Sramana: A private liquidity exit can be bad if the founder is crucial to the success of the business. I saw a similar situation where the founder did not allow a team to get built around him. I am surprised the investors allowed him to have that liquidity event. They needed to raise money, and the founder used all types of leverage against the investors to extract a large liquidity event without creating that management team around him. It was a no-win situation.
Bill Daniel: I have seen that happen, not in a large liquidity event. One of the things that is going on right now are private companies with billion-dollar valuations. They raise money and then use a big chunk of that money for liquidity. To me, those can be very tricky situations. At some point when you have achieved financial independence, you are in a position to take your toys and go home. If you are critical to the company, and you have to be there for the company to be successful, that can be disastrous.
Sramana: It will work if the founder has built a team. Not all founders do that. They are interested in their own well-being. That is unethical.
Bill Daniel: It is not going to be successful in the long run. Those CEOs will have a hard time getting future investors. If they are true entrepreneurs, they will want to do another company and they will not get support at that point.
Sramana: The message is that if you are going to be a serial entrepreneur and you are going to take a private liquidity event before the company has achieved its liquidity event and the investors are still in the game, then you better not screw the investors, or nobody will ever work with you again.
Bill Daniel: The way to do that is to build a team that will run and scale the business. Put yourself in a position where you are not the critical success factor. You need to shelf the ego and be responsible. Ultimately, there is a lot of capital out there. There are a huge number of VC firms and private equity firms. You can get away with that a bit easier in today’s world, but reputation will usually precede you.
Sramana: What are you planning on doing with the company that you are currently running? Are you planning on taking it public soon?
Bill Daniel: We are in growth mode. We have plenty of headroom left in insurance. We believe our model will work in other industries as well. We also have some product and technology innovations that we think can change the way that insurance agents use what we do for their business. We have a lot of different vectors that we are excited about. We don’t need liquidity as we have patient investors.
Sramana: Is it your preference to do this building work in a private mode?
Bill Daniel: Yes, it is much easier that way. We don’t see a need for hundreds of millions of dollars. We don’t need to go buy companies. Most of the businesses we are interested in our world are small and show great promise. They are not at the point where they command ridiculous valuations. We know how to scale so larger businesses are not as attractive.
Sramana: This has been a great conversation. Thank you for taking the time to share your story with my readers.