Scales Of Success Podcast

#43 - The Real Rules of Entrepreneurship with David Makharadze

• Marcus Arredondo

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In this candid episode of Scales of Success, host Marcus Arredondo chats with serial entrepreneur David Makharadze to share hard-earned lessons from a career spanning scrappy startups to major exits. From recognizing opportunities others miss to forging lasting partnerships and navigating challenges with integrity, David shares strategies and stories that have driven his success.

David Makharadze is an investor, operator, and entrepreneur with a track record of building and scaling ventures across technology, real estate, renewable energy, among many others. A graduate of Cornell’s Hotel School, he has built and scaled multiple businesses, diving fearlessly into every challenge and mastering any skill needed to make them thrive. He’s still in the trenches wearing a variety of hats, including advising growth-stage companies, mentoring founders, and backing projects built to last.


How to connect with David Makharadze:
Website: https://www.cambridgespg.com/team/david-makharadze/
Email: Info@cambridgespg.com

Episode highlights:
(3:50) Scaling Wall Street bites
(8:31) Why did he give it all away?
(20:29) A 16-year-old’s first shuttle biz
(28:53) Identifying and nurturing natural curiosity
(34:38) Building and scaling Zustek to acquisition
(43:43) Passion, grit, and staying in
(50:17) When everything goes wrong
(55:20) The Palm Springs comeback story
(1:04:18) Business advice that actually works
(1:11:13) Mentorship, teaching, and giving back
(1:16:44) Outro

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Note: The transcript was generated by AI and may contain errors.

David Makharadze

(0:00) I lobbied their parents and did a little presentation deck on why they should send their kids with me instead of the bus, because there's less stops, there's less pick-up time and drop-off time, it's a direct path, we can establish times better, you could have more influence over things. (0:21) So anyway, it worked and that was my first kind of shuttle business when I was 16. (0:30) And I think I made like $10,000 that year.

Marcus Arredondo

(0:33) Today's guest is my friend, Dave Macarazzi, a consummate entrepreneur whose story is less about flashy exits and more about hard-earned trust. (0:41) At 21, he gifted a profitable business to his partner so he could rebuild without having to sign a non-compete. (0:46) Years later, when a real estate deal collapsed, he stayed involved not for profit, but to help investors recover what they could.(0:52) But what sets him apart isn't just what he's built, it's how he's harnessed prior experiences into future opportunities. (0:58) We talk about what it means to lead with integrity, the unglamorous side of entrepreneurship, and how David turned midnight street hustles and pitching shuttle rides to parents as a teen into a lifelong bias for action. (1:09) His path is about resilience, relationships, and choosing the long game, especially when no one's watching.(1:14) Let's start the show. (1:16) Dave, welcome. (1:17) Thanks for coming on.

David Makharadze

(1:18) Thanks, Larry.

Marcus Arredondo

(1:19) Thanks for having me. (1:20) I'm really excited. (1:22) For the benefit of the audience, I've been badgering Dave for the longest time to try and get you onto the show, and I finally bent your arm to come on.(1:30) And one of the main reasons I wanted to talk to you, not just for my own benefit, you've been an amazing friend and unexpected advisor, mentor on a number of different areas of my life, because we know each other through a mutual friend, William, who's been on. (1:47) But we've had fewer, a lot of hangout sessions, but like less in the professional realm. (1:54) And you've become a lot more of a professional advisor to me.(1:57) So there's like a unique sense here. (1:58) But there's two parts about you that I want to really focus on the first, which is that people like to call themselves an entrepreneur, but I have never met an entrepreneur that fulfills that definition more than you, in that you blow out of the water, this idea that you have to be good at only one thing. (2:21) And I want to talk about a bunch of the companies that you've started, you've advised, that you've led, starting with what you started in college.(2:31) So I'm going to kick it off there. (2:32) But as a teaser, I also sort of want to talk about where you came from, how you came over, your work ethic. (2:40) You're clearly an articulate, bright guy.(2:43) But I think, in my opinion, part of your success comes from something else besides just brains. (2:51) So I want to see if you agree with that. (2:53) But that might be for later in the conversation.(2:54) But to kick it off, and I'll stop talking. (2:57) I just want to prep the audience for where we might be going. (3:03) Tell us about your company in college, how that came about, what it was, and then what you ended up doing with it.

David Makharadze

(3:10) So it wasn't in college, actually. (3:11) My first company was right after I graduated. (3:15) I think it was actually the summer post-graduation.(3:19) I was working at a trading company, like a day trading firm. (3:28) And it was on Wall Street. (3:30) And there wasn't a lot of food options at the time, or at least we thought there weren't any food options.(3:35) And I think you'll find a common theme in any of my stories, where there's a lot of transition. (3:41) There's not a lot of hard stops and new starts. (3:44) There's always some overlap or something you see in the middle of doing something else.(3:49) But during that time, I ventured out and started to walk around Wall Street and found that there was actually quite a few really good restaurants. (3:59) But people were just eating at the restaurant downstairs in their building. (4:04) Everybody was busy and they weren't wearing the hat of social.(4:10) They were wearing the hat of work, which is nice. (4:13) So I had some really good lunch one day, and I brought that menu back to the trading floor. (4:20) And we ended up ordering food from them.(4:23) And it started to kind of change the life of that restaurant owner a little bit, because he went from a small, not that busy place with really good cuisine. (4:36) And all of a sudden, he was getting orders from the 300 people on my trading floor. (4:42) Then he started to ask me if I had any other businesses that I could take his menu to and stuff like that.(4:52) And there was born a quick idea, where if people are willing to sort of eat new things and try new things, which we proved very quickly, and other people were desperately looking to get that sort of promotion. (5:08) This is back in 1997, 1998. (5:12) So it was before a lot of the normal things we're used to today.

Marcus Arredondo

(5:15) There was just one yahoo.com that you looked up.

David Makharadze

(5:18) Yeah. (5:21) So anyway, I spent that weekend walking around restaurant to restaurant, trying different foods, finding my favorite ones. (5:30) And actually, it became a business when with one of the guys, they said, hey, I can get you a lot of business.(5:38) Would you pay for that? (5:39) And he said, of course, I pay for marketing all the time. (5:42) This sounds like the best kind on earth.(5:45) And very quickly after, I had about 60 restaurants, built a website, made a booklet called Wall Street Bites, where it was one of the first websites out there, really. (6:02) And there was a hard copy book as well. (6:06) And I struck deals with every major law firm, accounting firm, and finance company on Wall Street, where they would order these books for me.(6:18) The restaurants would pay to be in the books. (6:21) So I ended up distributing about, I don't know, almost nearly a million copies of this over the course of the years I did it, as well as the website. (6:29) So it was really cool.(6:30) It was just, everybody wanted it. (6:32) It was pretty easy, simple thing. (6:35) It was a lot of hard work, but it was, the model was easy.

Marcus Arredondo

(6:38) And this was your side gig, that you had a full-time job. (6:43) You were just doing this on the side. (6:45) But that entails going to all the restaurants, gathering their menus, building the website.(6:50) Did you build the website yourself or did you hire someone?

David Makharadze

(6:52) I hired a designer who was like a local buddy from Queens where I grew up. (6:58) He designed everything. (7:01) Then I found a website guy, which was not easy to find back then, to kind of put it together.(7:07) Yeah, it was fun. (7:09) It was a lot of fun to do.

Marcus Arredondo

(7:11) But that ultimately, I mean, you don't have to disclose actual numbers, but the valuation on that company was not insignificant. (7:17) It was something that probably would rival what you were making on the trading floor, if not more.

David Makharadze

(7:23) So yeah, interestingly, the company did really well in its first year. (7:29) And then I had a bit of a, I started it alongside, my business partner was my university or a division within the university that sort of did entrepreneurial things. (7:42) And so the president of that group changed hands.(7:48) And ultimately, I was the only non-faculty sort of partner. (7:55) So it caused some confusion within the group. (8:00) And ultimately, they didn't have a model.(8:03) I don't know if they just think it didn't work, it wouldn't work or what it was, but ultimately when it worked, they approached me and said, look, this thing looks like it has longevity and we don't really have a model for how to have a partnership with somebody outside the organization. (8:20) So we'd like to buy you out, which wasn't very interesting to me, because like you said, I was actually making pretty decent money off the effort. (8:32) But being a young guy without a lot of money, I think, I believe they anticipated I'd have no option but to sell when ultimately I didn't want to sell.(8:41) They gave me a buy-sell option where they said either you buy us out or we buy you out. (8:47) So anyway, that caused a lot of stress to a 21-year-old guy who didn't have a lot of business experience. (8:56) So I did a lot of reading and homework.(8:58) I certainly couldn't afford to buy them out, but I didn't want to be bought out. (9:03) Ultimately, what I came up with was to just gift them the company to avoid any sort of non-compete situations that would be forced upon me if I was to sell it. (9:17) And so I gifted it to them and immediately went and started a competitor.(9:23) And that company that I started went on for like 13 years. (9:27) That other one actually went under very quickly. (9:30) So it was kind of a hard lesson pretty early on that you need to structure things really well when you have a partner to make sure that you can kind of think through as many scenarios as possible.(9:44) But that was not something that I had in mind because it was going great. (9:49) I thought we were going to keep doing it together.

Marcus Arredondo

(9:52) So this was Cornell faculty that was your partner, is this correct?

David Makharadze

(9:58) So we're been faculty. (9:59) There's a group within the university, somehow related, but not under Cornell's like owns or anything.

Marcus Arredondo

(10:08) What role did they have? (10:09) Did they provide capital upfront?

David Makharadze

(10:11) So they provided student resources to help with the sales efforts. (10:17) I trained and managed them and sort of dispatched them to various locations and whatever it took. (10:25) From a financial standpoint, there wasn't very much to fund because another common theme in my life that I try to do is try to find a paying customer which proves value before you go to spending a bunch of money to build stuff.(10:40) So we actually, in that first year, took deposits greater than the cost of the entire business to run. (10:47) So there was no cash infusion of any sort, but there were some resources.

Marcus Arredondo

(10:54) That seems so obvious, but it's not something obvious at the moment to me. (10:59) I think when you're building something that doesn't come naturally to people, but it made sense for you. (11:05) So real quick, when you're training these people, this is pre-Zoom.(11:08) So are you going back up to Ithaca from New York City to go do these training sessions? (11:14) And are you spreading it beyond Wall Street? (11:15) Is it in other cities?

David Makharadze

(11:18) No, I built the business to be a summer thing just so I could have interns kind of helping me run this thing. (11:27) So as soon as the school started, they would go back to work. (11:30) So no, they would all come down to New York City.(11:33) We would tend to find people who already have family. (11:37) A lot of people from Cornell simply were from New York City, so they would just be home anyway. (11:42) And so those are the ones mostly I worked with just to keep costs down and complexity low.

Marcus Arredondo

(11:48) So at the time that you made the decision to walk away, to gift it, did you have legal counsel helping you in any way, giving you advice?

David Makharadze

(11:57) I didn't have any. (12:00) Obviously, I couldn't afford major legal counsel, but I had a buddy who was an attorney, and that's the first I ever heard of non-compete clauses and stuff like that. (12:10) So he just said, yeah, if you don't have an agreement that doesn't have that in there, and you don't sell them anything in which they would have that language, then you're kind of free to operate, particularly if you're giving them the entire business, which I did.(12:27) I said, it's all yours. (12:28) Which is so ballsy to me.

Marcus Arredondo

(12:30) And so what was your pivot? (12:31) I mean, you had to have thought, okay, the outcome of the alternative has a higher likelihood success to me than just acquiescing to what that offer was.

David Makharadze

(12:43) Yeah, I don't know. (12:45) I mean, there was a lot of nervous energy, probably. (12:49) I was full of strength as a young person to go out and spend as much time as something took.(12:57) I would say I was like going door to door to restaurants by myself, because I now didn't have any resources, right? (13:03) So I kind of had to fend for myself. (13:05) So I did it after work.(13:08) Everybody at my company knew I was doing this. (13:10) Remember, I'm the one bringing the menus in the book, and my name's all in it. (13:13) So everybody was super supportive of it, because they were benefiting from it too.(13:19) And when you're trading, you're done at four o'clock. (13:21) So I'd leave at four, and I'd just go door to door to restaurants, probably to midnight. (13:29) And sometimes getting there, a lot of restaurant owners, they'll have a drink or two with their customers.(13:36) So getting to them at like 10 p.m. at night sometimes was very helpful in making that sale. (13:43) But yeah, so that first year, I did it by myself. (13:46) I just did the whole thing on my own.(13:49) And then it was a very profitable year. (13:51) So then I started bringing more and more people into it. (13:54) But always interns kept it.(13:56) It was a side thing for me. (13:58) It was a full-time thing. (14:00) And ultimately, after about, I don't know, five, six years of doing it, I, in essence, donated the business to my fraternity.(14:10) And every year, I would not hire, but I would partner and train a junior that was going into their senior year, and they would run the business. (14:23) And I would be a mentor, and much more than that, in this particular case, for the most part, they were responsible for the business. (14:33) And that went on for like eight years until the final year where the person who was working on it last needed way, way more hand-holding than I had time to give.

Marcus Arredondo

(14:46) And ultimately- And then at that point, it just folded?

David Makharadze

(14:49) Yeah. (14:50) Yeah. (14:50) It just folded at that point.

Marcus Arredondo

(14:51) That's incredible. (14:53) And I'm assuming you had to have developed some good- I mean, how good did these juniors turn out to be in the long run? (15:00) Did that- I mean, awesome guys.

David Makharadze

(15:04) Every one of them has reached out to me multiple times. (15:06) Some of them are like running fairly substantial PE firms and doing various things. (15:12) Just like you and I are talking about this experience, even though this is now 30 years later for me, they talk about it the same way where it was kind of like their learning ground.(15:23) Because you, with a small business, you really have to understand how to do every part of it from PR to marketing and advertising and distribution and contracts and finance. (15:37) You start to really understand how a business works. (15:40) And those principles, while vastly different in many ways with larger companies, a lot of them, the core structural stuff remains the same.

Marcus Arredondo

(15:50) Do you think that came- Well, I know that the hotel school, right? (15:54) You graduated from the hotel school, which it's funny. (15:59) Every person I know who graduated from the hotel school is doing extraordinarily well.(16:03) Yet while we were there, that was always where the partiers went. (16:09) But I know that before graduating, you had to sort of do- You had to run the hotel at different parts throughout your tenure there from bottom to top, right? (16:22) There was like a week or two where the hotel school took over.

David Makharadze

(16:25) You have to run a restaurant by yourself for one night where you're responsible for bringing in chefs and wait staff and paying them and charging the customers a rate and putting out a menu that would interest them to come and pay that amount for it. (16:45) And you're responsible for the P&L and everything. (16:49) On the hotel side, there was definitely a lot of programs where you got to participate in management and operations.(16:57) But I wasn't personally doing anything that ever I had to run a hotel by myself.

Marcus Arredondo

(17:04) Well, I guess the fundamental component of that question that I'm getting at is I think the most successful entrepreneurs I know have one thing in common, which is that no matter what their pedigree is, they have at some point or another had to get dirty, have had to really sweat it out, have had to do everything from top to bottom. (17:31) And regardless of the fear, whether that fear exists or not, there's a willingness to overcome whatever hurdle it is in order to learn what's needed to move forward. (17:42) Is that something you think you had from college or is that something, I mean, it sounds like, and maybe this is a good segue because we could talk about this business for a really long time.(17:52) I'm fascinated by it. (17:53) But you started businesses when you were a kid. (17:57) I mean, you were a constant hustler, right?

David Makharadze

(17:59) Yeah. (18:00) Yeah. (18:01) I mean, we immigrated to this amazing country when I was five.(18:06) I watched my parents work so hard. (18:10) The amount of love they gave us, me and my brother, given how little time they had to give it, working multiple jobs, they gave us a beautiful life, but I definitely saw the trouble of not being well off. (18:29) So I think kind of experiencing that you promise yourself that you're going to do everything you can to not have that in your life more than you have to.(18:42) So yeah, I think I just, I knew I was willing to work really hard and get really creative in any way possible. (18:53) And yeah, I started pretty early with the, yeah, like the first thing I did, my dad, I really wanted a car. (19:02) I remember.

Marcus Arredondo

(19:03) Yeah, I was hoping you were going to tell the story.

David Makharadze

(19:04) Yeah. (19:05) Yeah. (19:05) Like that, that was, I was thinking there's two, there's two like this, but this one is the one that I'm more proud of.(19:12) The other one, I might as well share it, but like I would at the hotel I would stay at, they'd give you passes for ski lift tickets if you're a guest. (19:26) And so I would get, I would go to the front desk multiple times to get them and then go sell them. (19:33) And I was never proud of it.(19:36) But I was just like, I, like, I didn't know how else. (19:40) You didn't set up the system. (19:41) I was like 10 years old, you know, like doing this.(19:43) I couldn't tell my parents. (19:44) I was literally just like stashing money away in like a box.

Marcus Arredondo

(19:49) But you understood arbitrage. (19:51) You started to understand the market and the demand that was there.

David Makharadze

(19:55) I don't know, man. (19:56) It's always a tough story to tell because it has a, you know, let's call it gray in it that I don't, I don't really like much in my adult life, but I guess that's why you got to sometimes forgive kids when they do things. (20:12) But yeah, the other one that I was more proud of, which is, you know, my dad like couldn't really afford to buy me a car, but he said, I'll do it as long as you pay for everything else.(20:24) And he bought me a car for $2,000, I remember. (20:29) And I lobbied the kid's parents at my high school. (20:35) I went to Bronx science, which was like either a two hour subway ride for where I grew up or like a 45 minute bus ride.(20:44) But that bus ride was $10 a day, which was, you know, at the time, pretty expensive, but I knew exactly who was paying it because they were on my bus. (20:52) So I lobbied their parents and did a little presentation deck on why they should send their kids with me instead of the bus. (21:02) Because there's less stops, there's less pickup time and drop off time.(21:08) It's a direct path. (21:10) We can establish times better. (21:12) You could have more influence over things.(21:17) So anyway, it worked. (21:19) And that was my first kind of shuttle business when I was 16. (21:25) And I think I made like $10,000 that year, which was nuts, right?(21:30) This back in 92.

Marcus Arredondo

(21:34) So you're 16?

David Makharadze

(21:35) I'm 16. (21:36) Yeah, it was right when I got my license. (21:40) So yeah, so that was any time I could participate in anything anybody was already doing and I could do it a little bit better.(21:51) Those are the obvious businesses, right? (21:53) You're like, they're already paying for it. (21:55) I'm not creating some unique thing that I have to like, because my wife likes to say, try not to look for, don't look, well, what does she say?(22:06) I always forget what she says. (22:09) Don't be a solution looking for a problem, right? (22:14) So that's an easier sort of format of businesses.(22:20) What are people already doing and are they enjoying it or how can you make it better?

Marcus Arredondo

(22:24) That reminds me of, I read Richard Branson's book, Losing My Virginity, which is a great book. (22:31) It's a really fun read, but he talks about how he started Virgin Records. (22:35) And the way he would start distributing him would be by placing ads in papers.(22:41) It was like before whatever that record company that where you would cut the little thing.

David Makharadze

(22:48) Oh yeah, the CDs, yeah.

Marcus Arredondo

(22:49) Yeah, EMI or whatever. (22:51) And you get 10 CDs for 50 bucks or whatever. (22:54) That's how he started it.(22:56) He got the orders, he got the money, and then he used that money to actually obtain the records and then distribute them. (23:03) And I always found that so fascinating. (23:05) But on that note, I want to scratch on something that you mentioned before, which I find really fascinating because you have leveraged very successfully.(23:14) Let me ask you a separate question real quick. (23:16) Was that trading job the last time you had a boss?

David Makharadze

(23:21) No, I worked for Accenture. (23:23) It used to be called Anderson Consulting. (23:27) But after that job, I went to Accenture for two years before I went entrepreneurial.

Marcus Arredondo

(23:33) Well, I want to ask about that. (23:34) But the one thing that I was going at before is at each juncture, as I've looked through the chronology of what you've been able to accomplish, you've leveraged off of every preceding opportunity into something that, I don't want to say organically fit into your next pursuit, but there was a path that seems logical, at least deducing it backwards, right? (24:00) I'm sure it may not have been clear at that point.(24:04) But how, that's not just, I mean, I would suggest that that probably is present in more people's lives than we would expect. (24:12) There's just a lack of that ability to identify what those are. (24:18) And I'm curious, that experience at 21 or 22 with the university and walking away and still being able to build that, I would think combined with over time has created an opportunity for you to say, one, I trust my gut.(24:36) I know where I stand with this and I can see an angle. (24:40) And two, because you've had that success, it's giving you a keener understanding to identify what those next opportunities might be. (24:50) I'm not trying to put words in your mouth, but how does that sit with you?(24:53) Do you think that's true?

David Makharadze

(24:55) I'd say yes. (24:56) I think it's really hard for me to ignore when I see something obvious.

Marcus Arredondo

(25:03) Yeah.

David Makharadze

(25:04) Is a really good way, I think, for me to summarize it maybe. (25:08) So those transition points, whether they're natural by design or just my inability to ignore something that is an opportunity, which I don't go out seeking it. (25:22) They kind of show up, but I can't put my mind to sleep when I see something or hear something that I'm like, that's an obvious mess in the world.(25:32) And if there's a way to solve it, either I'm going to do it or I'm going to at least talk about it. (25:40) So somebody does it because it's a shame that it's sitting out there. (25:43) So that's where it kind of some of the transition stuff comes from.

Marcus Arredondo

(25:47) Do you think Anderson helped you as it relates to identifying those trends? (25:51) I mean, you're studying P&Ls and operational contingency plans and seeing what works and what doesn't.

David Makharadze

(25:58) Yeah. (25:59) I was more in the tech and change management side of things at Anderson, more than I was in the financial side. (26:06) So I was a consultant.(26:07) I would go into businesses that were emerging, being acquired, and try to look for inefficiencies and see how tech can solve for some of those inefficiencies. (26:20) Obviously the hard part was redundancy. (26:23) When you'd see multiple people doing the same job that either tech could do or one person can now do as a company is merged.(26:32) So looking into these big companies that have been around a long time exposed an amazing amount of overhead, inefficiency, politics. (26:47) And again, at that time I'm 22, 23, right? (26:51) And I'm having to cut through this stuff.(26:53) So I had really good leadership there at Anderson that helped me figure out how to look at process, find the holes, fill the gaps. (27:04) I used that all the way through the rest of my career and I still use it today. (27:09) But yeah, I mean, I think there was just so many intelligent people there that I would go again, the door to door is a common theme for me, but I would knock on partners' doors when I was not allowed to and had no business doing so and just beat my head in and say, hey, I'm on the bench.(27:28) They don't have me on the project right now. (27:30) Please give me something to do. (27:33) Like I cannot be bored.(27:35) And some of them would say, get out of my room. (27:38) But like enough of them were like, who is this guy? (27:40) Like, come in, sit down, tell me about yourself.(27:44) And then they'd put me on their projects after that. (27:47) And so that event would let me work directly with a partner instead of like the hierarchy of like 16 people in between. (27:56) And that's kind of ultimately, I looked at them as entrepreneurs because you had to buy into that position.(28:06) So anyway, they inspired me a lot. (28:07) I learned a lot there.

Marcus Arredondo

(28:08) Well, like that, that comes from hunger, not ambition to me. (28:12) And the difference from my perspective being trying to climb the ranks, trying to get some prestige. (28:18) You're coming at it from a perspective of, I want to attain that knowledge.(28:22) I want to hustle. (28:23) I want to get out. (28:24) Where do you think that comes from?(28:26) I mean, that has to be part of your upbringing. (28:29) But I'm trying to think, and here, let me just frame it for you as it relates to even you, because, you know, as a dad, how do you instill that desire, that self, that agency, that self-sufficiency to, in many ways, not just push forward, but actually filter out the noise?

David Makharadze

(28:53) Like, yeah, I got two wonderful girls. (28:58) And I try to, like, anytime they show curiosity in something, that's a desire for learning. (29:13) It's actually being genuinely interested in something.(29:16) And it's hard to fake that in life. (29:20) So if they're curious about something and me and my wife give them the ability to chase that curiosity into, like, actually doing something with it, I don't know. (29:36) You see that flourish.(29:38) Like, one of my kids, she just, you know, it starts with a Lego set, right? (29:43) And some kids will just throw that in the garbage. (29:46) And other kids, like my youngest daughter, can't wait to come home and build stuff, right?(29:53) And so what could I do with that? (29:56) I don't want to tell her, you must be an engineer or an architect. (30:01) She doesn't know what those things are.(30:03) But what I can do is say, are you bored with your Legos? (30:09) Do you want a different type of, you know, playset that has robotics possibly, or whatever it is, to see if, like, that's an area of interest and curiosity for her. (30:21) Or is she perfectly happy with Legos, which makes me believe, okay, she's not looking to one day be an engineer or architect.(30:31) This is something she loves doing as a hobby. (30:33) Great, right? (30:34) And so, you know, if we can expose the additional, give her a lens into what else is possible when you're building things and see where she naturally wants to go with it, that she could take for the rest of her life and enjoy what she's doing without it being work or a chore, right?(30:56) Because she's doing it without anybody giving her anything to do it today. (31:00) Like, that's the sweet spot.

Marcus Arredondo

(31:02) I also think, you know, as you're mentioning this and thinking about kids, you know, there's something special that you witness, or I'm witnessing with my own kid, which is that, like, their, his, more of him gets revealed. (31:20) I mean, I see why a blossoming tree is often an analogy to describe a child, because it sort of comes from within. (31:26) As we grow up and we become adults, I've thought about this quite a bit, and I don't know if this is accurate or not, but we, whether it's the shadow self, because of the noise that sort of clouds who we may be, or other circumstances, we tend not to gravitate toward things that have friction, things that cause us discomfort.(31:49) But when you're in an uncomfortable position, there is another revelation of yourself. (31:55) There is another layer that gets exposed that may not otherwise have been exposed. (32:00) And I'm thinking specifically of when you gifted the company.(32:06) You've also, when did you start Zustek? (32:08) Because I want to talk about Zustek, because that seems like a pretty big pivotal moment in terms of your development. (32:13) Because that, that was around when you left Anderson, and that was the last time you had a boss.

David Makharadze

(32:19) Yeah, well, Zustek, I started in 2001. (32:24) There was, I moved out to California for a startup that a friend of mine had me come out to advise, because at that age, I was the only person he knew who had started and run the business. (32:39) So, and then after advising for two weeks, I fell in love with California, and I ended up taking over business development for that company.(32:50) And we raised money and had a really fun experience. (32:53) It was from there that the evolution to Zustek came, and the CEO of that company and I started Zustek. (33:03) We had both left the company by that time.

Marcus Arredondo

(33:06) What was the company prior? (33:08) What did it do?

David Makharadze

(33:09) Oh, it was a marketplace for services. (33:12) So, it was like Amazon for services. (33:14) But back in like 1999, where homeowners and customers were online, but no companies were online.(33:25) So, we would literally sell like oil change and haircuts and house cleaning, and then do deals with ideally regional or national businesses, but they weren't online. (33:40) So, they were literally faxing us their calendars at the end of every day. (33:45) And we were like having people overseas transcribe that into something we could use digitally to show a calendar so that you can schedule a service.(33:58) So, it was one of those ahead of its time things that today is doing very well. (34:04) And that company, I think I left in 2001. (34:11) I think it shut down in 2002 at some point.

Marcus Arredondo

(34:15) Yeah.

David Makharadze

(34:16) Yeah.

Marcus Arredondo

(34:17) But there's some DNA from Downtown Bites in that.

David Makharadze

(34:20) Oh, yeah. (34:20) That's how I even connected to it. (34:25) Yeah.

Marcus Arredondo

(34:25) And then from that, you and the CEO started Zustek.

David Makharadze

(34:29) Yeah. (34:30) It was like six months post my departure from that company.

Marcus Arredondo

(34:38) So, tell us a little bit more about Zustek, what you built and then the exit. (34:44) Because that seems like you were sort of climbing, climbing, but that was sort of the explosion.

David Makharadze

(34:49) That was the one that like changed my life, sort of life-altering financially. (34:56) But yeah, there was a couple of guys that had built an email platform mostly for... (35:10) There was some marketing stuff, but it was mostly transactional emails, and they built it for a single client, and they owned the tech.(35:19) And my partner, AJ, and I met with these guys to look at that tech because there was a relationship that AJ had with that person, Kumar, great guy, still really good friends today. (35:37) And in that meeting, he was just like more kind of picking my brain as to like, hey, I have this cool thing, but for like two years, I've been trying to see if anybody else wants to use it and nobody will, or I don't know how to sell it. (35:55) And so we kind of joined forces, not immediately, but over the course of probably I'd say six months, we were like helping each other, and ultimately we became one company.(36:08) So understanding that platform, I was like, it was one of those things where I'm like, this makes a ton of sense for everybody, right? (36:15) Yet no one's using it. (36:17) And it was pretty new at that time using email.(36:20) I'll give you an example. (36:21) When we started the company, when you bought an airline ticket, it came in the mail. (36:27) Like you bought an airline ticket.(36:29) Do you remember this? (36:29) You're not that much younger than me. (36:32) You'd buy a ticket over the phone, or even if you bought it online, they would send you a physical ticket.(36:39) And so as soon as I understood this tech, I was like, I would imagine an airline or a hotel, like there was the hotel reservation, same thing. (36:51) You'd make a reservation, they would mail you a letter with welcome to Marriott. (36:57) And so it made a ton of sense to make that digital.(37:02) As a consumer, you're on pins and needles when you buy something, and then you're waiting for days to see if the transaction went through. (37:11) So I started thinking about what are all the benefits that this could bring? (37:16) And it was endless.(37:17) Like the list I made was, and so when I started looking at it that way, I'm like, there's a hundred value points to this one solution. (37:28) It was pretty easy to kind of like start talking to people about it. (37:32) So my first client was Cornell.(37:34) I went to the hotel school and it's hard to ignore an alumni. (37:40) So they took my call and I went and I met with the head of alumni relations. (37:47) And I said, look, you're sending a lot of letters.(37:50) You're having a hard time communicating with people. (37:53) I know because you leave me voicemails. (37:55) I'm like, I'm not going to call you back.(37:56) But if you send me an email that talks about what you're trying to get across to me, you'll be fielding inbound calls instead of like sitting here making calls all day. (38:07) And so they were the first client and all of the emails that came out of the hotel school and ultimately other groups like Cornell were through ZoosTech. (38:18) And once I had that client, by the way, I donated the software, of course, but I now had a logo to display when I met with other companies.

Marcus Arredondo

(38:28) And data, right? (38:29) To see like what the click-throughs are.

David Makharadze

(38:31) Data. (38:31) When you, yeah, I had how many people opened it, click-throughs, like all that stuff were capturing, right? (38:37) And so, and then the next client was through a friend, you know, Pam Kazdin?(38:43) Doesn't ring a bell. (38:45) Okay. (38:45) So she was a friend, my roommate at the time, she was working for Sony.(38:51) And I'm like, if I can't get a meeting with my roommate's boss, I'm closing this place down. (38:56) So I went to Sony and I pitched them on all the marketing they were doing for their movies. (39:03) And I'm like, you know, you can reach so many people about your Spider-Man movie and sell tickets and do all these things.(39:12) Like right now you're like posting billboards and like this stuff, right? (39:16) And I'm like, is it a time to actually build a database of customers who are loyal to your movies? (39:23) Now you could cross market, do all these things.(39:26) Anyway, they were into it. (39:29) They, it took, I don't know, like eight months or so to get that deal, but ultimately they did the deal. (39:37) And then we're off to the races.(39:38) Then I went to America West Airlines and I, it was the first airline to ever go fully digital. (39:44) I took them a hundred percent off of direct mail for everything. (39:48) Like literally they went zero.

Marcus Arredondo

(39:49) Are you cold calling the chief marketing officer or something?

David Makharadze

(39:52) Yeah. (39:52) I was, I was cold calling like, you know, pretty much once a week for months and months until somebody picked up. (40:02) And I think I might've said I'm in Arizona.(40:06) I don't think I was, but they're like, yeah, if you're here, come on by. (40:13) I think that's how you and I've had lunch a couple of times. (40:15) That's absolutely right.(40:18) So anyway, so yeah, that was the first airline that ever went fully digital and the benefits were tremendous, right? (40:25) Like their call center went from so big. (40:29) I walked their call center.(40:30) I'm like, what are all these people doing? (40:31) They told me, and I'm like, they're literally fielding calls of people that are afraid that their purchase didn't get through. (40:38) Totally.(40:38) Right. (40:39) I'm like, I like, not only am I going to save you money on direct mail, but like, you could probably cut half this team like overnight. (40:46) So anyway, and then, you know, a thousand clients later.(40:50) So that whole thing was pretty much bootstrapped as well. (40:54) We never raised money and, you know, grew that business to about 300 people internationally and then sold it to Investcorp.

Marcus Arredondo

(41:03) So, I mean, that was the formation of CRMs, right?

David Makharadze

(41:06) I mean, that was like the system had a function without the CRM, but as we implemented CRM into the solution, the results were exponential, right? (41:25) Because now I know exactly like, you know, Mattel was a client with all their brands, like Hot Wheels and Barbie and all that stuff. (41:33) Right.(41:33) And like, we were tracking when somebody's born. (41:39) Right. (41:40) It's a birthday gift.(41:43) And then you could follow up on birthdays and you can, you know, exactly how old, you know, somebody is when you're, and then you're like, okay, they're done with Barbies. (41:52) Let's move to this. (41:53) Right.(41:54) And there's all this interesting stuff you could do with data. (41:59) And back then, like now it's commonplace, of course, but back then it was just, you would sit down with people and they're like, what? (42:05) Tell me.(42:05) It's like what AI is, you know, now is what the CRM kind of was back then.

Marcus Arredondo

(42:11) Well, it just seems like you were always sort of following your nose, you know, like where...

David Makharadze

(42:16) Is this a joke about my big nose?

Marcus Arredondo

(42:19) No, not at all. (42:20) What I'm saying is you sensed opportunity and what you didn't know, you learned and you just kept pursuing angles. (42:28) Like I just have never met anybody that's so (42:30) fluent in technology, marketing, operating, being a principal, being an advisor, raising money, (42:39) selling companies, that's just a lot of hats to have worn and continue to be able to call upon (42:46) so quickly, which is why I, you know, I do enjoy talking to you because you can really talk a lot (42:52) of different languages, you know, within business, you can speak fluently. (42:59) And I guess, I'm not really going anywhere with that, except that, you know, how do you recreate that? (43:03) Like, how would you advise somebody, you know, some 15, 17, 19 year olds coming up to begin who wants to go into entrepreneurship?(43:12) Because I don't think... (43:13) Most people who want to go into entrepreneurship think it's sexy. (43:16) And I think it can be, but there are parts you and I've shared where you know, in your vast estate of companies, there are some that are going extraordinarily well and others that are not.(43:32) And, you know, and somebody is like, how's your business, how are your businesses going? (43:36) It's always a textured answer. (43:38) You're not going to see, I mean, you can say great, but like, there's stuff going on that sucks.

David Makharadze

(43:43) Yeah, always. (43:44) I don't remember a day that that wasn't the case. (43:48) Yeah.(43:49) There's never been a time, I'm pretty diversified, so there's never a time where every industry I'm in, or certainly even within the same industry, if, you know, there's been times I've had three or four companies in the same industry and two are doing great and, you know, one or two aren't. (44:07) And I think back to your question of how do you guide somebody to expose themselves to all these verticals or knowledge bases, I think really just follow passion, like people bet on passion. (44:24) I don't know how else to put it.(44:26) Like, if I'm super excited about something and I genuinely, like 100% believe in it, people will bet on that. (44:36) And I don't just mean they'll give you money, like as an investment, which is obviously important in certain businesses, you can't really, you know, bootstrap everything, but customers will bet on you, right? (44:49) Like when they're like, this person believes in this so much, and in the way that he or his team is going about doing it, they will not let it fail because they're too passionate about it.

Marcus Arredondo

(45:03) Yeah.

David Makharadze

(45:04) Or certainly they won't let it fail in a way that hurts me, the customer.

Marcus Arredondo

(45:08) Yeah.

David Makharadze

(45:08) Right? (45:09) And people have to take that bet on you when you're a small business. (45:15) They have to bet that you won't disappear, that the company won't disappear, that the services will be what you say they are, like all of that stuff.(45:26) So you get to be somewhat industry agnostic if you are truly passionate. (45:32) If you're not truly passionate, you better be really, really good in the industry you're in, where people bet on you because of your history and not your passion. (45:42) And it's like, I don't know, that's been my, I'm not suggesting that my way is, there's a hell of a lot of people that work less than I do, make more money, have had way smoother paths in life.(45:55) So I'm not, you know, pitching anybody on this, but I'm more answering your question, if that is something somebody wants to do, that's the way to do it.

Marcus Arredondo

(46:04) Well, there's a couple of thoughts I have. (46:05) One is just in terms of grit, like I think having to go through simultaneous ups and downs, simultaneous, like in two different companies, maybe two companies within the same industry, how do you navigate that from, you know, an emotional component, right? (46:24) Without, you know, I know you work out, I know you treat your body well, like, you know, all that sort of stuff, but what, are there other components to help you sort of increase your threshold for pain, for lack of a better word, right?(46:38) I mean, because you do, the higher up the ladder you've gone, the more pain you're enduring simultaneously, but maybe it inflicts you a little bit less each time because you've become, you have to have thicker skin now than you even five years ago, let alone 20.

David Makharadze

(46:52) Yeah, well, I'll say my sanity comes from having a beautiful wife and incredible kids, right? (47:00) So as long as I have that to come home to, I tend to comfort mentalize out of the business troubles when they come, but during the day, I don't know, I'm far from immune from pain, stress, anger.

Marcus Arredondo

(47:23) Sleepless nights.

David Makharadze

(47:24) Sleepless nights. (47:26) I'm very project oriented, so when the challenge or a problem comes, I think one thing I've learned and have repeated to myself is that I've had challenges before that I can't even remember, right? (47:45) Like, I literally cannot remember probably 90% of the challenges that I lost so many nights of sleep over, and now I can't remember what they were.(47:56) So I turn a problem into a project, and when it's a project, you go right into solutions mode. (48:03) And so, and if it's a project, you also know it has a beginning and an end, right? (48:08) And so you know this is not your life now, this is not your business now, this is nothing other than this is the new challenge.(48:16) And I think the more I get better at that, the clearer my head is to attack these challenges. (48:26) I'm also part of a group called EO Entrepreneurs Organization, and I'm in the forum with, you know, eight incredibly successful, amazing people. (48:38) And frankly, we do this thing called deep dives or presentations, where if you're going through a challenge, you present your challenge to this, like, group of people that know you really intimately at this point, like after you're together for years, you meet once a month for four or five hours.(48:57) So when you're presenting your challenge between the group, they've either been through something very similar, or you realize that there's a normalization process that happens with a challenge that you call it very, something very specific, like I have a portfolio of apartments and during COVID, like I had 40% of my tenants just stopped paying rent. (49:25) It was a huge financial burden and challenge. (49:29) But during that meeting, it was normalized to like ARs, right?(49:35) And when it became accounts receivable, not being collected, that didn't make it less of a problem, but it made it a global issue that could be addressed somewhat globally, instead of like some like really specific problem that only I was having, right? (49:51) And so that's sort of like ironing out the perspective. (49:57) That perspective is really powerful.

Marcus Arredondo

(50:00) Have you experienced an event where you've had a setback or a failure that you just couldn't satisfy your customer or a partner or an investor? (50:12) And if so, how do you, any thoughts on how to successfully navigate that?

David Makharadze

(50:17) Yeah. (50:18) I mean, I have a challenge currently still that like an investment we made like, geez, almost 10 years ago, that was meant to be an eight year investment. (50:30) And now it's been 10 and we're years out from it coming to a conclusion.(50:36) The way it's a real estate, large real estate development project. (50:41) And the way that deal is structured, I make money on the upside, but there is no upside that is realistically remaining after 10 years of trying to, we had every disruption, I don't want to make excuses, but I mean, COVID, massive construction interest rates, you name it, it was just endless hits. (51:06) I believe most people by now would have exited this.(51:13) All I know how to do is keep trying. (51:16) And on a regular basis, I'm still trying to find some creative solution to conserve as much of that investment as possible so that I could give it back to investors. (51:29) Even though I'd say more than half of them have come to me with, hey, I can't believe you're still doing this.(51:37) We understand if you need to stop. (51:42) And so many of them were, they've been really gracious about it and they know that I'm still working on this for them, but I don't know. (51:51) I don't know any other way.(51:52) That's just the simplest way to put it.

Marcus Arredondo

(51:54) Is there a part of your business mind that looks at that as, and maybe not that one in particular, but an event where it's logically, and by every measure, if you were an outsider, not somebody in operations, not somebody owner specific, you look at it and say, there is no course of action other than to hand over the keys, to walk away.

David Makharadze

(52:14) Yeah. (52:14) I would say any, if you went to AI and plugged in a zero human element, the business decision for me personally, and I think ethically and in every other way, it would be understandable. (52:37) But I don't know that I could, I can't disrupt my sleep by not doing everything I can.(52:45) So what is that worth and what does that mean for the rest of my life? (52:48) So I have a few things that have been ongoing forever. (52:55) And because multiple times, things that should have gone dormant, I was able to revive or fix.(53:06) And I could give you an example or two if you like, but sadly, because I've had some success with actually doing that too, that I'm like, I'm not giving up either. (53:15) So I got to keep going.

Marcus Arredondo

(53:18) Yeah. (53:18) I would love an example.

David Makharadze

(53:21) Well, this one's a little crazy, but I bought a defunct, incomplete, I believe it was 30 or 35 home development in Palm Springs. (53:35) The entire customer base was Canadian. (53:41) So the building next door, all Canadians and the handful of completed homes, Canadian.(53:47) They loved coming there to be there during the winter. (53:50) We did absolutely all of our marketing to the Canadian community. (53:55) And there was a ton of interest in this project when it was going to be complete.(54:00) As soon as we completed the project and launched it, the Canadian dollar felt like 40% or something crazy. (54:10) So literally every single ounce of marketing effort from brokers to ourselves, to brochures, to you name it, listed the Canadian market. (54:21) And they were heavily in the Palm Springs area to begin with.(54:26) When that exchange rate flipped so badly, not only were they no longer buyers, but every other Canadian that owned property in the area was selling their home to take advantage of the exchange rate. (54:40) So it got into a problem because we had a hard money loan on this asset, and we had to, there was a cliff. (54:48) And the group we were working with was kind and trying to work through it with us.(54:55) But after a few months, when the whole market there tanked because of this issue, they didn't see a natural conclusion. (55:05) So they're like, look, guys, just give us the keys and we'll call it a day. (55:09) The same thing, I'm like, I can't do that.(55:11) I have 20 investors that I care about.

Marcus Arredondo

(55:13) What year was this, by the way?

David Makharadze

(55:14) This is, it's supposed to be like 2015 or something, something around there. (55:22) I don't, whenever that big drop was, I don't remember. (55:25) But so I was like, I can't put it to sleep because then everybody loses all their money.(55:35) Yet I don't have a great solution for it either. (55:39) And the bank gave us like 30 days and they wanted their money. (55:48) So I got an extension, I think to 60 days, which they were gracious enough to give.(55:55) And then stayed up all night, wrote an email that was insane to all the investors. (56:01) And the email said, we could either lose it all or we're all going to work together, buy these units, rent them out until the market rebounds and then sell it. (56:14) And there happens to be 25 remaining units.(56:18) There's like 20 of us, everybody buy one, I'll buy what's left, whatever, let's do it. (56:27) I lined up a bank to provide loans that would use the equity we had as our investment as the down payment. (56:38) Nobody had to come out of pocket any more cash.(56:41) I was like, you can either lose it or have this asset in your name. (56:45) So you could do whatever you want with it. (56:47) But I promise you, I will manage it a hundred percent through exit.(56:51) Everybody did it a hundred percent. (56:53) And we closed and bought all those units, leased them all up. (57:00) Obviously we managed everything where the investors didn't have to deal with it.(57:05) And then as the market started going back, which didn't take long, it took like less than a year, I would just do a spot check on value and send an email to everybody saying, hey, your unit's now worth $220,000 or $250,000. (57:26) Do you want to put it in the market or hold? (57:29) Market or hold, market or hold.(57:31) And over the course of two years, everybody sold, got their money back. (57:35) And obviously, I didn't make anything from that effort because there was, people just got their money and their loan back. (57:44) But I saw it all the way through and it was kind of a weird pollution, but we did it.

Marcus Arredondo

(57:52) That's an incredible story. (57:54) So you talked about agnosticism before in terms of industry, and I want to just offer a buffet because we don't have time to go into all the nooks and crannies I want to talk about. (58:04) I'd have you here for three hours, but you obviously alluded to real estate.(58:08) You've done development. (58:09) You've done your own sort of partnership deals where you're the main LP. (58:14) You've brought in other situations where you're the GP.(58:18) You've gotten into, I mean, Quativa and Energy Service Partners, I want to give you some room to talk about as well. (58:25) Kelton, which of these sounds appealing to you to sort of talk about under the lens that what I'm, you know, I'm interested in all of these, but what's the through line in terms of what you, what has been the most valuable experience that you've gleaned from any of these that have served in other parts of your business life? (58:52) And personally, I mean, I sort of think a lot of the lessons that happen within an entrepreneur's journey tends to benefit you personally as well to the extent you can harness it because of the agency, the resiliency, the grit, the follow through, all that sort of stuff.(59:09) But with that in mind, which of those are you most tempted to want to talk about?

David Makharadze

(59:16) Well, I'm going to put it back on you. (59:18) Why did you start this podcast? (59:20) What's the purpose of it?

Marcus Arredondo

(59:22) I'll choose the story based on what- Well, there was, there's, I recently, I had a guest on, Alan Graham, who was a developer, and he built this, he had a calling as a result of a retreat he had within his Catholic group, and he ended up finding a calling. (59:44) And that calling was to find solutions for homelessness. (59:49) And so one thing, as I talk about within entrepreneurs, is the willingness to go get dirty.(59:55) In his case, he went dumpster diving. (59:56) He lived on the streets for 72 hour periods. (59:59) He brought his son and he got investors.(1:00:02) He worked with the city of Austin, figured out the financial components to be able to build these sort of small units on a large plot of land, provide services. (1:00:11) There's a farm that helps to sustain those individuals. (1:00:15) And one thing he alluded to within his discussion was that fulfillment is often the mix of contribution, creativity, and connection.(1:00:27) And I had not thought about that when I started this podcast, but I was in a tough spot personally, professionally, but I also had the balance of having just had a son. (1:00:36) And so there was a lot of joy in my life at the same time. (1:00:40) But as I was in that nadir, I've been parts of other groups, not quite EO, but others where I was having these discussions, and they were really helpful from a catharsis perspective, but also from a general perspective.(1:00:54) And I'll land the plane to answer your question. (1:00:56) But as I had these conversations, it was really to scratch my own itch while trying to contribute something to an audience member who is curious, who is interested in identifying practical, reusable skill sets, things that you can actually apply. (1:01:14) And I'll give an example with my son.(1:01:16) I've seen with a child, if I'm seeing him frustrated and I say, calm down, that's not a productive way to inform him how to calm down. (1:01:27) That's not a good thing. (1:01:28) And if I don't possess the skills to teach him how to calm down, then I have not mastered it myself.(1:01:36) But I do know long walks have statistic, biological effects between oxytocin, endorphin, same thing with longer breath work. (1:01:48) All of these little tools, which may work in better capacities than others, are things that he can actually implement to result in a calmer state of mind. (1:01:58) And to take that same idea with you and other guests, it's to learn practical skill sets that are not opaque, that are not...(1:02:09) Yes, they can be philosophical, but at the core, I think that's partly why I'm attracted to stoicism because there's a lot of philosophical components, but it's very practical in nature in terms of how is this going to most materially benefit my actions? (1:02:24) How can I improve my current state? (1:02:27) And that's why I started this podcast.(1:02:29) One of the great joys I have when I talk to you, which is that even in so far as the examples you share, you identify very specific events that occurred. (1:02:42) The last example being a great one where you... (1:02:47) A lot of investors right now, I'm in the office world, and not all of them are reacting with such grace as you did when the hard money lender gave you 30 days.(1:02:56) A lot of people are getting red in the face and starting to yell at these circumstances. (1:03:00) You accepted the reality, you identified some potential solutions, you put it onto the people who mattered most and presented them with an opportunity, and you took a huge hit on the chin to continue doing that. (1:03:12) And so there's a lot of things that I draw from that, including integrity, legitimate care for your investors.(1:03:21) Those investors may not return, and I'm sure you hope that they may, but that doesn't seem like the reason that you were doing it. (1:03:28) So anyway, I realize that's a little bit long-winded, but I wanted to give you some context. (1:03:33) I want to find as many aspects from your methodologies that are things that your daughters would learn from, somebody who's 18 would learn from, and somebody who's 44 would learn from, maybe even 60, because you do have a unique experience, a unique insight, and you've been able to replicate it, you've been able to scale it.(1:03:59) I've made several attempts to do something in that vein, and I've had various spurts of success and less success, learning opportunities, but I want to come back to the well, and I want to do it better. (1:04:16) So does that give any context as to...

David Makharadze

(1:04:18) Yeah. (1:04:19) I mean, I think from what you said, there's an umbrella above the business that is kind of what's healthy for the mind and soul as well, which obviously everything's connected. (1:04:34) I think, and I'll choose one of the ones you suggested in a moment here, but what's common amongst all of those companies is the sooner you can identify...(1:04:49) Well, first, the sooner you understand that everybody has different skills, right? (1:04:56) And to be frustrated with the lack of someone's ability or inability, that's on you. (1:05:07) Your job is to identify what everyone's best at.(1:05:15) Be that above you with your boss, or below you, or colleagues. (1:05:22) The sooner you can identify that and stop being frustrated by someone's inability to respond as quickly as you would, or summarize that 30-minute meeting into 10 the way you would be able to do, or do that financial analysis the way you would. (1:05:43) So anytime I enter a business, whether I'm starting it, or I'm advising, or I'm a partner, I very quickly try to understand what I'm dealing with.

Marcus Arredondo

(1:05:57) On a personal, personnel level, on a culture level?

David Makharadze

(1:06:00) Just like on an everything level, professional, personal, and otherwise, right? (1:06:05) Some people work really well under stress, and some people break in half when they're stressed. (1:06:14) Yeah.(1:06:14) It doesn't mean they're incapable or not valuable to the organization or to the partnership. (1:06:20) Everyone has really, really different traits that they're born with. (1:06:25) Some can be learned, others cannot.(1:06:28) And so if you walk into any door understanding that, then it doesn't matter, again, what the company is, what the solution is. (1:06:37) It's a business full of people. (1:06:40) And if you understand what everyone's good at, you have a really good chance of succeeding.(1:06:47) So I'm going to speak about Energy Service Partners because of what you just mentioned and what was meaningful to you in your prior meetings. (1:06:54) But that company, I'm not a founder, and there's three owners, a father and two sons, incredible people. (1:07:06) I met them because I owned another solar company that they were a client of mine.(1:07:12) And in conversations, they would start sort of tapping me, hey, can we have lunch? (1:07:18) I want to pick your brain about something. (1:07:20) So there's a number of these lunches.(1:07:23) At some point, Gary, the father, said, hey, can we formalize something? (1:07:28) Because I can't keep taking you to lunch. (1:07:31) This is not fair.(1:07:32) And I was like, sure, we'll talk about it. (1:07:36) It ended up becoming a very meaningful partnership where we grew multiple businesses together, made really good money together. (1:07:45) And more than anything, I believe we learned a lot from each other as a group.(1:07:50) I am far more detail-oriented and meticulous in some ways than they are, they would say the same. (1:08:00) Their ability to operate, be thoughtful, intelligent, and just take situation with grace is like I learned in my, I met them in my 40s, right? (1:08:16) So I'm not like a young kid at this point, but they changed my life and always led with genuine care for people.(1:08:28) And I would say, not to air dirty laundry, so I won't give specifics, but they've had challenges in their lives. (1:08:38) Their ability to bounce back and enjoy life throughout all of that was like such an inspiration to me. (1:08:45) It absolutely changed how I lead my life.(1:08:51) So at that company, they never, I came in as an advisor, ultimately became an owner, an investor, and a partner. (1:09:03) There was never pressure being put on me other than an amazing amount of generosity and kindness, which translated to pressure that was self-driven and derived, which feels a hell of a lot better than somebody putting it on you. (1:09:25) And so I worked really hard and we turned that business that was struggling at the time around to be the largest solar installation company in California, one of the top ones in the whole nation, just amazing amounts of greatness came out of that business.(1:09:48) So, and I'm happy to share a couple of specific things that I did there that I think translate across the businesses. (1:09:59) When I went into the business, the first thing I looked for in any company is how can we increase revenue? (1:10:08) How can we increase value of the company without major disruption to the existing business, right?(1:10:16) Because that disruption comes with a risk. (1:10:19) You disrupt the business, you could also break it as much as you're trying to improve it. (1:10:24) So if you can find something that doesn't have disruption, but has incredible upside, I know it sounds like, you know, well, if that's so easy, why, you know, but it's, I tell you time and time again, it's there.(1:10:40) You just have to stop and have the willingness to stop to look for it. (1:10:44) But, you know, we had a lot of vendors because we were doing a sizable business at some point and we're the customer, we're buying a lot of stuff from them. (1:10:55) So of course you want to negotiate the best price as possible, but also you want to try to find ways to partner deeper in return for a better outcome, as long as it doesn't disrupt or hurt the business you're in.(1:11:13) So if you have three vendors and you go to one, that's a lot of exposure, that's really risky and dangerous. (1:11:18) But you can do things like, I'll give you, you know, more than 50% of my business to one and I'll split the rest amongst the next three or four. (1:11:28) What is that worth?(1:11:30) And there's different ways to sort of position that. (1:11:33) You could go and ask for something or you can understand their business and put it into their words. (1:11:41) Okay.(1:11:42) So I went to the larger vendors that we had and I said, look, right now we have a bunch of salespeople and each one selects which of you they use at any given time. (1:11:54) So I can't tell you how much business I'm going to give you. (1:11:56) You can depend on that.(1:11:58) That's an issue for you, I imagine there's some value to you in having predictability, number one. (1:12:04) Number two, how do you guys market? (1:12:07) How do you build business?(1:12:08) Oh, we have a marketing fund. (1:12:10) We do this, we do this. (1:12:11) Well, what's your cost of acquisition?(1:12:13) So I went down the path of understanding their cost structure so that they don't look at me as a cost. (1:12:21) They already have a cost. (1:12:23) So if you're spending, let's say a million dollars to acquire 20 million dollars of business, and I could assure you 20 million dollars of new business, you just saved a million dollars in marketing, not to mention all the other benefits.(1:12:40) So I would split what the deal looked like as two separate things. (1:12:47) There's a marketing fund from which you pay us a million dollars, and I'm also negotiating a good price for the volume we do, right? (1:12:57) Two completely separate things, different departments, different budgets.(1:13:02) So it didn't disrupt our business in any way whatsoever. (1:13:07) We kept doing exactly what we were doing. (1:13:09) All we have to now do is incentivize salespeople to use the products.(1:13:16) We only had the products we believed in in our arsenal. (1:13:18) So all of them were fine by us. (1:13:20) It was just what the salesperson selected.(1:13:22) So we would say, hey, by the way, your commission is a little bit more if you do this. (1:13:29) So there was some arbitrage there for us. (1:13:32) But in essence, it was a handful of emails, a bunch of negotiations.(1:13:36) The process didn't change at all, and it increased our bottom line by approximately 25 percent. (1:13:43) Wow. (1:13:44) Like major, right?(1:13:45) Without, we didn't hire an extra person, nothing, there's no additional cost. (1:13:49) It deepened the partnership and only made things better. (1:13:53) So anyway, that's just one example, and I'll stop there.(1:13:56) But that's the type of stuff that in most businesses, if you go and you start to understand not only how does your business work, but all of the players in the ecosystem, what makes you a successful vendor? (1:14:09) What makes you a successful employee? (1:14:12) What makes you a successful partner?(1:14:14) What makes you a successful investor? (1:14:16) If you truly understand what makes them successful and you build your partnerships on those principles, there's usually some low-hanging fruit that has been missed.

Marcus Arredondo

(1:14:29) That's a great story, man. (1:14:30) I know we've got to wrap this up. (1:14:31) I'm curious, what's your day like?(1:14:33) What's your ideal day like?

David Makharadze

(1:14:35) Actually, I try really hard to not set alarm clocks. (1:14:42) So either I naturally wake up around seven o'clock or so. (1:14:48) If not, my kids will come wake me.(1:14:51) My wife and I alternate which day we take them to school and pick them up. (1:14:57) And in the middle of the day, I'll work. (1:15:03) I actually like working.(1:15:05) So I'd say from 10 to four, I'm pretty much at my computer doing meetings and stuff. (1:15:13) And then after that, I'll go home, pick up the kids, hang out. (1:15:17) We finally built our dream house, so jump in the pool.(1:15:22) I'm a social creature. (1:15:24) So I'd say a good 50% of my time is spent on social or family and friends.

Marcus Arredondo

(1:15:35) As someone who's seen your house, it is amazing. (1:15:38) And I'm very happy that it's not a tech bro that owns it. (1:15:41) Thank you, man.(1:15:42) This has been awesome. (1:15:43) Any closing thoughts or topics or considerations that you think we may have missed?

David Makharadze

(1:15:50) I don't know. (1:15:50) I mean, right after this, I have some meetings with... (1:15:54) There's a group called ERA, Entrepreneur Roundtable Accelerator, where I'm a mentor for new startups, where I meet with five to 10 companies a year.(1:16:08) I don't know. (1:16:09) If you don't do any mentoring, I think I would say that's got to be one of my favorite things to do, like helping guide people in a new environment. (1:16:19) When I think back of what's made me happiest beyond family, that's got to be some of my best...(1:16:25) We didn't get into any of that, but some of my best stories are from that stuff. (1:16:30) It's really cool.

Marcus Arredondo

(1:16:31) That's funny, because the whole time we were talking, I couldn't help but think, if you've ever thought about teaching. (1:16:39) But that's for another day.

David Makharadze

(1:16:40) Only in that way. (1:16:40) Never anything more. (1:16:41) But yeah, it's one of my favorite things for sure.

Marcus Arredondo

(1:16:44) Thank you so much, man. (1:16:45) This was awesome. (1:16:46) I really appreciate it.

David Makharadze

(1:16:47) All right, buddy.

Marcus Arredondo

(1:16:51) Thanks for listening. (1:16:52) For a detailed list of episodes and show notes, visit scalesofsuccesspodcast.com. (1:16:56) If you found this conversation engaging, consider signing up for our newsletter, where we go even deeper on a weekly basis, sharing exclusive insights and actionable strategies that can help you in your own journey.(1:17:06) We'd also appreciate if you subscribed, rated, or shared today's episode. (1:17:09) It helps us to attract more illuminating guests, adding to the list of enlightening conversations we've had with New York Times bestsellers, producers, founders, CEOs, congressmen, and other independent thinkers who are challenging the status quo. (1:17:22) You can also follow us for updates, extra content, and more insights from our guests.(1:17:26) We hope to have you back again next week for another episode of Scales of Success. (1:17:30) Scales of Success is an Edgewest Capital production.