Todd Goldstein has spent a decade making deals and investing in more than 100 startup companies. He has a vision of what Northeast Ohio can be as an entrepreneurial community and he’s committed to doing his part to make it happen. One thing he has learned is the importance of patience when you’re a dealmaker.
“Companies take time,” says Goldstein, founder and CEO at LaunchHouse. “When we look at the entrepreneurial community, it’s not a one-year time frame. It’s not a 10-year time frame. It really should be a 50-year time frame.”
That sounds like a long time, but Goldstein is a big believer in seeing the big picture and looking beyond what’s right in front of you when you’re negotiating an M&A transaction.
“When I think of an entrepreneurial community 20, 30, 40, 50 years from now, it’s not led by one industry,” Goldstein says. “It’s led by several. And it’s finding those individual entrepreneurs that are doing something different.”
In this week’s Dealmakers Live, we talk to Goldstein about the evolution of Cleveland’s entrepreneurial community and the value of looking at a deal from different points of view.
Dealmaking is a way of life
Dealmaking has really been part of my whole career. Whether it’s been investing in companies or forming partnerships with cities or landlords, everything I’ve done over the last 10 years has been dealmaking. I’ve invested in over 100 startup companies over the last decade between LaunchHouse and my personal holding company. Every deal has been completely different. Whether it’s been on the investment side or dealing with cities in forming a partnership to create space for LaunchHouse, or landlords when a business needs to grow into a new space. Dealmaking impacts every part of my day-to-day life, whether it’s making investments, negotiating potential partnerships with cities or universities to bring LaunchHouse to those communities or even helping companies to structure deals that allow their business to grow within a piece of real estate or expand to other communities.
See the deal through their eyes
In doing deals, there are always pain points that you have to work through. A couple come to mind immediately, the first being valuation. When you’re investing in a company or buying a company, there are two sides. There’s the investor or the purchaser. On the other side, there is the entrepreneur or the business owner. A lot of times, they both have very different valuations on what their business should be purchased for or what the value of the business is. It’s probably one of the biggest reasons why I’ve seen deals break down over the last 10 years.
For me, what I’ve always tried to do when approaching a deal is look at it from the standpoint of the entrepreneur or the business owner we’re buying that business from. A lot of times, it’s very tough to do that because you’re trying to negotiate the best deal for yourself. But at the same time, you have to take into account that business owner or entrepreneur, though it may not be reflected in the deal or the financials, how much time and money they’ve spent getting that idea started or that business to a point where it could be sold. And so always when doing a deal, put yourself in the shoes of that other person, just for a second. See where they are coming from while negotiating that deal.
The entrepreneurial community
Where is the entrepreneurial community today? Looking back after 10 years, and I think back to when I started LaunchHouse in 2008. There wasn’t a home where entrepreneurs could come together day and night and start and grow their business from an idea stage. There weren’t a lot of free community events or entrepreneurial programming. Really, the community has grown by leaps and bounds. Today, there are probably 10-plus co-working spaces throughout Cleveland. There are multiple organizations that can provide capital to help entrepreneurs get off the ground whether it’s through private investment capital, nonprofit organizations, private angel investors.
But when I look around the entrepreneurial community today, I see a community that is a little bit confused. While a lot of what you hear about is just technology, that’s not just what entrepreneurship is in Cleveland. The entrepreneurial community really is all sorts of people.
Companies take time
It’s not often that a company goes from an idea to the software created to a billion-dollar exit. Companies take time. When we look at the entrepreneurial community, it’s not a one-year time frame. It’s not a 10-year time frame. It really should be a 50-year time frame. In (1994), a company called Amazon started as a place to sell books online. Today, every person who listens to this probably receives an Amazon package or purchases something from Amazon.
So while the community has grown so much and there should always be a major focus on technology and health care because we have two world-class health care systems with University Hospitals and the Cleveland Clinic. We should really look at all industries and all innovation around entrepreneurship in Northeastern Ohio. When I think of an entrepreneurial community 20, 30, 40, 50 years from now, it’s not led by one industry. It’s led by several. And it’s finding those individual entrepreneurs that are doing something different.