Dan and Elise Gold from Mumgo tell a similar story. Elise gave up her job at the Commonwealth Bank last year to set up a company, Ladybub, which sold baby gear at 70% discounts with time limited offers.
In March this year, she and her husband Dan, who had worked at Macquarie, set up a website. In the first week, they were approached by eCommerce specialists Catch of the Day, which is run by two brothers, Hezi and Gabby Leibovich.
Catch of the Day has taken the market by storm. It had been doubling its revenues every year. It was on track to make $250 million turnover that year.
A little start-up run out of an apartment was suddenly thrust into the big time.
“It was in the first week that we received a LinkedIn note from the Leibovich brothers and we couldn’t believe what we were reading. We pinched ourselves,’’ Dan Gold says.
“They asked us to come in for a meeting and we had a suspicion that it was for this type of reason. After three months and fifteen meetings, we finally got to the position of this aqui-hire.”
Negotiating the deal while running the business was a challenge, he says.
“It was interesting, attempting to grow Ladybub on one hand and focusing on all the operational aspects of the business and, at the same time, be negotiating this deal with a very large intimidating eCommerce group that is also interested in their slice of the pie.”
How did they know they weren’t making a mistake and ending up in a place that would destroy their dream?
“It was definitely something we considered,’’ Elise Gold says.
“I think in these situations you really have to take a leap of faith and put a certain level of trust in the other party.”
“But, in this case, we were able to judge that we were a really good cultural fit with the team here at Catch of the Day and we had an almost identical vision in terms of what we’re building here.”
“You can always do a lot of due diligence on the people you’re dealing with. Melbourne is a pretty small place and we have people who had had dealings with the Leibovich brothers and other people involved in Catch of the Day and everything we heard was positive. That was part of the due diligence process.”
Dan Gold says those meetings over the three month period was critical.
“All of that builds a level of rapport and gives you confidence in the people you are likely to be spending more time with should anything progress and develop,’’ he says.
“That was the nature and tone of the discussions: this worked so well. We not only had the same vision but we’re fairly easy going folk and I think Catch of the Day are too.”
“There were 20-30 people we met over those three months. We just got along with them fantastically well.”
“We have similar backgrounds and ultimately we share a similar passion for commerce, so that makes things quite easy.”
What sort of terms and conditions did they negotiate to ensure their entrepreneurial activity was preserved?
Dan Gold, who has plenty of experience in mergers and acquisitions from his time at Macquarie, says it was standard stuff.
“Going into the discussion, we had some idea of what a reasonable expectation might be on a number of different levels, like an equity component of the business that might be retained.
In terms of employment contracts; that can follow as part of the new business as senior employees and about how those arrangements could be structured.”
“There are a number of particulars within these employment contracts that are fairly standard in those transactions,” he says.
The business is now thriving. Before, it was run out of the Gold’s apartment, now it’s located in Catch of the Day’s Braeside office. It has employees.
There has been one big change: the company changed the name to Mumgo, something that came out of a Catch of The Day brainstorming session.
Now the business not only sells baby gear but also goods for busy mothers, including jewellery, clothing, accessories, shoes, homewares, towels and linen. Its market has expanded.
Was it hard giving up the name? Dan Gold says something like that had to come with the deal. It’s called compromise.
“In any negotiation, there are things you win and things you lose,’’ he says.
“With the sentimental value attached to the name after six months, it’s not that great [a compromise]. When you’re dealing with financial metrics not only around equity ownership and employment contracts but also an up-front payment for the acquisition, these are the types of things that you’re willing to negotiate on.”
Neither is prepared to talk about how much they made on the deal. Still, they are both happy and comfortable. Enough said.
In the end, making that decision comes down to what the start-up entrepreneur wants.
“People need to understand their motivation as to why they started up their venture,’’ Elise Gold says.
“Are you starting it up to be your own boss and that level of control is extremely important for you?”
“If being your own boss and controlling your employees 100% and your own business is why you’re starting up your own company, then obviously this arrangement might not be something you would be open to.”
“But if you want to build a big company and you believe this idea has legs, then engaging in these sorts of discussions makes sense.”
