The PE CEO

Private-Equity CEO x2
Scaling what founders spark. Building what comes next.

[The PE CEO @ThePECEO]

Founders get all the glory.
PE gets all the blame.
I’m the guy in the middle.
The CEO who shows up after the founder exits — and builds what lasts.

Been here before. Doing it again.
Real talk. Follow along!

[The PE CEO @ThePECEO]

@markbdelaney @PoorAtAuberge Never does. It can work if a company moves from 5 days/wk in person to more of a virtual/hybrid/regional hub & spoke model.

[The PE CEO @ThePECEO]

@WalbridgeSMB @markbdelaney Chipotle moved for Brian, as an example.

[The PE CEO @ThePECEO]

@RosserJobs Ha I’m sorry. I thought you were the client!

[The PE CEO @ThePECEO]

@alt_w_v_g Ha. I’m mostly joking. I agree you can. But how do you figure out who to take the phone call or coffee chat with? What is your criteria to narrow down?

[The PE CEO @ThePECEO]

Another pro tip… if your CRM company where you store CC for processing membership fees doesn’t have a Credit Card Updater, switch! These tools allow you to automatically update credit cards numbers that go bad because they were lost/stolen/replaced/expired and lets you keep auto payments going. Big time and revenue saver.

[The PE CEO @ThePECEO]

As you get to bigger scale, you should be able to negotiate this if you find a payment processor willing to accept lower rates based on the membership agreements you have in place and that the first txn to secure membership was made with a card swipe/tap. Should be able to get to 250bps or so.

[The PE CEO @ThePECEO]

I would a) plan to go and b) book morning / afternoon / night refundable flights for every day of the event so you can get home within 8hrs. Most likely, even if she goes into labor, you’d be there in time.

I say this only because she is telling you to go. You should pressure test this. Most ppl would stay home. But I get the “Super Bowl” thing and it’s a big deal to miss. But not as big of a deal as missing the birth of your child. Plan accordingly!!!

[The PE CEO @ThePECEO]

Pretty sure a half cash, half stock deal will imply a 25% or so valuation decline to existing GME holders based on the dilution they would take by funding the deal.

Would need to spin up a quick model to prove it, but order or magnitude this is roughly correct.

[RetailStock @StockRetail]

West coast here, so I just finished watching the interview with @ryancohen

People taking shots are missing deeper points imo:

1- He seems cagey - Yeah, why tell everyone everything and let shorts try to work against him?
2- He seems less than friendly - Yup, the cnbc crew has been, at times, nasty to gme and amc. Think he forgot? He didn't and he let them know pretty clearly.
3- He highlights perverse incentives of boards and execs (I LOVE THIS). It tells me a big part of his plan is simply to remove nonsense and wasteful spending.

Honestly, I enjoyed the interview. I felt it further cemented the fact he cares about running a company the right way, pursuing value, and rejecting the poison that has grabbed so many corporations.

Rooting for RC, Gamestop, TRK, and Retail

Let's go
$GME

https://t.co/BtB8KakP61

[RetailStock @StockRetail]

West coast here, so I just finished watching the interview with @ryancohen

People taking shots are missing deeper points imo:

1- He seems cagey - Yeah, why tell everyone everything and let shorts try to work against him?
2- He seems less than friendly - Yup, the cnbc crew has been, at times, nasty to gme and amc. Think he forgot? He didn't and he let them know pretty clearly.
3- He highlights perverse incentives of boards and execs (I LOVE THIS). It tells me a big part of his plan is simply to remove nonsense and wasteful spending.

Honestly, I enjoyed the interview. I felt it further cemented the fact he cares about running a company the right way, pursuing value, and rejecting the poison that has grabbed so many corporations.

Rooting for RC, Gamestop, TRK, and Retail

Let's go
$GME

https://t.co/BtB8KakP61

[The PE CEO @ThePECEO]

Buying Netflix would have possibly saved the Blockbuster brand. But 9,000 locations would close no matter what. And the Blockbuster team couldn’t bring themselves to be the ones to bankrupt their franchisees directly. That’s the whole story. (End)

[The PE CEO @ThePECEO]

You’ve heard the story… Blockbuster could have had Netflix for cheap. Possibly one of the most short-sighted corp M&A mistakes in history. Blockbuster didn’t pass because they were short sighted. Blockbuster passed because they (thought) they were in a different business than Netflix. (1/12) 👇

https://t.co/UPzy6YJ4Lr

[Yasmine Khosrowshahi @yasminekho]

The year is 2000.

Two men walk into Blockbuster's Dallas headquarters in shorts & sandals.

Their company was in $50 Million debt.

They asked this mammoth($6B company) to buy them.

Blockbuster laughs at their ask of $50 Million.

That laugh wiped their existence off the planet.

Here's how:

Blockbuster had $6 billion in revenue, 9,000 stores worldwide, and 60,000 employees.

Netflix had $5 million in revenue, 150 people, and $50 million in debt.

But still, this ant(Netlix) was able to eat this elephant(Blockbuster).

It started with a phone call at a dude ranch.

Marc Randolph, co-founder of Netflix, was on a corporate retreat at Alisal Ranch, deep in the mountains outside Santa Barbara. Horses. Dirt roads. No reason to dress up.

He was in shorts, a t-shirt, and thong sandals.

That's when Blockbuster called.

"We'd like to see you. Tomorrow. In Dallas."

Randolph turned to Reed Hastings and said there was no way. Different time zones. No direct flight. Impossible.

Then they remembered they were $50 million in debt and had been trying to get this meeting for months.

They chartered a private jet.

The next morning, they walked into the 27th floor of a glass and steel skyscraper in Dallas.

Enormous conference room. A hardwood table the size of a small country. Blockbuster executives in suits filing in from one side.

Marc Randolph standing there in sandals.

He made the pitch anyway.

"Combine forces. You run the stores. We run the online business. Build a blended model. Our research shows it's a game changer."

The executives leaned in. Questions were flowing. Things felt good.

Then came the big question.

"How much?"

Randolph had rehearsed this on the plane. They were $50 million in the hole. The number was $50 million.

Silence filled the room.

He watched their faces carefully, trying to read the reaction.

Then it hit him.

They were trying not to laugh.

This tiny company, drowning in debt, at the lowest point of the dot-com meltdown, had just asked to be bought for $50 million. To the people running a $6 billion empire, it was almost comical.

The meeting ended shortly after.

Quiet cab ride to the airport. Quieter flight back to Santa Barbara.

Randolph sat with his head down the entire way, thinking one thing:

They are not going to save us. They are going to compete with us.

What happened next is where the story gets interesting.

Most people assume Netflix simply outworked Blockbuster. Built a better product. Won on merit.

The truth is messier and far more human.

When Blockbuster finally decided to take Netflix seriously, they nearly destroyed them.

They built exactly what Randolph had pitched years earlier. The blended model.

Rent online. Return by mail. Or return in-store. Or pick up in-store.

It was everything Netflix could not offer because Netflix had no physical locations.

Randolph admits it plainly. They could not compete with that. Blockbuster came frighteningly close to taking Netflix down entirely.

So why didn't they?

Here is where a single human decision changed everything.

Blockbuster had been targeted by corporate raiders. Investors who bought large chunks of stock, took seats on the board, and began pushing for short-term profits over long-term survival.

John Antioco was the CEO driving the fight against Netflix. He understood the threat. He had pulled a team out of the building, funded them properly, and told them to go after Netflix with everything they had.

Then the board denied him his contractually promised bonus.

He said: then I quit.

And he did.

The replacement CEO came from retail and convenience stores. His vision for Blockbuster was not winning the streaming war. It was asking why their 9,000 stores were not selling gum and clothing.

The online operation was abandoned.

Randolph describes it using a scene from an old Spielberg student film. A robot chases someone, getting closer and closer, almost close enough to grab their ankle. Then a cost calculation hits break-even and the robot just stops, turns, and walks away.

One second before victory.

That is what Blockbuster did.

Netflix scampered to safety.

On why Blockbuster never moved fast enough:

Imagine you are the CEO sitting on $6 billion in annual revenue. Someone walks in and says let's build an online component. You ask how much it will make in year one.

They say $2 million.

Do you pull your best engineers off working products and bet them on a $2 million experiment?

Of course not.

So the B team gets it. Then the C team. Each time underpowered. Each time failing.

Meanwhile Netflix was not a movie company. It was a software company built in Silicon Valley with people who had spent their entire careers writing software. Even Blockbuster's A team would have struggled to compete.

By the time Blockbuster committed fully, it was almost too late.

And then one bonus dispute ended it.

Blockbuster did not lose because Netflix was inevitable.

They lost because changing a $6 billion business model requires a kind of courage that is nearly impossible to find inside a company that is still winning.

They lost because the person with the will to change things was replaced by someone who did not believe change was necessary.

They lost because they were one grab away from winning and walked away anyway.

Netflix did not kill Blockbuster.

Blockbuster killed Blockbuster.

Netflix just showed up to the funeral.

[The PE CEO @ThePECEO]

The story was always going to end the same way… digital was going to take out video rental retail shops. The same way that Amazon killed Borders. The same way that Travelocity killed Borders and iTunes killed Tower Records. (11/12)