Arguing Agile

AA219 - How Private Equity Killed Instant Pot (And Why Your Product Could Be Next)

• Brian Orlando • Season 1 • Episode 219

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Instant Pot had $300M+ revenue, passionate users, and $100M cash on hand. 

So why did they file for bankruptcy? 

The answer lies in the pattern of how private equity systematically destroys beloved products through financial engineering! 

In this podcast, Product Manager Brian Orlando and Enterprise Business Agility Coach Om Patel examine the acquisition of Instant Brands and discuss how leveraged buyouts, special dividends, and debt loading likely turned a kitchen innovation success story into a cautionary tale for every product team. 

Watch or listen to learn: 
• Real reasons successful products fail under PE ownership 
• Why "professional management" really means cutting the people who built the product
• How debt servicing kills innovation budgets
• The one question every product manager should ask their CFO 
• Why product-led growth can't survive private equity's playbook 

This isn't just about Instant Pot - it's about protecting the products and teams you care about from becoming the next casualty of financial engineering.

#ProductManagement #PrivateEquity #InstantPot

References:

  • New Lawsuit Accuses Private Equity Company of Plundering Assets of Instant Brands; Michael Wolf, Nov 2024; https://thespoon.tech/new-lawsuit-accuses-private-equity-company-of-plundering-assets-of-instant-brands/
  • Arguing Agile #61: AA61 - Experiences in Corporate Buyouts (Mergers & Acquisitions)
  • Arguing Agile #96: AA96 - Stages of Company Decline, or When Companies Hate Their Customers


Tags
#ProductManagement #InstantPot #ArguingAgile

LINKS
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Website: http://arguingagile.com

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if you don't know about Instapot, what is inspo? It's a cooking device. It's like a crockpot wonderful device. Yes. Yeah, it's an electric crockpot. I can do a whole bunch of things for you , and apparently you can do a bunch of different things with it too. In the deep dive for this episode, I read people sterilizing their lab equipment and using it for all kinds of purposes. Because it was a very versatile product. Anyway, they filed for bankruptcy. In the thread that I read about all this, there was about 500 comments I made it about halfway through the comments before, I just couldn't take it anymore because the comments had a theme. The theme over and over again was talking about, well, if they would've just added wifi to the cooking pot or invented air fryers or came up with different colors everyone was throwing different product suggestions yes or you know, we're saying like, oh $300 million of revenue, that's not$300 million in profit. People saying like, oh how dare they not be able to run a company with $300 million? You know, how bloated must they be. every comment was a derivation on one of those themes , I read through the whole thing and I said to myself Hey, I'm a product manager. I have some experience in products that work or don't work. And I was like, this just, doesn't sound right to me. I need to know more. Look, as a customer of Instacarts, I own three Instacarts two, now my daughter took one, but they work great There are downsides to the user experience, but we're not here to talk about those there's no instructions that come with it. Other than that, you can figure it out yourself. But once you have. They work great. I'm disappointed that they filed bankruptcy because now I get no support , well I understand you're disappointed, but let's turn that frown upside down. All right. Because today we're gonna, I'm gonna tell you a story'cause I did a big deep dive into Instapot and the holding company that, that holds them and that bought them. I've got a great article for us to talk through. We're just gonna look at it to get a summary and orient ourselves. Before we launch into the podcast. it's a little longer intro than normal today because I think it deserves it because today a, we're talking about a topic near and dear to the hearts of many people that may listen to this podcast. It's how private equity turned a beloved product into a financial failure through financial engineering , I think most people would connect with this. This isn't the first product that I've seen impacted. By private equity. This is gonna be a good podcast for anybody that works in product or anybody that works on teams with how to keep private equity from killing your product. But, honestly your business, because that's the backdrop of what we're talking about today. Private equity, a wolf in Wolf's clothing. so there is the article. On Spoon Tech. First off, I had never heard of Spoon Tech, but I did look at all the quote mainstream media sources and nobody was covering this aspect of Instapot. I'll try to add this article's link in the description of the podcast on YouTube and the audio product so other people can read it. This article says The lawsuit accuses the private equity company of plundering assets of Instapot. Brands, oh, sorry. Assets of Instant Brands. So I guess Instapot is the product and Instant Brands is the company. They got bought by private equity and even if you're not in product or if you're just a, or if you're a team member or an analyst or a develop individual developer you can. Like, you can't be unaware of this stuff. This is how the quote adults are using the money that you're producing with your products. And especially when your company is telling you that you're just a cost center. You don't produce any money. But then you work on a product day in, day out that brings in the revenue for the company and somehow they convince you and your manager that, that you don't make any money for the company anyway. You can tell I have some grievances that we probably should just bundle up separately into a giant. Pile for a burning man of a podcast later. Let's continue. Reading the article, it says, the acquisition of instant brands, maker of the Instant Pot by Cornell Capital, took a turn, the filing of a complaint on behalf of company creditors to $400 million in losses. The filing alleges Cornell Capital LLC and its leadership orchestrated a series of fraudulent maneuvers. Lemme try to hit the highlights here because we have an agenda for this podcast and it's not reacting to this entire article. The story begins May, 2017. Cornell Capital is a private equity firm. They're trying to grow through acquisition, which is normal. Cornell Capital acquires World Kitchen named named it Corelle Brands Carell Capital, using Cornelle Brands. I'm assuming this is. Them loading down Corelle with debt to make other acquisitions and they acquire Instant, instant brands in March, 2019 for $650 million. Let's keep going. It says, the complaint states that shortly after the acquisition, Cornell Capital discovered that Instant brands financial records has been misstated, had been misstated, particularly 2018 ebitda. So they're buying in March, 2019. They're saying the previous year's ebitda. It was all messed up and the discovery meant that Cornell Capital had significantly overpaid for instant brands, so they bought the company First of all, I don't know how a PE firm goes through and makes this whole m and a deal. without actually doing the due diligence. Crazy crazy. One of the first numbers you think about when you're looking at anything financial is an ebitda, right? So it says in the wake of this revelation, Cornell Capital threatened legal action against Instant brands sellers. Inventor of the Instant Pot and his co-founders three people for fraud. Two of those sellers negotiated a restructuring agreement in February, 2020. That knocked the purchasing price down. In a move that would later become central to the lawsuit, Cornell Capital secured itself the sole entitlement to a future $200 million dividend from instant brands. they bought this group for $600 million. Six 15. Yeah, the $615 million. They negotiated some of that down. Okay. So I don't know what the negotiation down was. It doesn't say, I have no idea. It doesn't really matter. And then they said, okay, , we're gonna take an entitlement of $200 million out of instant brands on future dividends, right? Additionally, Carell Brands filed a $268 million claim with his representations. And warranties issuer in May, 2020 alleging the misstated financials had inflated the acquisition price. So that's a 268., So let's pretend that like, I don't know what was in the settlement, but let's pretend it was nowhere near on the order of like $200 million, right? So they're saying they're gonna take $200 million dividend out of instant brands, and they're taking out a claim worth $268 million against the brand as well. So already we're already stacking up four something, 400 something million dollars, like easily over four 50. According to the complaint, Cornell Capital pushed forward with his plan to extract a dividend despite knowing about instant brands overstated valuation and declining financial performance. they already weren't in a good spot, right? Yeah. Alright. In March, 2021, instant brands approach lenders to secure financing for a dividend recapitalization. Which is all the rage these days. Of course all the kids are doing it.. All the while concealing the truth about its financial blows, the company states that Cornell Capital instant brands are withheld information. So throughout this withholding of information the complaint alleges that Cornell Capital successfully secured a $450 million term loan in April, 2021. Again, like the, the two things that I just outlined, brought us up to a $450 million, you've got these claims on their money. And now you're taking out a loan worth 450 million. So you paid $650 million for the company. You've essentially leveraged a company 'cause it is a $450 million loan. And then the loan along with a hundred million dollars in instant brand cash. Was allegedly used to fund a $345 million dividend, the majority of which went to the primary stakeholder, which is Cornell Capital and its co-investors. Yep. So I don't we're at so much money right now. I can't even count this high. And then eventually in January 20, 23, less than two years after the dividend payout and they're outta cash 'cause they spent their hundred million dollars in cash on dividends. Right. They have to file for bankruptcy. In June, 2023. Yeah, so it says the tangible assets of instant brands at this point, January, 2023 is estimated at $200 million. They've leveraged this company for a billion dollars at this point. We stacked up $200 million here,$200 million there that's like, that's like couch cushion money. I guess that's like, that's where I go. My couch. No. Yeah, I mean somebody, these these assets would then used as collateral for a 50 $55 million loan. From Cornell Capital Partners, this maneuver termed the unsub transaction. What does that mean? Like somebody watches too much CSI Is that what's happening? UB, which, was allegedly designated, was allegedly designed to strip instant brands of its remaining valuable assets and shield the earlier dividend payout from scrutiny under bankruptcy laws. And then of course, they filed for bankruptcy in June 20, 23. Three. I mean, you, you like there's no way they can pay back this money. They were circling the drain the whole time. Yeah. right. So UN sub I believe stands for unsubsidized. And then the complaint seeks a comprehensive account of financial maneuvers. The complaint says, I wanna know everything and it requests the court void, the $245 million dividend and other payments oh, 345 million. Additionally, the trustee's asking for the recovery of the value of those transfers is seeking an award of no less than 400 million to compensate. So they're basically asking for the money back., And then some it looks like, right? Yeah. for punitive and whatever else. I'd like to follow this case to see if they ever get any of their money from private equity. I'm gonna go out on a limb and say, ain't nobody getting paid except for PE here. I wanted to read that article about the downfall of a brand that had , 300 and something million dollars in sales, like that year when they filed bankruptcy. Yeah. They're a household brand , you know? So kind of surprising to me that. the acquirers wouldn't do their due diligence and then after the fact come back and said, you said, she said, he said, honestly, reading that whole article, it seems like they, for whatever reason didn't do their due diligence. Maybe they were buying a, maybe they had a bunch of m and as that year, and they were overtaxed. Who knows? But it sounds like they turned around and really punished that company financially. they used their financial tools to punish the company. That's the way that article reads. Part of me wants to say that's very unlikely. PEs don't do this as a routine, make mistakes like this. Could it have been perhaps a strategic ploy to essentially write off? Take that as a loss, right? Buy and sync. The company. Take that as a loss against all the other assets that they may have. I'm just pontificating here that that's possibly a motive, but we don't know. Lawyers will get rich off of this, I'm sure. There's lawsuits over lawsuits. Right. About the same time when they did this, there was a huge influx in the market of Instapot clones other manufacturers bringing their own versions did the PE company rush it in? Do this, would they have been better off buying a smaller company perhaps? Who knows, right? I don't know. I mean, it's like, you kind of wonder about the strategy behind this. this article my brain started firing a million neurons a second When I first read this article, the first question I said to myself is you know, go going through a few private equity M&As in my career. Who, which, which, which, for better or worse, worse. or worse? Even worse. Worse. Or even worser. Arguing Agile. Episode 61. Mergers and Acquisitions. Three years ago.. Unbelievable. I know three years ago that we did that episode. So because we did a podcast on this exact topic. It got all cylinders were fire in my brain. And I asked the question does private equity inherently destroy product? and because you're here and like good teams and good team organizations and structures, that was a question I wanted to have a whole podcast about. Yeah. and you know, as an initial reaction to that question, yes. I mean, that's the initial reaction. Get the music again. If you look through history and think about companies that have been. Made more wholesome, made better through private equity, that list is much, much shorter than companies that are on the other side of the equation, right? Yeah. Sadly. And not because of any one reason. I mean, some of these reasons are absolutely strategic, right? I go back to the old days of Sunbeam for example, that was split apart into many pieces by Al Dunlap. He came in to rescue the company 'cause they were in deep trouble and he broke it apart into many pieces and sold each one for a lot more than the sum of the parts were worth. Same thing happened with other companies, right? Like Phillips, for example. Mm-hmm. So this isn't new, but what is new is, the pace at which this has been going on over the last few years. We're gonna return to forum for the podcast and actually stick to the agenda because there, there is a solid foreign against in this category. Yep. And I, and I, I, I can tell you from working for PE backed firms for a good part of my career I already know all the arguing points. They're gonna have all, the sales pitches and the biggest one that they're gonna roll out is they're gonna say, look, we are professional managers. Like we have this stuff on lockdown. We've got a great finance department, an HR department, we can take care of all your admin overhead. You can just do the creative, fun stuff. Yeah. I don't know how much of this we hit in our previous podcast on this topic when we went through mergers and acquisitions, but that is the thing that got rolled out every single time. I think in that episode I talked about going through four m and a activities and the m and a events, I don't know how I want to call it, m and a iceberg hitting four m and a icebergs. This got rolled out every single time oh no, we're professionals at this. Yeah. The keywords that get thrown around when this happens are synergy. acquiring you provides synergy for you because we have, like you said, the expertise, well, there's the synergy. Yeah. So I would say that's a different arguing point. I would say number one, they say like. Oh, we're gonna eliminate all of your corporate recruiters and finance staff and HR staff and whatever, because we have corporate finance and HR now. Yeah. So we're gonna fire all those people.' cause you know, 'cause'cause none of them were valuable in getting you to where you are today. You're gonna use all of our people. Yeah that are like cut rate outta wherever we got 'em from and that's some sort of winning effect, you know what I mean? So, so but that is separate is what you just said is like the synergy of, to say well we bought Brian and O'S product development company. Brian and O'S software development company makes software widgets. For people that love widgets. Yes , the greatest widget producing company in the world. We bought Timmy's software development company and they make widgets produced and sold B2B enterprise. And then we bought Timmy's software development company and the other part, and, and Timmy is like direct to consumer B2C he makes mobile games or something like that. Yeah. So they're synergies, we're gonna put your two companies together., They're, do those things relate to each other because they're, quote software development, they're completely the same. I don't think so. When you're pitching widget creation, your salespeople are in there saying oh, by the way. We got this mobile game company. You want some mobile games with your widgets and the companies are like, get outta here. Why would I need mobile games and widgets? These things are not related at all, but to these guys who don't know anything about software development. It's just a bunch of nerds typing on keyboards. Of course there are lots of nuances there. There're uneven, subtle, different sales channels all of that stuff. I agree. The other phrase that gets thrown around a lot here, economies of scale, right? Like you said, we have corporate hr, corporate finance, corporate legals. We don't need those functions at the various entity levels, right? that's a selling argument this is good for you, trust us, right? we'll give you efficiency by doing it this way and the expertise, right? We've been doing it for a long, long time. The holding company has grown by acquiring all these other companies. Sorry. I, I hear what you're saying and I understand the spirit of what you're saying, but in all, all this, all I hear is conceit and assumption. The typical part of my product role where I have to challenge people is to ask do you actually know that or are you assuming that, and can you point me to evidence or bring a person in that, that, that has evidence and I'm used to having conversations like that and they can get slightly tense. But coming from private equity where the adults in the room are saying that, it sure sounds like another podcast where I've said like, the diagnosis is, you've got dip theory, take two Motrin and keep it elevated and call me in the morning. They don't point at evidence right? They look back and say, look at our history. We have grown leaps and bounds over the last five years, 10 years, whatever through this strategy of acquisition, right? And we will integrate your little company into the greater fold. But if you're looking for actual evidence none to be found here. What about companies that went through a PE acquisition or examples to be held up for success? You know, there's a few of them out there that got acquired by PE that have grown probably and become more profitable over time. Although I can't think of a single one right now. I don't know of any like that, that are stellar examples. I'm sure there are. It would take a deliberate strategy to succeed with a niche company or product line for that to happen. Way long ago in my career, I worked for a holding company that acquired peripherals companies or hardware, they acquired two competitors going after the same market space with different technologies. One was band printing, one was dot matrix printing. That shows you how old I'm, but the com, the holding company held onto those, right? I. Oh, I, I got, I have a couple. I just ran a quick Google search. So it says, dollar General was bought by KKR in 2007. That led to operational improvements and expansion, resulting in a successful IPO and significant return for investors. It says Hilton Worldwide. Blackstone bought it. That's, I'm not gonna talk about evil companies today. It says, beats Electronics Carlisle Group bought them and then sold them to Apple River. Capital Management acquired Chrysler. I don't know if that's such a great story. Burger King. Wow. Burger King's on this list. Hey, listen, PE I'll buy Burger King from you. I, I definitely know how to make Burger King successful. The rest of the examples here from this Google search, like they're not good. But, what I find absolutely hilarious. I just ran this quick Google search and I just asked it for companies that have grown successfully through private equity, and it gave me this list, a lot of which are weak examples, but then for some reason at the bottom of the list it, it says companies, that private equity just destroyed like toys or us. Which is deserves its own episode. That's, that's funny. It, it gave me a, a list of failed private equity companies. Anyway, let's get back to the topic of does private equity inherently destroy product? There's two big issues that have happened at every single private equity firm that I've seen and I'll see if you push back against this or not. Number one, I would say you need consistency of leadership in order to determine a vision, a, a good product, a strategy, whatever you wanna call it. And PE firms generally have a higher turnover at the leadership level of these companies. And they don't retain the people that build the vision and the strategy, which is the founders, these people are usually gone when PE buys a company. And I would also say it's probably hard to attract people with this deep vision and understanding of their, their product, their market segment. Because the professional managerial classes running these operations and the founders are all gone. So the second hot take, I didn't know these were turning into hot takes. What They are the second hot take. And the one that really never gets to talk about in the news is this debt servicing, debt leveraging thing that's going on. We're gonna load you down with debt and you don't have any say in the matter. And now you have to do extra jumping jacks just to say fit, like it's hard enough to build a product and keep customers happy and pay the bills and not have to cut anyone on the team and, and all this kind of stuff while they're not using your company as a piggy bank. And then forcing you to pay this debt that they use to, to buy you as a company. Yeah. It used to be called over-leveraging. Lemme just go back to what you said earlier about losing that core expertise, the core talent of the company they acquired. Perhaps it was the entrepreneurial spirit that drove it to where it is. Right? And that might have been an actual strategy by the inventor of the company to get it to a certain point and then sell it. But the PA firms do not have that expertise. They don't have the drive that the other person had. It's basically nothing more than a sell and a spreadsheet at some point, right? so, consequently what happens is you are just looking at raw numbers. Is the company red or is it green? Right. Coming back to how we're gonna take this company and we're gonna say keep running, by the way, we've load you down with debt. Right. And, and overburdened you stay keep your head above water. That is a very challenging situation. Because that company that was an entrepreneurial company was used to inventing things, perhaps. And they can't do that because now you have to service your debt before you can have what's termed as luxury funds. Right. To invent. Some people are gonna say, oh, you always gotta pay your bills why is that such a big thing? Where I would push back on that is I would say, yeah, you do have to pay your bills, but you probably got to this area of success with a certain amount of money. Spent on a regular basis towards r and d. Yep. Innovation, whatever you wanna call experimentation, whatever you wanna call it. Like we would call it experimentation, right? Percentage of your roadmap that goes to trying new things, doing cool things, Doing cool things is not something you can write onto the balance sheet. Clearly for the PE guys when they're like, Hey, how come you're not, you know what I mean? People are asking for white instant pots. Why aren't you creating white instant pots? Why are they all this metallic color from a PE perspective, that's one of the first things that gets cut, because they don't understand the need. To experiment in order to innovate. So yeah, we're an Insta Park company. Just create them, right? Just make 'em, what color have they been? They've been selling fine. You don't need to be any other color look at the signals in the market first. Yeah. I came to this subject for the podcast with this thread I was reading, and all these people are like, oh, I got all these product suggestions. And I'm like, that's great. They're product suggestions are great. Like companies will bend over backwards for actual users that come in as like, Hey, I own two instant pots. I would love an instant pot that also had X, Y, z , the problem is they've cut the people that listen to all your suggestions. This actually hits home for me specifically as a customer of Instapot. I have two of 'em. My daughter took my third one. one of the things that bothered me from the get go is why do I have to have an instapot that does almost everything that I needed to do, but almost not quite? And I have to have a pressure cooker that's a separate device. Yeah. Why can't I use an Instapot as a pressure cooker? So that is a piece of functionality that I would've paid a premium for. I'd have replaced one of my Insta pots for a single device. Never happened we now know why. But you know, that's something that perhaps the original owners might have listened to. And also the funny thing about this is all this was avoidable. If it weren't for the special dividend, they had a hundred million dollars on hand cash. The company's worth $200 million. So basically they had 50% of their evaluation, which is a luxury in most companies. That's a lot of cash to have on hand. I mean, they could have spun up a million dollar$2 million, six month side project to experiment with pressure cookers or whatever. But when you have to spend a hundred percent of the cash you have on hand for a ridiculous dividend to people that already don't need the money. It's not like PE firm was on the ropes ridiculous. They just wanted to extract as much cash. and load them down with debt as possible. that's what all this evidence leads me to believe. Wild. Absolutely wild. We didn't even talk about the pressure on the employees at that point nobody cares about pressure on employees. You got $320 million revenue. What a terrible job you're doing. I can't even, I couldn't, I couldn't even fathom somebody coming in and be like, Brian, your product brought in $324 million in revenue this year. I can't believe how terrible job you're doing. I would kick them straight outta my, like I would DJ jazzy Jeff, kick them straight outta, my fresh Prince, prince Bella mansion. Yeah. Like it would be ridiculous. PE firms are not the innovation fairy godmothers that would be the suggestion to try to stave off some of this to draw a hard line in the sand. To say we absolutely have to have a percentage of our revenue dedicated towards innovation and, that percentage is untouchable and have that in the contracts down to that level so that it absolutely cannot be touched. The problem with that is the PE people will be like, that's cute kid. Get outta my office and do what I said. This suggestion might come from if you've retained anybody from the company you acquired on the board, perhaps. Right. It might come from them because they know the value of it, and this might even be a condition of them staying on or selling I mean, it's good. I think so. A plan? I think so, but again, we're not aware of anything like this actually happening, but again, these are people that have financially engineered. The downfall of the company. So you don't think they're smart enough to be like, oh, 10% of your budget has to go back into RD. Okay, cool. Except it's gonna go to Brian's r and d firm. Brian's RD firm, and you gotta use my employees. And every dollar that goes into Brian's RD firm you know 90 cents on the dollar goes back to Brian's pocket, right? And then 10 cents goes actually into his actual company for r and d, that, these people are smarter and, and also also have less morals in you. So there's that. Agreed. Let's talk about a second category which is almost as important as a first, which is, can product-led growth survive private equity? earlier we put up some examples of companies that did, They weren't the best examples, but there were some I was gonna say, a lot of those on that list, that were private equity, it was like PE had like a small Yes. Investment. Yes. It was like Airbnb and stuff like that. private equity was like a partner to them, not a whole owner. Correct. It was basically, seed funding to get 'em out of orbit a partial fund. Yeah. So that's a different ballgame. The claim in this category, I found some numbers here. It says that companies that. Practice product-led growth, typically reinvest in product development and the user experience at a much higher rate, like a factor higher rate than PE-backed companies. So and again, that probably is like wholly due to the fact that all these PE companies are strapped with debt. If you have to pay 20% of your entire margin to debt, no matter what you do. Yeah. O obviously you're gonna have less RD money. The strongest argument in this category can product-led growth survive private equity? Is the odd numbered Star Trek movies stink, and the even numbered Star Trek movies are great, in order to make this case to you, I'm gonna point out remember, I'm arguing on behalf of private equity here. Okay. Star Trek the Motion picture was made on a budget of $46 million in 1979. They made this movie because Star Wars came out made a bunch of money, and they're like, we should make a bunch of money too. adjusted for today $152 million budget, a gross of $460 million. So $46 million budget in 1979. 139 million gross in 1979. So that's a good take on your money. Yes, definitely success, right? But paramount was not happy with it. Because they're like, dude, I spent $150 million on this film. You only gave me three x return. And they want like 10 x, a hundred x, right? Yeah, of course. So the curse of the Star Trek movie, like Wrath of Khan, star Trek 2, 19 82. That's three years later the budget. You can see the budget went from 46 million almost in 1979. To 11 million. Which is insane. That's insane. That when 46 million, they basically got their budget slashed by into a quarter of what they had. And also they had, their big showrunner removed. Crazy. Just absolute bananas. Moves behind the scenes.. Huge reduction in budget, huge removal of staff this is like our equivalent of removing founders. 27 million. adjusted numbers for today's money. Monopoly money, 27.9 million to produce. Made 240, 241 0.9 million, but basically all nearly 10 x so a, a pe person would see this and say, Hey, I reduced your budget by four times, and you made almost 10 times the money off of the movie, right? It's less than the original one, but the multiplier of what they made, the reason I bring up this discussion is because the private equity people will tell you financial pressure forces focus on the highest converting features. The highest converting features. Meaning if I pressure you and cut your budget down to a quarter of what you used to have. You'll produce great stuff. And we got evidence, like they'll point to this evidence. Did I talk about survivorship bias already in the podcast where I was like, just because one out of 1 million times you survived. That means that every other case in the entire world, you'll survive because one company survived under this duress. Cutting funding automatically means you are cutting out funding for things like experimentation trials, right? AB testing perhaps. So how is that going to lead to more. Revenue if you are experimenting less well, that's a really good question. Let me answer that. I don't care. I just wanna make money spoken like a true PE person. I'm super greedy. That's, that's I don't care. I don't care how you get it. Just get it. Sorry. I didn't even consider trying to argue at that point. I was like, I don't care here's your budget kid. Can you do a Boss Hog accent? what we haven't talked about is that data-driven decision making requires a certain amount of tooling, a lot of companies I've started with, hit success and then just start growing they never turn around and say Hmm, you know what we should build some features in to let us measure exactly how successful we are. They never really do that until I'm there. So I'll always make a case to say, Hey, y'all should be measuring to try to help orient yourself over the long period of time. And then I'll try to carve off some percentage of my roadmap. But I would expect, if you're under this debt and you're under this pressure and whatnot, this like, oh, well, there's no revenue directly behind those features. And people are not going out of their way to say if we do X, Y, and Z and use the data to do this other thing, maybe we can make less money. There's hops in there. It is not exactly like we build this feature and there'll be this much revenue, We build this feature, there'll be this much savings or whatever. It's like we build this feature, we can measure these things and then we can make a decision that might lead towards like, that's too many hops for private equity, too many hops. And it usually gets labeled as internal work. Internal work, so then that's frowned upon. Yeah, exactly. And it's like no, straight out. Yes. You know, it's inefficient. Right. So make sure that we're focused on efficiency. Any improvements to onboarding also goes in this category, which, which involves there's a, there was a big market downturn in the last two years or so with UI and ux and there was a lot of like people online griping about like, well, companies are kind of like shortcut in the future if they're shortcut in ux that goes in this category as well. But the one I really wanna talk about is. Community building. the idea that you're creating a product that you could very easily build a community around, and you don't wanna spend any time doing community building. we had a great episode that everybody should listen to arguing Agile, 96 stages of company decline or when a company hates their customers. That was the episode we did about lizards and wizards. our faux gaming company you never know. Who knows. Yeah. By the way, that company is they've also continued taking a downturn since we did that episode. It's almost like you could lift our episodes and just bet against those companies in the market. And make money a gaming company like that, your community are the people that use your products And enjoy them and run games on a regular basis with regular players. It's almost as if you could. Hire some people and have them start understanding who the most influential people are in your community, how wide their voice goes, what you can do to help them out, what you can learn from them. and just like a community manager type of position. Maybe they don't necessarily manage anyone, a community listener is really what they are. A liaison type of person. Yeah. Liaison. And you can call it like a marketing position, honestly. Sure. I mean, that's the way I think about it. But in reality, it's a long-term investment position. And I see them all the time going through big waves where they just cut. Big swaths of people like this. I'm not quite sure how this person connects to direct bottom line revenue. Right? It's not a hundred percent clear to me. Yes. And just cut large swaths of these people and they cut people to have like deep relations with influencers that can make or break your product over time. I agree. one of the things you could look at is, those people that are good at this work, some people are community builders, when these people get let go from these companies, they land at. one of the competitor companies and see how well they do there. It's like, you cut too close to the bone here. Right? it's either that or they pivot to a completely different industry. And then your whole industry loses out, but you definitely lose out. I've known people who can build communities like team builder folks, scrum masters, agile coaches, that type of person, right? Yeah. Yeah. Who are really good at building communities. Reaching out to people and getting people to show up at a certain time, at a certain date and then share their expertise or bring people outta the shell who otherwise would just like, stay in their corner of the business. And the company eventually will say well, I don't understand how you connected the bottom line. We're gonna get rid of your position, we need to make a number for the last three months and cutting a couple thousand dollars from you here and there lowers that number down. Meanwhile, you're super strapped up on debt, maybe if you weren't strapped down on debt, maybe you could afford this. You could afford this Again, we're taking individual, people contributing to the bottom line when really you should be doing it at a team level. You should have one of these people cut across two teams and spread the overhead. The same thing you do with your finance people. HR department. C levels and stuff like that. You spread 'em across and carry 'em as overhead. I don't understand why you can't do it here, this is adult stuff. They don't contribute to the bottom line. I'm trying to save some money you've mentioned gaming companies, but social media platforms. They absolutely have to have this liaison role in place, or even healthcare companies, they get their health fairs out there, get the word out with their services that should be part and parcel of the budget you know, typically it is rolled up on the marketing, but it doesn't really matter where you put it. that's not directly impacting your bottom line, but it really is impacting your bottom line. Yeah. We didn't talk about exit pressure we are just the temporary custodians of this company. there's an exit pressure of a final date. So just keep pressing, keep pushing. Keep burning the midnight oil. because eventually. there'll be an exit. There'll be an IPO, a sale to another PE firm you'll get your big payout And then also, like luckily in this category, survivorship bias is a real thing. This category would be much harder to get behind if survivorship bias was not a thing. If the data was free flowing every time. You heard like, my friend Bob sold his company for whatever, whatever. And every time you heard about Bob selling his company, the statistic that 70% of small businesses within their first two to five years fail. that fact was included every time as a sub bullet of like, maybe I can not do that. Yeah. I went through some of this way back in the heyday of the internet. We worked crazy hours because of that situation. the carrot that they handled in front of you you would've been a millionaire without a doubt it didn't happen, of course, as the bottom fell out. I think now, even today, these companies that have the staff in their corporate rungs, like these PE companies They really don't care what they have to do to make the numbers right. So they will exert that pressure. Sometimes it's exit pressure, sometimes it's just, we're gonna flip this. Right. Yeah. Whatever it is, it's not a healthy situation for anybody except themselves. Well, can, product led growth, survive in private equity on that debt service balance beam. What do we say? Are we giving them a, are we giving them a 8.5 dismount? Are we giving them a, I'm giving them a 0.0 dismount because I don't believe anyone can dismount from that beam. I think I agree. 0.0 dismount, what? Off the mattress, what you're saying is if one person ever in history dismounts from the beam and lands on their feet. It must be possible. And all the rest of y'all must be be, don't dunno what they're doing. Yeah. They, you don't know. Yeah. That's what you're saying. Yeah. Survivorship bias. there's a whole episode coming at you in the future on survivorship bias. It's so good. I feel like tech is the only place it just like professional gamblers Is that what's happening? Or like, they just believe like, oh, you didn't throw the dice Right. Om, that's why you didn't get a seven and win on the first roll What are you talking about? Like, you this is, it's a game of chance's. Yeah, exactly. You know? Right. It's random. You're like, it's luck, it's skill. So I wanna talk about another category, and this was my original first category to talk about because I think it's very good, which is the pushback that you will get that says, listen, why should the team even care about finances? Why should product even care about finances? We got a whole finance department. And if you're saying, yeah, but I could even concede there's some legitimate causes in here. Why fight about it? Don't we have better things to fight about? Can we be fighting with people all day long? Is that really how you wanna spend your day? let the finance people deal with finance. We'll do with product stuff. Okay. The, do we have silos for a reason? All the corn grain is over there and all the wheat grain is over here and all the whatever grain is over there. Yeah. Well, let's build some silos and stay on our silo. That's what I'm saying. 70% of private, private equity backed companies experienced significant operational changes with 18 months of acquisition, including reduced r and d spending and accelerated product timelines to meet debt obligations. That is a completely made up number, but I totally believe it. The real numbers. Probably aren't too far apart. To piggyback off the question, why should we even care finance is the oxygen, for companies. Without that you really can't do very much. So if you're a product, you need to understand how much money you can invest in a product. Finance is so people that are saying, well, you, you just do what you do don't worry about finance. Right? Those people will use this against you and say, financial literacy is something that you don't possess. Let me dog pile on to what you just said, my job is to write software. I can't deal with the cognitive load and distraction of also taking into account all these financial metrics. Like that's not my job. My job is to write the best software, pay attention to the architecture, do the best job I can, build the best team I can I can't be doing this in addition to all that. offload this to the silo that is finance and let them fire off the warning flares or whatever. They won't though, right? You won't know until you've been running to the ground. They won't, they won't. I mean, that, that's an easy one to argue against because you would say, well maybe they're not good finance people if they're not shooting that flare off, the finance structure is largely unchangeable at the team level. The private equity owners have decided. That your Instant pot company is gonna take on two $200 million in debt. We're gonna get a loan from the bank of Brian at 0% interest now, why would we not get $200 million and just put it in the bank? These decisions have been made at the highest levels by adults. That's what I'm saying. Adults have made adult decisions. Why would you spend a modicum effort with your expertise in software development? Why bother? Like the smart people have taken on a loan on your behalf? Yeah, so two things, right? First of all, those people that are making these decisions in their ivory towers aren't necessarily smart people. Your destiny is being crafted by these people so if you understand these strategies that they're using for over leveraging and overburdening the company, you might keep that resume updated and get out of there. How dare you call into question the sanity of all these finance bros with cocaine habits. What are we talking about right here? The people that are choosing to like leverage your company down with $200 million in debt when they see you're on the decline and the whole market. Took a 20% dive with Instapot all the markets took a dive when COVID happened however, we decided to also take out a 200 million loan while we saw a 20% dive. And then we said, well, well you're, you're, you're in free fall. We'll, just like we know your business is dying anyway. We're just gonna load a bunch of debt on you and make as much money as we can quickly. In the face of increasing competition by new entrants in that market too. Right? That also happened. If they're doing that, you are really basically driven against a brick wall at high speed. Should you not at least open your eyes? You should be aware of what's going on. in the finances of your company. Great market performance overrides any balance sheet loss if you just came out with Insta pots that are white or gray or sea foam color or whatever you just should have made better products. I've heard that one a million times. It wasn't a bad idea to start with. You just didn't implement it it's always that. So good. A bunch of finance bros are gonna tell me that I just didn't implement it the market performance matters more than the balance sheet. More than the debt we incurred on your behalf without your consent. Or like the debt that we took out that we're not helping you it's not, we, it's not like we took out a $2 million debt and then we're using it to accelerate your software development work. no, no, no. We took out $2 million and then bought a yacht, right? 200 million. I mean, I'm sure just a few zeroes here and there. I bought a tiny yacht. Mine's in my kitchen sink. So when they say, look at all these companies that basically came out of bankruptcy, they will use those examples to their advantage. But really, how many of those are there? If you peel back the hood, you'll see there aren't that many companies that actually avoided bankruptcy at the last minute if you look again under the hood, it's not because of any other reason than another financial restructuring. Right. To come out of bankruptcy. So liquidate the assets, for example. It's not bankruptcy when you're doing that technically, you're simply breaking the company into pieces. And selling every piece separately. Well, I feel that's the worst case scenario. That's a strategy though. Oh, in some cases, right. I'm not unconvinced that, that was not the Instapot scenario, leverage it down with as much debt as possible so we can recoup some money out of it before we complete, it seemed like the intention was to destroy the company. While extracting maximum debt out of it. If the situation weren't, were not so hostile, I would say that there's a positive side of this and that is, it's a reminder to us all that we need to be understanding how they're leveraging debt. Our company and what they're doing with the finances of our company, and that includes development teams and product. Understanding the financial ecosystem of the business lets you spot early warning signs and maybe see some things that you should be aware of before they happen. Now, the one big tool that gets deployed to nefarious means when it comes to this is lack of transparency, the adults not being transparent with you while the business takes on debt and they don't tell you, or taking out loans, moving debt around, or I. Moving customers from business to business. There's like an intentional financial engineering happening and I, and it's hard to think, that is not intentionally leading towards bankruptcy. these are games it is, hoodwinking. Lack of transparency. For me as a product manager, without an idea of the debt strategy, we're gonna buy this company and then we'll take that debt and it will be a certain overhead that I'm willing and expected to absorb on the margins and pay and pay it back over time. Like what do we, I I just need to know what do we get from that? Because I might have an interest in when is the right time to add it? You know, what, what things might we be able to try? That needs to factor into my roadmap, and if I'm not invited to the table where that conversation happens, You blindsided, basically, look, you make portfolio decisions. Yeah, right, exactly. If I'm not invited to that conversation, there's a lack of awareness. There's a lack of strategic direction, and there's many, many more problems that can come up at, you know, I just don't know how you stay successful if that is the environment that you work in. Yeah, I agree. I mean, look, that that's the kind of environment, people in product or even other domains will say, finance, that's not my job. Right? Right. And to those people that say it absolutely is your job, become financially literate. Understand your company's structuring and how they're maneuvering, try to get ahead. It's a little bit easier with a public company 'cause the finances are disclosed. But be wary of things like forward looking statements because they're nothing more than spinning yarn. The next category is the mentality of growth at all costs versus building a sustainable growth model. And I will tell you , I'm not sure if PE has an advantage here because the VC folks in the last decade or so have really started eschewing, Ooh, that, that's a good word: eschewing. The idea that we are gonna build a repeatable, sustainable company with strong revenue stream. And I'm gonna start growing at three to 5% year over year. And we're just gonna keep doing that for 20 years. Well, we build a flywheel and push it faster and faster. And the VC people hear that and they yawn and they talk about that it's boring and they don't even wanna look at it. That's a real Silicon Valley thing that I've heard about and I've watched podcasts about. They're just not interested in operating in that model. It's not. not in vogue. I forgot what we were talking about. Growth at all costs. Uh, VCs don't like that. Sustainable growth. Yeah. The VCs don't like sustainable growth year over year. Early in my career I joined the company and the CEO is like three to 5% year over year sustainable growth. We're gonna get that flywheel and start pushing that flywheel. Slowly and over time, the flywheel keeps moving and we get more and more growth. we three, 5% every year and eventually we go from having 30 employees to 300 employees to 3000 employees, which worked like that. That slow sustainable At one point, that was the mainstream strategy. Right? Right. Yeah. No more. Right now people want explosive growth hockey stick. That's right. Hockey stick. Exactly. Tech companies like IBM are in that sustainable growth. Sadly, what's that led to? They're not really a leading force in things like ai, for example. Not saying they're lagging too far behind, but they're not leading. Oh boy. This is not the podcast to talk about Microsoft, but if you want to talk about a company that really has, has this problem they see other companies, Silicon Valley companies, and they're like, we want some of that. another category that I don't think we're gonna get around is technical debt compounds exponentially when you get rushed. If we're talking about growth at all costs, I really consider that like all costs. Cutting corners. Yeah, absolutely. When you're cutting costs or rushing, you're gonna accumulate technical debt. And a lot of times I hear people say, we'll come back and fix it later. Imagine having that discussion with your. PE owners that we're gonna spend some time and effort and money, on fixing things up. Let's have that conversation because I'll be the pe owner in this conversation, I'll say, listen, ohm, you have a bad attitude. The attitude you need to understand is the winner takes all in these markets, these competitive demand fed markets like, like the race to a GI, for example. Yeah. The winner takes all in these markets. I'm saying this not based on literally any evidence at all but I'm trying to create an artificial sense of urgency under you. Under all of us to say, oh, but you're making me go so fast that we're either delivering bad quality or we're building all this technical debt into our product that's gonna come back and buy us eventually. Well, customers are okay with that because they know that we're growing in significant ways and we're offering them significant features and products that allow 'em to do things they can't do anywhere else. We're hurting them though, because what's gonna happen is they'll call and complain and we cannot fix things because we cannot sustain what we have without fixing the core systems that we have, right? We can't just maintain that. it's just longer and longer to maintain simple things. Now because you've built up all this debt, what would you say if I said We can fix all these problems, we can leverage quality in our products, but we have to scale first. You have to get, we have to grow to a certain amount of a RR and then we stabilize, and then we can reach this quality level. That's an interesting discussion because you're saying grow to a certain a RR with subpar quality, right? First it's gonna take you longer to get there that way.'cause the early impressions on bad quality will hurt your reputation. So that's a risk, it's a risky strategy to take. Now, if you're the market leader the innovator. The first entrant, Maybe you can get away with it for a bit, but competitors will catch up quickly. And if they're going at a slower pace, building more quality into their products, and at the same time your customers are getting antsy because your quality is not that great, you're gonna lose customers. You wanna hear my experience which is the customer experience suffers from scale before quality. it doesn't suffer because of like things that you might think off the top of your head. It's usually the company producing the software, they start confusing their market position. They think oh, we're successful because of feature X or because of the ability of the software to solve x pain point when in actuality, most of your users have y pain point. Yeah. So you double down on the wrong pain point. I feel the more you press your product teams, the more they're under pressure to give you what you want from how you're pressuring them rather than to find these user insights. This might be a squishy topic for people to I don't think it's squishy at all. I mean, look, your product either has a good product fit or not, right? It might be understanding why your product fits might be squishy to a lot of people. that's what I'm saying. The point of this subject in this podcast is, if you're confused about why your product is successful, it's gonna make all this way worse. At scale. Agreed. Absolutely. Well, this velocity versus stability speedometer, measuring the velocity versus stability speedometer where zero is moving so slow ing backwards and 10 is going so fast, the wheels fall off. What would you give this category? I'd say this is probably an 11 from a PE perspective anyway. Oh, okay. You're not going fast enough. Faster. Faster. Regardless if you're going towards a brick wall, the concept that technical debt is manageable, if you properly manage it the pushback here is like, oh, Brian, you told me a lot about technical debt becoming unmanageable. Maybe you are just not good at managing it. pinning blame on an individual. Yeah. When the system really is fault. Like I could see that coming out of this. People do this all the time. They tackle the person not the problem. So should product leaders build bankruptcy resistant products as a top priority? That's the next category, an analysis of 500. the Arguing Agile podcast did an analysis of 500 tech bankruptcies showing that companies with strong user communities and low maintenance products are 60% more likely to be acquired as going concerns rather than liquidated for parts. Remember all the numbers are made up on the old arguing Agile podcast. Yep. We did this research on a Sunday afternoon. I think what they're saying is if you have low technical debt and high quality, you are more likely to be preserved as a viable entity and be purchased as opposed to broken up into pieces. Right? Yeah. I mean, look, there's some logic to that, right? If your company, if your products are terrible, no one's gonna buy 'em, no one will buy a company that produces terrible products, they may find some products that are salvageable. Or may augment their products, so they're gonna buy pieces of it, I keep going back to the same example as before. Sunbeam was an example with this, and perhaps Philip, but I think with Philips it's a little bit different. But yeah, Sunbeam was definitely this example. So let's start with a four in this category. Product leaders should build bankruptcy resilient products. Even in the Marty Cagan books, user loyalty creates acquisition value, meaning products with passionate user bases always attract buyers. Even if a company is failing you, you will always have buyers. So it craft those missionaries, not mercenaries, and you need people to help you develop that group, right. People who can build lovable products. They don't have to be perfect products. On both sides, you need people building the products to really believe in them, but then you also need people using the products to really believe. And what's best is to bring those two groups together. the real synergy is when you bring those two groups together and say these people really understand each other and now we're gonna sit back and rake in all the cash because we got people who understand and love the product building four people who understand and love the product. If you get to that nirvana state, that's a force multiplier. It'll lead to other products in the future, right? Mm-hmm. Through this alliance that you mentioned. How many products are like that? I can think about maybe just like Apple hardware, people that are diehard aficionados of Apple, myself included, but not necessarily for anything but a phone. They will typically stay with Apple. they'll complain you took away my headphone port, et cetera. They'll complain, but they will stay with you. I'll die on the hill of the headphone port. switching costs. that's what you're talking about. Switching costs, we minimized. So the switching costs, like the switching costs for Apple users goes super deep.'cause it's like, it's not just, it's not just switching to a different phone. It's abandoning all of your apps that work with Apple. If you use a Mac as well. now you double, triple, quadruple down if you bought stuff that stays with Apple. Apple's probably an easy example. But, I would also argue you could build a product where your amount of support and touch points with the users is so intense that it's hard for them to go to any other brand when they speak up. They have the development team jumping all over themselves to be like, oh, let me check into that. I had the same problem. or other users jump in and say, oh, I had the same problem you had. How do you build that tight-knit community that helps other members like that? That in and of itself requires effort. And again, if you're in this PE ecosystem, it's tough to even like those people that do that kind of work to help manage your community. They don't really make money and they're not, I, they're not direct revenue focus and I just can't like the, the so many shortsighted things. I, I would also say on the development side of this, continuing to invest in a low. Maintenance architectural runway. Purely on the development side of the house, which means all of the third party libraries we integrate with and all the dependencies that our software is dependent on. we're never more than n minus one behind with all of our vendors. There's a dedication involved on the product development side of the house to be ooh, vendor put an update to this library. We gotta test to this library right away. And, and like, that's what the world of testing and automation steps in. For companies like this, it's like. Software testing. Oh man. That's like, that's something that people outta India or you know, Belarus ukraine, let them do that on free time or whatever. Like I, we get Yeah, we can get the low cost providers to that Absolutely. For us so it is unfortunate because paying attention to these things that you mentioned, it's not even that much further in the future. It can pay off pretty quickly. The example of n minus one, you're not at n minus one, let's say, what are you gonna tell your customers that they now have to stay on old libraries or old dependent products and stuff? I've seen that. And it's not a pleasant experience. I've also seen companies that are at N minus one and they say, as soon as something's coming out get ready, we're gonna come out with a release.'cause we're already testing it in the lab completely different. Experience between those two. Yeah. But again, PEs if you're not making money or saving money, don't do that. I'm glad you went there because I have some points that will be used against in this category. Mm-hmm. Which is that market opportunities are time sensitive. So while your team is spending time retrofitting for the latest version, version of Python or whatever oh, Python three 13 is out or whatever. So what I'm saying is we're just going to put a milestone marker on our development team's roadmap 'cause right?'cause we use Gantt charts because we're pe right? Sure. We're just gonna put an October milestone marker to test our software with the latest Python. That's no different than what Apple does, you think about the cadence of Apple hardware when they come out with new phones, it's typically every year or something like that. Well, the argument point here is like, marketing opportunities are time sensitive. So you're saying what you could be doing is that opportunity cost argument. Leading up to October, what could we be doing in the market to gain share other than like starting to prep for whatever's in three 14. Like who cares what's in three 14? There's other market opportunities. We could be adding features to break into this other market, or we could be adding AI features to catch up with our AI competitors. In the category of should product leaders build bankruptcy resistant products is you should be chasing the market regardless of whatever other things you got going on whatever's happening in the market, whatever latest trends you should be considering those top priority we need to stay ahead so we don't get behind in the architecture, but also we gotta stay competitive. That would be honestly out of all of the things we talked about probably in this whole podcast, this one hits me the hardest we gotta react. There's no argument for me on that. You have to, otherwise you're falling behind. if you're standing still, you're actually falling behind. And that is true, but in the scenario we were discussing earlier about the Python versions, for example. There's no reason why you cannot say just like Apple does here's our planned release but thereafter, here are all the capabilities we're releasing in the DOT releases. What it's doing is you may not even make those dot releases or you may change the capability mix, just like what happens in a piece of hardware that's been decreed to be released a year from now. Potentially if they just released it, it's a year from now they will say it'll have this, this, and this, but when it actually comes out, some of those features will be swapped out for others or just omitted all together. So I remember, mac rumors or whatever it is, they say the next iPhone will be much thinner, foldable, et cetera. When it comes out, it's none of those things. And that's fine because it keeps people guessing. And so what I'm trying to say in a long, kind of roundabout ways, it's not one or the other. You have to do both. you have to stay competitive, but you can also ensure there's a decent roadmap with features that you are luring the customer base with what about customer loyalty? Let me ask you your opinion on that one. I would say customer loyalty, you might be the most loyal customer of your black cab service in London. But as soon as you can pull up an app on your phone and be like, Hey, I can have a car to you in two and a half minutes and it's gonna cost you one third of the cost of your Black Cab service. Wouldn't you abandon that old black Cab service immediately? I bring that up to say the idea of customer loyalty isn't that like non-defense customer loyalty is fickle. At best. in that example, absolutely I'll take a ride share service or whatever. Right. From the convenience standpoint, if nothing else. So the key thing here is figure out what it, what the customer price is and cater to that. As a traditionalist, it almost pains me to say that,'cause I liked the black cabs. I liked having the conversations with these people but today the market is all about convenience and it's moving quickly. Fast forward a little bit and maybe you won't have anybody to have a conversation with.'cause you'll be in a Waymo that has no driver. I, I love the, oh, sorry. I played cyberpunk, so I don't want to be in a Waymo I remember the cyberpunk mission where the Waymo with no driver brought you to the combat zone with all the rest of the Waymo is with no guy. I don't wanna deal with it. That's Rage Against the Machine. The free market version of what we're talking about would say well, the Black Cab services could have built their own app to compete if they had been flexible enough on the market. That's right. To understand where the market was going and just undercut. Uber or whatever. This arguing point kind of undercuts itself. But it's super interesting to talk about why they didn't react fast enough. Well, there's several layers there. A whole podcast you probably could do. Yeah. Just on that. Not least is the issue of being a unionized entity and just being a laggard when it comes to innovation, because they've always been there, Black cabs have been around for decades, and suddenly this new fangled thing comes along. They don't believe it's gonna impact them. Until it does. What do you think about the statement that financial structure problems require financial solutions? So no amount of product engineering can overcome fundamental capital structure problems. And I'm assuming we're talking about debt here. Debt and leveraging Look, I agree with this. Financial or financial engineering is what I'm talking about. I think financial problems do require solutions through financial engineering. You could have the best product. How many companies do we know of that had the best products, because of the financial decisions that were made. These companies are now gone, or at least the product lines are gone, Probably a lot. I'll give you an example that I just recently learned about. John Deere acquired a small company for $300 million. So it wasn't that small, but it was in a niche market. Yeah. this company was AI first they came up with, recognition of weeds. They had a trailer towed behind a tractor in the fields, and it would recognize heads of lettuce, anything else that wasn't a head of lettuce, it would say, that's a weed, using this company's product, john Deere marketed that together. Farmers can now target and pinpoint weeds as opposed to indiscriminately killing heads of lettuce as well as weeds, right? So it's an example of really just like they made a, a wise financial decision to acquire a company, which might have seemed silly because it's $300 million and the company's not proven yet, with anything that anyone can name. It was actually a sound. Acquisition strategy. So I agree with the statement. Financial issues really do need financial engineering to solve them. Modern problems require modern solutions. There you go. On a scale of the Titanic versus lifeboat construction index, where zero is we don't need lifeboats, this ship is unsinkable versus, we need a lifeboat spot for every single customer. Probably two, just in case everyone panics. I'm gonna give this category a solid 1.5. So half a lifeboat for every customer, right? Yeah, I like it. Customers should be smart enough to find their own lifeboat you know, early in the podcast we said. Every product manager should ask their CFO one question, what percentage of our revenue goes to debt service? And if the CFO won't tell you keep that resume updated. Yeah. Another thing we discovered today is product-led growth and private equity are like oil and water. One requires a patient application of money, and the other requires an inpatient shaking of things to get things going. You can shame 'em together, but they'll separate the moment that you stop stirring and you'll end up with a mess. Yikes. Instant Pot, didn't fail because it was a bad product. I don't think anyone will agree it was a bad product. It was a great product, and it was used for many different things other than actual cooking of food it failed because of financial engineering that turned a kitchen appliance into a leveraged buyout casualty. And this podcast was about your product not being next. You have been warned. This was a little bit longer than I expected this podcast to be by about twice the length, but worth every minute. But listen, I hope you enjoyed this one. As much as I enjoy this one, sorry, I love talking about private equity. I would do it any day of the day of the week for free. I have scars on my back thanks to pe so I really did enjoy this. That was great. If you did too, please let us know. down in the comments below, and don't forget the like and subscribe. Oh, and also I have a part two. Coming up soon of this podcast. Let me pitch you on part two of this podcast. I feel that most product people and most development teams do not understand the finance. Okay. The breadth of finance, the depth of finance as it applies to their jobs. I think we should do a whole version of this podcast, except in the vein of why you really should have a say in the financials. it's a very worthwhile topic. I've not seen anybody touch this as a podcast topic, so this will be good, right? Yes. Alright, that may or may not be the follow up to this one, but if it is or if it isn't, we'll see you in the next podcast.