208: Bootstrapping a $50M/Year Business (And Exiting Twice) with John Arrow

Most founders dream of selling their company once. John Arrow sold the same company twice.

He bootstrapped a mobile product development firm (Mutual Mobile) in college, scaled it to 300 people, and pushed nearly $50M a year in revenue.

But the real unlock came from one bold decision: moving upstream into enterprise clients. Prior to that, his model was unsustainable. He and his co-founders made the decision to fire all of their customers and only work with companies with a spend of at least $1M/year. That’s when their company took off.

In this episode, John breaks down the decisions that unlocked explosive growth, the typical traps most founders never see coming, and why selling a services company is far more about timing and terms than topline revenue.

You’ll hear why he and his co-founders turned down a $100M offer, the minority deal that allowed him to take chips off the table, and how John was able to come back as CEO years later to orchestrate an 8-figure exit.

Mic Drop Moments

• “If you’re trying to do everything at once, if you’re an entrepreneur doing multiple startups at the same stage, you really don’t get any comparative advantage.” – John Arrow

• “You can’t time the market exactly. So, make sure you’re building something from day one that can support some type of profitable growth.” – John Arrow

• “Our most important user wasn’t our customer. It was the end users of their products.” – John Arrow

• “If you put the right people there, then it becomes more manageable. You get more scale.” – John Arrow

• “Our most important user wasn’t our customer. It was the end users of their products.” – John Arrow

• “This is the single best time in the history of humanity to be an entrepreneur.” – John Arrow

• 01:05 How He Started & Scaled Mutual Mobile
• 02:55 Why Shifting to Enterprise Clients Changed Everything
• 07:48 What Uber Taught Him About Testing Ideas Fast
• 09:34 The Pros & Cons of Using AI and No-Code to Prototype
• 11:04 The Life-or-Death App That Validated Their Model
• 14:20 How Mutual Mobile Found Its Identity Along the Way
• 16:47 The 2nd Dumbest iPhone App of All Time
• 20:22 An Unusual That Attracted Enterprise Deals
• 24:56 Why Austin’s Tech Scene is a Recruiting Goldmine
• 29:22 The Real Economics of Owning a Private Plane
• 44:47 How He Ended Up Selling the Same Company Twice
• 53:06 The Earnout Terms That Actually Matter
• 55:43 Creating AI Software with Zero Censorship
• 57:42 Why Operators Make Better Investors
• 58:57 When (And When Not To) Invest in Side Ventures
• 01:01:50 John’s Advice for Entrepreneurs in the AI Era

Brad Weimert: Today’s guest is John Arrow. John, you are a pilot. You have a plane. I want to talk about that. But you bootstrapped Mutual Mobile into a 300-person, multi-eight-figure agency that was then acquired by building some pretty cool tech. I’ve also heard you referred to as the next Elon Musk and a true futurist. Welcome to Beyond A Million.

John Arrow: Hey, Brad. Thanks for having me. Looking forward to having some fun talks today.

Brad Weimert: Yeah, definitely, man. So, first and foremost, you launched this platform, FreedomGPT, recently, somewhat recently. Creating an AI platform like that in this era seems like a bold move. Why’d you start it, and what do you want out of it?

John Arrow: I, like a lot of people, was so excited when ChatGPT shipped. I had been following the company for several years before that, and then when ChatGPT 3 came out in November, I think it was November of 2022, I started using it, and within five minutes, I asked some questions. It was innocuous, and the platform refused to answer me. Basically said, “Hey, that’s not an appropriate thing to ask.” And I was so taken aback by that moment. It reminded me of this service early AOL instant messenger days called SmarterChild, where you would ask things, and it would sometimes say, “No, that’s not appropriate to ask.” And it shouldn’t seem like a computer should ever scold you, right? That’s not something that should happen.

And I had such a visceral reaction then, I realized a lot of other people are going to be using AI and being scolded and told no by a computer. And so, I wanted to figure out how could we create something where an AI would never tell you no. It would always answer your question, and whatever model was the best model would respond to you. And that was the initial catalyst.

Brad Weimert: So, you invest in AI companies right now, and you have this. Is this intended to be a passion project? Is it intended to be something that you want to put money behind and grow? Where do you see it going?

John Arrow: So, a year before we sold Mutual Mobile, a year before ChatGPT shipped, we saw everything that was happening in AI. And I knew no matter what, I wanted to make that my singular focus after Mutual Mobile. And I wanted to put a lot of chips down. It was really tempting to kind of start another company in the AI space. But the same token, everybody was doing all of these different interesting things. I knew I couldn’t stay away from investing. And so, it was very fortunate, invested in Anthropic through our fund, and we had a big win there. And then along the way, we said, “Well, running companies is too much fun.” So, we created FreedomGPT. And really, the focus has been let’s learn as much as we can about the space, chiefly to make investments in other companies. And when we think we have a real advantage to win, let’s double down, let’s build a team, and let’s run something. That’s precisely what we do with FreedomGPT.

Brad Weimert: So, you’ve got more than your toes in the water, and you’re playing with it, but you’re seeing where it goes before you make more investments or more of a decision?

John Arrow: That’s kind of the thought is that the best investors I found are either previously operators or currently operators. It gives you something extra when you’re seeing it firsthand of what works and what doesn’t. It helps you evaluate the team well, and it helps you evaluate the market well. And so, I think if I had just thrown away the operator hat, I wouldn’t be able to kind of make investments at the cadence that we’re making them and kind of with the skill that we’re making them.

Brad Weimert: That’s interesting. So, often I have seen you go on sort of from a distance what I would look at as like side quests, exploring things. I have a hard time segmenting my time in a way that feels good to me when I’m in operating mode. So, if I’m trying to execute on something, I fall into this trap of going all in on that thing and then leaving no time for a side quest or other things. And I rationalize that through those being distracting. How do you decide what is worth spending time to invest in, and how do you allocate that time?

John Arrow: It comes down to what the specific nature of the side quests are. There needs to be some type of cross-pollination between them. They can’t be so disparate that you’re having to completely shift mental gears. I found them very helpful from a really early age. When we were launching Mutual Mobile, it was great to see what the next shiny object was, learn from that, and then take it back to another project. But I think what you’re talking about is very, very real risk, is that if they’re disjointed and there isn’t kind of a cross-pollination, you’re likely to get nothing done. So, it’s very important that you have the specific right type and that you don’t have too many.

Brad Weimert: What is too many, and how do you dictate or how do you qualify alignment?

John Arrow: Well, certainly nobody’s better than Elon Musk on that front. He’s got the ultimate number of side quests turning into real ventures, right? I mean, he’s probably got more startups out there than kids, which is saying a lot for him. And he’s able to do it because he is able to put the right team behind it. And if you put the right people there, then it becomes more manageable. You get more scale. If you’re trying to do everything at once, if you’re an entrepreneur doing multiple startups at the same stage, you really don’t get any comparative advantage. So, I think you need to kind of look at the side quests at different stages, too. They shouldn’t all be fledgling startups. One should be kind of more towards a scaling or mature stage, versus something that’s a new idea that you’re trying to test out.

Brad Weimert: I mean, I think you are right in the case of Elon. However, he also gets really uncommonly involved in the companies, right? So, like he is this notion of do you work on the company or in the company? You’re taught as an entrepreneur coming up, you should aim to work on the company, right? Elon is the opposite, right? Yes, you’re right. He comes in with tons of money in big teams at this point, but in all of them, he is known to go in and spend months solving the hardest problem, being there 18 hours a day or longer.

John Arrow: I think that’s the interesting context switching. He’s going into the problems that nobody else has solved, and then once he does his magic touch there, he leaves. He isn’t breathing down someone’s neck continually. And I think if Elon’s constantly doing your job, well, he’s probably going to remove you from it. And so, people despise him kind of to work side by side with him. It’s almost seen as a failure if he has to come in. But that being said, he’s never there when he’s not needed. If somebody else can do that job, I’ve never heard stories of him going in and micromanaging. He only does it when he perceives some type of blockage or some type of failure on the part of the team that was supposed to solve the problem.

Brad Weimert: Yeah. I think that’s a very good distinction. So, let me back up in your journey here. So, when I moved to Austin in 2014, Mutual Mobile was sort of buzzing in the tech scene. And you got local press, you had dope South by parties. People knew who Mutual Mobile was. The business model, to me, as I dug into it later, was unusual. Can you break down the business model and how you got started there?

John Arrow: Yeah. We recognized, I mean, one of the things people always say is it’s impossible to scale a services business. And so, we wanted to be really cognizant of that. We didn’t want to just trade our time for dollars. And so, we became something closer to a management consulting company rather than your typical IT services company. Really early on, we would do contract work. Startups would come to us, and they would say, “Hey, can we buy some of your engineers’ time?” And that was kind of the first right to win that we had. We had more iOS engineers under one roof than any company outside of Apple for years. And we were able to have that edge. That’s why Google would come to us. That’s why Nike would come to us. That’s why ‘you name it’ would come to us. We had that scale.

But eventually we realized it was going to commoditize, and it did like our prices. We were able to charge whatever we wanted early on and turn down projects and literally charge for conversations. We would have people come in and say, “Hey, we have an app idea. We’re this business.” We’re like, “Well, we need you to purchase a prototype before we can talk to you,” because there were so many people that needed a mobile endeavor done early on or an emerging tech endeavor done. But then that commoditized, and that stopped happening.

Brad Weimert: So, let me pause on that and put some other words to this because I think when you’re talking to mid-market or enterprise companies, IT service provider, or consulting means something that they don’t to a brand new entrepreneur or to somebody that’s a few million in revenue. So, what were you, and this is my understanding, tell me if it matches, but you were producing mobile apps for huge companies very early on. So, when you said you had more iOS developers, that was why, right? So, people were coming looking for mobile apps to translate their software into. Was that the underpinning of it?

John Arrow: That was the underpinning of it. And when we started, there really wasn’t a budget for enterprise mobility. So, a lot of the companies we were dealing with were literally startups, and they were, for a very short while, individuals with app ideas. And we quickly realized this was not a sustainable place we wanted to do business.

Brad Weimert: So, you went upstream to enterprise?

John Arrow: We did. And before we made that, we made a bad mistake early on. We had, at one point, I think 500 simultaneous entities or individuals that we were billing to, that we were working on. And so, we ended up firing nearly all of our customers. We helped them relocate them to other companies that could take on those type of project work. We even created another brand for a while called Touch Technologies that would do that type of work. But we said it was too difficult to context switch between a $100,000-a-year project and a $10 million-a-year project. And it was really kind of this existential crisis that the company had. And so, we decided, grudgingly, “Look, we’re going to turn down all of this revenue, all of these small projects.” And after we did that is when the company really exploded.

So, we basically kind of had a rule for a really long time. We would only work with companies that had a spend of at least a million dollars a year with us. And that was this moment. That’s when the profit just skyrocketed, the headaches went down, and things really gelled into place because at that point, we weren’t really selling technology. We were more selling some type of solution. People were expecting a business result by working with us. And instead of charging time materials, FTE, we were able to basically predicate our pricing on what’s the business impact going to be, what’s this going to do to your quarter profit next year, right?

Brad Weimert: Yeah. I think you also, I’m not going to say always, but most commonly that happens in enterprise, not small business.

John Arrow: I think you need the context, right? You need the really good accounting, and you need a CFO there. Startups are not going to be as cognizant of that, or they’re not going to have that track record to make financial decisions. They’re going to be more, I don’t know, I would say intuitive decisions.

Brad Weimert: Yeah. I think you also have to make the distinction when you say startup of funded or not funded.

John Arrow: True.

Brad Weimert: Right? So, if it’s a VC-backed startup, they’re more likely to have some of those, some of that context in place and/or make a dumb decision and just give you a bunch of money to build something.

John Arrow: Right. And sometimes they’re making very smart decisions, and it can seem almost crazy at the time. I remember we were working with MyFitness, early on, that got acquired by Under Armour for $200 million. And there was this moment where we were so busy, they had been spending, I think, half a million dollars a month with us. And the project ended. We didn’t call them back. And I remember running into, I think it was John Thornton at Austin Ventures, who recently passed away, a great guy. And he said, “Why did you not call us back for more work? We had more work for you.” And we were just so busy at the time of shifting the enterprise that we didn’t do that. But that was a great story of they had an incredible engineering team in-house. It was just a matter of scale for them and how they could run faster, and then it was a great outcome.

Brad Weimert: Well, I love the conscious, albeit grudging, decision to shift into enterprise. Well, most people don’t make that decision, so most people will actually sync the company because they want to do it all. To do it over, do you think that going through that process was a necessary part of getting into enterprise? Or would you have tried to start with enterprise?

John Arrow: We knew there was this wave coming, and we were a little bit early, right? I think that was what made the company, it was an advantage, but it was also a disadvantage in the sense that our early customers didn’t have the types of spends that supported a really large team early on. We knew that they would. So, I think what I’ve kind of realized that I’ve taken into subsequent ventures is you can’t time the market exactly. So, make sure you’re building something from day one that can support some type of profitable growth. Because you don’t know how long you’re going to need to wait, and you just can’t time the market on these types of things.

Brad Weimert: Yeah, man. I think it’s such a good lesson, and it’s hard to do specifically for a first-time entrepreneur. I think you have to be incredibly thoughtful, and you probably have to have a lot of money going into it, or you have to be willing to completely shift your business model. But functionally, what you’re saying is weather the storm until you get blue ocean, and one or the other has to happen, right? Like, you need to have a totally different model that you shift. Netflix, right? Or you have to have a bunch of money. And actually, I don’t know which one it was with Netflix. I don’t know if they were heavily funded in the beginning, and to do the DVD path, but they knew that they were going to stream from the beginning. And they were like, “We’re just not there yet, so we’re going to ship DVDs and tell the Internet’s capable of streaming.”

John Arrow: Right. What a fabulous story, because they wanted every stage. The other story that’s reminiscent of Netflix to me that was an early customer of Mutual Mobile was Uber. So, we did a lot with Uber. Before we even started working with Uber, we got to know Garrett Camp, who was the first CEO. Travis was the founder, but Garrett ran it for a while. He came to us wanting to build Stumble Upon, and obviously, I had a bunch of questions about Uber, and he says like, “Look, we’re probably going to be the most valuable app company,” because at the time, they were still starting out. And he says, “Look, as the most valuable eventual app company, we started with no technology.” It was literally Garrett and Travis standing in front of the Arc de Triomphe in Paris, and they were pissed off that they weren’t unable to get a ride.

Like, why is this the case? And instead of going out and building a technology solution, they used SMS. They said, “Let’s just buy some cars.” Both of them had some previous successes. They bought some nice suburbans, and you would text your location, the car would pick you up, and then all your friends would see you get picked up in a black car and ask about it. They operated like this for a year before they started writing a line of code.

Brad Weimert: Damn.

John Arrow: And I’ve tried to take that back to our clients, right? So, I’m always the last to say, “Let’s add technology. Let’s do it this slow, unsexy way, prove the revenue, and then come in with the tech.”

Brad Weimert: Damn. That’s a really good reminder. I think that we are in an age of, specifically with AI, we’re in an age where people want to implement the new shiny object, and they very often do it before thinking about the concrete reasons or the concrete outcome thereafter. Right? What are they trying to accomplish? Now, the flip side of that, I will say, is I think if you’re really far ahead of the game and you have a lot of clarity around vision, yes, but I also think that there’s something to be said for learning what’s possible through the development of software. Let me back out one layer, though, I think that’s possible now with the new no-code tools. You look at any sort of marketing automation platform or reporting platform. For many, many, many people, it’s through playing with the platform that they start to see what’s possible and what different paths might actually help them.

John Arrow: That’s a great point.

Brad Weimert: How do you think about that play versus, and like the time to play and discover things like that, versus don’t bother with the tech until you’re really clear on what you’re trying to deliver?

John Arrow: It’s what’s funny that how… It’s the new silver bullet, right? It’s powered by AI, made with AI. And I don’t think customers really care. They want a solution. They want something to work. In fact, I kind of get a bit jaded when I see that it’s an AI-powered tool. I’m like, “F*ck, this thing isn’t going to work that well.” And so, as a result, like nothing’s really changed. This is a new device that we can use to be better. The no-code tools are amazing. Like, I’ve been asking engineers that I work with, like, how much more effective are you today than you were a year ago? And most of them are saying 3X or 4X, which is just insane, that level of leverage, but it’s not a silver bullet. You still need to focus on building something that has value for the customers.

I think the thing that it lets you do the most is people who aren’t engineers, the people who don’t have that background or that desire to kind of spend capital early on. They can test out an idea. They can get a prototype to market in a week. And then see, is it worth perfecting?

Brad Weimert: Yeah. No, I think that’s right. Speaking of figuring out if something’s worth testing, what was the first app that let you know that Mutual Mobile was going to be worthwhile or a possibility?

John Arrow: There was so much early on, like just opening my inbox and seeing these leads. There were so many ideas that I just didn’t feel right about us building. I didn’t think they would have a return on investment. Like, we early on learned from the healthcare space. We did a lot within healthcare early, and we learned about the Hippocratic Oath and how important that is. First, do no harm. And when you add technology, it can screw up things, right? We have Cloudflare down today. We had AWS down last month. And so, we became super cognizant of that. I think the area that showed me that what we were doing was helpful to the world and not detrimental was we partnered with this EMR company called Greenway Medical out of Atlanta.

And they had come to us and helped us realize that people were dying due to paper and pen being used in the ER and the OR, where something would get written down incorrectly. The wrong order of magnitude of medication would be used, and that person would die as a result. And they said, “Hey, can you build a solution where we use mobile to eliminate the paper and pen?” And after we did that, it produced a bunch of revenue for this company. They went public, and then people started living that would’ve died. They were saying that, I think it was when we did the solution, eight times more people were dying from medical errors and car accidents, which is an insane stat.

And so, after we were able to solve that high-stakes problem, we had the confidence that we could go into other verticals and have the same type of effect. And the revenue will follow. If you’re working on a high-stakes problem, you don’t really need to know if there’s kind of consumer, if there’s fit, right? Peter Thiel has this awesome line about product risk and market risk are inversely correlated, right? If you have the next cure to cancer, there’s no market risk. Anybody with cancer will be buying your product at whatever price you sell it at. But there’s immense, immense technical risks. So, I guess it’s market risk and technical risk are inversely correlated. Conversely, if you have the next idea for a social network, there’s no technical risk. You can buy an out-of-the-box solution, but there’s immense market risk on getting that to the masses.

Brad Weimert: Yeah, that makes sense. That’s an interesting way to think about it. I can’t remember who I was talking to recently, but they were talking about how they approach new businesses from the perspective of the audience first. And can I captivate the audience? Can I rally the audience and get their attention without a product? And then can I build a community? And then can I figure out what they want? And that’s a very, I think, interesting capitalistic approach to how do I monetize an audience. How important is it to you as an entrepreneur to be working on something that has sort of an impact to humanity versus the financial aspect of it for yourself?

John Arrow: I think at this stage, it is immensely important. There’s a lot of different things that we can do to make a buck. It’s always fun to put in $1 and see $2 come out from an ROI standpoint. But there’s a huge opportunity cost. And so, my favorite thing is when they’re aligned, and there’s this confluence between you’re doing something impactful for the world, and it’s having a pretty amazing financial result. So, when those two things align, that makes me much more likely to be a problem that I want to focus on or back a team that’s doing something in that space.

Brad Weimert: How about when you started? So, you talked about this moment when with Mutual Mobile, where you saw proof of concept because of a healthcare company that solved a significant problem that was super meaningful to them in the world. And?

John Arrow: Well, I will say, I’ll give a disclaimer first before I answer that. Entrepreneurs are notorious for this revisionist history of their stories, of their founding stories, right? Because a lot of times, how it starts is a bunch of experiments, and it only makes sense looking backwards, right? At the time, it didn’t, right? And I think the nuance that we had as a team early on was there was going to be way more demand for people needing to make software, digital products on mobile and then tablets and then IOT than there could possibly be supply. It was a new programming language, Objective-C, for iOS. And so, we realized just by getting access to that supply, we were going to have pricing power.

And for a really long time, we were every ad on Google, because we recognized the value of these leads. We had a bunch of different companies, and we did it the correct way. We registered entities for it. But if you search for iPhone app development from, call it, April of 2009 until the end of the year 2012, they were all our ads. We were outbidding every single person. We were spending so much on Google, they were trying to visit us every week. They were sending us all these fun toys. They sent us a refrigerator, but that was just that conviction that we had. Later on, I think the revisionist story became, you know, we recognized we were the best people to do this. We cared. We integrated design and engineering. We cared about business results.

Our most important user wasn’t our customer. It was the end users of their products. And so, we started crafting the story that became the reality. Even though early on, we needed the revenue to survive, so we were more likely to take on work that might not have checked all of the boxes.

Brad Weimert: Yeah. It’s interesting. I don’t know that I would put the label revisionist on that. I think that puts a negative slant on it. I think that as you grow in a company, I sort of believe that you develop. I think there are different paths to this, but I think that it’s helpful to develop an identity as a company and not pick one and then try to grow into it. Totally. Right. I think you discover things along the way that are relevant, and like you said, you decided as you grew, “Oh, we have an opportunity to do things that are of value. Oh, that’s something that I can get behind.” And actually, let’s latch onto that from a value perspective internally as well as externally.

John Arrow: Absolutely. I like your way of saying it better.

Brad Weimert: So, I seem to recall a story about you creating a really stupid iPhone app. Tell me that story.

John Arrow: So, my co-founders and I, we all had our companies before Mutual Mobile. We met in college. That was one of the best things about college. You meet people that are like you. I think that’s the experience I’m the most grateful for. And we knew mobile was going to be huge. So, Steve Jobs announces it in 2007, the iPhone. It ships in 2008, and then the App Store goes live in 2009.

Brad Weimert: Damn. You got in that early to it.

John Arrow: You know, we were so immensely excited about it. I had the same feelings about the first iPhone that I did about ChatGPT. The only difference was none of us had iPhones super early on because they’re hard to get and they’re expensive for a college student.

Brad Weimert: They also weren’t great. The iPhone 1 was lacking quite a bit.

John Arrow: It needed something. I think people saw the potential, but it was like the Wright brothers’ first flyer. A lot of people didn’t realize this was going to become the 747, right? But we embraced it. We didn’t have the phone, but we said, “Look, let’s build a company around all of the new products that are going to need to be created and redesigned as a result of this.” We saw it as kind of the website moment, and we said, “Look, if we want to hold out to the world that we’re the best technologists, we should at least have one app on this thing.” Back in 2009, you can’t really have credibility if you haven’t done it before.

Brad Weimert: It’s amazing. I know where we’re going. So, this is amazing.

John Arrow: Right? And so, let’s do something. And so, back in 2009, there were about 50 apps in the store. Today, there’s I think like close to 4 million or so iOS apps, many, many more Android. We said, “Let’s put something out there that everybody’s going to have fun with.” And we created something called Hang Time, a bit controversial. I know you know the story, but it was something that we’re still pretty proud of, even though it’s embarrassing. We made an app where people could throw their phone up in the air, and an accelerometer would dictate how long the phone was in the air. So, you do a small throw. You catch it. I’ll demonstrate.

Brad Weimert: Nice. Nice catch.

John Arrow: Nice catch. How embarrassing if I dropped it.

Brad Weimert: You almost did.

John Arrow: That was like less than half a second, maybe a quarter of a second. But we did two smart things. One, we were super early, and second, we made a leaderboard so you could compete around the world. We charged $0.99 for this thing. Before we knew it, tens of thousands of people were downloading this. The first revenue that we recognized as a company was people buying this application.

Brad Weimert: Wild.

John Arrow: And the scoreboard started to rise. The times would get higher. The phone needed to survive.

Brad Weimert: In order for it to count?

John Arrow: Right. Because it had to communicate back to the server. And people got pretty creative.

Brad Weimert: How many complaints did you get?

John Arrow: Most were good-natured, but, I mean, there were some people that were legitimately upset, but I think you can’t be upset if you’re throwing your phone up in the air, right?

Brad Weimert: There are a lot of stupid people out there, bro.

John Arrow: Well, the stupidest of the people were like, “I’m going to take this a step higher.” And we said, “Let’s go build the real company. Now, let’s focus on that.” But there was this, I couldn’t help myself. I love checking data and leaderboards. This guy had to score out there over 19 seconds, which is just immensely high. 32 feet per second square, that’s thousands of feet up in the air. I get in touch with them because people, we were talking about this app we built. It was very rare to have an app in the store at the time. And so, people would check our leaderboard. I knew nobody was going to take it seriously if they saw a 19-second score. They would’ve just thought our app was buggy.

Get in touch with this guy, and he’s offended that we accused him of breaking our app and that he cheated. It turns out he’s a skydiver. Yeah, right. So, the name of the game switched from who could throw their phone the highest to who could wait the longest to open their parachute. People kept beating his score, and then Apple pulled it from the Apple store.

Brad Weimert: Now, it’s risk of death.

John Arrow: Now, it’s risk of death. But we did win our first award as a company. It was named by Gizmodo as the second dumbest iPhone app of all time.

Brad Weimert: That was the title. That was close, stupid. It was dumb, not stupid. Yeah.

John Arrow: It was fun like to create something used by many, many people. Didn’t have a positive effect on the world. It may have helped Apple sell some more phones. That’s why we started looking at the high-stakes problems right after that, and we didn’t go back after that. I mean, once you solve something high stakes, you can’t get the type of employees motivated when they’re building, I don’t know, like an EMR.

Brad Weimert: Yeah. I think, though, that it’s an interesting comparison to today in that I think really Gary Vee did a lot to raise awareness to entrepreneurs of the value of attention in the game. And so, did the whole creator economy which arguably could be driven really heavily by him and his presence. The comparison here is there are a lot of people that put a lot of dumb content out, that functionally drives top of funnel for something else, right? Now, I don’t know that it served that purpose for you or not, but there was… I can’t remember who. Man, memory’s killing me today. I had somebody on the show that was talking about this guy in China who basically looks for the trending content and then re-does it.

And it’s not even correlated. It’s bizarre trending content and makes sort of a meme about it, short videos. But the virality is crazy, but they’re totally uncorrelated. They’re just human videos. They’re just interesting, funny human things. But then he sells like a paper towel holder. He just sells widgets, and he does multiple eight figures selling widgets. And his only lead source are these ridiculous videos that have nothing to do with the product. And then like, at the end of the product, he’s like, “Buy my thing.”

John Arrow: Yeah.

Brad Weimert: Yeah. And it’s eyeballs, and like the conversion rate’s low, but it’s enough.

John Arrow: Well, I think people could consistently have a superpower, right? We tried a variety of that, and I kind of count on maybe one hand the time that this viral content worked well for us. The time that it did work really well, and just out of everything we did, probably led to more earned media for the site, was when there was this intersection between it being viral and then the right type of content. So, leading up to the sale or the debut of the iPad, people were immensely excited about the tablet. This was like Apple’s Tesla moment before they shift to full self-driving. People had no idea what it was going to look like and how it was going to change the company. There was immense excitement over the tablet, way more than the first iPhone.

Most people didn’t have the ability to preview it. The only people that Apple was letting preview the iPad was if you were a developer, you had a MacBook Pro, and you had Xcode downloaded on your computer, you could get into a simulator. And you could run and see what the early iPad experience was going to be with, because they wanted to create some apps up there. We made this super viral and expensive solution where anybody could use the iPad remotely. So, we set up a bunch of Mac servers, ran Xcode on them, and you could go to iPadSimulator.com, I think it was the URL at the time, and start to play with an iPad for the first time. To the day we sold Mutual Mobile, I think that was actually the number one way people came to the site was to play with this iPad simulator, and people do really creative things on it.

And that led to… Most of the traffic was completely junk. I mean, people would share it for sure, but your typical person checking out the iPad isn’t going to be an enterprise client of ours. However, one-10,000 people happened to be some key decision maker at a Fortune 1000 company, and we would earn business to make their tablet applications as a result of that.

Brad Weimert: Wow. That’s a trip. Was that the thought process behind it, or were you guys just playing?

John Arrow: We thought it would be a creative way to get traffic, and we didn’t realize how successful it was. And it was probably more expensive than paid search because we had to buy these servers. We thought we bought enough, and then it was too slow, so we had to have a wait list, and then it just became a bad experience. We kept adding on and on to it, and before we know it, we probably had the biggest iPad simulator in existence at the time.

Brad Weimert: Did you get traffic from it early enough? Did you get converting traffic from it early enough that you thought this makes sense to keep maintaining it? Or were you grudgingly holding onto this thing that you had already built, but you had sunk cost, and you had traffic, and you’re like, “Ah, we can’t kill it.”

John Arrow: It was more of a ladder, I would say. We were proud of it. It was an exciting thing that people were talking about, and we said, “Let’s just see where this goes.” We don’t know what’s going to become of it. Yeah, it’s expensive from just a bandwidth standpoint, but let’s just see what happens, and it worked out immensely well.

Brad Weimert: Yeah. How the tech scene in Austin has, I mean, I think Austin’s had interesting waves through COVID and after, through the influx of people from the coasts and then the departure of some of them. I’d say the departure of the good ones, the ones that should leave. But Austin has built a reputation to be a very tech-forward city. Apple, Amazon, Google, Facebook, Oracle, Tesla, I mean, Dell, Pickett, everybody has created a presence here. How did Mutual Mobile being in Austin impact recruiting or publicity, if at all?

John Arrow: We benefited immensely from being in Austin. I split my time now between Austin and New York, and one of the things that I love about this city is how easy it is to get other people to come here. People want to be in Austin, and you have an amazing computer science school at the University of Texas where you can draw from. If you’re a tech company, you have a ton of companies that get sold, bought, go out of business. You can grab engineers and designers from there. So, the fact that we have those resources and the types of people that want to be here is amazing.

A lot of people want to be .in Miami, but they don’t have the tech aspect. A lot of people want to be in New York, but they’re being pulled in a bunch of different directions. Same thing with the Bay Area. So, Austin’s like this Goldilocks spot in my book where you have the right type of talent that wants to be here and they’re not so busy that if you have the next great idea, they’re going to be willing to join you if you make a compelling pitch to them.

Brad Weimert: Yeah, I mean I certainly have appreciated lots of the dynamics around that. Do you think that’ll continue in Austin?

John Arrow: I think it’s going to continue in a lot of unusual places. I think Austin, I wouldn’t bet against Austin. I think its best days are ahead of it. We’re having a renaissance here. One of the most amazing things though about this AI revolution is that you can do this from anywhere. So, I think we’re going to start to see the rise of rural cities and places where people don’t need a huge team. We’re going to see so many new unicorn companies where the team is sub-five. I think that’s going to be a possibility. If you want to live in Austin, that’s great. I want you here. And I remember recruiting here was awesome because people would say, absolutely, I’ll move. But I don’t know if you need to be in Austin anymore, like you used to be in the days at Mobile.

Brad Weimert: Yeah, I think, my hypothesis on that is that for the very few that are extreme self-starters, that are extremely capable of driving, committing to outcome, having their internal accountability, they can live wherever they want.

John Arrow: Well said, yeah.

Brad Weimert: But for the rest of the population that are aspiring entrepreneurs, you better f*cking get around other people because you need that connection, you need that communication, you need that brainstorming, and you need the community. Can you do that online also? Not the same way.

John Arrow: Good point. If you weren’t living in Austin, where would you live?

Brad Weimert: That’s a great question. St. Pete, Florida was on the list before I moved here. San Diego was on the list too. Austin beat St. Pete for a lot of reasons. And San Diego taxes in time zone.

John Arrow: I get it.

Brad Weimert: Yeah. Yeah, taxes speak for themselves, but time zone can’t be ignored back to community and communication, right? Like, if I’m finishing my workday at five or six or seven and I drive home and want to call my folks on the East Coast, it’s 10:30. That gap makes a big difference, those two hours from Austin or from Texas to West Coast.

John Arrow: It’s a real thing. I was just in Marrakesh, Paris, New York, Austin, Vegas in the last six days. And it screws you up. And flying in aviation, we use Zulu time so we always have the same time, which is nice, you don’t have to think.

Brad Weimert: What?

John Arrow: Yep.

Brad Weimert: No.

John Arrow: Yeah.

Brad Weimert: Seriously?

John Arrow: Flying is always the same time. That’s crazy because it’d be just too confusing. You’re going between time zones, so we have to have one coordinated time.

Brad Weimert: That’s amazing.

John Arrow: Yeah. I think we maybe should do that. I mean, people would still sleep, I guess, when it’s dark out, but…

Brad Weimert: The time zones are confusing as hell, especially like the date timeline.

John Arrow: Right. It’s kind of an arbitrary thing where you cross.

Brad Weimert: It feels like it, feels like it…

John Arrow: Imagine we start going to the moon and Mars and you’re going to have to deal with those times.

Brad Weimert: Oh, that’s a really good point. Yeah, I was just in Asia recently for a couple weeks and it just destroys me. I’m a terrible time traveler, but I hope we figure out a better way to do it because I also– rabbit holes. So, you’re a pilot. let’s have a divergent path here for a minute because I’m curious about all things aviation. Namely, there are sort of– not sort of, there are a few different distinct buckets of how you can travel by plane. Obviously, there’s commercial and I think most people, you start flying, coaching commercial at some point, you start flying first class in commercial. Then you look at the private options, and the private aviation options, you can pilot yourself or you can sort of find a different way to fly on a private plane. And those range from getting a seat on a plane.

And there are some of these sort of– JSX is one of these companies that tried to do this model and they have scaled up and scaled down. And then there are chartering planes, there are buying planes, and then there are different types of planes. And then there’s piloting your own and getting something small. Why did you choose to become a pilot? What do you fly? And what are the basic economics of flying that plane?

John Arrow: So, I can never remember a time not wanting to fly our planes. I always was just fascinated. We’d go on family trips to see relatives, and I’d just be amazed that we can go up into the sky. Seemed like magic. And so, I always wanted to do that. Obviously, as a six or seven-year-old, I thought that was a career path. I could be a pilot. People could pay me for money. So glad I didn’t pursue that because I think I would immensely hate it if I was being told where to go and when to go. That would take all the fun out of it. But I did start flying at radio-controlled aircraft at a very early age and then hang gliders, which are pretty dangerous actually, but a lot of fun. And then as soon as I was old enough, I got my pilot’s license.

Brad Weimert: Isn’t hang gliding really dependent on the airstream?

John Arrow: Just basically, you need either a mountain to run off of or you need to be towed up. Those are kind of your two essential options. And so, most of the United States, geographically speaking, you’re kind of far away from either one of those options. So, that was inconvenient. But you’re right, you need to, in order to stay up, you don’t have an engine, so you’re using thermals and ridge lift and all that type of thing. But the journey was such that I knew I wanted to get my pilot’s license and at the University of Texas, I joined the Flying Club. Because of the Flying Club, I met my co-founders for Mutual Mobile.

Brad Weimert: Oh, wow.

John Arrow: So, it’s funny how that serendipity, when you just follow things that you’re naturally interested in, you’re going to meet other people that are very interested in things. I’m so grateful for that experience. Business and aviation have been this constant multiplier. I always have benefits to my businesses because of aviation. It’s a small community. You meet people that are interested in aviation flying. The number of entrepreneurs that are also pilots is immensely, immensely high. And anybody who wants to get into flying just for fun, I mean, the first thing they’ve realized is it’s not the most useful tool in the world when you’re starting out. Like, you have to really want to do it, right? If you think about, you learn and you train on a Cessna, it’s not that much faster. You have to just want to enjoy it. It’s not until you get to faster planes, like a Cirrus would I fly or into the jet world where it starts to become a real time savings thing. So, you have to want to fly.

If you don’t want to fly and you’re just using it as a tool, you’re probably not going to do it often enough to be safe. Like, my plan is to go flying this evening right after this because I need to do my night currency to stay current. From an economics standpoint though, it’s very, very reasonable. If you’re flying yourself, that’s probably the cheapest way to do private aviation is to fly yourself.

Brad Weimert: If you’re flying a smaller plane.

John Arrow: If you’re flying a smaller plane. If you’re flying a larger plane, it’s still going to be cheaper to do it yourself than it is to own a plane and have a crew and a team. If you really want the ability to go anywhere in the world on a whim, you’re going to need a whole flight team. And it’s just prohibitively crazy. There’s very few people in the world who have a flight team. You need multiple airplanes because one of them is going to be down for maintenance. But if you think about a Cirrus, yeah, flying with Cirrus, the SR22 that I fly, it’s very comparable, especially if you have four people to like first-class tickets, probably a little bit less.

Brad Weimert: Well, so this is, I got to break these things down. So, one of the ways I can rationalize this conversation, the people listening actually would benefit from hearing the breakdown, but the breakdown is sort of deceptive and confusing, I think, without actually hearing all the pieces. So, you can say, yeah, for four people, it’s comparable to first class. So, let’s talk, how big is the plane? How far does it go? And then the way that these things typically are measured are like cost per flight hour for the plane, right? And usually, the cost per flight hour, I shouldn’t say usually, that can either embed things like maintenance and you amortize that over the cost of the year, or you look at that as an independent line item. And same thing with the pilot.

John Arrow: Right. If you think about Cirrus SR22 that I fly, I mean, this is a plane, amazing plane. It’s got a great track record. You can buy them from anywhere from about $300,000 to over a million now, depending on the age you get in the feature set that you get for an SR22. So, you have obviously the capital cost, opportunity cost of the money. Then the next biggest cost you’re going to have is fixed. And the fixed costs are every year, a plane needs to basically have an annual exam where they take it completely apart and put it back together. And there’s time life parts where even if you haven’t flown it at all, if it’s a certain age, like the parachute in the plane, you need to repack it. And so, those one-off events can easily cost $30,000 or $40,000 a year, but those are more rare.

So, I’d say like as a budget from someone who wants to get the type of plane that I want to fly, I would figure probably about $40,000 a year and $40,000 to $50,000 a year in fixed expenses. And then you use maybe a thousand dollars an hour variable. That’s how I would think about it. And the fixed expenses are going to include everything from hangar costs to annual fixed maintenance, to insurance, to training, to updating the avionic charts in the plane.

Brad Weimert: Okay. So, let’s go high end on this. So, let’s say you spend a million dollars on a plane and you put 20% down on it and you get a loan for the other 80. And so, you’re in that for four grand a month or something, something like that.

John Arrow: That’s right, yeah.

Brad Weimert: And then you’re 40 grand overhead, so now you’re seven grand a month to hold, carry the plane just to keep it. If you’re flying, any given flight that you’re on, we’re in Austin, so let’s say it’s two and a half hours because that’s how long it takes to get anywhere from Austin. I guess it might take longer. Let’s talk about that in a second. But let’s say a round trip is six, seven hours. So, now, if you fly once a month, you’re seven grand per flight and you could put four or five people on the plane. Is that the size?

John Arrow: Yep.

Brad Weimert: So, if you split it, then that makes sense. If you’re flying solo, then it’s seven grand or so each time you take the plane, wherever you want to take it.

John Arrow: Right. You’re really not going to come out ahead unless you want to enjoy doing it. It’s always going to be quicker.

Brad Weimert: Yeah. I don’t even think. So, one of the reasons that I want to highlight is because, I think it depends where you are when you say come out ahead, right? So, if your goal is to not deal with the airport ever, have flexibility of time when you can come and go, right, be able to land in smaller airports, those are all big benefits.

John Arrow: They’re huge benefits. And if you get joy out of the journey too.

Brad Weimert: That’s a whole ‘nother one.

John Arrow: It makes the road trip way more fun when you’re flying. I mean, I can go to New York, I’m stopping once in Nashville for fuel, but it’s a fun flight. It’s going to take you longer than commercial. It’s going to be like six, seven hours. But it’s a fun trip and you can go on your schedule, the plane won’t leave without you, which counts for a lot. It’s just a fun thing to do.

Brad Weimert: So, what’s the range on that plane? And yeah.

John Arrow: It’s about a thousand nautical miles with the reserve. And so, that means, wind is a huge, huge thing. If you’re going…

Brad Weimert: A small plane.

John Arrow: In any plane, actually, because if you’re going east, you get the tailwind, which is really nice. You get to add whatever the speed is to the plane. But if you’re going west, they call that going around the world, the hard way, you take it away. So, east trips are always going to be way, way faster than west trips.

Brad Weimert: Interesting. So, I learned this the other day. I didn’t know this actually. I was talking to one of the robots and they were explaining to me the difference between nautical miles and the rest of the world miles, which is bizarre. And so, nautical miles are 6,060 feet, something like that.

John Arrow: Right. It’s a minute of latitude.

Brad Weimert: Yes, a minute of latitude, which equates to 6,060 feet or something, very close to that, versus the 5,280 by land.

John Arrow: For statute, yeah.

Brad Weimert: Bizarre. It is.

John Arrow: That’s how we measure things in knot still.

Brad Weimert: It’s so bizarre.

John Arrow: But as fun as the small planes are, I love them. I think most people, if you have some time, it works really well for getting around the country, the United States. I’ve taken mine out overseas, I’ve taken it a lot of different places, but it’s about the journey. If you want utility, then you got to go up into the turbine world where there’s jets and then the cost increases by order of magnitude.

Brad Weimert: A lot, yeah. So, the other thing that I think is a good takeaway for entrepreneurs that are thinking about this stuff is you can appreciate a huge chunk of the plane on the front end. And so, you can actually take, and I don’t know, are they 100% depreciation this year?

John Arrow: I think they renewed it. Yeah, it expired and they renewed it. So, you can take 100% of depreciation. It is an area that’s very kind of looked at, so you have to– I’d recommend getting professional to help you figure out, and it’s only for the portion of the flights to use that are related to the business. So, if you go and take family somewhere and there’s not a business for a reason, you can’t count that.

Brad Weimert: Right, right. But I think if more than 50% of the cost of the plane itself is used for business, then the cost of the plane itself can be depreciated entirely.

John Arrow: I believe that’s right.

Brad Weimert: Yeah. So, if you spend a million dollars on a plane and you had a million dollars of earned income, then effectively you have zero earned income for that year.

John Arrow: Right. And that’s pretty wild. I mean, that’s a huge, huge incentive. It’s funny, we always try to look for business. I love aviation. Anybody in the aviation world tries to figure out how to make it from a business standpoint have a positive ROI. And it’s really difficult when you add in airplanes because we like them a lot, right? There’s a saying that if you’re starting an airline, the way to become a millionaire starting an airline is to start out as a billionaire.

Brad Weimert: Yeah, right.

John Arrow: And even Warren Buffett has lost tons of money because of airplanes. You look at most of his investments, there’s sound, he did diligence. NetJets is an example though, where he was buying planes over market from Textron and it was just this horrible situation that was losing tons of money. And so, I think you have to look at something like airplanes as more of an entertainment thing rather than a sound business investment.

Brad Weimert: Yeah. Well, that’s actually why I want to talk about it, because if you look at your plane, your use case, is the Cirrus a four-seater?

John Arrow: This one’s a four-seater. They have a five-seater version. It’s the same airframe essentially, but they crammed another seat back there.

Brad Weimert: Yeah. And then there are other ones that are similar that will hold six, seven, eight that are turboprops. And I can’t remember the brands off the top.

John Arrow: TBM and Pilatus.

Brad Weimert: Yeah, TBM and Pilatus are the ones that I looked at actually, also. So, those are the turboprops that also have more range. Maybe like 1,500 nautical, something like that.

John Arrow: Yeah, some of them can go almost 2,000.

Brad Weimert: So, you go to 2,000 nautical miles and then basically from Austin, from the center of the country, you can get to essentially anywhere in the country without stopping for gas. And they fly at like 300 to 350 miles an hour-ish, which is pretty good.

John Arrow: And above the weather too. That’s the other thing. They go much higher than the piston planes. Turbine planes can go above the weather. They can get better routing too, as a result of being up high.

Brad Weimert: Interesting. And so, then you step up the next level and then you’re looking at sort of small/mid-sized jets. And those are just, you go from a thousand bucks an hour to operate to 3, 4, 6, 7.

John Arrow: Right. The fixed costs go up immensely. I would say even more than the variable cost, some of these planes, and it’s the type of thing that the plane stops being– the worth of the plane is the engines. There’s a saying that when you’re buying a jet, they give you the plane for free when you buy the engines. It’s all about the time that you have left. If you’re ever browsing on eBay or any of the sites like Controller where you can look at airplanes and you see a really good priced jet, it’s because the engines are timed out and that plane’s probably not worth anything.

Brad Weimert: Timed out, meaning that they have a defined lifespan by the government.

John Arrow: By the FAA, works with the manufacturer to create a time called TBO time before overhaul. And unlike piston planes where you can fly it beyond that time with a jet engine, you have to replace it then. It’s required. That plane becomes unairworthy. The only people are going to be flying, it is some banana republic country that doesn’t have like an FAA equivalent.

Brad Weimert: And the reason that you need to overhaul it is because it’s not safe anymore.

John Arrow: Exactly. That’s the most important part of this. And it’s determined, these things wear out and they’re extremely expensive to replace or overhaul. On a typical jet like a CJ3 or something, the engines might be $2.5, $3 million each.

Brad Weimert: Yeah. And so, the fixed cost for a small jet versus a prop plane, you go from 40 grand on a prop plane to what? 250 to 350 in a jet, small jet?

John Arrow: I think that’s reasonable. And then, if you’re not flying it yourself, you’re going to need a staff too, right?

Brad Weimert: And some of those are two pilots.

John Arrow: Nice thing is most of the small jets, you can get a waiver to do single pilot on.

Brad Weimert: Oh, okay.

John Arrow: If you’re flying what’s called Part 91, so not as a charter jet, but just as your own jet, and you can fly them with one pilot. So, there’s a plane I’m looking at called a Citation 510 Mustang, where it’s a six-seat small jet and you can fly it completely by yourself.

Brad Weimert: Yeah. And then if you’re hiring a pilot, you can count on maybe, what, per trip?

John Arrow: It depends on the type plane. Obviously, the bigger the plane, the more expensive the crew gets, but figure about a thousand dollars a day plus expenses.

Brad Weimert: And so, then if you different then, and this is why I like breaking down this math because for anybody that’s, for the 7% of the audience that’s considering a plane, these are details you don’t deal with when you’re doing commercial or when you’re flying yourself. But if you take your plane somewhere and you’re there for three days, you’re paying for the pilot to be there for three days or you’re flying them home and bringing them back, right? Like, there’s a cost to these things, which is also why planes are f*cking expensive.

John Arrow: It is. Yeah, we just took a plane to Vegas and that crew that didn’t leave, they had hotels in Vegas too. We didn’t see them on the casino floor, but they were there, yeah.

Brad Weimert: Probably for the best, depending on their role on the plane.

John Arrow: Probably for the best. But the crazy thing is, unless you really enjoy having a plane, I recommend chartering. I think that makes just so much more sense for most people. Unless you want to fly yourself, you want to fly yourself, then by all means, down that path.

Brad Weimert: Yeah. There’s some, like the frameworks that I’ve heard for when it makes sense to buy a plane or when it makes sense to charter versus buy are basically based on flight hours per year. And so, until you’re flying something like 150 hours a year, you shouldn’t even think about buying it.

John Arrow: I think, unless it brings you joy. Unless it brings you joy by having it and knowing that you can go. But if it’s a piston plane, hopefully, it’s not going to move the needle that much. But you’re right. If it’s a jet plane, you need to be putting that into a charter fleet. The opportunity cost is too high if you’re only flying 150 hours a year. I mean, everybody who has a jet puts it in the charter. It’s very rare not to, unless you’re like Mark Cuban or something.

Brad Weimert: Yeah, yeah, yeah, unless you have way too much money. I don’t know what that number is, but yeah, okay, well, that’s interesting, man. How often do you fly?

John Arrow: I try to fly a few times a month, my plane, just to stay proficient. I think it’s one of those things that brings me joy. I’m extremely present when I’m doing it. I’m not multitasking and I love that feeling of just having to be there focused on the task at hand, not texting. With self-driving cars, we’re not going to get that anymore. It’s going to probably be only flying where you get that moment where you have to be really in the zone or on like a motorcycle or something.

Brad Weimert: Yeah, that’s true. Well, I love the winding road here. Tell me about selling Mutual Mobile and kind of the next chapter of life as you see it. So, my understanding is that Mutual Mobile was acquired by Grid Dynamics. Leading up to that, you were pushing $50 million in revenue for one of the years leading up to it. But the story of the actual sale wasn’t detailed out, anywhere that I read it. How did you go about selling it? Did you feel like you got a good number? How did you tee up to sell it? What did that look like?

John Arrow: Well, the most important part of the story is we sold the company twice. So, we bootstrapped the company and we seriously looked at raising, when we were early 20s, we looked at doing our venture round and we grew so fast, we had private equity guys calling us, wanting to put money into the company. We went really far down that path. So, 2009, we launched the company. We did a million dollars, a little over a million that first year. The next year, we did four and a half. The year after that, we did 15. And the year after that, we were flirting with 30. After that, we had all of these companies coming to us, all these firms saying, look, can we put money in?

We thought it was great, but like, yeah, you want to invest in our company and let’s have all these conversations. And then as 22-year-olds, 23-year-olds, we learned about liquidity preferences and how just because you get a good valuation number doesn’t mean that’s going to be good for you. They were offering us arrangements where not only could we put money onto the balance sheet at a really nice valuation, but we could take out secondary, we could take out founder liquidity and…

Brad Weimert: Which means that if you raised money again, you could take money off the table at that point in time?

John Arrow: Right. So, we could take money out at that round. They would basically say…

Brad Weimert: Oh, got it, in that round.

John Arrow: They would write us a check, personally, buy our shares. We would still get diluted because they’d be putting money onto the cap table too. But that seemed like a great deal. And then we started thinking about this more and there were these liquidity preferences. We’d have to return a multiple of the capital. And at that point, it’s like, wait a second, if we want to sell this company, if our goal, and we started the company with kind of the goal, or at least I did, I want to make it so I can create something where I never have to work again if I don’t want to.

Brad Weimert: Can you break down the liquidity preferences for me?

John Arrow: It was something like a million dollars for each of the early shareholders that were selling who wanted to take money off the table, and then the rest of it would be going onto the balance sheet. And I think that term sheet that we seriously considered was at maybe like a $75 million valuation. So, it was very little dilution, but the liquidity preference was pushed in three. And so, we were looking at a situation where if we wanted to basically take money off again, you need to sell it like a $200 million valuation.

Brad Weimert: Oh, got it.

John Arrow: Right. Which like, okay, yeah, we’re really ambitious, we believe in this, but we believe that we’re going to have the CAGR and the growth to support 20% of a billion dollars valuation. Maybe, maybe not. And we had some disagreement as a team around that and what we wanted to do. And ultimately, we passed on that deal. It was great. It was with a great private equity firm called FTV out of San Diego, I believe, passed on that. And then we said like, what do we want to do? And I said, I want to sell the company. Like, it’s insane, if we’re getting these types of valuations right now in our line of business, we were getting valuations that were 2x revenue, which is kind of insane for business like ours.

Brad Weimert: Yes. And also, unless you actually know your type of business and the expected valuations, nobody knows.

John Arrow: Like, 99% of the people hear that and they’re like, I don’t know. It’s hard to say. And I think that’s one of the things you go through as an entrepreneur. You go through these days where, how my business is worth billions of dollars or my business is worth zero. And you have this oscillations of emotions, this vacillation, and you go back and forth really, really quickly. And so, we were having an existential discussion at the time as founders of should we keep growing or should we sell? And I was kind of vehemently in the camp of let’s sell. And two of my co-founders were like, no, we should keep building and growing.

And I think what was amazing about that is we found a consensus, like, let’s run a process and whoever wants to sell can sell. We’ll do a minority deal. We won’t sell the whole thing, so we’ll run a process. And we hired a bank, an investment bank. They were great. And we started getting in all these term sheets from a ton of different types of buyers. Most of the buyers insisted on buying the whole enchilada.

But there was one organization, WPP, which is a giant advertising conglomerate on Madison Avenue. They employed 300,000 people. they said, we’ll give you a minority deal if you want it. We’re happy to. We had a term sheet for well over, about $100 million where they would’ve bought the whole enchilada from SAP. We passed on that. We went with WPP at a slightly lower valuation where it allowed every founder that wanted to sell to sell. And the thought process was, okay, I’m going to sell the most because I want to sell the company. And then my two co-founders were going to run the organization after that, I’d stay on as chairman.

And so, we did that deal, and that was probably the best decision that I’ve ever made, was taking a fair amount of chips off the table in that junction. I stayed on as chairman. but I left a CEO and, and we had two co-CEOs for a while. I think when you’re running a company like that, you believe that there is no limit to what you can do. And right around that time after we sold, technology development in our space started commoditizing a lot. We were facing wars on multiple fronts and so, our revenue didn’t continue that…

Brad Weimert: Trajectory.

John Arrow: Right. And it was insane. It like looked like a problem up until that point. After we sold, and I think partly because we sold, there wasn’t the same emphasis, the same urgency. Before that, we had 99.9% of our net worth kind of, yeah, in this company. We had companies before this, but this was something much, much greater, much more grand. But after that kind of comfort, got into our bank account, we ended up having this less urgency because everybody sold a little bit. Everybody was a millionaire after that even though we sold different amounts.

And so, I left and stayed on as chairman. And as the company kind of continued running but leveled out from a revenue standpoint, the valuations also got tighter in the market. So, if we wanted to sell again, we wouldn’t be able to sell at kind of the same multiple number. Five or six years go by and just life happens and the board asked me to come back as CEO. I said, I’ll come back, happy to come back, but I’m only going to come back on the condition that we’re going to sell the rest of the company. And at that time, everybody was in alignment. So, I came back. We fixed things up. We got growth happening to a degree, and then talked to some banks. I’m like, I know how to do this. We’re not going to pay them their commission this time. And so, I ran the process as well…

Brad Weimert: Oh, damn. Really?

John Arrow: Second time around. And we sold to Grid Dynamics out of the Bay Area.

Brad Weimert: Got it. I mean I have a couple questions here. Had you not run the process yourself, do you think you would’ve gotten more suitors or a better deal?

John Arrow: Well, it’s funny, I got to look down that can a little bit because we did initially retain a bank. And the reason I wanted to retain a bank is it kind of gave conviction to me that our board was aligned with doing that because you have to commit to a tail when you hire an investment bank. But even if you fire the investment bank, there’s 18 months where they still collect the commission, kind of like a realtor.

Brad Weimert: Oh, wow.

John Arrow: And so, we hired the bank. The market wasn’t right. It wasn’t great timing to sell. We weren’t getting the types of term sheets that we wanted to. I said, let’s go back, let’s work on the business. So, we terminated that relationship. We waited 18 months and then we restarted the process. I was back longer than I expected. And we restarted the process and I was able to– I think when you’re invested in it, it’s your baby. You’re kind of able to solicit even more interest than some Wall Street firm that is divided across half dozen clients, and so…

Brad Weimert: Yeah, I think that those questions are always interesting, when to do it yourself and when to hire out expertise and when to take the time to learn the expertise from those you hired so you can do it yourself the next time.

John Arrow: Exactly.

Brad Weimert: Or when you just always hire that expertise. And realtors may be an after comparison, probably not because they offer very little value in the marketplace in general, but maybe the best ones offer some and you can learn from them and then you know what you’re doing.

John Arrow: Yeah. I would say it’s on probably par of the amount of value that investment bankers offer too.

Brad Weimert: Oh, is it really?

John Arrow: The good ones made me go really well far and beyond, like the good realtors. I’ve worked with both kinds for different companies along the way. The first firm we worked on was exceptional. But I will say that the organization that matters the most when you’re selling a company is the law firm that you work with. I think that’s even more important because they’re driving the T’s and C’s, right? And that’s bigger in most cases in the economics that are on the LOI on the term sheet is how does this play out? Because any company that’s selling itself almost surely will have some type of earnout now. And making sure that you hit and maximize that earnout is so, so key. I don’t think I’ve ever heard of an earnout where litigation isn’t threatened later on or like air happened. I think we were really fortunate our earnout, we avoided anything on that. But there’s always a lot of contention around earnouts and around how you calculate things like networking capital after the transaction. And a good law firm will guide you through that, whereas a good bank kind of just wants the deal to get done and doesn’t care after that.

Brad Weimert: Yep. I think that’s great advice, man. And I think to close that comparison, a great realtor will look at the terms in addition to the money and not just try to get it done so they can get their commission.

John Arrow: That’s a great point, yeah.

Brad Weimert: But all negotiations are, if negotiations were just priced, then you would get really sh*tty things or really great things for that price. No, the terms really, really, really matter, right? No, it’s half the equation, if not more.

John Arrow: And one of the things that we learned along that way about the terms is that the first negotiation is negotiation you’re doing with an investment bank. If you are hiring a bank, the terms matter so, so much. My co-founder, Tarun, did just such a wonderful job. Once we found the bank, there were some terms in there that were not very advantageous to us and he pushed very hard on them. And we got a better, better arrangement as a result of that. So, it’s kind of like when you’re working with a realtor, you don’t have to just take their paper and say, these are the terms. Everything’s negotiable, even if it’s written in caps, right. And they don’t send you the DocuSign. The PDF is not what you should be signing.

Brad Weimert: Yeah. No, I couldn’t agree more. I think that’s one of the beautiful lessons from world travel is that everything is negotiable at any store or place. But the other is great lessons from entrepreneurship, like we’re all just making sh*t up. Yeah, absolutely. Just because you stamp it out, put it in a DocuSign or put it in a PDF or it’s hard coded, none of that matters. Somebody made the decision, we can still talk about it.

John Arrow: Worst-case scenario, they say, no, we can’t move on that.

Brad Weimert: I love that, man. Well, I know we’re coming to time here. What other fun sh*t can we talk about? No. What advice do you have? We have a lot of fun things we could talk about. What advice do you have for new entrepreneurs right now?

John Arrow: This is the single best time in the history of humanity to be an entrepreneur. I say that with complete conviction. I think it went from two and a half, three years ago to being one of the worst times to one of the best times because three years ago, really hard to get engineers. It was just super tight and everyone was hiring. You had to compete against Meta, you had to compete against Google for people. And now, if you’re a first-time entrepreneur, you don’t need engineers. You don’t need designers. If you’re non-technical, you don’t have to go find a technical co-founder.

These agents, these tools like Cursor and Gemini 3 right now, which is amazing, you can just go do things on your own and try it out. And I just think that this is the most exciting time in humanity because you can think of a product, build it the next day, and launch it day after that, and possibly have revenue going through. I mean, I do that all the time and test the ideas now. I have a team. I’ve hired over a thousand engineers and I used to always go back to them, and for really key mission critical things, I’ll go back and I’ll find those people. But now, more often than not, I’ll just test the idea out myself because I’m not an engineer. And now I can kind of ship things and launch things without needing to be dependent on somebody else. And not only is it cheaper, it’s faster and there’s no room for something getting lost in translation. And I do this all the time, just playing around. It’s a game. It’s fun.

Brad Weimert: Yes. What tools do you use to do that? Right now, it’s the end of 2025, so this is going to be a bit that you’re going to have to cross reference if you’re listening to this in ’27, but…

John Arrow: And I would give a disclaimer, if I have no interest in the companies I’m recommending here, but v0, I love a lot. Right now, Vercel owns them, I believe, v0.app. It’s just the easiest tool for creating a user interface that you’ve ever seen. It does some of the backend and middleware stuff too, but you can completely go to shipping just with v0 and probably ChatGPT. That’s one of the tools that I use the most. I think it’s even easier than Cursor.

Brad Weimert: Amazing. I love it. John Arrow, man, it’s great to pick your brain and hear some stories.

John Arrow: Awesome. Well, hey, thanks a lot for having me, Brad.

Brad Weimert: Definitely, man,