I just finished writing my tenth case study last week so I decided to do a deep dive to find the most potent takeaways (about 70 hours of research, 132 sources and 87 founder quotes) and thought Iād share it with yāall.
Companies studied:
The ten companies in my dataset so far:
AppArmor (campus safety app), Sour Strips (candy), RXBAR (protein bars), Baremetrics (SaaS analytics), Wirecutter (product reviews), Plenty of Fish (dating), Pura Vida (bracelets), MVMT (watches), Tomās of Maine (toothpaste) and Base44 (AI app builder).
Every one of them was built and sold to buyers that included Kellogg, Hershey, Colgate, The New York Times, Match Group and Wix.
The Numbers
- $1.7B in combined sale proceeds.
- Acquisition prices ranging from $4M (Baremetrics) to $600M (RXBAR).
- Time to exit between four months (Base44) to 36 years (Tomās of Maine).
- The median time to exit was about six years.
- 8 of the 10 never took outside investment.
- The median sale price had a 2.6x revenue multiple (for the eight with a proper revenue figure at the time of sale)
- Of the 5 sale prices I could check against the press-reported figures, 4 had cases where the press reported a number that was higher.
Lessons
1. The first distribution channel usually fails
Of everything I learned this was the most common finding. Founders often failed with their first attempt at a distribution channel. It wasnāt until they gave some thought to where their customers were hanging out that the second channel actually led to growth (sometimes magnitudes more than the first channel).
Examples:
- AppArmor spent years on blog posts and social media before the founders realized the people buying campus safety systems were emergency managers who werenāt on social media at all. That realization led to the switch to direct mail, trade shows and formal tenders and got them to CAD $1M annually.
- RXBARās first wrapper focused on a logo and a catchy tagline. The second try put the ingredient list on the front with āNo B.S.ā underneath causing a revenue increase from $6.5M to $36M the following year.
- Base44ās Product Hunt launch brought 15 users and a few thousand dollars spent on ads and influencer marketing did nothing. LinkedIn took it to $1M ARR in three weeks (though he did have an existing following there).
The takeaway here is that if your first channel isnāt working, thatās normal. Take time to rethink where your ideal customer spends their time and optimize your marketing there.
The second part to this lesson is that almost every company grew on one channel for years before adding a second. That means that years of growth were lost because the original channel wasnāt challenged. In some cases (like those below) they got it right from the start, although this was less common.
Plenty of Fish ran on search and word of mouth for its entire life. Tomās of Maine sold through health food stores for 13 years before CVS became the first chain to stock it in 1983. MVMT went all in on Facebook and Instagram ads from year two and only added podcasts, Google and YouTube once that was proven.
Most small businesses I see spread themselves across five platforms and do none of them well. Once you find the channel that works, double or triple down.
2. Start where nobody is selling yet
Of the things founders did right, the one that stood out to me is how founders discovered uncontested distribution channels to kickstart growth. Five of the ten (RXBAR, Plenty of Fish, MVMT, Base44 and Tomās of Maine) found channels where traffic was thin, customers werenāt yet buying their product or service through that channel, or competition was weak.
RXBAR sold door to door targeting CrossFit gyms in Chicago. Plenty of Fish was free when every other service was paid (and marketed on dating forums). MVMT relied on early Facebook ads when it wasnāt yet common. Founders sniffed out the least utilized channels and used it to grow quickly and effectively at little or no cost.
3. Platform risk is real, own your audience
Youāve probably experienced this yourself if youāve posted content consistently. Youāre at the mercy of the platform, algorithm shifts, and being banned. If your brand relies on social media for all of your leads, platform risk is high and your business could take a hit.
Facebook ads got more expensive for MVMT in 2018, the year the founders sold. In 2021, Apple changed its tracking rules across apps (that users could opt out of) and the edge Pura Vida had for finding new customers disappeared just two years after Vera Bradley bought it.
The companies that held up had relationships that wasnāt controlled by a single platform: AppArmor had contracts with campuses, Wirecutter had its reputation with readers, and Maxx Chewningās YouTube viewers followed him into the candy aisle. It isnāt a guarantee (Pura Vida had over a million email subscribers and still struggled), but getting customers onto an email list, a contract or into a store reduces the risk that a change to an algorithm canāt shutter your business.
4. This wasnāt their first rodeo
What I found inherently interesting was that the majority of founders were not āone-hit wondersā. They had built before, sometimes hundreds of different businesses: Josh Pigford said Baremetrics was āprobably my hundredth thing to build.ā while Jake Kassan from MVMT started a T-shirt company at 17: āI had other businesses that had failed and I blamed myself. I wasnāt going to let that happen.ā
Adding to this, very few were actually experts in the area in which they sold. The Pura Vida founders werenāt jewelers, the MVMT founders werenāt watchmakers and Markus Frind from Plenty of Fish wasnāt a dating expert. What they shared was the willingness to try and a few habits: splitting the work with a co-founder who had the opposite skills, working closely with early customers, and saying no to other opportunities to expand the business.
5. Press-reported sale prices are rarely the real number (important if youāre planning to sell)
Digging through the publicly available information was painful for a lot of reasons, but the most annoying was finding the sale price only to discover that it was overstated or just straight up wrong. The official filings from each buyer provided the real numbers that rarely lined up with what the press quoted.
This matters if youāre ever looking to sell and are comparing prices for similar companies. Here are some examples:
- One headline stated that Plenty of Fish sold for $800M; the buyerās filing said $575M.
- Wirecutter was reported at āmore than $30Mā; the New York Timesā filing says $25M.
- MVMT was reported āup to $200Mā, but $100M of that was an earnout that was never paid.
- Base44 was the only one on track to pay out far more than the $80M announced price.
My advice? Treat the press-reported figure as an optimistic estimate and dig deeper to find the actual acquisition price in the buyerās filings (if theyāre public). This has proven to be more reliable in my experience.
I started writing these case studies in early August and have learned more than I ever thought just researching and writing, much of it Iāve applied to my business such as selecting the best channels for distribution and having several failed businesses behind me and using them as lessons to learn from rather than something that holds me back.
My question: has anyone here gotten distribution right on the first try? Or is testing five platforms at once the only way to find the one that works?
PS: the full study is about 4,500 words and free to read. I'm incredibly proud of it. shoot me a DM and I'll send it to you.