Conclusion and Sale

This is the sixth and final chapter of Kommon: A Startup Story, a set of key lessons for first-time founders told through the story of the successes and failures of my business.  

I have been told that putting these lessons within the full narrative of an early-stage startup, including real customer data and product feedback, has meant they really resonate for first-time-founders navigating their own startup journeys. ‍The introduction to the series with further details on why I wrote it can be found here.

Introduction

I said right at the start how this story would end. In early 2023, my co-founder and I decided to close down Kommon.

This is a short section to talk through how we came to that decision and the happy circumstances that led to us selling our nascent training business. 

Making the Decision 

I don’t remember it being hard to make the final decision.  

We had invested so much in Kommon but that also meant we knew our business.  We knew what we had achieved and what we hadn’t.  

Our customers loved the product we had created and our training courses were the foundation of a growing business.  The playbook continued to be a superb top-of-funnel asset and to draw in ideal leads.  Over 400 potential customers had downloaded it by the end of December.  

What we didn’t have was a scalable business that either my co-founder or I wanted to build.  

I had built a services business before and I knew what the path to success from here would look like:  

1. We would close more sales and expand revenue. 
2. We would eventually close enough sales to hire additional coaches to run our training. Revenue per coach would be reasonably predictable and the business would scale through additional hires.
3. We would (hopefully) see patterns in our customer base to be able to productize our offering and make it scalable. 

Part three was the exciting bit but I also knew that getting there would take at least a year, probably two, and there was no guarantee we would find the scalable product we wanted on the other side.    

Of course, we could have totally pivoted - started from scratch as a pair of co-founders on something new.  But as I found in my notes from this time: 

“We both seemed to agree that at this stage we’re lacking an idea big enough, about a compelling enough problem, upon which to confidently build the next stage of the business.”

People teams and their challenges had been our lives for three years.  We didn’t have an idea we wanted to work on in this space, and we needed to spend more time in the world beyond that to find something new we had confidence in pursuing. 

Push and Pull

That was the ‘push’ part of the decision - the factors nudging us away from continuing to work on Kommon.  

But there were also pull factors.  Decisions about what to work on are relative.  It wasn’t that it was a choice between Kommon and nothing.  It was a choice between Kommon and the thousands of other valuable and interesting things we could spend our time creating.

I still think new manager development is a fascinating topic and an incredible force multiplier for any company which gets it right. The world needs more great management training companies.  It’s a fantastic mission.  I just came to believe that it wasn’t my mission.

As time went on, I became more interested in the climate crisis and the scale of the challenges facing the world in the coming decades. I was inspired by the companies who were working on solutions to these huge problems, and was increasingly attracted to doing my part.  While all these companies will still need great management training to operate at their best, I knew I wanted to work directly in this field rather than being an enabler of it, and resolved to pivot my career.

We were being pushed and pulled away from Kommon but for all the right reasons. 

On 13 December we had a meeting where we consolidated these thoughts, agreed to think about it over Christmas and come back in January to see if either of us had changed our opinions.  We didn’t.  In January we agreed to wind things down.

Winding Down

I’m not going to go into all the details of the process of winding down Kommon.  Hopefully you’ll never get to this point in your ventures and you can cross this unfortunate bridge as and when you need to. Suffice to say it was a combination of dull administration with accountants and careful communication with customers.  

We thought a lot about our messaging.  We wanted to be clear with customers about our decision and when services would be stopping, but we also wanted to make sure they were properly supported and to ease their transition to other suppliers. It felt like the right thing to do and good business relationships have a habit of paying off in unexpected ways in the future.

In keeping with our high-touch approach to investing in customer relationships, we sent many personal emails, made many phone calls and set up many meetings to discuss our decision.  We even continued training workshops with one customer until September to close off their program properly. 

The process of closing down the company validated our decision.  It took several months to fully wind down the company’s operations and during that time, we had numerous occasions where we could have been tempted back.  

We continued to get referrals for new work from some exciting potential clients.  But as these came in, it felt right to turn down these opportunities and refer them to other suppliers.  Even more tempting though was the release of ChatGPT. 

AI and New Manager Development

Casting back to the previous chapter, the key insight on which we founded our training course was that the most confident first-time managers all had someone they could discuss their challenges with as their issues arose.  Our training aimed to fill the gap for those who didn’t have that person.  Some initial experimenting with ChatGPT showed that it also had immense potential to help with that. 

I asked ChatGPT some of the most common questions we received from new managers about managing underperformance, running successful 1:1 meetings, giving feedback, and creating urgency in their teams.  While the responses weren’t exactly the advice I would have given, there was no doubt the responses were helpful.  They were at least a 70% solution, and because of the personalisation, the responses were vastly more useful than the static content that much conventional management training is still based on.  

While not a true substitute for our training course, I had no doubt that AI had the potential to deliver enormous value to new managers, either in companies where personal coaching was regarded as too expensive or as a complement to these services. This was the scalable technology product in this sector we had been looking for.

But even with my excitement about this breakthrough, I knew I didn’t want to pursue it.  I was set on a different mission by that point.  Someone will build a brilliant AI-enabled manager coaching platform and exit for hundreds of millions of dollars.  I’m fine with that and I hope they succeed.

The Sale

‘How does it feel to be an exited founder?’

Other startup friends ask this with a smile and I tell them to shut up.  It was such a small deal. But yes, in 2023, we managed to sell Kommon’s training business to Unicorn Labs, a larger management training consultancy. 

While the number was small, the validation of what we had built was very satisfying.  It’s one thing being proud of what you created, but it’s another to know that your peers valued it enough to buy it. 

This is the brief story of how it happened.

The Deal

I’m sorry to say I don’t have the secret sauce to selling your company.  Small services businesses rarely get acquired. Kommon’s sale happened because of a combination of good networking, timing, and negotiation.  If any of these factors had been different, this story would have an alternate ending.

Networking

There’s a famous quote about marketing budgets which is attributed to John Wanamaker, a 19th century retail magnate: ‘Half the money I spend on advertising is wasted; the trouble is I don't know which half.’ 

Networking is the same. Half the time you spend on it feels wasted, but it’s hard to know which half.  Invaluable connections can come from the most unexpected places.

In mid-2022, I was in one of those unexpected places.  A friend had invited me to a small founder meetup in a coffeeshop in Ottawa.  Less than ten people were going to be there. I said yes because I rarely say no to meeting new people, not because I expected I would meet the person who would catalyse the sale of Kommon. 

The meetup was fine.  It was a little awkward in the way it always is when busy people are meeting one another for the first time, assessing how much they have in common, and wondering how much to invest  in the conversation. One founder, Simon, didn’t say much but we exchanged just enough sentences to realise we had a couple of mutual interests and it might be worth another coffee. I left after an hour as the conversation dwindled and went back to work.

Simon and I did go for that second coffee, and as we got to know more about each other’s businesses he said, ‘Oh I get what you do, we have a ‘you’, he’s called Fahd.’ His company used Unicorn Labs and their founder Fahd Alhattab for their management training and he’d noticed some similarities in how I described my approach and how Fahd did.  

‘You two should meet’.  

Of course I said I would but I had low expectations for the meeting.  We were clearly competitors and similar meetings with other providers in the industry had been pretty frosty. Nevertheless in early 2023 Fahd and I met for the first time, and six months later he would buy part of Kommon.

To summarise the serendipity of all this: 

• I said yes to a meetup with a group of people who I never got together with again.
• I followed up on a very limited conversation with another founder and he was attentive and proactive enough to introduce me to Fahd.
• Fahd and I both took the meeting despite ostensibly being competitors with a limited amount to gain from discussing each others’ businesses with one another.

If any of these steps hadn’t happened, Kommon wouldn’t have been sold. 

Timing

When Fahd and I first met, I don’t think either of us thought we would end the year with Kommon as part of Unicorn Labs. 

I hadn’t told anyone about the decision to close down Kommon, so there wasn’t anything to buy.  Fahd and I were just two professionals in the same sector discussing our approaches to management training, a topic we both cared a lot about.

Simon had been right.  We did have similar thoughts.  Both of us were critical about how poorly served startups were by most management training and we were committed to finding a better way.  

As we continued to talk, it also became clear that we had complementary focuses.  Fahd had built a broad-based management training business serving multiple levels of seniority combined with a successful corporate retreat practice.  Kommon was focussed on first-time managers.

It just so happened that one of Fahd’s projects for that year was to bolster their new manager offering. He wanted to create a course and a set of content focussed just on this market segment.  But he also knew this was going to be a significant amount of work to develop, particularly doing it alongside running Unicorn Labs day-to-day.  

And yet here was another founder saying he was looking to move on from the sector, with a proven new manager training course and sales funnel to support it. 

The timing really couldn’t have been better.  

While Fahd and I both worked hard to make the deal happen, its foundation was this extraordinary coincidence.  His strategic priority was what I had.  And we were sitting opposite each other in a coffee shop in the same town. 

Negotiation 

From the moment we realised this strategic alignment, it became about whether Fahd and I could agree on a price and a structure, and if we could build the trusted relationship to underpin a sale. 

Clearly the answer to that question was yes.  On reflection, I think the crucial factor was openness and a willingness on both sides to put their cards on the table.  

Fahd was clear from the start on Unicorn Labs’ financial position and the value he needed to realise in his business for a sale to make sense.  From my side, I was candid about the time and effort it had taken to create the Playbook course and marketing content, the results we had seen, and our analytics. There was never a sense in the negotiation that one side was trying to get one over the other.  It helped that during negotiations I was able to make a successful referral for him to a US Series A startup looking for a training provider.  There was no better way to show I was committed to his success.

I worked hard to understand Fahd’s business, put myself in his shoes, and think about where Kommon’s assets could create value for Unicorn Labs. In that sense, it was no different to any other sale - except this time rather than a training course, I was trying to sell a company.

Finally, it was a lesser factor but I think the fact that both Gareth and I were leaving the management development space was helpful.  It de-risked the conversations and any information disclosure as there was never any danger that we would use what we learned to compete in the future.

After 3-4 months of discussions, we had a deal.  Unicorn Labs would acquire all of Kommon’s training courses and content, and I would work with Unicorn Labs to set up a similar Playbook funnel which had worked so well for Kommon.  

Gareth and I were exited founders, with a very small ‘e’. 

Conclusion

If you’ve read this far, then presumably this story has been interesting or useful (hopefully both). 

One question you might still have is was it all worth it? The clichéd answer would be to say yes.  To say that even with all the time spent, the foregone income, and the myriad failures, that the lessons learned made it worth the journey.  

The truth is it’s an impossible counterfactual. We spent a long time on Kommon and who knows where we’d be if we spent that time and effort elsewhere.  Also, learning lessons is great, but so is getting it right the first time and making a boatload of money.

I started this story by saying that there was lots of valuable startup advice out there but it was hard to take it to heart until you’d experienced it yourself. In hindsight, one thing I now fundamentally believe to be true is that there is no substitute for founding a company.  Its unique pressures sharpened and inspired me in innumerable ways which I will take forward into whatever I do in life.  

Selling something you have created makes you believe you can take on the world. It helped me realise that people will look past your previous experience if you have the talent and drive to solve a meaningful problem.  My horizons have broadened immeasurably. It’s hard to put too high a value on that. 

My current interest is in helping solve the climate crisis by repairing our atmosphere through carbon dioxide removal - a generational task.  I wouldn’t have believed I could contribute to this if I hadn’t built a failed SaaS app and sold some training courses.  You might think that sounds contradictory, but if you’ve made it this far, then you’ll know it makes sense. 

I wish you all the best with your ventures.

This story captures a fraction of the main learnings from building Kommon. If you have any further questions, get in touch.

Key Lessons

Product

• Good data is fundamental for fundamental decisions: the decision to close down Kommon was made simpler because we’d run rigorous commercial experiments in the previous year and knew exactly where our business stood.  If we hadn’t been tracking the data, making such a significant decision would have been much harder. 

Sales and Marketing

• Invest in customers until the very end: even though we were closing down the company we made every effort to communicate clearly with customers and ensure they were supported.  It’s too early to point to concrete outcomes from investing in these relationships but I’ve no doubt there will be some unexpected positive consequences in the future. 

Operations

• Say yes to meeting new people: the opportunity to sell Kommon only came about because I said yes to going to a routine, unremarkable coffee event.  I only met Gareth because I forced myself online to an unpromising tech speed-dating event.  It’s impossible to know which networking will pay off, but as a general approach, saying yes to meeting new people has underpinned much of Kommon’s development.  Particularly when I really didn’t feel like it. 

• Openness can help get a deal done: different deals require different approaches, but it can be easy to default to caution when trying to establish working relationships.  The deal between Kommon and Unicorn Labs happened in no small part because both parties were willing to be open about their respective businesses and positions, which quickly built the trust on which to progress negotiations.