54: How Dream Water Created a New Consumer Category and Achieved a Successful Exit | David Lekach

Speaker A: Are you serious about planning a successful business exit? From angel to Exit is your go to resource. Subscribe to our newsletter@ekfault.com podcast for even more valuable insights and to get personalized guidance, take our free Exit Readiness assessment. It's just 24 questions and it will give you a clear picture of your exit readiness. Find the assessment@ekvelt.com exit submit your results and we'll schedule a uh, free follow up call to discuss your specific situation and the best way to maximize your valuation and ensure a successful transaction. Now back to the episode. Welcome everyone. This is from angel to Exit. I'm um, Bruce Heckfeld. I'm your host. Our guest today is David Likach. He is a founder. He's done a couple of different businesses. We're going to talked about his journey. His most notable exit was Dreamwater. We're going to hear a lot about that. But he's had some other interesting experiences as well and also what he's doing today post Exit. So excited to cover all those things, excited to hear his, his story, hear about his journey and some of the lessons learned with all that. David, welcome to the program.

Speaker B: Thanks Bruce. This should be fun.

Speaker A: Yeah, it will be fun. I, I can guarantee it just based on what I know already. It's uh, going to be a fun conversation. But before we get into the business stuff, I'd love to get going to get personal background. Like how, like give me a sense of your, you know, kind of growing up, did you to be a business person, did you know in kindergarten was it, you know, you wanted to be an entrepreneur? Give me a little of the backstory.

Speaker B: Uh, yeah, no great place to start. I actually come from a very entrepreneurial family. I'm a first generation Hispanic American and my, my dad and family came to this country with nothing. And ultimately he's done a lot of things but ultimately he built a chain of stores called Perfumania. So there are fragrance retail shops. Uh, he built it up, took it public and when he sold controlling interest it had over 300 selling stores across 30 selling states. And I very much grew up with big family that everybody worked in multiple businesses. We had another publicly traded business that did fragrance brands like Perry Ellis, Paris Hilton Gas and so on.

Speaker A: Mhm.

Speaker B: And I'm the oldest of my generation. We're probably 20 something in my generation.

Speaker A: Uh-huh.

Speaker B: Maybe close to 30. And I always, from a very young age, I'm a twin and my brother and I should say we always hung out with when, at every family meal, when all the men were together. We. I certainly would shadow them. I'd be there, I'd listen. And there's a whole background and story. Like, you know, I was working in the stores for fun, volunteering. Like, that's what I wanted to do with myself. 12, I think. So I very much grew up in. In a entrepreneurial household. And my dad didn't boat or fish or golf, so the hobby was entrepreneurship, I guess, and talking about. And talking about. And going through work.

Speaker A: Yeah.

Speaker B: What do.

Speaker A: What do you think that taught you? Like, what was the actual learning that you got from having that exposure so early?

Speaker B: Uh, that's a good question. I think maybe more than anything, it's. It was just osmosis, you know, like, you would. I liked. Wasn't ever forced on me. And I revered and respected my dad and my uncles. There was six men across, you know, all together. And I always appreciated, even at a young age, like, I hated the fact that, you know, there was a thing called the newspaper. Bruce, I think maybe you remember, maybe some of your audience has no idea what we're talking about.

Speaker A: Yeah, exactly.

Speaker B: But I hated that my m. Dad's businesses would be reported in the Miami Herald. And so my friends, as we were getting older, into high school and things, they would know what was happening. Oh, you had a good quarter, you had a bad quarter, good year, bad year, whatever. That always bothered me. But I. But I also, like. I guess liked it. And I always respected more than anything my dad. I was very aware at a young age that my dad wasn't just providing for me and my family. He was providing for, I think, at 3,000 employees.

Speaker A: Ah.

Speaker B: So I was always clear on that. Like, it always mat. Not clear. It always mattered to me. Sort of the responsibility he had every day.

Speaker A: Huh.

Speaker B: I liked it. I don't know. It just. It was absorbed. And I was able to do a lot of big work stuff from a very early age just because I was around it. I chose it, not because it was forced on me.

Speaker A: Yeah. And what was your first kind of real entrepreneurial adventure that you started?

Speaker B: Oh, uh, I was always doing something then. I was always doing something. I guess that's the nature for all of us. No, but I guess very early on, I'll tell you a cool story. So I went to University of Michigan business school. Yep. And it was. I was there 90. I graduated high school 98. So, like, what, 99 to 2002. Something like that. And we had the dot com. Again. Here, let me translate to a potentially younger generation that was the AI boom of the late 90s. Early zeros, you know, and so. But everything was crazy and the valuations were nuts and things like that or what have you. And I remember my dad came into the office, maybe home to a Shabbat dinner or something, and he says, hey, I'm going to make perfumania.com. and he did it from scratch. 9M months later, he was public on the Amex on the American Stock Exchange. And he built it. And I think I remember for some reason, I have it clear, it's a very different dollar amount. But I think it was like a million bucks just to have some big web company to make you a website. Uh, it was nuts. And that was 20 something years ago dollars. But that was very cool. And then one of my uncles, he was really a good, strong marketer, brand guy. My dad and this one uncle were very complimentary to each other in a lot of different ways. My dad was very much an operational, the operator, and my uncle was more like the visionary and things like that. My, uh, uncle Ilya. And he had this idea that there was a website called Blue Mountain, a P car, an E car, a virtual greeting card company called in the late 90s. And he was getting huge valuations because it was getting tremendous amounts of traffic. So my, uh, uncle goes out and buys a company called Postacard.com. can't believe I'm talking about that right now. But he buys a company called Postacard.com and he tells me, hey, man, I just got this. You just have to run it. You have to go do something with it. Because it was all about public and pumping and you have to have a story. These sites generate a lot of traffic, so I actually hired some. So I'm a sophomore at University of Michigan.

Speaker A: Yeah.

Speaker B: And I move into my fraternity. I was a social chair of my fraternity. Uh, it was the most important job. And I lived on the top floor and there was a room that was just storage of crap, like nothing. So I just turned around to my friends and I'm like, if I clear this out, can I make it my office?

Speaker A: Yeah.

Speaker B: And, and so my first, my post apart office where I had two grown men, plus m, multiple University of Michigan comrades, you know, fellow students coming in and out of the fraternity house. One of the biggest party school party fraternities in the field.

Speaker A: Uh-huh.

Speaker B: Just to go work in my office in the fraternity. So that's amazing. You know, maybe that's the first notable one that that sort of rose above anything else.

Speaker A: I love it. What did you learn from that? Like, what was your kind of takeaway kind of experience from there?

Speaker B: You know, when you're young? Who. When I was young, I should speak in first person. Uh, maybe I just. I thought I was good and I knew everything and all of that fun stuff. Right. I'm sure some people here can relate. Like, and I don't know that I cared sort of like that, you know, 20 year old David did not necessarily think about, what am I learning here? What am I doing? Look, I'm the best business school in the country. I could spin this up. I could turn things into. To, you know, into a business. I would say, actually as a joke, as a practical matter, I was our. I was in my friend's group, my internal IT guy. So I majored in finance and computer information systems. But we used to have to wire our Internet.

Speaker A: Uh-huh.

Speaker B: Everywhere I lived, I had to wire

Speaker A: the Internet because I want a Cat 5 cable.

Speaker B: But I think that, I guess looking back at it, I never had fear. And maybe when we touch on some of these things in the dreamwater Journey, it was like they've often spoken about the fact that maybe lack of experience is good. Not that you need a ton of experience to do this, because I think maybe fundamentally there's no fear. So, like when a little kid goes skiing for the first time and just bombs down the mountain and just goes super fast, they just don't know to be afraid.

Speaker A: Yeah.

Speaker B: And I think because I grew up in it, because I had been exposed to it, because I had real confidence, not because I think I'm great, but because I had real aptitude across a variety of different business topics and so on and so forth. I think maybe just looking back at it, it was just like, uh, a proof point that, like, yeah, sure. Oh, uncle, you want me to run this thing? What do I. What do I know about E commerce greeting card sites? Right. So, like, it was something like that. Yeah.

Speaker A: So I know you had a couple of ventures between. Between that and dreamwater. Give us some highlights, some things that you Kind of the path and journey that you're on. That kind of the experiences that led you to dreamwater.

Speaker B: Yeah, I'll try to be quick about it. At one point, I ended up running perfectmedia.com. that was fun. It was good. I wish I would have cared to do it more because I like Ecom. Just generally and broadly. It was the nascent years, the early zeros. I mean, if you can remember what E Comm. Was like back then, we didn't have the tools and the gadgets and the methodologies and how the platforms. I mean I think maybe you had, we were advertising on Yahoo at the beginning, you know and I think you had Google was coming up, you know, and things like that. So like it was a very different time and I wish I would have loved it a little bit more. I will say something cool that I did. Um, my senior year of college, we're about to graduate and and I, we were at a Detroit Tigers like opening day or one of the early baseball games just as we were about to graduate. Long story short, March Madness was upon us or had just come and me and my friends group had joked like, what if we ranked and I'm not saying this in a sexist way, I love women and respect women, but what if we ranked the uh, senior girls of Michigan in a March minus style tournament and let users vote on it. And really what it was for me was applying all my computer information like uh, knowledge and learnings. I had an open source message board and then me and one of my Indian friends, I was a token white guy in the Indian community in Michigan. To this day they're some of my best friends and we built this site in like overnight. It was really, really cool, fun experience. I say that to say like in terms of like some of these highlights, like that thing ended up going incredibly viral like immediately. So virality at the start of 22,002, like that didn't exist, you know, anything and I didn't really appreciate or realize what I had. But I will tell you, I knew every time that somebody watched the Social Network, the movie when it came out because if they knew me or college me, they were like, or just post college me they were like, you, you

Speaker A: are almost un, this is you.

Speaker B: So I actually remember interacting with the Facebook people because I made it into the next year. There were so much inbound inquiries that I ended up setting up the platform to let multiple schools run it. You know, Harvard was one of them. I made it into the Harvard Crimson. I remember sending my mom an email saying, mom, look, I made it into Harvard and you know, things like that. So that was really cool. And again I say maybe looking back I didn't really understand or appreciate the virality that I was tapping into and what it really meant and what it could be. I tried to turn it into a business. I actually ended up pitching a uh, TV show around it so there would be a live competition, you know, that kind of stuff. I'm sure I was out in LA pitching It, it was an interesting experience. Sorry for the huge dovetail.

Speaker A: No, no, that's good. I mean, you know, I find these things are formative though, right? Like these experiences that we have, they teach us things, you know, good or bad and they prepare us for next steps. So. So tell me about dreamwater. So what, how did this come about? Like what was the beginnings of it? Like, I'm always kind of curious how things get founded.

Speaker B: Sure. I will say just to sort of wrap that up. And there was a bunch of other, you know, things that came along the way. But I ended up doing my JD MBA 2002. The.com bubble had burst.

Speaker A: Yeah.

Speaker B: And at least I had job offers. But there was, it was very hard again for younger people that might be watching. It was incredibly hard time to get a job coming out of school and. But I had offers and everything like that. But I had a dad who multi generationally. I was the seventh one, including my twin that graduated three years instead of four from nyu. I was the seventh that ever graduated from college. And my dad had like suggested why don't you just, you know, maybe go to law school or something like that. So begrudgingly I didn't mean to do it. I ended up doing my JD MBA in the original landing. I had to come home and that, uh, that set the stage. But the same uncle that I was referring to in poster card and things like that, he would make fun of me for three years at every family meal. He'd start from like personal injury ad when I would walk in because he was so disappointed because I was on this crazy park. But then I don't know what happened and okay, I'll take the. Maybe I wasn't enthralled with the job offers. I had offers from Dell and some Wall street firms I was interacting with. But I ended up going down that path. He was very disappointed in me for going down that path. But I ended up becoming the first graduate graduate of graduate school in my family. And that's proven to give me a nice little base and foundation that I've used, you know, for the last 20 years professionally. So we come out of doing the JD MBA. I've been doing a bunch of stuff along the way and working and things and what have you. And then with my family we made an investment to a small financial services company in New York prior to the 0708, you know, crash, the big recession I would say, in this market. And that's where I ultimately met my. I was miserable. I used to tell people I Was doing investment banking and I was like, I have a front row seat to the end of the world. I mean, uh, 52nd and 5th, uh, you know, in an office and just watching everything crater. And, you know, the world was really tough back then. Major crash. And my eventual co founder Vincent, came up to the office looking to raise money for this thing called dreamwater, which I happened to have the very original version of. It was like this 8 ounce, syrupy kind of, you know, not that great packaged drink. And, and whenever there was a CPG or retail pitch, even though I was focusing on alternative energies and metals and mining, I thought that was like, ooh, for the next 10, 15 years, a good place to be. Whenever there was a CPG or retail pitch, they'd call me in because of my background. And I met Vincent and he handed me one of these bottles and my head doesn't shut off so easily at night. So I'm in my late 20s, maybe 28, 29, 30. And my, you know, 12 o' clock would turn into 2, 3 in the morning very quickly, uh, for me, classic. And I tried this and I couldn't believe it worked. And I woke up with two dots. I can't believe it worked. And the second thought was, this has to exist. There's no way. I just found the anti Red Bull, but it didn't exist. And that's when the dreamwater journey kicked in.

Speaker A: Yeah. And what's the underlying formula in the original formula? Like, what is actually, how does it work?

Speaker B: It's a combination of GABA, melatonin and 5 HTP.

Speaker A: Okay.

Speaker B: And so it was all natural. It was really tapping into a trend where sleep was starting to get again. I didn't fully understand that in the moment, but sleep was starting to get a lot of attention as a fundamental building block from a wellness perspective. Right. We think we have to eat right and work out, but sleep is a, is right up there, uh, with both those, you know, in terms of that. So it was sleep was having a moment, or it was the start of maybe sleep having a moment. Obviously a trend toward natural good for you wellness products.

Speaker A: Ah, yeah.

Speaker B: And so this was like sort of perfectly encapsulating this thing, but for me it was just like, this has to exist. And I call it the fucked up entrepreneurial gene. Where you go from talking about, oh, this is a good idea, let's go, you know, make a website of bureaus on Michigan to, you know, hey, let's do it. Like, let's actually build it, right? Like, let's go beyond talking about it. So, you know, you jump into this, and I'm like, this has to exist. And I have found myself to be an incredibly resourceful person. You know, one of the first phone calls was on our fragrance side. There's very big fragrance and flavor houses. The two big ones that I can recall right now are IFF International Fragrances and Flavors and Juvedon. And we were doing a lot of work with Juvenile in the moment. And so my m. Uncle puts me a different uncle, puts me in touch with the guy at Juvedon. And that guy Don, I can't even believe I remember his name. Used to brag that he has two accounts. He's got Pepsi and he's got Dreamwater. And I loved it. And that was great. And that was, you know, the start of let's go and let's figure it out. Uh, ultimately, we never commercialized the 8 ounce. We commercialized a shot. It originally looked like this. So it was a, you know, two and a half ounce shot.

Speaker A: Okay, so. And what. And I mean, I'm seeing a lot of possibility. What were the challenges at that point? Like, what do you see as being. What were the hurdles that you saw in terms of bringing that product to market? And kind of, what are the known knowns and known unknowns or unknown unknowns that you could. That you can share?

Speaker B: I was very. I wouldn't talk to you about what I was doing unless you signed an NDA and then you'd say, what am I signing NDA for? And I say, I can't tell you. It was kind of, I guess, childish and stupid in retrospect. But, you know, I was like, dude, dude. Like, I just found something that doesn't exist.

Speaker A: Formula. Yeah.

Speaker B: So when we were thinking about where and how to launch, the US Is a massive market. I'm, um, based. I grew up, and I live in Miami now, but I've lived in New York a bunch of different times in my life and in other parts of the US and parts of the world. And I said to myself, this idea of NDA is stupid. The second we come out, we're going to come out. And my entire approach from start to finish was always one from a, uh, place of curiosity. At the very beginning, it was, what do I have? Do I have something? I think it's good. I think it worked on me. Everybody who I've given it to loves it. But do I have something from a commercial perspective? And I really looked at it like that. And so ultimately, the first step was deciding where and how to launch. Ultimately, it ended up being we're going to go straight to New York City, which is, again, possibly a little bit crazy.

Speaker A: We're going to.

Speaker B: With the idea of putting the city that never sleeps to sleep. And that was. That was very much sort of the plan. And once we knew where to look, we also thought about channels. So where would you effectively, where would you expect to find a sleep aid? And you have convenience stores, you have supermarkets, food chain, you have travel retail, you have mass market, Walmart, Target and what have you. You have, you know, drugstores and so on and so forth. And ultimately we said drugstores. But when we thought about New York and then drugstores, there was an independent chain called Dwayne Reed at the time, uh, within launching at Duane Reed in December of 2009. We in Duane Read got a part of a Walgreens, like in February that year. So it's perfect timing because it was

Speaker A: like,

Speaker B: you know, you got the behemoth of, uh, Walgreens, you know, coming up and what have you. But that was really sort of the focus. It was very, what do you do? How do you do it? You know, how do you get started? And ultimately, what we decided in New York, we now knew where we wanted to Target. We figured out we knew something there, and that's how we started and we launched. And it was very New York centric to launch for a long time for that. For the bulk of that first year.

Speaker A: Yeah. And I guess when you started this, did you have particular goals, ambitions, but where you wanted to take it? Like what? Like were your. What were you thinking at the time when you first founded things?

Speaker B: I think even then I'm probably 30 at that point. I was the elder statesman in Dreamwater. Like, I was the old guy always. Yeah, we hired a couple people older than me at some point, at different points in the process, but I was technically there. And I don't think I thought about any sort of big, grandiose terms. I think it's something that limits my ability to set goals properly, is I believe that if you do enough of the right inputs, the output will be far greater than what you think it can be.

Speaker A: Okay. Huh.

Speaker B: And I was always focused on that. So I always found goal setting weird or hard for me because I'm like, I want to sell a million dollars. Why do you want to sell a million dollars? If you can sell a million, why not too? You know? And so I think my natural inclination was always just try to do the right things or the things I Perceive to be the right things sort of along the way. And the outcome will be far greater than what I think it could be, if that makes any sense.

Speaker A: Yeah, it does. What was the competitive space like at that time? I mean, you said you couldn't find another product like this and stuff, but, uh, you know, that had to have changed pretty quickly. Like, what, what. What happened in terms of the market for these products?

Speaker B: It is the funny thing, right? I'm sitting there having people sign in VAs and like, oh, my God, look at what I found. And isn't that just it? Like, you think you're working on something crazy, and then somebody else is doing the same thing somewhere else, you know, all the time. And so we launched with Dwayne Reid, and within two, three months, a second brand launches at Dwayne Reed called Relaxen. And I was like. I was like, no, you know, like, this is terrible.

Speaker A: Uh, end of the world.

Speaker B: Uh. Oh, my God. Really? I think probably I was more shocked like anybody else was working on this at the time. You know, like, what are the odds?

Speaker A: Yeah.

Speaker B: And I was always data driven and very data hungry, and we were killing them because I think that fundamentally, if I had to create this product, it would look, sound, and be called Dreamwater and taste like this. And, like, so I think that we created. And I'm not saying that in a weird way, hopefully, but I think that we created the right product for the right thing and we positioned it the right way. And, yeah, the sales were, you know, 10 to 1, you know, relative to the. To the other guys. And then, of course, a million copycats came out, right. And a part of me was like, great. I was a little bit flatter probably, if I. If I go back in time, but really I was like, clear that one brand is not a category make. And so our opportunity here was brand building, but also category building. And that is a much bigger aspiration. But for you to have a category, there has to be more than you, you know, so that I was sort of always clear with that. And then also I had this idea right from the beginning, thanks to Relax It. I was always very collaborative. I mean, there's a little set tangents that I can get into with that. I was very collaborative, including with the guy from Relax it. And. Or at least I tried to be. And then I was always kind of like, kind of quickly I understood. Like, you got to put the blinders on a little bit, but with, like, the ability to look a little bit to the sides, but, like, run your own race. Yeah, I, I, that, that was sort of cemented to me sort of very early on. I felt like we were doing a lot of the right things in different areas, and from distribution to branding to positioning to product development, you name it. And I just, I believe that you should run your own race, but paying attention to what's going on, but run your own race. And that was sort of clear to me. Right. Right from the beginning.

Speaker A: Yeah. I'm curious how. What was the family situation like at that point? Right now you're running something that, you know, it's got some real legs, you have some traction. Do you get a lot of support? Was there competitiveness in there? Like, what, what happened with that dynamic?

Speaker B: My, I'm, um, one of five siblings, but really my dad had a daughter first, but the four of us that grew up in the house, my dad has a household of entrepreneurs.

Speaker A: Yeah.

Speaker B: And my dad sort of set it up that we, we look out for each other and we take care of one another.

Speaker A: Uh-huh.

Speaker B: And so that's just how it was. And my younger brother, so I have a twin, a sister, was two years younger, and my, My, My brother Joseph, who's seven years younger, and he, uh, actually came into dreamwater. He graduated Babson, and that's when I was getting started with dreamwater, kind of. He was a year or two out of graduating from Babson. So there you're supposed to be an entrepreneur and so on and so forth. And so Joseph came in early on in dreamwater and eventually ended up becoming my EVP of sales.

Speaker A: Okay.

Speaker B: And so we worked incredibly well together. We pushed each other very hard. It felt very collaborative. My twin was living in Mexico at the time, running parts of our fragrance business and things like this. And he was very helpful also. He helped, he helped bring in some early investors. And he was a good sounding board. Right. Like, he wasn't in the business, but he was, uh, a good sounding board. And I think, you know, collectively the whole thing amplified. And my dad worked out of our office, I should say, first we worked out of his office, then they took it over, and I took over, you know, a couple of his people. And then he was working in my office, but he always had the main office. So, so, so. But he was always an incredibly useful resource for me and all of my team. There was a one team member that couldn't walk into his office, and it was like a free paid consultant just sitting there, ready to go and knowing about your business. So that was, again, it was very much set up to be like one plus one should be more than two from a familiar perspective.

Speaker A: Yeah. Yeah, I love it. What were some of the big challenges around scaling the business? I mean, you mentioned that you kind of were the leader in the category, but what were. Do you have any face, any headwinds or challenges that you can share?

Speaker B: All of them. You know, it's very hard. You know, people think that they made it when they make it into Walmart or uh, Walgreens or Publix or, you know, you name it, it's not so it's how you're in those stores. And then we were always incredibly gritty and resourceful because again, this idea of lack of experience I think served us very well. I wasn't beholden to the rules of the game, so if I did things the right way, dreamwater probably would have started and ended within the first year. Yeah, I didn't do things that way, but not because I was smarter. I just didn't know or I was into how things are supposed to happen.

Speaker A: Yeah.

Speaker B: So we were running all sorts of regional programs with Walgreens, specifically with Walgreens, CVS and Walmart.

Speaker A: Yeah.

Speaker B: Following their rules, following their, you know, branded style guides and merchandising guidelines and everything like that. But basically building data. I've always been data hungry. Basically building the data to say, guys, I know it sounds weird because we're sleeping, but if you give us the right in store opportunities, look at what our sales are. This idea of inputs done the right way should equal the outputs infinitely bigger. And that kept proving to be true. Like our sell through would be huge, off the charts huge on a truly incremental sale because it wasn't something that we were replacing. It was, it wouldn't have sold but for our sale of it. So, so the frustrating part though was taking their own regional data. I was selling more 200 CVS's than 7000 CVS is doing it their way. Where they would bury me in the sleep aid, uh, set and everything like that. Ah, I was selling more than 200 than they were selling 7,000. There, uh, there was always this sort of back and forth and I was so close to the unlock, I think several times and it never really came to fruition. And that's that plus never finding my true marketing magic bullet. You know, where we talk about a lot, you know, in modern times, about the return on ad spends and uh, you know, things like this and whatever other metrics people go by these days, but I never found that. I never found a dollar this way equals $2 that way that not being able to fully unlock that corporate, you know, backing into a major program. And. And then ultimately also we got sued under a truth in advertising kind of construct.

Speaker A: Yeah.

Speaker B: Basically the ambulance chases of the corporate world. They go up and down the rows of, you know, Walmart, you know, Walgreens, CVS and what have you, and they just go. And they sue you for anything. So for me it was, it was a, they fashioned like a class action and it's straight. But the, the, the, they go up and on the things. And I got sued not to deal with that for four years. Uh, I ultimately won outright in trial because it was just corporate extortion.

Speaker A: Yeah.

Speaker B: But I couldn't get it done. I do remember I had a friend in Greenberg Charge and I call him. I'm m. Like, dude, I just got sued. I was like at the end of the second year, our first year was like 1.1 million in sales. Our second year was like maybe 2 7, something like that. So we're approaching like this early and I got sued and I had never been su. I was so nervous that I called my buddy Greenberg Chor and he was like, congratulations, you're big enough to sue.

Speaker A: Exactly. Yeah.

Speaker B: Um, right of passage. Yeah. And it was just, it was a terrible experience. I learned a lot from it, but it was a terrible experience. They shouldn't be allowed to exist. California, if you could hear me or if you're watching this and you matter in California in terms of being like, stop it. Don't allow these things to happen. It's terrible. Sorry.

Speaker A: No, it's fine. Well, I mean, this is the reality of business. Right. Like, I think every, every entrepreneur I've spoken to that, you know, achieves some level of success. I've had to deal with things like this. Right. It's just, it is, unfortunately, it's kind of part of the game for sure.

Speaker B: What.

Speaker A: I guess. So when did the idea of exiting, of selling the company first come up? Like what was. Give me the insights there again.

Speaker B: I guess the theme here is this idea of like enough of the right inputs will get you to some sort of outcome. It wasn't the outcome I had in my mind. I guess every once in a while fantasized it would be because I thought it could be huge. Yeah, but the, But I was always. I viewed my job as a CEO, one of, uh, I was always interacting with private equity and all of the major private equity groups, all of the strategic companies that you would logically think of and even the ones that you Wouldn't logically think of were examples of logic. Pepsi to all these OTC or major Meg brands, Proctor Gamble, Johnson Johnson, uh, you know, the like and what have you. And lots of other guys also because again, the private equity guys, a lot of them would, you know, be looking to cobble together, yeah. Three, five brands or six brands, 10 brands, whatever, and turn it into a little house of brands or what have you. So there was sort of running the gamut across the board and I always stayed in touch and I feel like, you know, and if. Especially if you're some of the Gravitates podcast, you'll hear this idea is that you should be cultivating the relationships when you don't need them.

Speaker A: Yeah.

Speaker B: So that when you do enter a transactional opportunity that you can get there.

Speaker A: Yeah.

Speaker B: But in the weirdest of ways, my. I wasn't able to do a lot of international business because melatonin specifically gets regulated like a drug.

Speaker A: Yeah.

Speaker B: Basically anywhere England ever. Empire built. So.

Speaker A: Okay.

Speaker B: From the Middle east, other parts of the Middle east, to South Africa to Australia, to a lot of the eu, Caribbean.

Speaker A: Ah. Yeah.

Speaker B: Wherever England touched, it was kind of regulated like in Dragon.

Speaker A: Okay.

Speaker B: But I was able to push a lot of international demand and I was able to push throughout North America, Mexico, through Canada. And I had. I had a Canadian distributor who, long story short, comes to me, he was. I was always impressed not by his distribution ability. I had to do all that work and all of the stuff and take all the sales meetings or whatever. Although I like working in Canada. Every retail is in Toronto, every major retailer. And there were some that weren't, you know, what happened with like in the US they're all spread out somewhere else.

Speaker A: Yeah, I know.

Speaker B: Uh, so. But one day he approached me because I want to buy you. And I was always impressed with his ability to raise money and wheel a deal and, you know, interact with what's called Bay street, it's the Wall street of Canada in Toronto. And. And I entertained it kind of, you know, for a little bit just to see what would happen. And ultimately that's the deal that got done. And that's. And I ended up selling Dreamwater to a publicly traded on the Toronto Stock Exchange, Canadian cannabis company.

Speaker A: Okay, interesting. And I guess how did that deal, I mean, was it a pretty clean deal? Was there a lot of back and forth? I mean, I was kind of curious on the kind of gory details of actually getting these deals done. What was it like for you?

Speaker B: Again, I don't think I followed a playbook I wanted to meet an investment banker, somebody that could help me at any point. But, like, I never did quite, you know, unfortunately, you know, because it would have made my job a little bit easier and better.

Speaker A: Yeah, like, how so, like, what did you feel like you ended up having to do as CEO, that investment, uh, banker would have done for you?

Speaker B: Because I would be reached out to by pick it and then they give me a list of like, you know, 100 PE guys or whatever. And I actually interacted with a lot of them. So I'm like, oh, who do you know at? And then fill in the blank. And they wouldn't, you know, it would just be like, oh, here's the list. I want to target all of them, you know, whatever. I was like, well, I spend time cultivating these relationships, right. So, yeah, it would have been nice to be able to have something open doors for me or that that could complement what I'm doing. Right. Like, I know them my way, maybe you know them better, you know, or something like that. And it would have been interesting. I never had a word, just the cash. We ended up raising about 6 million overall in the overall experience of the whole thing. But I never had more than like 2 billion bucks in cash at any given moment. And even that was for like a very brief moment. Yeah, I skipped over the fact that I had my highest highs and lowest lows in 2013. I sold in 2018. So I sold it to a second wind where we were. I had built up intentionally a huge innovation pipeline from cannabis to other form and function possibilities. So I created sort of a long tail of an opportunity. Like, guys, you buy me today for this. But, like, look at what I've built. I even created another brand or a couple other brands along the way for it. So, you know, there's a lot of stuff and I think my second sort of win going through these things. But I knew ultimately about the exit that the guy Steve did not have the wherewithal to be able to pull the transaction off himself. So I also knew that he was buying it at a dollar a bottle from me, which wasn't hugely profitable for me, but I was doing all the work and things like that or whatever. He needed to have it at a better margin if he was going to be able to turn that into a real business. And it wasn't a major part of my business at all. It was kind of annoying. I was even contemplating what to do with it at the time. Maybe take back Canada when he randomly just says, hey, man, I want to buy You, I said, great. But I effectively negotiated two deals around Thanksgiving of 2017, which was it's got to be a quick close to a transaction. I knew he didn't have the wherewithal with hard money at, uh, every step of the way. Okay, not in escrow, not in anything like money comes across to me because I didn't have any cash cushion. And I knew I was gonna have to spend money on accountants, illegal and what have you. And it was going to be distraction. So I was like, money's got to come in hard. But it was also against the backdrop of better, uh, distribution agreement. So I was going to move to a cost plus. I was trying to build this whole digital ecosystem for dreamwater the time. And this was my alternative funding way, which is front me effectively with something like front me three years of gross profit to today and I'll sell you at cost plus 15 or 20%. So now I bring down his margin. So that was our backup plan. Negotiated fully into that initial deal in around Thanksgiving of 2017. The original deal was supposed to close in February. Actually made it February 15th of uh, 2018. So when I tell you it was supposed to be quick. It was meant to be quick in nature.

Speaker A: Yeah.

Speaker B: And just to, uh, highlight it. But you know, February 15th rolls around and I already had hundreds of thousands of dollars in my bank account. Like it was already there. It was contemplated. It was great. It was very helpful at the time from a cash flow perspective. February 15th comes around because I put February 15th because in theory I was going to do February 28th, but February 15th is my birthday. And so what a cool thing. I never told that. I never told them that. Why February 15th? They didn't question it, but I wanted a theoretical birthday present for myself. But February 15th comes and comes and I know that they're not ready to do the deal or close or transact or whatever, but at that point. And again, we could have done 40 minutes just on the exit. But I'm trying to sort of highlight it. But at that point I knew Steve and who he had land up were very pop committed. So I said, I'll tell you what, I'll grant you an extension, but probably another 100 grand. I'll give you a one month extension. March, middle of March rolls around, they're not ready to close. I'll tell you what, man, you can go to and, and I will give you another month extension.

Speaker A: Yeah.

Speaker B: Ah, so we did that twice. I think I was already in hand free clear, maybe 500 grand at that point. And the sort of, the biggest lesson of not doing it the traditional way was, I think, but for having, you know, really slowly getting those commitments at every step of the way, I sort of put it as. That's entirely why we closed the transaction ultimately. And it was announced in May of 20. It was announced and transacted in May of 2018. And so. But I did a lot of that along the way. And then even at the end, when they needed an extension from the end of April to the end of May, I did it again. And my attorney was like, it's enough, David, stop. And I did it again.

Speaker A: You're hooked on this.

Speaker B: Yeah. In fact, I, I did screw something up. Uh, but at the very end, that's a story. I don't know if it's worth going to a tangent. I almost screwed up the entire deal at the end. But what I will say is I never, I didn't, I didn't spend dollars. I have aptitude across sort of all these business segments. So that, plus the fact that I'm very organized, I was able to turn around a 17 page due diligence checklist with a data room that's tied to everything within a day. I remember I was in Chicago for a Walgreens meeting and I got a call from one of the guys saying like, hey, when you want to review the list, I'm like, look at your email, buddy, it's already done. So I was. There is something to be said for being very organized and tight. I went through. I forget which big accounting firm, you know, Deloitte or one of them, like, uh, came in and ran me and my little team through the gamut, you know, the gauntlet, and smooth as hell, because I was right in tight the whole way. And, and, uh. But I layered in my own attorney. I had one attorney, Jamie Hurwitz, from start to finish in upstate New York. And I layered him in April, like when I felt that the transaction was coming due, and I said to him, just don't fuck it up, man. Just paper it and don't fuck it up. So it wasn't a good idea for me to be the lead. Yeah, back and forth. Because I was kind of an asshole. Not in an way, but yeah, I negotiated hard and I was, you know, but I had to theoretically work for

Speaker A: them after, like, that's always the challenge is you go from this, like, very adversarial to all of a sudden, we need to work together.

Speaker B: Yeah, my, my attorney was a good guy. I was a bad cop and he was a good Cop in our back and forth or whatever. And you know, I layered him toward the end just saying like paper it and don't it. I didn't have Cloud then, you know, so. Yeah, I, if I had Claude, I might not have even more fit into the.

Speaker A: Yeah, exactly. You would have done it yourself.

Speaker B: You probably would have. So, so, so, you know, I did learn something of uh, there is a little bit of value to letting somebody else be the bad guy. But at the end of the day I trusted myself and even I almost fucked it up the eve of uh, it got done and you know, that was.

Speaker A: What did you do with the eve, uh, of what was the misstep?

Speaker B: Literally, because they're publicly traded, uh, the tsc, because it was cannabis company, they didn't allow you to transact. So we announced it on May 3, but we closed on May 28 or May 30, something like that of that year. The, the TSC needed time to approve the transaction. Yeah, I had versions of CBD and THC Dreamwater products. If I had commercialized them, TSC would have rejected my. Yeah, would have rejected the deal. Um, it wouldn't have happened. So in a fortuitous way that worked out really well.

Speaker A: Yeah.

Speaker B: But I had to deal with two major. Like maybe the biggest law firms in Canada and me like uh, schmuck from Miami. And you know, you get close at the. After you've gone through a whole deal and all these things or whatever and transactionally. And so I remember I was seeing a girl at the time. I'm at her house, I'm in her backyard. And the plan for the next day was they have to have a board meeting. They'll ratify the transaction on May 2 in the board meeting. And then they're going to let me know because my whole thing was like, I got to tell my company M. You can't announce it without me being able to sell my company first.

Speaker A: Yeah.

Speaker B: And so I call, I called an all hand meeting, but I didn't tell anybody why. On, on for May 2nd. And I'm sitting there twiddling my thumbs like waiting for the phone call. But the night before I said that I think his name was Aaron. I said like I said I did a post mortem on the deal before it was done. Uh, and I kind of said like, hey man, you know, I would have given you this, I would have done that. You overpaid here, you know, or something like that in a very nice, friendly way. And then Steve calls me on the second, I'm like, oh, here's a phone call. And he goes, you, David, what'd you do? What did you say? And the deal didn't happen that day. And I thought it was done. I went to my brother Joseph and my brother Isaac and there was supposed to be a huge party that night.

Speaker A: Yeah, of course.

Speaker B: No, because my aunt, another family member literally had her birthday party or something. Like it was a monster party. I was like, great. I get a parting of three where it's going to be announced and I get to go to this with all my friends and family or whatever. It was a huge party that I didn't have to be an eye for. And it didn't happen. Instead I stayed in and I drank some whiskey probably with my brothers and they cried, probably. And I felt like shit. And it was terrible. And uh. Oh, at that point I had gotten 750 grand cash. Like if the deal didn't happen, I. It was the most profitable thing I had done in Dreamwater. Yeah. And uh. And we were able to get it back on track and announce it literally the next day. But it was weird. I had an all hand meeting that didn't happen. I wasn't telling anybody. I was all of a sudden, like, I was on my dad's couch in his office. I was like, so fucked up.

Speaker A: Honestly, access a crisis. Yeah.

Speaker B: And then the next day I get to call. I wasn't sure what to expect. I didn't know. And out of nowhere get the call and I say, guys, meeting whoever's like, here's the dial in. And then it was announced. We sold Dreamwater. And I love it. It was very much a Dreamwater. My daughter are the same age and for a lot of us, we grew up together, so to speak, as adults, which I'm very proud of. And so it was this sort of surreal moment, like the grind and everything, whatever. And here we are announcing this moment in time and all that stuff. So that happened and I almost screwed it up, but good for you.

Speaker A: Well, at least I like, I got closed. I've heard a lot of the stories where they did screw it up and it didn't close. And then they're back to business, trying to figure out how to put the pieces together. So. Yeah, yeah.

Speaker B: Although my business, like I said, would have been more those profitable. Yeah, yeah, yeah, yeah.

Speaker A: No, it could have been the best, the best deal that you didn't close.

Speaker B: My dad started to laugh every time I would come in and be like, I got another extension, I got more money. Like, that's not how he's used to business, you know.

Speaker A: Yeah.

Speaker B: Or things like that. If I listen to my attorney, if I even listen to him, like, things like this wouldn't happen because of the rules of how things should be.

Speaker A: Yeah.

Speaker B: But I was really just trying to solve for stuff and what would make it worth my while. And it had happy ending, but even if it hadn't closed, it would have had a happy ending. I, uh, presupposed because the inertia was there. Plus, I just had my most profitable moment in time. So, like, I had a little bit of extra cash and it was a, uh, really good way to have done some fun fundraising, so to speak, without having to deal with fundraising.

Speaker A: Yeah, exactly.

Speaker B: You know, it was good.

Speaker A: What, um, I'm curious what your big takeaways are from that whole experience that you'd kind of give as advice to, you know, founders that are in the process still running their businesses. Anything that you tell them to kind of think about or do.

Speaker B: Professionals, just because they're called a professional doesn't mean that they are. That they know what the hell they're doing or what they're talking about. Uh, and I think you got to be able to read the situation and understand your part of that role or situation and play the hand that you. You're dealt. But, like, I'm trying to make a poker reference. This is not coming out. But, like, I played the hand that I was down.

Speaker A: Yeah.

Speaker B: And I think I played it well without intentionally trying to do it. But I was sort of listening to myself and I was sort of clear on what my goals and objectives were. That was my guiding light. Not the rules, not, this is how it should be done.

Speaker A: Yeah.

Speaker B: And I think that can apply to a million set of circumstances. I can't tell you how many times I've confronted a consultant or a professional and they tell me how things are supposed to be and do and go or whatever. And I'm like, all right, thanks. Like I said, if I had done everything the right way, quote, unquote, the right way, dreamwater probably wouldn't have lasted a year. And if I had done things the right way, I would have gotten no money out of this transaction and I would have probably, ah, not closed on a sale, and who knows what would have happened from there. So just a couple highlights of like, well, maybe you don't always have to do things exactly the right way.

Speaker A: Yeah. Yeah. I think one of the big ones that you mentioned that I really liked was this idea of don't get overly fixated on a Particular goal, right. Like, oh, I'm trying to exit for this amount and this number of years, just like focus on doing the right things right, like get the business going right, like focus on the inputs right. Like how to get the inputs right and the outputs will kind of work themselves out or those things will happen. Because I do see a lot of founders get overly fixated on, oh, I want to exit for this amount of money or this multiple and this number of years and they take their eye off the actual operating the company and then it doesn't matter. It doesn't matter how big of a goal you set. If the company's not operating well, there's very little chance you're going to get there.

Speaker B: So I will say I was quite amazed that in my little company, really only my right hand man, Natalie, knew what was going on because I said that, hey, we have auditors coming because I'm going through a fundraising round and nobody questioned it. And I've always been very open and transparent with my team for the good and for the bad. And I was very pleasantly surprised that nobody found out that this was happening until I announced it. Joseph knew, my brother knew and Natalie knew. That was it. And I was going to say something else about, oh, there was another thing that, you know, when I say, hey, just like anchor yourself to what actually matters to you or those things. So I had a, a little pool of money that was meant for me to say thank yous. That was very important to me. So it wasn't for me and it wasn't for my shareholders. It was a specific pool. I think it was maybe like half a million. Maybe somewhere between that and a million, like just for me at, uh, my discretion, I could have taken the whole thing for myself.

Speaker A: Yeah.

Speaker B: But it was for me to say thank you to people. And I can't tell you how many times it tried to negotiate that away from me in the process. And I was like, no, like, dude, I already did my negotiating to the term sheet up front.

Speaker A: Yeah, exactly.

Speaker B: It was very detailed.

Speaker A: Yeah.

Speaker B: So like, no, like, you know, and so on and so forth. And I wanted to say like something like that wasn't for me. I mean, again, anchor yourself to the things that matter to you, I would say. And then play the end, you know, play it out and, you know, and hopefully if it's the right things and you anchor yourself to the right things, it will yield the result better than you had hoped.

Speaker A: Yeah, yeah. David, this has been a pleasure. Uh, if people want to find out more about you, about the work that you're doing today, what's the best way to get that information?

Speaker B: I've been doing a lot of data work lately, and so my email in my data company is david@trinitybi.com.

Speaker A: uh-huh.

Speaker B: And you could reach out to me on LinkedIn, Instagram, Facebook, I guess, any of those things, and I'd be glad to interact. I can't tell you how many times I've paid it forward in terms of my time, guidance and things. I'm a mentored endeavor. I'm very pro entrepreneurship. And try me. Reach out to me and, um, ask me anything, and I'd be glad to roll up my sleeves for at least an hour and help whoever you are out.

Speaker A: Uh, yeah, Perfect. I appreciate that. I encourage everyone to look you up and get more info. David, thank you so much for taking the time today. It's been a pleasure.