"What matters for me and what I've learned over the last 14 years is that I helped other people be successful. " -Joel Lessem
Joel Lessem has over 25 years experience in successfully accelerating revenues and growth of businesses. Under his leadership, Firmex is rapidly becoming a standard for sharing large volumes of highly confidential and sensitive documents for corporate transactions, litigation and compliance. Firmex is a rule of 40 business delivering strong investor returns and high customer and employee satisfaction scores.
Prior to co-founding Firmex in 2006, Joel drove the US growth of Point Force leading to the company's acquisition in 2004. In 1999, Joel co-founded Crescent logic, a software company that provided online equity research publishing tools for investment banks.
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Steve Wells: [00:00:00] This is Steve Wells.
Jeffrey Feldberg: [00:00:01] And I'm Jeffrey Feldberg. Welcome to The SellMy Business Podcast.
Steve Wells: [00:00:06] This podcast is brought to you by Deep Wealth.Are you a business owner who is wondering how to either grow your business,sell it, or both?
Or maybe in today's environment,you're wondering how to make your business pandemic proof. Visit deepwealth.comto find out how you can master the strategies to grow and extract the deepwealth from your business. Visit www.deepwealth.com.
Jeffrey Feldberg: [00:00:26] Welcome to episode 18 of the Sell My BusinessPodcast. This episode will be a solo run as Steve Wells is often recharging hisbatteries. You're in for a real treat today as today's guest has not only aninteresting story, but his insights are worth their weight in gold.
Joel Lessem has over 25 years’experience in successfully accelerating revenues of growth of businesses.
Under his leadership Firmex israpidly becoming a standard for sharing large volumes of highly confidentialand sensitive documents for corporate transactions, litigation and compliancefor Amex is a rule of 40 business. Delivering strong investor returns and highcustomer and employee satisfaction scores.
Prior to co-founding Firmex in2006, Joel drove the US growth of Point Force leading to the company'sacquisition in 2004. In 1999, Joelco-founded Crescent logic, a software company that provided online equityresearch publishing tools for investment banks.
Joel, terrific. To have you withus today. Thank you so much for making time on your schedule and calendar withus. Why don't we start by having you tell our listeners who you are and yourstory, because I know offline, we've been chatting and you have quite the storythat I'm excited for everyone to hear.
Joel Lessem: [00:01:52] Well, thank you very much, Jeffrey. So, myname is Joel Lessem. I'm the CEO of Firmex Firmex is a software company thatprovides, something called the virtual data room for sharing large volumes ofconfidential documents for due diligence, primarily for finance and M&Atransactions.
I'm the founder and CEO of thiscompany for 14 years. but my background really, I was originally going to be ahistory teacher and realized that at one point that I did not want be a historyteacher, so I was unqualified to do anything. So I got a job in sales and Iworked from computers for, a bunch of years, about six years.
And that's how I learned theworld of commerce. These are small operations, typically, you know, 10 to 30 or40 people. And then, I had my first startup in 1999, during the dotcom.excitement and, that didn't, become a commercial success. I'll say it was for awhile or that it didn't like 2011.
It was all over and, I went backto being a sales person. And then, and then in 2005, got involved with a groupof people and starting another company, which is what I really want to do. Andthat was Firmex and Firmex has been a commercial success and the company has asgrown and it's been sold a couple of times and this is where we're leading toon this call.
Jeffrey Feldberg: [00:03:07] And so, Joel, we're definitely going want totalk about both because for our listeners, there's just value add on, on eachside, but why don't we start with when you became the founder of the company,what happened in terms of not so much the exit, which we do want to hear about,but what happened after the exit is quite unique. What were some takeaways foryou? And then the story after to the story.
Joel Lessem: [00:03:32] Originally Firmex required some capital earlyon. So, we did have some third-party investors. Non-institutional investors, back in 2008and then 2016, the company was majority acquisition by a private equity fundcalled NovaCap. And, in that case, the company had been growing nicely and bothon the top line and profitability. It's important to them that they have astrong operator running the business.
And if there's already one inplace that makes the business even more attractive, because there's always riskin bringing in another CEO or president to run a company. They wanted me tostay on and they wanted me to keep a fair amount of stock in the company.
I happened to work really well with financialinvestors in the sense that I'm very analytical, I'm very numbers driven. I domental math in my head., and they really liked that. I had a good chemistry andwe also had good alignment on how we were going to get shareholder returnsgoing forward.
I stayed on after they, theybought out all the other investors and the vast majority of the otherco-founders' equity. They reloaded the company with an option plan. So that's athing to note is that you get, and can be entitled to additional stock options.
And I really didn't know what to expect. Theadvice that I got, actually was from take it off money off the table so if itdoesn't go well, it doesn't matter. So, so I, I took it enough money off thetable realizing that, you know, things didn't work out that well, and I neededto go find other employment or do something else that I had enough money that Iwould feel comfortable.
Anyway, it was a, a productiverelationship with this fund. We achieve goals as far as continued growth andprofitability of the company. So, when you've got institutional investors,they're going to have a lot of rigor around reporting and corporate processes,and my case that wasn't as big a change, maybe for some other entrepreneurs,because I already had investors prior to this. And so while we had a majorityin that case, I was always very diligent about reporting to them, quarterly,written reports. And, but in the case of a private equity fund, you know,Courtney becomes monthly and there's very formal board processes and such.
In addition to the concept thatsomeone else owns a majority of your company, you're no longer in control.Effectively when you do a transaction, there’s actually a new entity that'sformed that acquires the company and you get an employment agreement.
And for a lot of founders maybethey don't even have an employment agreement. What do you mean? I'm the CEO because I started the company and when Igot this employment agreement with my name and CEO, I thought for the firsttime I thought I've actually earned the job because I've had validation from aninstitutional investor to say, we want you. And now I've gone from a founderCEO to a professional CEO.
Jeffrey Feldberg: [00:06:30] So let's talk about that for a moment becausewhat you say is so true as, as founders, you know, we, we do our thing. Don'tthink much about it. And then someone comes along and, you have a contract andit's a different game mentally for you. So, you sold your company, you kept agood portion of the ownership in Firmex with the new acquirer.
And so, they were privateequity, but it sounds like they were a different type of, private equity inthis case because they kept you on and you had a terrific relationship withthem and a wonderful run with them.
Joel Lessem: [00:07:01] When you'rebought by a corporation, you might have a widget that's really critical to thatbusiness.
But we were bought independentof any other corporation. We were just purely as an investment. Really inprivate equity, there, there are different classes of private equity, there'sventure capital, growth equity, what he buys out equity. And then you, you getsome specialists to do like distress situations.
We call it vulture capital, butthe vast majority of private equity is what we call buyout equity. They onlytake majority positions. When they buy a company, they're going to have morethan 50% ownership. That's their rule. And so that's probably the 75% of theprivate equity, out there, which is measured in the trillions of dollars.
Now I think it's one and a half trillion.It's a huge industry, private equity surprised a lot of people because, youknow, 20 years ago it was fraction of the size. You didn't see it so much of itaround. But it's become extremely popular for, pension funds and otherinstitutional investors to put money into private equity because they've hadslightly better than market returns.
And so what you find is yourliquidity options are increasingly private equity versus going public or versusbeing bought by a corporation.
Jeffrey Feldberg: [00:08:12] And so Joel with you, it was a good newsstory. So when the private equity bought the company and you stayed on, and youmentioned earlier that you work well from the financial side.
I'm sure that there's businessowners out there when it comes time to exit their company and private equitycomes along in the back of their mind, they have to be thinking, well, do Istay on board and look to work with the new owners or do I actually exit thecompany? So what would be some of the factors in your experience of what wouldmake someone not want to stay on board or say themselves, I don't have that fitor that personality or the requirements to stay on. What would that look like?
Joel Lessem: [00:08:55] Well, I think someone who's just used to doingwhatever they want without approval would not want to work with private equity,just that they would not want to work in a company that requires approvals.
There's a document, that usuallynew to people when they get private called the delegation of authority. Andthese are what level of approval you have. So, you know, you might say, well,any purchase that's outside the budget that exceeds $150,000 you need forapproval.
Well, you know, for someentrepreneurs who really became entrepreneurs because they just couldn't beartaking any instructions from anyone else this might bother them. They likehaving complete and total autonomy. Whereas if you've got a personality that'smore about, I can understand why this is important, and it's about havingfinancial controls to make sure there are no surprises. These are othershareholders that are important. I amsharing my company now with other people, and they're just as important as me.And I think for some people that might not be palatable for other people.That's just fine. And so I think that's, that's the, the entrepreneur that maywant not continue on. I think the other factor is an entrepreneur who's maybetired of their business and says, look, I've been doing this for a long time.I'm ready for a change. I've put it in my 15 years or 20 years. I'm ready forsomething new and that's totally fine as well. I know about peers of mine whohave done just that with private equity, they said, look, I put in my time, Ineed to change and it's a personal decision.
Jeffrey Feldberg: [00:10:28] Absolutely. Now, in your case, Joel, somethinginteresting happened.
So you started Firmex, you soldit, you stayed on.
Joel Lessem: [00:10:37] Right.
Jeffrey Feldberg: [00:10:38] Why don't you tell everyone what happened nextthat puts you really in, on your own?
Joel Lessem: [00:10:42] Well, private equity funds will typically holdan asset for three to six years. It's a relatively short time.
So, two and a half years later,I sold the company at request of my new owners, to another private equitygroup. And so, that was done last year. So, I went through that process aswell. I think what's interesting about the two different processes is the firstprocess was what I call a non-brokered process.
It wasn't an option. It was aproprietary process and private equity fund that approached us and we didn'trun it, an auction process. And so those were interesting experiences. The fundmade a good return to the initial fund as did the original investors.
I think it's important when youhaven't investors, whether they are, you know, family offices or angelinvestors and private equity funds that your job as a CEO is to driveshareholder value for everybody.
You have a lot of other responsibilitiesto your employees and your customers and your business. But that's one of them.It's a really key cornerstone. So when you check that box multiple times, youfeel good about yourself. Yay. I'm doing my job and I've been successful at myjob.
And so, we sold to anotherprivate equity group. and, which was really good. We had an auction process. Wewere a bigger company. We drew more attention. It was actually the group we favoredand, so now we have another ownership group.
Relationships generally workwhen everything's working really well. Relationships are really tested whenthings aren't going as planned. And I would say COVID was not something anyonehad planned. And, you know, we we've been pairing probably better than expectedonce we, we were hit by COVID, but you know, you really get to know your, yourpartners well, when you're under stressful times. And so, it's been goingreally well. I really like this group. Interesting enough, I'm still reallygood friends with my chairman from the last private equity fund who lives amile away from me. And we go for walks every month. I think the real key herewhen, someone is considering private equity, it's the relationship with thelead partner.
Do you, do you have goodchemistry with that person? Because that's going to make all the difference inyour relationship going forward and how much you enjoy your job.
Jeffrey Feldberg: [00:12:58] Absolutely. And what's interesting with thetwo exits that you had in staying on with the same company at Firmex, one waswithout an auction and one was with an auction.
So, when you look back at bothexperiences, do you have a preferred type of exit scenario. And, I know some ofour listeners would be saying, well, what is even an auction and should I evenbe considering it? So, we'd love your thoughts.
So, I've, I've actually gonethrough four diligence processes, two have closed. And two of them wereauctions and two of them were proprietary, and they both have a 50% successrate. They tend to be more successful when you're larger, but there's all sortsof reasons. Deals cannot close. I think I mentioned, a lot of first timers whenthey get their first LOI think they've got a deal closing percentage on an LOIis probably about 40%. And so, you're only in your early stages. I would saythat, because we had an auction process early, we had a pretty good idea on theballot. And so, and 15 months later, when another cap came around, we had tomake a decision when they came with a preemptive offer to us, do we run a processnow?
Or do we think it's a really afair deal based on a good understanding of the market and multiples. And therisk of delaying their process with them. You know, you say, well, listen,we're going to run a process, come back later, versus just getting it done.
Time is risk in any deal. So, weopted to choose to go forward with Novacap without a competitive offer.
It sounds like one thing thatworked in your favor though, is because you already came out of an auctionrecently you had vetted what fair market value was.
Joel Lessem: [00:14:43] Right.
Jeffrey Feldberg: [00:14:44] So let me put you on the spot if I could,Joel, knowing, knowing what, you know, if you were a first time out there goingto be selling your company, like many of our listeners for the first time, itmight be their only kick at the can, so to speak,
Joel Lessem: [00:14:56] Right.
Jeffrey Feldberg: [00:14:57] Would you do an auction or would you not do anauction?
Joel Lessem: [00:15:00] I would generally lean to doing an auction.
Mainly because I think you willgenerally speaking get better results out of an auction process for sure.Because it's a competitive process. People are going to have to put their best,dollar forward. In fact, in an auction process. It's very much like selling ahouse where you get your initial bids and you take your top three and you goback and say, okay, well, you guys are in the top, you're know, you're going tostage two of diligence, do a little more homework and then put your best foot.And they know there's a lot of pressure. And I mean, the uptick on the secondbid, right? It was, 15 to 18% more from the same bidders. If you've got a goodauction going, if you've got enough, People at the table, you're going to get apremium for your company.
Now, keep in mind if you'rerolling stock, meaning you're staying on and you're keeping your stock. You'realso paying that higher bid yourself by rolling your stock into that business.And in fact, sometimes when you're rolling a lot of stocks, so we had some seniorexecutives who were rolling a hundred percent of his stock, then she wanted alower bid.
Because it really didn't matterwhat the value of the company was bought for what it also makes it easier tomake returns for your next shareholder because you're, you're at a lower value.You got to make a multiple. And so that's a little nuance. If you're exiting a hundred percent itdoesn't matter. But if you're going to stay on, you kind of want them to pay afair price. You don't want them to pay something that's overmarket becausethat'll be your challenge to make a multiple of the over market priceafterwards.
Jeffrey Feldberg: [00:16:38] Spoken from the trenches. As we begin totransition into the next part of your story with Firmex itself, because that'sreally a whole story in and of itself as we close out on your own personalexperiences with your exit.
If you had to look back and Idon't know, pick maybe two or three takeaways, that you would like to sharewith our listeners, what would those be when they're thinking about their ownexit?
Joel Lessem: [00:17:04] First of all, getting a deal done is, it's,it's a pretty intense process. and you really want to be well prepared for thatprocess.
You want to be well organizedthree or four or five, six months, or however long you're going to spend on it.If you do a marketing process, it could be a full year. It's going to be 80% of your consciousness is it's reallygoing to be full.
You've got to be prepared toprioritize it. You've got to be really well organized well, ahead of time withyour documentation and you should be thinking about it even before you getthere. As far as like, Oh, I shouldn't do that because that's going to affect,the sale of the business down the road.
At the end of the day, I thinkit's a great experience from a professional perspective, from a life experienceperspective. I'm really glad I wentthrough it. It's a trying experience. I kind of equate it to, I play a lot ofsports. So, if you're in the playoffs, it's very stressful, you could lose andget kicked out of class and not win the championship.
And every stage, like going fromthe quarterfinals to the semifinals and to the finals. And then now you'regetting more and more tense as you can no forward, because there's more, moreat stake. It's same in a deal process. As you get further, further into thedeal, the more tense you are, because you've got so much money that could begoing into your pocket or not going in your pocket.
And it's, it's nerve wracking,but when you close that deal, you feel like you've won the championship andit's a great experience. The neat thing about staying on is you get to play foranother one. In my situation it was a little different in the sensefinancially, I had a large founder group and some investors, it was alsomaterially valuable because let's say you leave half your money in, and thenyou get to triple that half amount, you actually come up with a bigger chunkthat on the second bite of the Apple, and you just keep repeating that. Thefinancial opportunity gets bigger and bigger as you go forward, which isvaluable if the exit's not going to be massive to start with, but I reallyenjoy the experience.
Part of it I don't, I mean, obviously look,due diligence is a very long, inquisitorial process that is, somewhat dull insome regards and time consuming. I'veseen it both ways. So I know.
Jeffrey Feldberg: [00:19:22] I think that's a terrific introduction toFirmex, which is also the company that you founded. And so Firmex is a virtualdata room company If you want to have ,a grown person frown, you mentioned due diligence and those two words do that, but like you and I were chattingoffline Joel the quickest way to have thedeal actually complete and have a high value is to give confidence to the buyerthat they know, everything that they should know. So, talk to us about Firmexas a company now that's providing virtual data rooms and why everyone should bedoing their own virtual data room even before they formally bring on an exitteam and an investment banker.
Joel Lessem: [00:20:06] Well, virtual data rooms are specificallydesigned for deals. As opposed to for example, a Dropbox, which is justdesigned for generically sharing documents. They have a lot of detailedreporting on who's looking at what, you know, interest, potential investors orbuyers are showing.
There's a lot of user permissioning.You can really control who sees what, when, and, and you can watermark thedocuments so you can protect your IP. People restrict, how the documents, areeither downloaded or not downloaded, not printed or printed and all that kindof thing. But what's really important is the perception that you're taking itseriously.
Data rooms are not very expensive. , Data roomcosts all in like $5,000., Just yourlegal fees alone at minimum are going to be a quarter million dollars.
And if you have a banker,depending on what you're selling it for, you can be well over a milliondollars. It's really a rounding error in the whole process, but it's theperception. It's kind of like if you were going to go out on a date, would youshow up in a car that's all rusted and beaten up or would you show up insomething nice.
It's going to make an impression. What's really critical is your understandingof your business, but also how you articulate it and how you can prove it comesin all sorts of ways. Whether you've already gone to the trouble of having yourfinancial statements audited for many years.
But also, being extremelyarticulate in the analytics and the proof that this business will generatesignificant future cash flows to whoever the investor is. If you could have allthis information grounded in facts, presented really well, that’s reallyimportant. One of the things I'd have to say is that M&A advisors do areally good job at is beautifying those documents, but also expressing thatinformation in really compelling ways. Getting that all organized, working withyour, your advisor well, ahead of time, obviously having the technology, like avirtual data room to present the information really well in a very securemanner and to really get an understanding of buyer interest is all important.
Jeffrey Feldberg: [00:22:10] I wouldeven take it a step further using the same analogy that you gave and at DeepWealth, one of the things that we've embraced as a best practice for us beforeyou begin the exit process for yourself. So, before you hire your advisors,before you hire an investment banker to do a due diligence on your own company,part of which would be, have your own virtual data room to put all thatinformation together.
I know at first glance, businessowners are saying, well, why would I spend the time and money to do that? Andin our experience, it's like you said, Joel, you don't get a second chance fora first impression. So, when you go to an investment banker and you have yourown virtual data room, you're prepared, you have all the information in there.
You've thought things through,you see the skeletons in your closet that you didn't even know were there thatyou've had a chance to correct. In our experience particularly with investmentbankers who trade on trust. You're guilty and never innocent. So even if youhave put a skeleton out there and you correct it, the perception that we findwith investment bankers, that's what they're going to remember.
So, if you show up in youranalogy in that car, that's not a rusted car, but it's a brand new car. It's allsparkling and it's clean and you put your best foot forward with the investmentbanker with your own virtual data room. In our experience that goes miles andmiles in terms of increasing the perception of your investment banker andultimately most importantly, increasing the value of your company when you'redoing that.
So, Joel, you see a lot of dealflow at Firmex. When it comes to virtual data rooms, what would be some do'sand don'ts that you can pass along to our listeners?
Joel Lessem: [00:23:46] Our clients created over 15,000 data lastyear, which is probably, 15% of the deal volume in North America.
Whoever's administrating yourdata room should be well-trained. Thething you'd never want to happen in a data room, the wrong person sees the document they're not supposed tosee, or you post a document you didn't mean to post because when you post adocument, email notifications that goout and do all that buyers and notify. You want to be very, very careful on howyou set your permission and, and how, how you host information to this data.Because what'll happen in the process is typically speaking in a day runprocess when you first go out, you bring bitters in, you have what we calldiligence phase one, which is, maybe 50 documents, which they're using to writetheir offers.
during that phase, they'll startasking for a few extra documents. And, to be fair, you need to disclose thatsame document to all the bidders and curating that information, making sure they check it first before itgoes up, you know, making sure it's well organized, making sure the rightpeople are seeing it and that will keep going.
When you get into acomprehensive, the diligence phase two diligence with that shortlist ofbidders, you're talking depending on the size and the nature of the business,often hundreds and sometimes thousands of documents. And those documents arenot all preexisting documents.
Those documents sometimes arehearing response to answering questions. Typically, a diligence question iscalled an initial question list is typically 200 to 300 questions. That's justthe initial volley. And then you'll get, you know, ad hoc questions coming inand in response to your answers.
And sometimes they'll be askingfor details about your business that require a bunch of analysis and anotherspreadsheet. You got to be sure whatever you publish is well-vetted, triplecheck because if there's an error in the model, or there is an error insomething you said, then they wonder, about everything else you said.
And, and, and remembered for thebuyer. This is a big risk they're taking. They're making a substantialinvestment. Whoever the lead corporate development person is, or the leadprivate equity person is buying this company. If they miss something in validdiligence, it's on that. They are very nervous.
They're worried about theiremployment. Remember they're not, they're not necessarily entrepreneurs.They're buying your company. They're either. These are paid employees that careabout their employment and can be fired. Unlike a lot of entrepreneurs, you are immune to being fired.
So, you do not want to make themnervous or worried by, Oh, sorry. That was a mistake. I can just send you somethingelse and you, and that starts happening consistently. They will get very skittishvery fast and keep in mind they have other options. They don't have to buy yourbusiness.
And so, make sure anything youpublish is really vetted locked down and, and there's no error.
Jeffrey Feldberg: [00:26:44] Joel, you've mentioned this before for ourlisteners though. It's worth repeating. You've made a very clear case whyemails simply won't cut it when you're trying to sell your company and evenmentioned other services out there, which aren't virtual data rooms, but peoplemay be tempted to use because they're free or they're already used to usingthem.
So, from a virtual data roommight take away from what you're saying is it gives you a professional image. Youhave security in terms of controlling, who sees what? And you can track thatand you can watermark things so that, you know, who's reading, what and whereit's going from. Is there any additional reasons of why other business ownersshould only be thinking of a virtual data room and not even looking elsewhere?
Joel Lessem: [00:27:27] Well, those are pretty strong reasons. Youdon't want information to leak. it is especially, if you've got a situationwhere, whether you're doing using email and you send it to the wrong, Steve, onyour email, and that happens to be your sales manager.
And they didn't know you'reselling a company to a competitor, that's really going to backfire in yourface. One of the biggest challenges ofselling your business is keeping it confidential. If you got a staff of 50,200, 300, 400 people, and all of a sudden, you're buried in your office all thetime you do not want it to leak, take out that the businesses for sale, becauseonce that leaks out to your staff beyond maybe your inner circle of executivesthat have to be included in the process, they worry and writing itself becausethere's uncertainty though, what's this new owner going to do, the company'sfor sale. You hear the company's for sale.
God forbid it leaks that you'reselling it to a competitor. And then they're like, Oh, we're all gonna lose ourjobs. They started heading for the exits and your deal collapses, and then youjust lost a bunch of employees and that's all you've accomplished.
So, you really want somethingthat's secure. That's not going to leak. That's probably maybe the other thing.Never mind being careful with, how you manage yourself through theprocess. That would be the other reasonto make sure you use something secure and you don't just start winging thingsaround by, by email. Companies get sold over Dropbox. Companies get sold overgeneric systems.
You can do it. People get from Ato B on a skateboard, but it's not the best idea sometimes.
Jeffrey Feldberg: [00:28:55] And when we talk about selling yourbusiness, really, you have one chance to get it right. You want to make itcount across the board with everything. And like you said, Joel perception isreality. So, as we're recording this interview, we're still in the middle ofthis coronavirus pandemic and business, as we know it has changed.
I'm curious, what's that beenlike on the backend of your operations at Firmex with the pandemic and whathave you seen in the marketplace now in terms of transactions?
Joel Lessem: [00:29:23] Because we're a cloud-based software company.We can all work from home without any disruption we've made sure by the way,late January, I was pretty convinced based on medical friends of mine, that thevirus was heading our way and was going to get out of China.
It's going to be everywhere. So,we made sure by late January that we had full infrastructure in place ateveryone's houses so that they could literally walk out of the office and gohome and keep working. And so sure enough, by second week of March, everyonewas at home working from home with no disruption.
I actually think other than missing,that it's a very social company. People missing seeing people at threedimensions, and hanging out with them, going to lunch for a lot of thecommuters, it's actually been a real benefit to work from home. They've beensaving hours a day.
They're better rested. They canspend more time with their families. I think this is the case for manycompanies and COVID that have this kind of business. and so that's actuallybeen a very, positive. and we've adapted quite well with the various videoconferencing technologies.
As far as deals were concerned,deals really took a hit. The number of M&A transactions were alreadyweakening pre-COVID you go through cycles. It's like any market. and then whenCOVID hit, they really stalled deeply in April and May. Even in the softwarebusiness, which is more immune, even software deals stopped dead in theirtracks, late March, unless they were really far along.
And because people really didn'tknow, I think it was more the shock and awe. Oh gosh. We're in this pandemicand no one's ever had an experience of a pandemic like this and in this centuryanyway, not for over a hundred years. And so, deal volumes really droppedsignificantly. We have a transactional piece of our business, which fortunately30% that was, that was impacted by that.
The subscription business wasnot, impacted, which was great. We were really happy. Those are people that buyannual subscriptions and they had enough activity that they kept going. I wouldadd that actually the activity is actually rebounded now. It'll be interestingto see what the resurgence of COVID if that hampers, the recovery of deals.
The biggest problem that peoplehave the yields right now is part of the diligence process is an in-personmeeting. And that not so tough if you're in the same country, that gets reallytough if you've got across borders. I was actually talking to a cousin of minewho's a private equity owner. He founded his private equity fund as well. He'slooking at a deal in a different country. And he's like, I got to go there. Butwhen I come back, I got to spend two weeks in quarantine. We were luckyactually with a deal in another part of the world. They had such strict lawsthat we'd have to spend two weeks in a hotel, in a room, in a hotel inquarantine before we could actually go meet them in person.
So those are the kinds of issuesthat are making it harder to get deals done. But deals are getting done. What'sinteresting. Europe has been really at a standstill in April and May and theyhave really come back. We've seen, more activity coming out of the Americasnow.
We're probably 70% to 80%, ofwhat we do, we're pre-COVID. So, it's still active. and, and people are stilltrading assets. There is a lot of money on the side lines that needs to be putto work.
And so, there are a lot ofprivate equity funds that really want to put their money to work. And if youhave an attractive business, they'll figure out a way to get a deal done.
Jeffrey Feldberg: [00:32:41] You're exactly right. Joel, our thesis, atDeep Wealth. And what we share with business owners who it's counterintuitive,they're shocked.
We say two things. Number one,nobody can time the market. I don't care who you are and what you say. Ifsomeone tells me they can time the market, I like to run the opposite that wayas fast as I can. But when you're prepared, you have choices and a pandemicbrings with it may negative things.
But sometimes out of thenegative comes the positive. So, if you're a company and you're prepared, inour experience, and what we're seeing right now is there's fewer sellers inthere are fewer buyers. So, the demand is now increasing. And I would say youhave a higher quality buyer out there because these are the buyers that havethe funds.
And they've been in the businessand are here playing the long game and you also have fewer sellers. If you'reprepared, this is a terrific opportunity to get what could possibly be a oncein a lifetime opportunity that much extra value for your company.
Joel Lessem: [00:33:42] There are some businesses that are performingextremely well in this environment. Some of that may surprise you. I mean,there's some obviously collaborative tech companies and we're on zoom rightnow.
So, I imagine that business isdoing extremely well, but you know, vets are doing extremely well. Why? Becauseeveryone's getting puppies In COVID , .you can't even find a bicycle within anhour of this city. So, there are certain consumer products that are doingextremely well, you can't even get a hot tub for your backyard right now.
So any type of productsassociated with how people at home products are selling like crazy. There areother industries that are benefiting dramatically from COVID those ones that Iknow, actually, in one of those industry, one company in that mix that isselling for an incredible amount of money right now in a closing next week.
So, I think if you're in anindustry that's benefiting from the at home environment. then certainly,they'll do well. In particular I think people are not, I'm going to forgetCOVID easily. Industries that are prospering in this environment will be givena premium going forward because you never know the next pandemic is going tohit.
It's kind of like that it's ablack Swan event that could happen again in five years. We don't, we have noidea or a hundred years. But I do think,those people that have, been resilient in the wake of COVID are going to get apremium for the business.
Jeffrey Feldberg: [00:35:02] Well, interesting times, and it never ceasesto amaze me what's in vogue today can be out of vogue tomorrow and all you cando is be prepared and try your best. So, Joel, as we begin to wrap up here, Afew more questions for you. You've been on both sides of the table. Now as afounder, a business owner, building a company, selling the company and nowgoing on the other side of the table of owning that company and putting yourinvestment vis-a-vis your ownership in the company a forward again, and,getting the returns as an investor. And also, how you're doing that Firmexbeing in the business itself of being a virtual data room. So, it's a, a broadquestion that I'm going to ask you, you can apply it to any which way that youlike.
Knowing what you know now, ifyou could just do one thing, when itwould come to building a business, growing it, selling it, some of the above,all of the above, what would that be from what you've seen and learned over theyears?
Joel Lessem: [00:36:01] At the end of the day, I always tell peoplewhat you want to do with a business or whether you stay or exit or keep growingor how you run it is deeply personal.
And, for me, the thing thatreally matters is, that the business is managed in a way that aligns with myvalues. And I think these are values that are shared by me leadership team andby most people, and those values are things like honesty, fairness,collaboration, and, shared success.
I think the thing that I reallyenjoy the most, and so assuming you're having a commercially successfulbusiness for me at the end of the day, for most people, if you sell a company,whether you sell it for, you know, a few million bucks or many million, itdoesn't really matter because at the end of the day it's enough money foranyone to live on.
What matters for me and what I've learned overthe last 14 years is I helped other people be successful. I get a huge kick I’mone of the village elders and our company a I'm 53 years old. You know, so Iwalked a lot of young people coming to the company and progressed and progressed,not only in the company, but in their lives.
They meet somebody, they getmarried, they start a family, and they go through this journey and they enjoytheir job and they enjoy what they do. And they like the company. And to me,that's very meaningful. We have a very positive Glassdoor rating that somehowcreating Firmex made a difference to other people in their lives and theirhappiness and their professional success. And so, to me, that's, that's reallythe interesting and the most rewarding aspect of running a company.
Jeffrey Feldberg: [00:37:52] Well said and some terrific insights. We'llput all this in the show notes. If someone wants to find you out there in thevirtual world, where can they look?
Joel Lessem: [00:38:04] LinkedIn, is a good place to find me. By all means, happy for them to reach out.You can send me an email as well.
Jeffrey Feldberg: [00:38:11] Terrific. Joel, it's been an absolute delightwith you today just to hear your story and your exit adventure, many timesover. I thank you so much for that.
And as we continue to work ourway through the pandemic, stay healthy and safe.
Joel Lessem: [00:38:26] Thank you, Jeffrey. You too.