Selling a Startup, Buying It Back, and Changing How Founders Raise: A Founder's Story

Speaker A: Welcome to Startup Success, the podcast for startup founders and investors. Here you'll find stories of success from others in the trenches as they work to scale some of the fastest growing startups in the world. Stories that will help you in your own journey. Startup Success starts now.

Speaker B: Welcome, uh, to Startup Success. In this episode, I sit down with Jacqueline Johnson, founder of Create and Cultivate and and co founder of Cherub, to talk about what it really looks like to build, exit, and then in this situation, rebuild a company from selling, Create and cultivate for 22 million to PE to buying it back just a few years later. Jacqueline shares the lessons founders need to know about private equity ownership and control. We then dive into how they're rethinking early stage angel fundraising with Cherub, what's changing in today's startup landscape, and what it takes to really stand out with angel investors in an AI driven world. Welcome, Jacqueline. So, Jacqueline, we have so much to cover, but I want to start with Create and Cultivate and kind of your background and what led to the founding.

Speaker C: So a long time ago now, but I had actually started a different company. It was called no Subject. It was a marketing events influencer before influencers were called Influencer Agency and really was working with different clients ranging from beauty, fashion, tech. Was the first time founder was in my early, early 20s, making a lot of mistakes like founders do. And really there was nothing at that time. And this is like 2010 timing that looked, felt, or spoke to me as a young millennial female founder. There wasn't that many resources, There definitely wasn't events. And so I created something called Crate and Cultivate as a side project through the agency to get women together, get offline, do a little workshops, speakers dinners. And it really started like a small 25 person thing. And then year over year, it kept growing. Brands were getting more interested, people were excited. It was 50 people and then 100 people. And then cut to 2016. I actually sold that agency and then went full time basically trying to build Crate and Cultivate, um, into something even bigger and better.

Speaker B: Awesome. And what caught our attention that's so unique is you ended up selling it, right? To pe.

Speaker C: Yeah, yeah. So Crane Cultivate was completely bootstrapped. Um, we raised no outside capital. We had really, really insane growth. I would say the founding started in 2015, which is when we were like, okay, let's take this seriously as a business. And then really up until 2019, we were doing 14 million in revenue, 4 million EBITDA. Just, uh, really crushing. Year over year. 2020, we were on track to do 25 million in revenue. And obviously we know what happens. Covid hit. But we ended up doing quite well during COVID and pivoting into more of like a digital footprint. And we ended up selling to PE top of 20.

Speaker B: Was that hard to come to that conclusion? Because I know a lot of, for a lot of founders listening like, it's your baby, right? You've been there through the whole rise and to just kind of take that step is a big deal.

Speaker C: Yeah, it was interesting. We had like an interesting kind of up and down with selling the business. We had really early interest in 2018. So at that point we're like 3ish years in, we're 8 to 10 people. I think we're doing probably like 8 million to 10 million in revenue, but like growing really fast. Had a lot of inbound interest. So we actually went through a process in 2018, which really was a great thing for the business to do because it got us very organized. We were able to tell our story in a really compelling way and we got a bunch of Lois. We ended up going with a public company. You know, obviously the diligence around that was really intense. And then it ended up not working out and falling through, which was devastating. But at the time it was like, okay, we were still fresh and young enough that it was like, easy for us to bounce back. A lot of the reason that one fell apart was because of the lack of C suite around me. So really, at the time, being such a small company, you know, I was the CEO, but I was also, you know, the head of marketing, the head of sales and that whatever, and, and also the face of the brand. And I think they got a little spooked that I was too much of the business. Essentially, 2019 brought in more high level people, including a COO CFO who was amazing and really helped structure and professionalize a lot of like the details. So our goal always was to go back out 2020 for sale. So 2019 was a great year for us. Top of 2020, we were back into a process. Had a bunch of lois around like March 1st and um, it's been a devastating, uh, kind of roller coaster as it is. I feel like on any process. And then obviously all of those pulled

Speaker B: out because of COVID Right.

Speaker C: Which from there kind of had mixed feelings about selling the company. I was like, I don't, uh, want to do this again. Like, this feels like a nightmare. We're doing well. We don't obviously. Covid though, put a total ring in it where I was like, okay, is the world ending? Are we gonna ever do events again? Like, it became a little bit of a different conversation. We luckily had launched a digital membership the year before. We built the infrastructure, built the backend. So when the world shut down, we pivoted very quickly into digital memberships, and we're able to scale that business really quickly to 10,000 members.

Speaker B: Wow, congrats.

Speaker C: Thank you. Which is highly profitable. So when we got to the end of the year, we actually had a really good story. While our revenue wasn't doubled what we thought it was going to be, you know, our EBITDA was the same. We were able to maintain revenue, a semblance of revenue from the year before. But the only people who were really interested in deals at that point was private equity. A lot of the strategics that were interested were not doing great or had shut down or like, were, you know, trying to fix their own situation. And so private equity came to the table. I will say, at the time, it felt like a really good deal for a few different reasons. One was, you know, they hit my number that I wanted to kind of walk away with. And two was I was super burned out and like, ready to walk away. I just mostly was like, I feel like obviously going through the twice of the acquisitions, like, not working out, and then Covid. And they were okay with that. They were like, yeah, we're okay with you stepping away as long as we can get obviously another CEO that you, like, train and bring in, which I was happy to do. And so it felt like the right move at the time.

Speaker B: Got it. So you stepped away and then explained to us how you then reengaged and that whole process. Because that's very unique.

Speaker C: It is very unique. It was very unexpected. It was definitely not on my bingo card. But I essentially stayed on as a board member and was involved in some of the events. But lightweight, not day to day. I'd actually started Cherub, my other company. So it was like, often kind of doing other things around. Two years in the PE firm came to me and basically was saying, interested in going a different direction, potentially selling the company again. Which was like, much faster than we had thought. And really I was kind of surprised. I wasn't expecting it. Uh, they wanted me to come back as CEO, but I was. I don't. I'm like, I don't know any of the team now it's a completely new team. Pretty much the direction they had gone in was different than what I would have done. Also, they were like, not Going to pay me what I want to pay. It was like a whole thing where I was, okay, like this doesn't sound interesting to me, right. But essentially the alternative was we might go out and sell it to someone else for parts. I didn't want that to happen either. So it was kind of this catch 22. I had started a separate business with my partner, Marina Middleton, who was awesome young operator, really smart, and we had built something called the Blueprint Mastermind, which was like a very. It was, it was a small business, but it was me, her, Ali Webb. We had started it together. It was like a mastermind to coach women. And it had done really, really well the year one done a million dollars. Marina was operating the business and so I brought it to her as like a conundrum of what would you do? What do you think? And you know, and she was like, well, what if we bought it? I. I hadn't even really thought about it. I was like, well, it feels complicated. I don't know. This is a beast of a business to run. I know. I don't want to run it. She was like, I would be the CEO, happy to come in and like, do this and like, let's build this thing. And so I had to go back and basically start these negotiations of, hey, we're interested, obviously the other buyers interested. I had to like recuse myself from a lot of it because I was on the board, I was on both sides. And so Marina had to negotiate a lot of it as well. But net net, we ended up buying back the business and relaunching. It took time to reorganize and then relaunched it in 2024.

Speaker B: That is a wild story. Good for you guys.

Speaker C: Very crazy.

Speaker B: Yeah. And now a couple year, a year or so in, are you happy you did that?

Speaker C: Yeah, no, it's amazing, honestly. Ah, for a bunch of different reasons. One was I would have been devastated if it had gone away. I think there's still a lot of the community also, I don't think fully understood that I had sold it or like that I wasn't a part of it. And so being able to tell the story of coming back and you know, obviously having re. Re energize the business. And for us it's been really amazing because one, we. We are running it completely differently than how I ran it. We are venture backed, so we did raise venture capital, uh, for the business. So we raised $2.6 million. And so, so for us, we're treating it a little differently. And on top of that We've really been, you know, able to tell our story and build the business in a way that we want to, which has been really exciting. And so it's nice when people are like, you're back. And, like, we're so excited. So it's been good.

Speaker B: That's good. That tells you something right there. So then tell us, in the midst of all of this, you have a new venture, which I think will be a lot of interest to our audience. So tell us about that.

Speaker C: In the year I took off, it was interesting. I did a lot of mentoring and a lot of coaching and things like that, as mentioned. And I felt like the number one thing asked across the board was, where do I find angel investors? How do I raise money? I think this is just like a constant conversation for especially early stage founders. And I didn't really have a good answer. I was like, here's how you raise money. They'd be like, okay, cool, I need to raise like $200,000. It's like, perfect. Like, you're not ready for venture. You need angel investors. And they'd be like, great, where are the angel investors? And I was like, uh, like, you can go on LinkedIn and like, search. And there was no really good place to find it, especially for, like, a lot of these early stage brands. I ended up going on a hike in Los Angeles with my now co founder, Angeline, who's a product engineering person. She had an exit through one of her companies. She's awesome. And I want to start intel investing. Like, where do you get deals? And I was like, honestly, I was like, people kind of dm. I get like random emails. I started a small email list of people I forward deals to. I can add you to it. She was like, cool. And then we left and she called me. I feel like there has to be a way to solve this. Like, this just feels like a really completely, like, discombobulated experience on both sides. For angel investors, it's like half your deals are in Dropbox, half are in your Google Drive. Like, what did I invest? Uh, I don't even remember. And then the other thing is, you're getting solicited for deals you're not even interested in, like on topics you don't even invest in, right? And then for founders, it's like, you're trying so hard to get in front of these investors, but the reality is 90% of fundraising is network, and 10% is like, right time, right place. And so if you don't have the network, you can't get in the door. And then also you can't be in New York City every weekend trying to network with people. If you're a founder that lives in, you know, Illinois, like, it's just challenging. So essentially the vision is the social graph for, uh, investing and what that means is it is the founders and like the home base for founders, it's the home base for investors and the content and the connection is around deals. So for instance, as a founder, you join, you get a beautiful squarespace style data room. It's a very consumerified experience, like unlike anything that's out there. We basically pulled a hundred investors to find out what are the top stats you want to know, what are the things that it's going to draw you in immediately. We built our pages around that, put in all the information around your raise, what you're looking for and then like what you want out of an investor. Do you want more women on your cap table? Do you want people who write $50,000 checks? Do you want exited founders? You're able to input that information. On the same side, investors create profiles. They talk about they're interested in their portfolio, what they look for, how they operate as an investor, their check size, all that good stuff. And then what they're looking for in companies. So cpg, tech, AI, whatever it might be. And then we match you based on percentage or fit score. So this is a good fit for you. It's like an 82% fit. Then the founder can say they're interested, the investor can say they're interested. It's a double opt in situation. So the interest is already warm. And then from there you can do a deal.

Speaker B: Oh, that's great.

Speaker C: I mean it's.

Speaker B: Yeah, it's amazing first of all that there wasn't something like that. I know. Uh, but then two, you both were absolutely right. Like there's such a need for, at the angel stage of people to find each other, especially there. You know, with everything being dispersed now, it's not as easy to network, you know, with these companies all over.

Speaker C: It's so hard. Yeah. And there's such good companies everywhere. And so you can't just be beholden what's in your geography or what's in your circle or what's in your socioeconomic, who you know or what you've done or where you went to school or whatever it might be. And so it's an awesome. Because since we've launched that product six months ago, $7 million has been deployed to brands through share of introductions.

Speaker B: Wow.

Speaker C: So we're super excited for a few different reasons. One is that obviously we're getting founders funded. That's great. But two is that the angel investors of that $7 million, 40% are writing their first checks. Uh, meaning we're getting accredited angel investors off the sideline to write their first checks into these companies. And, you know, when we talk them, because we do a ton of user feedback, it's like, I just never had access. I never had deal flow. So there's people out there ready, willing to write checks and excited about, you know, your company, but they just like, never were getting the connection. So we believe long term, what our aim is to build a social network where you can follow investors, follow founders, obviously do deals, but you could also follow some of your favorite investors as an investor. So for on the platform, I can follow like Ali Webb, the founder of Dry Bar, or Candice Nelson, the founder of Sprinkles. And when she invests in a deal, it'll ping me. And then I can look at that deal and be like, oh, that's interesting. I kind of want to maybe be part of that. Or, you know, it creates that stickiness for your fundraise for you.

Speaker B: Oh, that's so neat. I didn't even think about that angle. That makes like, adds a whole fun component to it. So you've been doing this has been in business now for six months.

Speaker C: Yeah, that product has been in the market for six months. We've been working on it for longer. Yeah, we, we launched with a newsletter. We were. Because I was like, let's see if this is a thing. Like, let's test the market. So we launched by being like, hey, who wants deal flow in this curated newsletter? We got 1500 signups in the first few weeks. We then, and by we, I mean Angeline built a, like, no code version of what we were going to build, looping things together. Like, are you interested? You know, can we connect you? We ran 40 companies through that newsletter. 100% got deck views from investors they otherwise wouldn't have. 50% got meetings. 20% were funded in three months or less. So from that essential little test that we did, we went and raised 1.5 million from Angels.

Speaker B: Oh.

Speaker C: Spent. Spent six to seven months building the. The beta, then did a closed beta for three months with just like a small group of founders and funders to be like, what's missing? Like, what, what can we do? That's like, missing? And one of the things that we learned, um, and that we built pretty quickly was a competitor to Docsend So Most people use DocSend. It's sort of like what everyone uses to share their deck and get analytics. We do all of that and more, essentially. So you can share your chart page, you get all the analytics, analytics who looked at your deck, who engaged, who's, like, interested, and you still are able to get involved in the directory as well for 279 a quarter versus 179 ahead a month, which is what DocSend charges.

Speaker B: Okay, thank you for walking us through that because it's a really great example for founders listening on how to test a concept, slowly build it out, take feedback, you know, user feedback, and make some really good changes. That's amazing. What. What's the meaning behind the name?

Speaker C: Cherub is a baby angel. So baby Angel. Okay. Yeah. So like, the little cherubs from, like, Italian, uh, paintings. So the idea was like, we would call, like, when we were doing all the prototyping stuff, we would call Angelina Baby angel because we're like, how many angelines are out there where it's like, you haven't written her first check, but you're excited to get started? And then there's like, the angels that are me, which have, like, 25 investments. And so we were, like, really excited about the baby angels. And so we went with Cherub as the name. Yeah.

Speaker B: Oh, I like that. Okay, that's great. And so are you seeing any, like, interesting trends? I mean, is AI big on your platform? Like, it is everywhere or what are you seeing?

Speaker C: Yeah, it's really interesting. So AI is definitely a big component of what we're seeing. We have a lot of consumer tech on the platform, a lot of cpg. We also have a lot of exclusive deals, which is really exciting. So we're rolling out something called private rooms, which really came about because angel groups and syndicates were like, I want to work with you. We want to be on share. We have deals, we want angels. What do we do together? So we ended up building a private room where syndicates and angel groups can create their own private room, put multiple deals in it, and then invite their members into it. So we're rolling out that feature, which is super exciting.

Speaker B: Wow, that's such a neat idea. I love that.

Speaker C: Yeah.

Speaker B: Oh, uh, that's great. So for founders that are getting ready to pursue angel funding, what do they need?

Speaker C: So we actually have a investability, uh, index that we have all of our founders take. We want you to be successful on the platform. Like, we ran into a lot of founders being way too early and not too early in their product, but way too early in the sense that they were prepared to raise. And um, so what we did is we built a fundraising masterclass. So we actually have a masterclass on the site that you can take before you build your chart page. And what that does is it gets you a few different things. One, it talks about what needs to be in your deck, what docs you need to have prepared, how the different ways you can raise, whether it's a safe or convertible note, how to build, build all of the things that you need to have a successful Cherub profile. Because we don't want people. The worst thing that can happen is you get on the site, someone's interested in investing and you don't have anything set up or ready to go. Like, you need to have all of your, like, docs, your incorporations, the trademarks, your bank account, everything ready to go. So we kind of, we were like, we needed, like have a course to send to people. Okay, I'm ready now. And then you can join Cherub.

Speaker B: I think that's excellent. We see that a lot with startup founders. They think they're ready, but they really don't have everything you need. And then it can really hamper your ability to raise, right?

Speaker C: Totally.

Speaker B: You don't look as organized or on it.

Speaker C: You have to move so fast on this thing because it is an impulsive, like we almost talk about it like it's a luxury purchase. When you're investing in a company, it's impulsive in a way. You have to catch them when they're, uh, excited. So the longer you wait, and I believe this about all deals, but like time kills all deals, so you have to be very prepared.

Speaker B: That's great advice. So that's actually leads to my last question. We always wrap up the show with this and it's one of the favorites for the listeners. Just advice you can share. Other advice for the startup founders listening. I mean, you've had two huge successes already and I'm sure, others again, professionalizing

Speaker C: your business as soon as you can and really just meeting, being buttoned up about your financials, your trademarks, your paperwork, your legal, all of those things. You know, oftentimes businesses surprise you. You, you start something, you don't even realize it's going to be a business, it becomes a business. You get excited, you move quickly, but like, you really have to have those fundamentals in place before it gets too big and out of control. I think that's when you kind of run into a lot of those issues.

Speaker B: That's great. Advice. So where can the listeners go to find more information about Cherub and then

Speaker C: also create and cultivate invest with cherub.com uh, we're on social. We have like a great Instagram and newsletter as well, so definitely sign up for that. Create cultivate.com we do large scale events for specifically women in business, ambitious women. We have our festival coming up in Los Angeles in September. It's like our biggest event with 4,000 women, small business stages. We have content creation workshops, networking and connection. It's going to be really fun. So yeah, check it out.

Speaker B: Oh, uh, that sounds fun. Thank you. It was so fun to talk to you. I know you're super busy, so thanks for being here today.

Speaker C: Thanks Kate. Good to meet you.

Speaker B: Nice to meet you.

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