know I'm going to take a similar approach kind of with my kids that I think my dad took with me of kind of a no pressure a no pressure attitude and if they find their way here and this is kind of they they they they come to conclusion that I came to where it was like I could go off and build a business on my own start something on my own except for you know the failure rates are really really high when you're building from zero there's a great book called buy not build by the way um but uh the the failure rates are really high well if if you can have a platform that is able to protect some of that downside and to make it a little bit easier to go from zero to one that's really what I'm interested in and hopefully that'll be attractive enough for my kids to be able to come and build cuz I realize that's what I had with my dad and I had it with this company and I said okay well if I could go start off companies by myself or I can start companies on top of the existing platform that we that we've built you know and we're also we also work on kind of this idea of like shared services so we want you know we kind of want all of our services to be able to be called upon by companies that we have investments in you know companies that we've acquired and so we really built that I I had a interesting conversation with folks at Google recently and there was a there was an engineer there who was working who works on their substation designs and you go Google design substations yeah they design their own substations right and the way that this engineer talked about it she said she kept on using you know kind of the the terminology product and she goes well you know my product is this and you know, and and I realized quickly by asking a few more questions that what Google does is they productize everything. So, most companies think about like a process. Very few companies think about my internal my internal resources. How do I productize them as if everyone inside of my company was buying that product, right? So, do I have a data sheet for for what's being offered? Uh how, you know, if I'm writing software, are there API calls and documentation? Um if I'm running a marketing playbook, how do I quickly tell, you know, how do I quickly tell the marketing team, hey, I want to I want to run playbook uh A1. And they're able to just go ahead and execute it. How do you kind of make every part of your business a product because I think ultimately that's what's led to Google's ability to scale so dramatically is that they think about not just like, oh, I'm designing this thing. No, I'm I'm actually making a real product inside of the businesses that then other people in the businesses are pulling on, using, developing off of uh or purchasing from us. Um and I think that that's a that that was kind of a unique site insight that I've been really moving our company to is like, "How do I productize a lot of what we're doing um internally?" And I think that that that leads to a much quicker scale. >> I think that's amazing to be able to think at that level of where you want to take it, have that longevity, and also just thinking about the family aspect. And I think that's something I encourage a lot of founders to think about um before they take on outside capital and look at a 5-10 year timeline and look about, you know, what would this mean if your kids were involved. It's often a conversation I have more with second-time founders. You know, people that have built and sold a company and now they're like, "Well, I made some money but I don't want to do that yet. Now if the the headaches of raising money and dealing with all that and they're trying to build more of a sustainable business and of course easier said than done but um for for you looking back now we can we look forward now looking back at some of the transactions and decisions you've made what would you kind of say was like one of the greatest decisions that you thought about? What were the stakes involved in that decision and what was the outcome? >> Gosh, I I I think I think as you go on in your career um you you keep on finding that the stakes just get higher and higher. Um you know, I I I think biggest biggest kind of one that that jumps to mind was we did a very very sizable acquisition um in 2021. So, I was literally kind of coming on as CEO um and I was leading a uh an acquisition of uh of a partner that we had been uh brand labeling uh their products um and the numbers for me at the time were scary, right? But ultimately I believed if we weren't in control of the product and the technology, we weren't going to be able to innovate, we weren't going to be able to win, we weren't going to be able to get our cost structures down um and you know, post acquisition with the debt service was you know, it was challenging because you it takes a long cycle before the changes that So, the changes that you make today if you're on like a 9 to 18-month sales cycle you know, you you you you're you're basically like, okay, I better be making the right decisions now, right? And you're now you're looking down $100,000 a month kind of debt service checks, right? Um and you got you got to make sure that what you're doing works. And so, I just I remember for under kind of an inordinate amount of pressure kind of at that time, especially just coming into the business. I think that looking back on it though, it was the right move and the returns on that acquisition have been stellar. And I I don't want to just only I don't want to only point at like the financial returns, um but the the returns to our customers were also dramatic. The the product probably in a lot in the 10 years prior to the acquisition, there had been new only probably two or three new product launches in 10 years. And within 18 months of acquiring the product uh the product line, I think we did four new product releases in 18 months. Right? Um and our our products legitimately save people's lives in factories. And and so the Yeah, so the the more that we can get compelling product offerings out, like product market fit for us means that like yeah, the customers like the product and we came out with the right thing, but it also means like it actually works in practice and like people get a tangible safety result, which is really I think inspiring when we're talking with our engineering teams, right? Like they know that they're working on technology that saves people's lives and not a lot of companies get to be able to say that. And so it's been a win I think across across the board. I think looking at it if if if you design if you design if you think about everything only from a financial impact perspective, you probably don't won't end up taking much risk. Uh you have to think a little bit more broadly about what the impacts are to your business than just oh, I think I'm going to sell this much. Um because often times when you're when you're just looking at the spreadsheets, it's all projections. You know? And you can make those numbers say whatever you want. Um and you know, you you can try to you can try to financially engineer it. And look, I do my fair share of spreadsheet work though. I don't think I've written a formula on like, you know, since Claude you know, Opus 4.6 came out. >> months, but it's been great. >> I'm rusty now. I'm really rusty. >> I don't need to I don't care about being rusty anymore. I just >> But yeah, but that that was a that was a big moment and it was really high stakes negotiation. If it went wrong, I think it it would have led to a big disaster in the business. I also not a not an M&A transaction, but a story that I share that I think is impactful about you know, we can look at these like good decisions we've made. But often times it's more interesting to look at like the bad decisions you've made. And one of the one of the pieces that probably set me up for better success today um based on a failure in the past was I was a couple years into the business. And I was working on a a project for a large uh consumer packaged goods company. Um and they were requesting a a new version of one of our products. And I I was sold. I was like, "Oh, this is awesome. I've got this huge multinational blue chip publicly traded company. They're asking for this thing." I type up the PRD. I work with the engineering team to like get it designed. You know, and uh I show it to them. They say, "Oh yeah, that's great." Um and I get I I go, "Okay, like let's go ahead and make the product." We go down the whole certification path. Um and you know, do all this do all this work and place the inventory order and the tooling order. You know, and we're probably about $400,000 into this into this product. We launch it and crickets. Absolute crickets. And you go, "Oh my god, what did I miss?" And I start looking back at it and you know what? I only relied on one customer's input. I was too proud and ignorant to call up, you know, 10, 20, 100 additional customers and see if they were going to buy it. Um I was uh you know, my we didn't have any way to rapidly prototype and iterate on the design. So, today that same development process that we went through, which took probably 9 months, you know, 10 years ago, we would be able to do that in probably two or three weeks and we would probably have already had three to four prototypes in that in that period that we could have like quickly iterated on at a fraction of the cost. Uh right? And so, that learning set me up for that's not how we're going to do product development. I'm no Steve Jobs. I wish I was, but even what I think people what I think people miss about Steve is at Apple, they're going through rapid iteration all the time. It By the time you've seen the product, that's probably their, you know, 2,000th iteration on that on that device and they're getting all sorts of feedback that you don't you don't get to see cuz you're, you know, they're they're behind a walled garden and they're so secretive, right? But for us, it's like, okay, so how do we validate these these products? How do we get compelling feedback? How do we make sure that when we're looking at product market fit, we're looking for products that have horizontal appeal across all sorts of industries, right? So, if I'm choosing what customers to go talk to, I'm going to go talk to metals and mining customers. I'm going to go talk to food and beverage customers, consumer packaged goods customers, data center customers. I'm going to talk to a whole variety and and hopefully even if you know out of those verticals, you know, uh three of them go, yeah, this is great. We'd love to buy it, you know, and two of them, at least we know then hey, when we launch for the marketing, we're going to make sure we segment the marketing to the to the parts of the market that we know we're going to win in. >> Drew, what I want to do now is I want to jump through a couple questions that I'd like you to answer quickly and kind of give your uh concentrated, you know, input on. So, first one I want to talk about is why did you choose acquisition instead of building the technology internally? >> Because you don't know everything. So, ultimately, there are passionate founders who have been able to figure out an insight uh that it was not originally apparent to you. Um and so, I believe that the more the merrier um and I'm not going to think that only every good idea comes out of here. Um and ultimately, if if they've got an insight and they're willing to work with us, I I would really love to leverage their passion, their understanding of the market, and their their perspective. Right? We don't We don't only buy art from one person. We often love to get art from other types of people. And so, why would I be exclusive in the kind of art that I'm going to acquire? >> Good way to look at it. What's the difference between acquiring technology and actually commercializing it? >> The commercialization piece is a long road, right? So, a lot of the commercialization, if you if you've got a piece of technology that is interesting that like let's call it just like a PCBA and some firmware that does something, right? The packaging, how it's installed, making sure that the channel can actually buy and resell it appropriately, Uh the configuration that you need. Uh all of the certifications. So, if you're putting it in a hazardous location, I mean, in order for your customer to actually be able to buy the product, they have to actually be able to use it. Uh and so, a lot of times technology is a little bit earlier than the commercialization or the ability of the customer to actually buy and use it effectively. And so, we try to look at it from like a whole variety of angles through our watch process and through our design uh design, manufacturing, quality, uh certification uh processes. >> And before you came on, did your father or the company have an M&A playbook, or did you kind of learn as you went along? >> No. Um it was something that, you know, with with me and some of our board members, I think we really we had to dial in and um put the plan together in flight. One of our board members is amazing. He was the senior VP of corporate development and strategy at Rockwell Automation and led I don't know how many dozens or hundreds of acquisitions for Rockwell kind of in his tenure there. Um and, you know, his advice to us though is is that every acquisition that Rockwell did was different. Um and so, I think you can find guiding principles in acquisitions, but every structure's going to be slightly unique, slightly different. There's this thing that's a concern. There's these risks. Um but having at least a general kind of principle uh set of principles that are guiding, you know, we're not going to acquire anything that's not adjacent to our core business, right? We're not going to go completely left. We're going to look at how it fits in the channel. We're going to look at it is it technology that we understand, we're able to innovate on top of, you know, other things that we, you know, other things that we look at. And And every time I think we go through a process, we learn something new. >> And what would be your advice to founders seeking to use acquisition to transform their company? >> Exhaust all other avenues first. Right? And and and figure out what why you want to do that acquisition. What's the insight that the other company or technology team has that you that you missed? Um and make sure that it's really adjacent. And so when you when you're looking at larger so most M&A playbooks are focused on larger companies where you're trying to drive synergy by taking costs out of redundant bureaucratic structures. Okay? Um for us we're we're usually having to add a lot more cost into when we do M&A, we're actually adding cost because usually the team that's coming over is like one or two or four people. Not, you know, not 20 people. Uh and so we're adding in additional resources. So at that point we're just trying to find okay, there's an insight here. We're going to we're going to grow this thing. Do we have product market fit? How do we get the message out? Um and you know, so so it's a little bit a little bit different. >> Great answers. True. I've enjoyed having you on the show, sharing your experience of taking a family business to the next level. What would be the best way for anyone to get in contact with you if they were interested in having a chat? >> Yeah, so connect with me on LinkedIn. Um Drew Allen, uh CEO of Grace Technologies. Uh send me an email at drewa@gracetechnologies.com. We're always looking for interesting technologies companies to partner with, commercialize, uh or invest in. Um and would love to uh would love to connect with all your listeners. >> Awesome. Well, we'll make sure to enable that for you as well as if anyone wants a direct intro to Drew, uh means reach out to me. Uh and I'm happy to to tee up that intro. Drew, thanks again for coming on the show and look forward to giving this up to our audience. >> Thanks Jason, appreciate it. >> If you were inspired by today's episode, then go ahead watch this next episode. Promise it's worth it. And if you really enjoyed this last episode and you want to connect with the guest I had on today, make sure to leave a comment down below telling me why you would like an intro to this guest and I'll make it happen.