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Two things I learned from having Mark Cuban as an investor

How’s that for some name dropping? Got your attention, though, right?

It’s true, however. In 2003, I joined an Internet company and quickly worked my way up to the COO position. It was a small company so the path was short. Mark Cuban was an investor in the company. We sold the company in 2006, and, while we exchanged a few emails, I still have never actually talked to Mark Cuban, but I did learn a lot by having him as one of our largest shareholders.

Take the long view

The company got its start in 1998, and like most companies during this time, raised a bunch of money, over-hired and under-delivered, and nearly went out of business. During a discussion in 2001 at the end of the bubble with the then-current CEO, CFO and lead investor on whether or not to shut the doors or do one more round of funding, Cuban said something along the lines of “We’re in a five-year cycle – if we make some long term decisions, work smart, and plan for that timeline with this business, then it will come through the other side.” The company did just that – trimmed all the fat, got the burn down, and survived the downturn, emerging with positive cash flow and some growth. And, as predicted, the company was acquired in 2006 as the five year cycle reached its zenith and public companies started making acquisitions again.

My biggest takeaway from this is to always take the long view. By focusing on actually building a business, we made smarter decisions and created value for our customers and shareholders. Instead of swinging for the fence, we built a business with lasting value.

“take the csash”

The first time we got an acquisition offer, the dollar amount was right at the bottom threshold of what we wanted to take. We spent a good amount of time with our shareholders and management team debating whether or not to do the deal, and sent Cuban a note reflecting this. His response: “take the csash” – clearly a quick email knocked out with thumbs on one of the primitive handheld devices at the time. No discussion, no reflection, just a very straightforward, misspelled response outlining a very clear rationale: don’t be greedy, the market is setting its price and it’s usually right.

I always remembered this exchange, because he made an implicit assumption, without knowing the context we had been agonizing over, that the market was making its best judgment on the value of our company. This applies not only to acquisitions, but to client and partner pricing as well. Getting greedy with the market can be detrimental, and the offer you get, while negotiable, is usually pretty close to the market price. I know, there are lots of exceptions to this, ie low-ball offers, non-rational decisions, etc, but as a guideline, it’s been a good thing to keep in mind.

Fortunately for us, this deal did not get consummated, and a year later the market for startups got even hotter, and when we got a new offer at nearly double the price, we didn’t hesitate, we took the csash.

So What?

What does all this mean for Meal Ticket? We’ve truly taken the long view. There is no part of our strategy that goes “ . . . and then we get bought.” It is our assumption that by creating value for our customers and partners, we will have our fate in our own hands, and be able to decide who is best to own and run our company. And, given that we are creating software solutions for an industry that has yet to be completely exposed and disrupted by technology, we are very realistic about what we think the market price is for our wares. We’re very careful to justify our pricing at every step, so that the value to our customers is clear. There’s no room for greed on our part, even though we know that the budgets we’re targeting are enormous. Lastly, we are in this unique position because we are able to open our ears and our minds to new possibilities and opportunities within the industry, which brings me to my bonus thing. . .

Bonus thing I learned – don’t pass up on interesting opportunities

Not long after I joined the company, I went with our company chairman to Dallas for something business related (I don’t remember now), and while we were at lunch, my travel partner got a call from Cuban. They had known each other for some time, and this was one of several other deals they had co-invested in. Cuban invited him (and me) to join him for a Maverick’s game that night, courtside. I had been travelling a lot at that point, and felt bad leaving my pregnant wife at home alone while I went to a basketball game, so I passed.

I have no idea if the Mav’s won, or if it was even a good game. But it was an opportunity to go sit courtside with one of the most prolific entrepreneurs of our time, the most vocal NBA owner (ever?), and overall a fascinating person. So, while I’m still an attentive husband and father, when opportunities like this come up to do something interesting, I do my best to partake.

About Wink Jones