The Future of Online Business Investing With Mike Swigunski [Ep.216]

Speaker A: Welcome to the Opportunity Podcast, where entrepreneurs come to learn from real buyers, sellers and industry experts on the lesser known growth opportunities to build their online business empires. We'll uncover tactics veteran online business entrepreneurs have used to build, buy, flip and sell their way towards personal wealth. Sit back, grab a coffee, and get ready to uncover hidden growth secrets. The Opportunity Podcast starts now.

Speaker B: Foreign welcome to another episode of the Opportunity Podcast. I'm your host, Greg Alfred, the head of marketing over here at Empire Flippers. Today I am speaking with a very old friend of mine, Mike Swigunski. Him and I were actually hired at the exact same time at Empire Flippers way back in the day, like over 10 years ago at this point. But Swig has gone on to go and acquire his own businesses and now he is going to build his own fund using a business called Dividends. His business Dividends, where they are going to have multiple different funds for investors to come and invest in with a little bit of a twist. So sweet guy. We catch up a little bit at the beginning of this episode and then one of his answers kind of blends into the introduction to Dividends. So we skip ahead there. But overall, I think this is a fun conversation. If you are someone looking to get exposure into the digital asset world where, you know, you do not need to be the operator and you don't need to provide some massive check, but you can still get some kind of investment back from your money in this space, like whether it's SaaS, agencies, you know, whatever, digitally native businesses that are recurring revenue, then this might be a really good podcast for you because that's exactly what Mike is doing with Dividends. So with that said, I will stop talking and we'll get into the episode. I'll see you on the other side. All right, I have Mike Swiganski with me here today, the founder of Dividends, uh, and an old friend of mine. I'm sure we'll cover a bit of our history together as heroes, uh, and villains in this industry together. But Swig, it's such a pleasure to have you on the show. I believe you've been on the show before, but been a while. So for anyone who doesn't know who you are, why don't you give us a brief background?

Speaker A: Yeah, Greg. So it's awesome to join here. Looking forward to diving into Dividends and just kind of the whole acquisition thesis that we have here. But as far as my background, I joined Empire Flippers as a tie with employee number four alongside you.

Speaker B: You are so lucky you said that because Lauren put it in this questionnaire that you were employee number four. And that is a highly debatable topic.

Speaker A: And I think I want to say, like, looking back, I think you actually arrived earlier because I remember you got the better room in the penthouse that we were working at. And I was like, okay, so I think he's, you know, employee number 4A. I might be employee number 4B.

Speaker B: You know, so here's some fun trivia that I don't know if, you know, I was actually employee number 4B and you were employee number 4C. Because the actual guy that was supposed to get the job in his second interview, he like showed up like wasted or something for the interview. Oh, wow. Thank God for that guy.

Speaker A: Dude. Yeah. So just back to give people a, ah, time frame. We both joined empire flippers in 2016 and yeah, I was with the company until 2020 and during that time I'd published my book in around 2018. Started also like kind of realizing, hey, we're talking about how awesome this industry is and you know, we're doing a lot of marketing around the space. So I actually took it to start buying my own businesses and in 2019 acquired my first software business. Kind of had to utilize a lot of the similar marketing techniques we were using at Empire Flippers and just on a much smaller scale and just kind of implemented those. And so within eight months had gotten my investment back. And that was really like that light bulb moment. Like, hey, this industry, there's a lot of opportunities to this, especially if you are a decent operator and you kind of can come into a business with a, ah, thesis on, okay, the prior owner was able to get the product market fit correct, but is really missing out on these opportunities to grow and scale the business. And so I've been essentially going through since that first acquisition in 2019, just buying slightly larger businesses, consulting in the space through first time buyers, first time people who are looking to buy, people who are looking to exit and even have done some crazy consulting for people like the Rothschild family who are looking to learn a little bit more about micro acquisitions and kind of the $10 million and below range.

Speaker B: I didn't even know about that one. You and I talk pretty frequently. What was that all about?

Speaker A: So unfortunately there's like a lot of like NDAs and kind of disclosures. I can't go super deep on it,

Speaker B: but what I can say is, uh, this is the podcast for you to break the law and I give you my permission. I'm not the one going to get sued for it so please go ahead.

Speaker A: So the Rothschild family has a division called the Three Arrows which is kind of their investment arm and essentially they wanted me to come on as a consultant because they were looking to kind of get into the brokering space and essentially the consulting turned into later a job offer to kind of build a European brokerage which ended up like declining the offer in the end just because it wasn't a fit for kind of what I wanted to do long term. So it was more or less building a. Let's just say kind of during the aggregator eras where a lot of people were going heavy on E comm they saw opportunities in Europe and Germany to build out these types of brokerages and they had a little bit of a fund and so in the end yeah, just kind of stuck at ah a consulting role. Didn't go into kind of what they wanted me to do would build a full on brokerage for them just because I didn't see the interest from my side. So have learned a lot about the space because again like buying a business gives you uh, kind of that other side of the table. So working with a variety of other brokers, people in the space, private deals, it just gave me like a really good perspective on like what's good about the space, how the other people stack up. And in the end I love the Empire Flippers process because the curation is such a key element that it really saves me a lot of time when I'm looking for deals. It really gives me a lot more I guess confidence going into that. So that's typically why I love doing deals with you guys because you make my job a lot easier.

Speaker B: Yeah man. I mean I don't want to uh, this would be super self promotional of EF but I've like talked with other brokers now over the years and I get how other people do things versus how we do it. And I would say our vetting process hands down is like one of the biggest, not the only one but a big differentiator especially on the buy side is annoying for the seller right to go through that but from the buy side it's so good because like I've seen some of these other brokers like P Ls are all messed up. There's no tax returns, just like nothing going on. It's just like they just let the seller upload anything and call it a day and put a multiple on it right. So you can get some really fly by night brokers out here in this space. As I'm sure you, you are well aware of before we get more of your acquisition stuff. I mean you've been in the game about the same length as me. I mean we got hired together, right? Our paths diverged a bit, but we're still pretty much in the same industry doing similar things. How have you seen the buying opportunity change over the last 10 years from say when we started back in 2016 to today?

Speaker A: Yeah, I mean a lot has definitely changed. Especially like the big milestones that I can think of is during COVID and during the aggregator space where like everyone was focused on FBA E commerce and now it's kind of like a weird market where I don't really know where it's going to end up. I kind of have my guesstimates or thesis on what's going to happen but I think AI, it's going to disrupt every industry and every sort of business is going to have some impact. And that's why like my sort of thought process is let's find a business that's under optimized and AI is another tool that we can use to grow and scale it. Outsource some of the automations, outsource some of the like team functions or customer service and in general just make it a better business. And so uh, a lot of times the businesses that I'm looking at, they're usually founder led and usually a technical founder that doesn't have marketing and sales experience. Meaning they got the product market fit great, they got those first 100, 200 customers, but they just don't really have the kind of concept to grow and scale a business to that next level. They're really good at maintaining it, really like understand the industry and the niche but they're busy building features instead of marketing the business. And so that's where you come in and where my sort of buy box is, is finding those types of businesses coming in, implementing a sales team, a uh, marketing team and trying to get those like really low hanging fruits where what is the like fastest, biggest impact we can make on a business to grow it. And a lot of times it's with conversion rate optimization or CRO. Um, and so we find a business that's likely under optimized, the checkout flow is screwed up, it's really lengthy or clunky or just asking too many details. They have high traffic but low conversions and they haven't tested a lot of prices. So we can come in with these businesses. They're already getting people into the store, but let's just say the cash register, the sales guy isn't doing a good job of converting those people in the store into actual customers. And so that process to double or triple that conversion rate is much easier, much more simple because changing a price on a landing page is a lot easier than trying to get, you know, two or three times more people through SEO or paid traffic or other ways into the store. So that's kind of the main step is like, let's fix that leak, let's optimize that leak before we expand out to these other types of traffic generation sources like SEO, paid traffic or social media, anything like that. And so that's usually step one is like one of those quick fixes. And you know, with a dev team and kind of our process, we're able to implement those things within weeks of actually acquiring the business. And so I've seen really quick results from my personal acquisitions and businesses that I consult on. And that's sort of like the hypothesis for this kind of dividends capital raise is how can we acquire these businesses and then turn them into a portfolio that's very easy for other people to invest in who don't have the skill sets to run a business. And they don't have the capital to buy, you know, half a million or million dollar business. They can have fractional ownership of that. And so the big term, long term vision is just to make a whole new investment class where if you go on Empire flippers, one of the biggest bottlenecks is people either they don't have enough capital or they don't have the skill sets and time to operate the business. There's a, you know, 5 to 10% range that fit into that of qualified buyers. But again, you go to a hundred people in the US and they want to actually get more cash flow or expand into alternative investments that actually pay dividends. There's not a lot of good options out there that actually do something that moved the needle. So we're trying to create a, another whole nother asset class for people that want to get exposure to this industry. But I see it as more of like a halfway step to kind of learn about the industry before maybe they buy and run their own business on their own. So that's more or less what we're building and happy to expand a little bit more on, um, in any way or direction.

Speaker B: You see, this answer evolved into a, uh, brief synopsis of what your next project is. I guess we should skip to that a bit to give the audience some background on dividends. Why don't you describe, I mean, you kind of did there to tell him. But give me a high level overview of, uh, what you're doing for dividends so the audience understands.

Speaker A: Yeah. So the simplest way to explain dividends is it's an AI investment platform. So AI powered investing and the underlying asset is online businesses that have been fully acquired. So investors can go on the platform within a few clicks, they can get exposure to the cash flow of these businesses. Essentially it's like going into and buying the S and P. But you know, you have the option to buy a portfolio or an individual business and you'll see the analytics, like similar to going to Empire Flippers. But let's say you wanted to invest three grand or ten grand into one of those businesses. And so the easiest example is you have a business valued at a million dollars on Empire Flippers and you get a fractional ownership of 10 people who invest 100,000 into that. So they would each get 10% of that cash flow. And so that's more or less the simple example of what we're building is trying to basically get these sort of businesses into a portfolio that everyday passive investors can get exposure to. Does that sound clear enough or do you want me to expand more?

Speaker B: No. Yeah, to recap is basically you're raising a fund that people are going to get cash flow, dividends, and you're using that fund to acquire the businesses that will give them the cash flow. You're paying, uh, out like distributions on a quarterly basis, something like that to the investors.

Speaker A: Yeah. So the long term vision is basically just to have a whole software platform where people can go there. And so it's a little bit different than a fund where usually a fund you just invest money and the person behind the scenes kind of does everything. You don't have any option on, like what the business is, what sort of, you know, industry or parallel it's in. And so the idea here is, you know, you'd have a platform where maybe there's a hundred different types of businesses that have more analytics on them. AI tools will give you analysis on what sort of portfolio is going to be the best fit for you. And so that investor can go say, hey, I really like the finance space. I want to invest in this portfolio. Here's the returns for the past few years, here's how long I want to have my money kept up in this portfolio. And then here's the estimated return. So typically it'll be we're buying these businesses, grow them and then repackage them into a portfolio where a lot of funds, they're Collecting the money up front, then buying the business. And the investor kind of has no real input into that. So a little bit different. We're trying to build, you know, something that's a little bit more proprietary in like the actual platform. And then underneath the underlying assets will be cash flowing businesses.

Speaker B: Interesting. So you're saying, and maybe I don't understand this, that I know from our talks, so you're saying on dividends you would have multiple different types of portfolios of businesses and people can invest in them, but you're not using that money to acquire the businesses. Rather it's kind of like you're selling, I don't know, like partial equity or phantom equity to these people so they can collect on the cash flow that already is existing from something you've already acquired.

Speaker A: Exactly. So let's say for example, we buy a million dollar business, we grow it to 2 million, we would fractionalize a percentage of that and likely keep it a minority percentage that people can invest in. And so that way we basically get to share in that cash flow and we also get to take some chips off the table without selling the full business. That's the initial thing. I think we'll likely in the future have kind of like, you know, it's a chicken and egg problem here. You either need the fund first or the business. So starting off, we're going to do the first round with buying businesses that investors have, you know, given us. And then in the future we'll package those into portfolios. And so we'll likely have multiple options where somebody can just go in and get, you know, all the portfolios, a broad sort of like exposure to every business. Right. Then there's gonna be options where individualized, where we haven't bought something but we have kind of a buy box or there'll be something that we've already acquired and people will be able to see the performance and invest in that. So I see it as kind of like, you know, starting off we'll have to have the proof of concept, have the business or businesses or business already acquired, package that into the first portfolio, and then when we expand, figuring out which direction's going to see the most appealing and be most favorable for investors.

Speaker B: So it's kind of like first part is more of a traditional fund in the sense you're raising the money to acquire businesses. But the big picture, it's almost like a private stock market in a sense of buying equities into these businesses. Obviously differences because like you're buying into the equity at uh, where the business is with its cash flow already, which is, you know, similar to how you would do it with a public stock. Right. Difference is this just private businesses you're buying the equity into. And so the idea is there could be two different types of investors or maybe they do a little bit of both or whichever one they want. I'm assuming the people who are part of the acquisition money gets a higher return just because, you know, you're planning the business. Right. But higher risk as well, because you don't know if it's going to work or not on those ones.

Speaker A: Yeah. So there'd be like a lot of different, like risk profiles on people who want, you know, the broad exposure will likely be the safest with the lowest returns. There also be, you know, shorter term investors. If they just want to stake or have the money held for a year or two, that'll likely have lower returns. But the people who are kind of like, hey, I want an individual company, I want to, you know, have the money as long as needed or five years holding period, those will likely have the highest returns. At least that's what our initial sort of process is going to look like.

Speaker B: So when someone, let's say we fast forward like I don't know, three, four years from now, everything's set up, things are groovy. You're starting to sell, you know, the soc version of this where the business is already in your portfolio. What's the benefit of that for you? Like, I'm assuming you're still you or your operators are still running the business. Right. So I'm assuming it's something like you can use the money to grow faster or something like that. Is that kind of the plan or is the plan with dividends to collect some kind of management fee on top of everything?

Speaker A: Yeah. So I think, you know, starting off, we're figuring out how the like actual payment structure is going to be processed for management fees or like assets under management. But there'll likely be, uh, let's just say three ways that we monetize everything. The first way is just going to be from the acquisitions. Right. We'll be taking a portion after we pay out investors. Our first goal is always to pay out investors first. Once we've hit our targets with them, then we'll keep a portion of those profits for operating the business, of course, but also paying out our team. And it's our sort of like, you know, operations to run and manage everything. And then again, the second way is going to be, let's just say, pro tools on the platform. So accessing reporting, analytics, other sort of things to, you know, maybe have community meetups and stuff like that. And then the third way will just be management fee of like the whole portfolio. So those are kind of the three ways we see to monetize the entire sort of concept of dividends.

Speaker B: Uh, I like the concept. I definitely like, I think it is quite unique selling like the equity after the acquisition, after the growth is done. I don't think I've ever heard people doing that necessarily, at least on this way. So that's pretty a unique spin on it. What inspired you to do this? Like why do this instead of just raise money privately and go and acquire your own stuff and not deal with these multiple tons of investors?

Speaker A: Yeah, so good question. Again, there's a lot of reasons why I chose to do it this way. I've been approached to run and manage funds. It just doesn't really excite me as much. And again, maybe, you know, I'm um, not seeing the excitement, but I want to have a certain area where people can get entry points to this at a much lower basis. Right. So most of funds, you know, that are out there, there's either like a 50k minimum or 100k minimum. And I've talked to just thousands of people who want exposure to this. And they've got five grand or 25 grand. It's not their life savings, but it's that percentage that they've compartmentalized a percentage of their investing pool to put into alternative assets. And usually it's anywhere from like 10 to 50 grand. And so they want access to this. But the main problem with all of this and all these investors and all these people I've talked to in the United States and around the world is things are expensive, right? They don't need a five year sort of fund or uh, more stock appreciation. They need monthly or quarterly cash distributions. And so that's the problem we're trying to solve is hey, there's a lot of options out there for you. Just invest in this and then in 20 years, you know, you have that appreciation. Right. This is something where we want to have a monthly cash flow and monthly income is kind of the goal. And if we can increase that for 10 to 15% for, you know, retail investor, that's a huge amount for them to keep up with the high rising cost of living that's happening in North America and kind of all across the world. So the reason we're doing this and the reason I really am passionate about this, I want to help people generate additional monthly cash flow is kind of the goal. And so it came out of need after talking to all these different investors who want exposure to this. But they either don't have enough capital to buy their own business or they don't have the time and experience to really do it. Because the person with, let's just say a million dollars likely has some of the experience to do this, but sometimes they just don't have the time to do it. Right. They don't want to spend 10 hours

Speaker B: the appetite for the risk. Right. Because like a lot of people, I mean, a person with fifty thousand, a hundred thousand dollars can go buy a multiple million dollar business in America using an SBA loan. Right. But yeah, that comes with a lot of risk with personal guarantees and a lot of unknowns. And you most likely are not doing that as a side hustle while still working at your corporate gig. You're like, all in. Right. Which can be quite scary for a lot of people.

Speaker A: Yeah. So I think again, there's a big need for this. You know, I've invested in just about everything, like from crypto stocks and, you know, online businesses, and online businesses have consistently paid the best dividends, pun intended, and the best return.

Speaker B: I see what you did there. Very good.

Speaker A: And so, like, again, I've been a crypto investor, stock investor, and again, it looks great on paper. You have some pretty good returns. But you have to time when you buy it, you have to time when you sell it, and then you get royally screwed with all the capital gains when you do sell it.

Speaker B: You just reminded me of a video. I did this video. I think it was like three, four years ago. It might have been longer now. Actually it was the title of something like the investment better than Bitcoin. I made all of our crypto friends so mad at me because the clickbait, uh, answer to the better investment than bitcoin was buying a business because you have so much more control over it. Right. Like you have no control over what the price of bitcoin is going to do, or a stock or like real estate, you got a little bit of control, but not much. But buying a business, like, you're like the master of your own destiny. Obviously there's caveats. Like our poor affiliate friends in the SEO game, they got hit by a bad one. But in general, when you're an entrepreneur, you just control so much more of the investment. So I think this type of stuff, like what you're saying, I think all this is great. I do have some Questions on like, how you think you will be different from past people that have done like, similar incarnations. So one of the companies I'm thinking of, and this is no shade to them, I love them to death. They're our sister company, so to speak, by Web street, which I'm sure you're familiar with. Web Street. They didn't have the exact same model as what you're doing, but pretty similar, right? Like a lot of portfolio, different funds that you can invest in of different types of businesses, mostly e commerce and affiliate. And they did get started kind of like the hotness of the market at the time, which is a bad time to be the buyer. Right. Because your turns are going to be

Speaker A: lower, buying at the top.

Speaker B: They've really struggled with continuing to see growth at a scale where it made sense to do that kind of model. So what do you think, like, happened there and how do you think dividends is going to be different?

Speaker A: Yeah, I've talked pretty in depth with Mike V and Dom from On Folio and I've looked at, I don't know, spent countless hours researching a lot of similar sort of options out there. Fundrise is probably the biggest one we're trying to model ourselves out of is like their whole thesis is backed on real estate and kind of like a, uh, real estate investment trust where it gives people a little bit better entry points and extra points to invest in real estate that actually cash flows. And so the biggest differentiator, I would say, is we're trying to one build something proprietary where On Folio again is more of a stock. And it's all, you don't really get to decide the businesses that you're investing in. The parallels, the industries, the niches. And then from Web street, their sort of thesis has been a little bit different than ours. We're focused on recurring revenue businesses where we can make a big impact and again where the investors can eventually on our platform, we want to have some incentive for investors to actually help move the needle on the business so they can get additional growth opportunities to essentially become an affiliate for the businesses that they're invested in. And so imagine you have 2,000 small investors in your business that are very incentivized to help grow, share the business and also like become an affiliate for that business. So it's another sort of growth lever that we'll be utilizing to kind of, once we've implemented everything, we'll unload it to investors and say, hey guys, you can also monetize this and get some additional income on top of your investment if you become an affiliate or partner for this business. And so building a whole platform where one people can have a lower entry point, where our goal is to have at least a hundred dollar minimum. You know, that's kind of like a much differentiator than Web Street I think is 60,000 as the entry point.

Speaker B: They started off I think of 15, but they still like raised it steadily because it was just easier in terms of like getting a fund done, you know.

Speaker A: So the long term goal is again we're likely going to have starting off a little bit higher minimum instead of going up will likely go down is kind of the plan and opening up to you know, much wider sort of market of people that have, you know, $100 or even $10,000 to invest or anywhere in between. And so that's the main differentiators. We want to have a proprietary system and like platform where people can go on and actually see these businesses understand a little bit more about the growth tactics and also utilizing a wide audience who want to actually take part in it to help grow and scale the businesses. And so that's kind of the differentiator, I would say the other big differentiator is we're focusing on a very specific part in the market. And this is where sort of my buy box has been really well for my personal acquisitions and for people I consult with which is focusing on recurring revenue businesses that have something more of a moat around it and they have more control over their destiny. There's usually not a lot of platform risk on these types of businesses where you're dealing with the Amazon fba, the Amazon affiliate or you basically are kind of at their sort of, you know, control. You really like don't have a lot of say in if they change their affiliate rates or if they charge extra storage fees. You know, there's all these other sort of like things you can't really control. And that's why I love software businesses and recurring revenue businesses because one just the makeup of the business. You own the customer data, you actually own like the software and the product that you're selling or giving access to. And you essentially can control more of your destiny. So if something changes or you need to pivot, it's a lot faster. And so you're basically buying that head start of the customers, the mode around the business to build that sort of software and that product market fit that it's already working, it's already functional and you have that foundation. It's so much easier to grow once you already have that and so that's more or less our sort of buy box and also, you know, running and growing empire flippers. I think we kind of had that bootstrap mindset which allows us that every dollar that we get as an investor to go a little bit further. And so we've kind of really figured out like how can we make the most of a buck to actually go grow these businesses. So I think coming in with that mindset on like what are these big home run opportunities that we can look at when we're performing due diligence on these businesses, what are these home runs that we can make? And basically every business we've gone into, we've had a lot of fast success because we're able to isolate these sort of approaches to buy scale and just really grow these businesses in a fast, cost effective manner.

Speaker B: Yeah, I mean all that makes sense, man. I think, I think that was probably one of the issues with Web street too. And like they're still kicking along. I think they just did a pretty big acquisition. It's not like they're out of the game. But I do think the platform risk was a big mistake on their end like with the affiliate and fba. Like we still sell a ton of Amazon fba. But I always tell entrepreneurs like, you should look at Amazon FBA as a marketing channel, not the business. Right? Because like um, it's great from a marketing channel perspective, but you should really de risk by having your own Shopify store, Facebook ads, going to that like the whole nine yards, right? Like figure that out because it just creates such a better business. And I agree with you. I think software recurring businesses like you are more the master of your own destiny. And it's something I've been talking about a lot on this podcast actually lately, which is what I call full funnel businesses where you uh, have full control versus like being the slave to Google or Amazon or you know, what have you. Now you mentioned software. With this, with dividends, are you mostly looking at SaaS businesses or are you looking at anything that's recurring?

Speaker A: I would say like broad market, recurring revenue, but broadcast mostly. Let's just say 70% will be. Software would be the main focus starting off early on just because that's the majority of recurring revenue businesses that I think have a larger moat mostly in the B2B space, in niches that I don't see being too disrupted by AI and where there is like a little bit more of a barrier to entry on these businesses where you know, it's not just some simple tool or sort of like plugin that somebody could, on a weekend project, replicate. So again, what are these, like, bigger moats? Again, some of these past acquisitions, they had contracts and agreements with universities, and these universities have thousands and thousands of students who are on it. It would be very hard for somebody to come in and replicate that business because there's already such a big moat about who is actually using the software and the agreements that they have. So what are those, like, businesses that you can kind of look at and say, hey, if AI, if you know, the whiz from college was going to enter this space and whip up something using Claude code, what is our moat? And so again, we're looking at it from that aspect, but we're also looking at it like, hey, this founder isn't really utilizing any sort of AI to improve the product, improve the customer service, or convert, you know, leads into customers. How can we also utilize AI to again, make that dollar go a lot further and have a bigger impact? So we're looking at it from all angles. And again, I think to be ahead of the AI risk, you have to live and breathe the AI space. So from our developers using AI to our team and every sort of, like, area that we're implementing, we're trying to integrate AI as best as possible.

Speaker B: Uh, that makes total sense. But in terms of the moats that are not going to be, I shouldn't say not, but less impacted by AI. But do you think those exist? Like you mentioned, things that are hard to copy in a weekend, like, what does that look like in practice?

Speaker A: So I think the big moats for the software is just the recurring revenue in itself. Right. So you already have the customer base. They're already like every month being charged, you already have a customer that is, you're not starting at zero every month like every other business. So I think that's the moat where, you know, again, that's a little bit of protection from somebody starting from scratch with AI. Uh, I think the B2B niches were. They're just a little bit like, more boring where, like, I see a lot of people who are creating AI tools and getting into the space, it seems to be more focused on B2C sort of projects. Not always, but in general, where, you know, again, to work with a university's sort of, like, interface, it took years and years for them to get those contracts where even if somebody were to create a better tool, it'd be really hard for them to penetrate that market. And a lot of times they just don't know about that market because it's so niche that an, um, individual person wouldn't really be interested in that unless they were experiencing some similar problems. So that's where I see it as kind of like finding a sweet spot in the product and sort of structure of the business itself. And then what is the moat to actually do that? A lot of these businesses, even with AI, it's still going to cost hundreds of thousands of dollars to build this because, you know, the original founder or something spent 10 to 15 years building it and continuously building it over that period of time as a passion project. Now trying to do that same thing, you might be able to do it in two to three years time, but we already have that 10, 15 year head start.

Speaker B: Yeah, that makes sense, I would say. I saw this post from Tim Solo, which I think you know him as well. Yeah, From Ahrefs he was talking about. I think it was something like, you know, with Clay.com, like, AI can just rebuild clay. I rebuilt my own version of Clay. Why is Clay getting this billion dollar valuation? And I was thinking, I think I commented back, like, well, one, they got that before AI in a lot of ways. But two, like, it's just convenient, you know, like, that's their moat. Like, their UI is convenience. Because, like, Tim, you are like a crazy Ukrainian programmer. This is easy sauce for you to do. Sure.

Speaker A: Yeah.

Speaker B: Or like the stressed director of marketing over here try to sling some businesses. Like, I'm not a technical guy. Give me the convenience, dude. I'm happy to pay an extra like 200 bucks a month or whatever. Right. So I think that's going to become more and more of a play with SaaS, though I do think AI is coming to each SaaS's lunch. But to your point, having those kind of like, tough to get contracts does make sense as another portion and kind of the theme of what you've been saying throughout this entire podcast. And you and I both know this is most people suck at marketing. Like, yeah, you and I, like, I don't think either of us would call each other a master marketer, but we're certainly better than most.

Speaker A: Better than average.

Speaker B: Yeah, but I remember, I think you'll laugh at this. I remember talking to an SEO agency owner of all things. You think that they would know marketing, but as you know, SEO and marketing sometimes are allergic to each other. But he was going on about how he, I can't go to these SEO conferences anymore because I'm not getting any clients. I looked at him like, why would you get Any SEO clients at a SEO conference filled with SEO agencies, Like, who do you want as a client? He's like, well, I want, uh, these like, you know, vegan food manufacturers as my clients. Like, why aren't you going to a vegan food, like, conference? It's just his eyes open. Like, I never thought about that. He started going and I followed up with him. Um, he's like, I'm crushing it. Like, yeah, like, why would you think that they're at this SEO conference? You know? But anyways, a lot of people have such funny ideas with marketing that really fall apart when you ask them, like, just a couple questions deeper about what they're trying to do. Like taking these businesses and doing that marketing is obviously an easy win. So I do have another question here for you. Another issue Web street had is finding good operators for these, like, for the multiple funds that they have. Right. So I think part of that, I think their problem is they were trying to go too big too fast. So it was hard to keep a portfolio of, uh, build the relationships with these operators for your setup. How are you going to do that? Are you going to bring in operators as well? Is it going to be more of a kind of a slow rollout with your own internal team doing that? Like, what's your thoughts there?

Speaker A: Yeah, so I think like, long term, we'll have an individual operator focus on each business and they'll be highly incentivized for the performance where it won't just be, you know, like an average person just doing everything. But starting off, we'll have an internal team that kind of manages multiple businesses and I'll be overseeing each one. That's kind of like stage one. Stage two will be onboarding individual operators for each business and a big portion of their payment structure will be on the monthly or quarterly performance of that business. So they'll be allocated to that growth. And so again, I think the operator space is a tricky one because the best operators, you know, they're likely doing it themselves or they're, you know, like the disjointed, like amount where the math just doesn't make sense. So a lot of times you gotta go offshore. And so being a remote business has kind of showed me like, hey, you can find some really good operators. Maybe they're really well versed in certain areas to grow and scale these businesses. So I think starting off, we'll be utilizing in house teams that are good at certain areas, like ppc, SEO. They'll have their specific area of expertise and then big term you know, as we're doing larger and larger deals, we'll have individual operators for each business. But again, yeah, just have to find the right person and the right talent and quickly incentivize them. If they're not getting results and they're not really performing well, I think you have to like fire them and kind of move on to a new operator, which was, is a very challenging sort of thing that we're looking forward to overcoming.

Speaker B: Uh, so no equity to the operators you're looking to incentivize them just, you know, purely through profit share of some sort?

Speaker A: Yeah, exactly. So I think we'll have long uh, term equity in like all dividends for, you know, employees where it'll be kind of this similar sort of Silicon Valley investment vesting schedule where, you know, they have a certain amount of shares over four year period, they get a percentage of those shares. So they'll still have access to those, but each sort of business that they're in charge of, they'll share in the profit.

Speaker B: How big would you say the uh, businesses you're looking at, uh, to target and how many of them would be in our portfolio?

Speaker A: Yeah, so again, it really depends on how much capital we raise on this first round, but likely the goal is $2 million on this first round, which would be between two to three businesses. The sweet spot that I found where there's a lot of leverage for the buyers is between that 400 to 800,000 range. And the reason that this area has been really good for me and you know, my sort of prior acquisitions is one, there's not a lot of competition for other buyers at that range. It's usually too big for the individual buyers and it's too small for the portfolio buyers. Where talking to a lot of these people who are running funds, once you get above that, you know, $5 million range, the really good businesses are super competitive and the terms are not great for the buyer. Where in this range we're able to really dictate some really good terms and negotiate some crazy good multiples. And so again, it's being able to give us that really like strong leg up when we go into a deal. We can kind of not set our terms, but we can get really good terms that are win, win for ourself and what the seller is looking for. So that sort of range has been kind of the sweet spot we're looking to acquire deals in.

Speaker B: That makes total sense. I've often said on this podcast and on other podcasts that the kind of like the orphan Zone of um, selling a business is between that 500,000 to $1 million range. No, 400,000. I like go down a little bit. I guess I degree at that range too. And it's for the exact reasons you just mentioned. It's, it's tough to get buyers in that phase. This is just slightly too big or slightly too small. But from a buyer perspective it's a fantastic area for those exact same reasons. Just like way less competition. I think the biggest seller finance deal I've ever seen happen in that range, which is like 50% of the value of the business, which is awesome. You know, not for us as the broker, but nor the seller, but definitely awesome for the buyer. Of course most of them aren't that aggressive, but you can really do some pretty interesting deals when it comes to that. So I guess we'll kind of wrap up this podcast or lead towards the end here talking about how you're like deal structuring this. Obviously you're raising money from um, investors. Are you using any other kind of like debt stack or equity injections or anything like that? Is your preferred deal structure with these?

Speaker A: Yeah. So you can follow the raise and see all the terms on we funder.com dividends but we're doing a pretty unique raise. Most people just raise in a safe which is essentially just equity. So we're doing the long term equity in this raise, but we're also giving rev share on the business and like the revenue that the business that we acquire generates. And so it's kind of a unique thing where people get the long term equity of all dividends. And our plan is to have, you know, billions of dollars in assets under management. But you're also going to get the short term quarterly payouts on this round. And so we're not taking advantage of anything else outside of that. But we will go into it and say, hey, we have this much capital, we have this experience, we are a very serious buyer. And when you come to the table with that and you have a track record, you know who to talk to. And again, working with Empire Flippers and other brokers, you know, I've done a lot of deals with all these people. They understand and they kind of, I wouldn't say they push people to work with us, but they essentially can give them a confident background that hey, this individual has done multiple deals, he is a serious, when he makes an offer, it is a serious offer. And so we've out, uh, competed, you know, multiple different other buyers in some more competitive deals that we've done because of that and because we really want to take this business and give it a new home and kind of bring it to that next level. And I think a lot of sellers also want that for their business. They want their business to go on and flourish and have an operator that's super passionate about it and kind of take it to, uh, that next level. So, yeah, that's basically the status is we've had some really good milestones as far as the raise. So far we made it to the quarterfinals as the most fundable company for Pepperdine University. So if we win that contest, it'll be a million dollar sort of, I guess, investment opportunity.

Speaker B: Is that like a grant or. How did you get involved with Pepperdine?

Speaker A: It's just a, uh, like competition that they hold every year. So we made it the quarterfinals. It'll likely be a few more weeks to figure out if we make it to the next stage. But it's kind of like March Madness with all the basketball teams where interesting. They have people.

Speaker B: You don't have to be going to Pepperdine to qualify for it. Anyone can do it.

Speaker A: No, it's just a competition that they host and have a, you know, some funding for startups.

Speaker B: It's pretty cool. Well, hopefully you win and get that million dollars and then we could transfer that wealth into Empire Flippers, which is always the best way to run a funnel course. But this sounds cool, dude. So sounds like it's a pretty simple finance stack you're using, which is just the, uh, I shouldn't say simple, but using just the investor money and then whatever seller finance or earn out, you can negotiate with the seller? More or less.

Speaker A: Yeah. So with the seller and the deal, again, we're always trying to get the best terms, you know, for the deal. So it would be a combination of seller financing, most likely.

Speaker B: Yeah. I mean that is always the go to. I was talking to this guy, man. One of the stories that like you've dealt with sellers a lot, both as a broker with us and you know, doing what you're doing. But talking to a buddy of mine, he has like a probably three and a half million dollar agency. And I was telling him like, yeah, you know, probably get like 20, 30 seller finance on it, like some mixture of seller finance to earn out when you come to sell it with us. And he's like, that's crazy. Like, what do you mean that's crazy? It's like very normal. He's like, no, no, it's not like. No, that definitely is, dude. And the funny Thing about it that uh, made me laugh so much with this guy is he's selling the agency because he's like really excited about getting to M and A stuff himself. And so he's creating this like exit planning software. I was like, dude, you are going to be in such a rude awakening and you're gonna have all your clients so pissed at you if you tell them they're going to get 100 upfront front for their deals. That like never happens to you? Uh, very rarely that it happens, especially in our area, like more offline stuff like H vac. Of course they're like the darling of the ball. But even like really good businesses are not in our space, they still tend to get like 10, 15% seller. Finance is very normal. But anyways, what's your go to market plan with this? So uh, let's say you raise the money. How are you going to go find these businesses to acquire?

Speaker A: Yeah, so it'd be right now just focusing on the actual raise because we really need to see like where we end up as far as the amount because again, you know, if we raise 2 million, it's going to be a little bit different if we raise 1 million. Right. The good thing is we are always looking at deals every day. I'm checking out Empire, uh, flippers and you know, I have also some private deal flow for people that I've consulted with who've bought businesses, you know, over the past two to three years. Some of them are like, hey, I've held this, it's cash flowed, I'm ready to exit. So there is a combination of like private deal float that I also have access to as well, which is pretty cool to have that. Even on a smaller sort of caliber. It is good to have people constantly, you know, looking to sell their business and also attending a lot of conferences, talking to people and private networks. You know, at some point in stage people are like, hey, I do want to sell this business. Would it be a good fit for dividends? But likely, first off we'll just be looking at deals with brokers, marketplaces to see what's a good fit.

Speaker B: Yeah, that's what I would recommend too. For anyone that raises money. You see all this talk like, oh, it needs to always be off market deals to the point where it's gotten almost comical. There's this person on LinkedIn I'm not. She's built an amazing like media brand. I think it's SMB, Deal Hunter or whatever. They're always talking about these off market deals. Get access to the off market deals. Like, well if they get access to it, it's not really off market anymore, is it? Odd market is on your market. I think going with brokers is always the way to do it. Like shop around, all that kind of stuff. Like you know, I talk to anyone out there listening who listens to these gurus saying don't use a broker. I can tell you and Swiggy, I'm sure you'd agree, like people who are like big in this space in their CRM, they'll have the marketing attribution like where did this deal come from? Like SEO, PBC and then broker. Right. All the brokers are in that one marketing channel in the CRM. So I think that makes total sense. I do have a final question here on the fun and then we'll move into a rapid fire section here. You know a big part of investing into a business or building a business is the exit at the end of the day, even if you're acquiring it. Right. So with these businesses, are you looking to long term hold? Are you going to build up to a certain amount of value to sell them, like maybe open up for the equity holders first and then you sell it or something like that. And in the event of a sale, what do the investors get out of that?

Speaker A: Yeah, so the target right now is a two to three year period depending on, you know, how the performance of the business is and sort of what the entry multiple is and what our anticipated exit multiple is. So I would say around two to three year target, some will be longer, around four to five years. But again that's how a lot of investors are going to get that money back. Right. So they'll be getting the quarterly distribution starting off and then you know, our uh, sort of target for the year is up to 15% cash yield. And then you know, a lot of that will come back on the exit once we've sold the businesses as far as like what the terms are and the payback for investors. So our first like we have VIP terms on we funder. And so basically the first $250,000 invested, they get a 1.75 payback. So if you invest $10,000, our payback terms are uh, would be 1750. After that first 250 it drops down to 1.5. So if you come in later in the round, you invest that $10,000, you'd be getting $15,000 paid back. And so that's the rev share aspect.

Speaker B: Sorry, you said 15,000 on the $10,000

Speaker A: or did you mean 1500, 15,000. So you'd be getting your initial $10,000 investment back plus an additional $5,000.

Speaker B: Gotcha, gotcha. And what's the, what kind of schedule is that? The 1.5 and 1.7. Is that like payback period, like within a year, uh, like you get like some kind of preferential treatment or.

Speaker A: No. So there's no set schedule on it because again, a big portion of that payback will likely come on the exit. So it's our sort of anticipation is, let's just say two to. But the cool thing about this initial round is you're getting that payback of the 1.75 or the 1.5. But even after that's been met, you still get the long term equity in dividends. And so we're doing a safe, which is basically an equity raise. And then on the next round when we start raising money in the future, you get a 20% discount at Ah, whatever valuation we raise at. So it's kind of like the best of both worlds for investors. Interesting.

Speaker B: Well, I think it's a cool idea, dude. It's something I've seen people do with often. I think they've made mistakes that could uh, have been avoided but you know, hindsight's always 20 20. I think you're avoiding some of those mistakes, so I think that's cool. But with that said, it's time for the lightning round. So I'm going to ask you some three quick questions and I want three quick answers. Are you ready my friend? All right, let me pull these up and uh, it's good job answering the first question. We're down to two, so. All right, first rapid fire question. Matt, what do you think is the best hidden growth opportunity and acquisitions today?

Speaker A: Good question. Hidden growth. I think AI is the easy answer and I think people just aren't utilizing it the right way. So I'd say like for the short, sweet answer, ChatGPT and Claude are like the hidden growth tools to use. It's just not everyone's using it in the right way. So I look at it like, how can we improve the customer experience and how can we get people who are in our store to a better outcome quicker and to buy more? And so whether that's with AI tools, you know, calling leads faster, getting them booked on calls, sending more dedicated and custom emails or text messages, just kind of customizing like that experience where maybe you needed a team of 100 people to really give them that white glove treatment of hey, you're in the store. Let me introduce you. As soon as you come there and be your personal assistant through the shopping experience, you can now do that with AI. So that's the, I guess the short answer.

Speaker B: I agree. I mean AI is everywhere and I do think most people are not using it very well. So much AI slop on LinkedIn and Facebook. Like all my friends are ChatGPT API rappers now. So I think that's like the wrong use of AI, but there's so many good uses. So I do agree with you there. For someone who wants to get in the game of acquisitions, whether it's full time operator or like maybe investing with dividends, what would you say are some good tools or resources someone could use to learn more about the game?

Speaker A: I mean I think YouTube's a great one than just kind of like consuming content on yourself. But again, I think whatever sort of industry or parallel you want to get in with acquisitions, I think you also need to do it yourself. So for example, if you're wanting to get into the E comm space building a shopify store yourself, trying to sell some product, you don't have to build a full on massive $100,000 store, but just start at a small scale. What's the smallest entry point you can do to get that experience? So I'd say try it yourself at a smaller scale. Learn about the parallel of building, get your hands actually dirty. Then learn about content on YouTube podcasts, reach out to experts that have one done it for themselves, but two have helped other people in a similar situation achieve the results that you want to achieve. That's kind of the second sort of step. Talk to those people, see if they have mentorship coaching opportunities. And that's the only real shortcut in this space is to learn from actual experts who are doing it and see if there's a way to incentivize them to help you kind of reduce that learning curve before you kind of go full on to do it yourself. So that would be kind of the short answer there.

Speaker B: Yeah, it makes sense. And I agree with that too to a certain extent. Like, you know, people will think about buying a business and they always think like this $4 or $5 million thing, but like you can go buy a thousand dollar business, it probably won't be like the best acquisition in the world, but like there's still opportunities of things to learn. Like you learn what an asset purchase agreement is, you learn how to transfer something. Like these are skills that build up into the bigger and bigger dollar amounts, right? So it's not like Buying the thousand dollar thing is the thing. It's just like part of the process and getting comfortable with it. And so much of, uh, you know, would be acquirers, I think are stumped by fear. You know, fear of the unknown. What am I losing all my money? Like if you put a thousand dollars and yeah, you might lose it, but it's a thousand dollars, at the end of the day, you probably learn something out of it. Right? So I agree with you there. All right, final question. Hardest question in your last 10 years of being in the digital M and A world. Like with me, what has been your funniest moment working in it?

Speaker A: I think it was probably our donkey ride.

Speaker B: And uh, I knew you were going to say where.

Speaker A: I don't know if it's like if it was M and A related, but we had spent a few months in the Philippines or a month there with Hot Money Magnotti in Manila and we basically planned to hike this volcano. And Greg took the smart kind of route of taking a donkey up the hill and I took the stupid route of walking. And so again it's, it's probably an analogy there that there's two ways to climb the volcano in the Philippines. One is probably a little bit easier and more exciting on a donkey and the other one is a little bit harder.

Speaker B: Dude, I felt like I was breaking that donkey's back. It was like this poor starved donkey and I was fatter back then too. You know, just coming from Alaska, I had all my blubbers still on me. This donkey looked like it could not support me. Man, that was a fun trip though. I had a blast. I'm glad I did ride the donkey because I think it was too fat for that mountain if I didn't ride the donkey.

Speaker A: It was hot out, so no, there's definitely been a, uh, lot of good memories. I'd say all the in person stuff I think like I love being able to work remote and have remote teams, but I do think there's a time and a place for the in person stuff. It doesn't need to be every day, it doesn't need to be every week. But I think like those sort of in person events with your teammates or friends or anything like that is always kind of the highlights. When you get the right people in the right rooms and kind of have like a laid back environment, some really good ideas can happen. And I would say like me, you and Justin kind of just like masterminding in some five star hotel. Like it's very hard to replicate that on zoom. And I think there is something to that. You know, kind of like art sort of like mindset where you don't really have some sort of distraction going on. You don't have another call coming up. You're just like, hey, block out everything. We're just gonna sit in a room for like four to eight hours. And uh, some really great ideas came out. I think it's where the Empire retreat was born.

Speaker B: It was the Crown Club, one of your fan favorite. That's still kind of not done, but sort of might happen. A lot of good ideas coming out of that though. And like there's something about the serendipity of just like being in person. I'm not arguing against remote work because you and I are both full in on remote work because like most offices, they're not meeting at a five star hotel, right? So you're a remote team. Like you could do that every now and then, right? Like it's not like you have this super long real estate lease or something. So I agree with all that. And the donkey ride is one of my favorite memories. Memories. And I'm glad that you send me a picture of me on the donkey almost once a year.

Speaker A: Yeah, Facebook always reminds me. The best part was like they gave us a printed like a physical photo and it was in a frame and I don't know what happened to it,

Speaker B: but I still have it somewhere. It's somewhere in my apartment. I believe me, uh, heroically riding that donkey dude with a hat. And back then I was still so new to Asia, I was still wearing like light color, like pastel shirts.

Speaker A: So you just see the sweat, like the sweat everywhere.

Speaker B: It was terrible. I also weighed like probably 50 pounds heavier than I am today, so.

Speaker A: Yeah, man, you're looking good.

Speaker B: Thanks buddy, thanks. Still sweat a lot, but not nearly as bad as I used to. I'm like caught between too hot in Vietnam and now too cold when I go back to Alaska. So I'm the best of both worlds now. But thanks for coming on, dude. It's always such a pleasure to speak with you. I really hope this goes well for you. I always love supporting you if I can, in the space. So for anyone that wants to pick your brain, learn more about dividends or maybe just want to connect with you personally. Where should we send them?

Speaker A: Yeah, so Mike Swagunski on all social media, pretty active on LinkedIn, Instagram, YouTube, just basically all those channels. Send me a DM if you have anything. But the most up to date stuff on dividends is going to be at we funder.com dividends or you can go to dividendscapital.com and I'm sure you guys will link everything down below.

Speaker B: Yeah, uh, we'll put all those links in the show notes for anyone that wants to connect with you. And Swig, always a pleasure, man. We'll have to get you back on once you acquire your first 10 businesses from us using the new fund you've raised.

Speaker A: Sounds like a challenge, man. I'm excited for it.

Speaker B: Awesome. Thanks for coming on.

Speaker A: Thanks, Greg. Appreciate you, buddy.

Speaker B: Foreign. There you have it. I hope you enjoyed it. I hope it got you inspired at all the different things that are happening in this industry. And of course, if you just want to buy a highly profitable business, you can always go to empireflippers.com marketplace. Or maybe you want to make an exit of your highly profitable business, you can go to empireflippers.com/sell your site. I've been your host, Greg. If you enjoyed this episode, make sure you leave a review, give us a like a follow. Share it across social media.

Speaker A: Talk to you all soon.

Speaker B: See you on the next episode.