The Flywheel Story: How To Scale And Sell
The best things come out of someone solving their own problem; super glue, post-its…
Like many small businesses, building something new takes vision, passion and often a strong desire to not work for someone else.
When Rick Knudtson and Dusty Davidson met in 2012, growing a successful business to the size Flywheel attained let alone selling that business weren’t their goals.
“You may not get into it intending to sell it. You start [a business] because you hate your job and it’s a way to do the work you want to do with the people you want to work with.”
Flywheel started as a solution to a problem Rick and Dusty were experiencing and scaled to a profitable business the size of which was beyond anything they envisioned; growing from a handful of employees to over 300 in just a few short years.
Flywheel offers managed WordPress web hosting services for businesses. Flywheel was acquired in 2019 by WordPress hosting platform WP Engine.
So, how do you grow and scale a business that attracts a WordPress hosting giant like WP Engine? Lots of time and grit.
According to Rick and Dusty, businesses like Flywheel are harder to sell because it’s all YOU; your hard work and your time invested and when they grow quickly, the real challenge is to develop processes that support growth and the ability to scale.
Rick and Dusty visited what was once their old office space and is now Fruitful headquarters, to chat with Ben all about the Flywheel acquisition; knowing what their business was worth, rejecting multiple offers, and the growing pains small business experience as they scale.
Check out the episode where you listen to podcasts and get caught up on past episodes!
Ep. 17:
The Flywheel Story: How To Scale And Sell
Automated Transcript
Ben Lueders:
Hey, welcome to Growing a Fruitful Brand, where we discuss how to create and grow a brand that makes the world a better place for you, your customers, and your employees. I'm Ben Lueders, founder and art director of Fruitful Design and Strategy, and I'm super pumped about today's guests. Rick Knudtson and Dusty Davidson are both serial entrepreneurs who helped start the Omaha-based WordPress hosting company, Flywheel, over 10 years ago.
Since then, they were able to scale the company, sell it to WP Engine, successfully exit, and help another growing tech company called Workshop. Today, we get into the nitty gritty of acquisition. How, when, and why to sell. How much are you worth? How do you scale a company that would be valuable to a potential buyer? And be sure to stick around to the end to hear Rick and Dusty reflect on their lives after Flywheel. Rick, Dusty, welcome to Growing a Fruitful Brand. Thanks so much for being here in the hallowed halls of Flywheel, right?
Dusty Davidson:
It's fruitful now.
Rick Knudtson:
Yeah, it's a trip down memory lane. I love it.
Dusty Davidson:
It's good to be back. This used to be a closet.
Ben Lueders:
It's still kind of a closet.
Dusty Davidson:
[inaudible 00:01:15] to be honest.
Rick Knudtson:
We like what you've done with the place.
Dusty Davidson:
It's way, way better.
Rick Knudtson:
Very good.
Ben Lueders:
Thanks. What's your favorite change?
Rick Knudtson:
Oh man, put us on the spot.
Dusty Davidson:
Dude, that conference room is sexy. We had a conference room made out of rope-
Rick Knudtson:
And this is the part where you can do.
Dusty Davidson:
I'll send you a picture, you can put it up on the video.
Rick Knudtson:
You didn't have private conversations.
Dusty Davidson:
I'll be honest, I said this earlier, it's cool to see it back. When we moved in here, there was, I think 12 of us and it's a really beautiful space for 12 people. But when you have 65 people up here, it goes from being beautiful to being just really annoying. And we made the best use of the space that we had available to us, but you'd be honest, it's fun to see it with 12 people in it again or whatever. It's-
Honestly-
Rick Knudtson:
It's beautiful again.
Dusty Davidson:
It's almost built for an agency, to be honest. It's what took-
Ben Lueders:
Omaha.
Dusty Davidson:
Yeah, totally. Yeah. Felt like one of our customers.
Rick Knudtson:
Want to feel like our customers, yeah.
Ben Lueders:
That's awesome. Well, we love it-
Dusty Davidson:
If a State Farm agency had moved in here, your State Farm agent had moved in here afterwards, I would've died inside. But when I heard you guys were taking over, I was like, oh my gosh.
Rick Knudtson:
We're good.
Dusty Davidson:
Oh, it's so perfect. It worked out really well and it's good to be back.
Ben Lueders:
Oh, that's awesome. Well welcome. Obviously, you guys founded Flywheel, you're both serial entrepreneurs. You founded Flywheel in 2012, is that right?
Dusty Davidson:
Yep.
Ben Lueders:
We start up in 2013, so we're about the same age here in some ways. But today we want to get into scaling a tech company in Omaha, also selling a tech company, getting acquired and life after that as well a little bit because you guys have gone on to do more things as well, and I'd love to hear how that's gone for you. So first off, how did you guys meet?
Dusty Davidson:
Well, I had worked for a bit. I was always a technologist, a software engineer. I'd worked for a bit in corporate America and then ultimately hated that and had started my first company called Bright Mix with a partner, Kevin Zink, and we were a dev shop. We did a lot of work for creative folks, we were the developers behind the scenes of a lot of folks like Fruitful, a lot of back in the day, Secret Penguin or Oxide or What Cheer, these companies that grew up out of Omaha.
Rick Knudtson:
What Cheer, oh wow.
Ben Lueders:
Yes, let's go for the throwback.
Dusty Davidson:
Right.
Ben Lueders:
I love it.
Dusty Davidson:
And we did a lot of this just tech work for those creative folks. So A, we met a lot of really creative folks over that time period and a lot of people that I'm really, really dear friends with to this day and we were just growing that little tech consultancy and ended up hiring Rick. Got connected with Rick at a UNO career fair, he was going to school there. We had a booth.
Ben Lueders:
That is so cute.
Dusty Davidson:
He'd come up and-
Rick Knudtson:
It was adorable, yeah.
Dusty Davidson:
He came up and he asked what we were up to and he'd heard of us, which was cool and ended up hiring Rick is an intern and then hiring our other partner at Flywheel, Tony Necker, as a software engineer. He-
Ben Lueders:
At Bright Mix.
Dusty Davidson:
At Bright Mix. And so-
Ben Lueders:
I did not realize that.
Dusty Davidson:
The three of us worked together at Bright Mix for many years. We built a software product called Triple C together.
Ben Lueders:
I remember that, yep.
Dusty Davidson:
We went on to help Grow and Nurture as well and it's doing very well today but that's the impetus. And then fast forward a bunch of years, we went on our separate ways. Each did consulting work and got the band back together to start Flywheel. Rick had a cool idea and-
Rick Knudtson:
And there's a good story about me working at Bright Mix, as I remember meeting Dusty at UNO and I had already decided that I want to work at an interesting creative company in Omaha. I'm not going to go work in corporate America, I'm going to do something interesting. Bright Mix was cool, What Cheer was cool.
Dusty Davidson:
What Cheer was cool.
Rick Knudtson:
There was lots of cool agencies in Omaha. And I sent an email to both Dusty and John Henry, I'm on the spot here on the podcast.
Ben Lueders:
John Henry Müller, if you're listening.
Rick Knudtson:
And I said, "Hey, I'm not doing anything this summer, do you need an intern?" And the funny thing is John Henry, this is very Dusty though. John Henry responded right away and was like, "We aren't hiring anyone." I was like, okay. And Dusty took a week to respond and was like, "Absolutely, come down." So all right, guess I'm going to go work there. So my life was like, that was a fork in the road right there, I could have been hanging out with John Henry for many years, but-
Ben Lueders:
That would've just been a nightmare.
Rick Knudtson:
Oh, terrible.
Ben Lueders:
Can you imagine?
Rick Knudtson:
John Henry's the worst?
Dusty Davidson:
The worst.
Ben Lueders:
He is just a mean guy. That's the vibe you get.
Dusty Davidson:
Can you imagine being mentored from a creative standpoint by John Henry Müller? It wouldn't have worked out for me, not at all.
Ben Lueders:
Well, you know how I kind of got in this whole world and this whole scene was I won that big Omaha coloring contest that John Henry did with What Cheer?
Dusty Davidson:
Oh, forgot that.
Ben Lueders:
I was just a kid working in my basement for a-
Rick Knudtson:
I didn't know that at all.
Ben Lueders:
...remotely before remote was cool. He did that coloring contest and I just wanted to go to Big Omaha so bad. Which obviously Dusty-
Rick Knudtson:
You got your first ticket at Big Omaha?
Ben Lueders:
That was, they had big-
Rick Knudtson:
Because you won a coloring contest?
Ben Lueders:
That's how I met all you guys.
Dusty Davidson:
That's amazing.
Ben Lueders:
And so it was so fun for me because I looked up to John Henry and Drew Davies and all those guys, I'd never met him. And then I was sitting with them at Big Omaha and it just, oh man, the whole world opened up to me. It was the coolest, I felt like the most- I won the golden ticket. It was so special.
Dusty Davidson:
That was a cool time in Omaha.
Ben Lueders:
Very cool time.
Dusty Davidson:
And a lot of things sprouted from that timeframe, whether it's Moore agencies-
Ben Lueders:
MasterCraft.
Dusty Davidson:
...or MasterCraft. Obviously Flywheel came out of that for the CREW startups in Omaha. Yeah, it was cool-
Ben Lueders:
Silicon CREW News.
Rick Knudtson:
And a ton of friendships, I think that's where I look at it. It's like all of the, I think young men and women that were there at that time, I would say that I'm still friends with the majority of them to this day. And if I see them at a coffee shop or we are on a podcast together or whatever, that's a really cool part of that. I see John Henry a lot, actually. The-
Ben Lueders:
That's awesome.
Rick Knudtson:
He's-
Dusty Davidson:
Doing cool stuff at Pet Friendly. He's really still-
Rick Knudtson:
He's working, doing cool stuff at Pet friendly now and it's fantastic, it's doing amazing work. And so that evolution is really fun to see. And it's one of the reasons is, Rick and Tony started Flywheel is, you got to work with your friends. This was like, you can start a company in lots of different ways, but the reality is, we had all of our friends were designers and agencies-
Ben Lueders:
You might as well.
Rick Knudtson:
It's what we knew and it becomes a really cool way to, I think build products for yourself and for people like you.
Ben Lueders:
Yeah. That's super cool, that's often what we say about Fruitful too, is the same thing: we were just a bunch of buddies hanging out and so we just did a thing together, we might as well. But it's totally true that that was happening a lot in Omaha at that time, there was popping up where people are just hanging out. Even how Grand Mortar started, it was Mike and Kristen are sitting over here and Camp Coworking and Eric's over here and things just started happening. It was super fun and inspirational to watch him be a part of. So let's focus in on Flywheel though, so tell me, how did Flywheel start? What is Flywheel Wheel and what was it trying to solve in the internet tech space?
Dusty Davidson:
Well, I think that in the simplest form, Flywheel was a better way to work with other developers building websites initially. We were, like Dustin mentioned, Bright Mix was building WordPress sites primarily at the time. I was working there, eventually became a freelance web designer, spent about a year doing that, building WordPress sites and Tony was in the same boat. We were across the street from Good Twin, which is another creative agency throwback. But we had all these friends building these sites and while I was freelancing, I was building a website for a client out in New York, Jessica Wyman, who happens to be one of the early team members at a company called Lever here in Omaha now, but she was out in New York running a small agency. And I like to say she was looking for cheap labor, so she called her friends in Omaha and said, "Hey, do you know anyone that builds websites?"
And I was like, "Me, I build websites." So we started partnering on some stuff in my freelance work. And then she passed over this very big project, it was an architect in New York, it was the biggest contract I had ever seen and I was freelancing and I was terrified of building this WordPress site in the potential of it getting hacked, which I had seen in the past. This was 2011 and WordPress was growing fast, targeted a lot. So anyway, wanted to build a website, but I was terrified of what could happen, this architecture firm. And I knew that Dusty and Tony were far better engineers than I was.
Ben Lueders:
Because your background's design and development or you do both?
Dusty Davidson:
We would say that I got a degree in computer science, but I'm definitely more of a designer type, that's for sure. So yeah, I was a front end web developer, you might describe it as. And so I called Tony and Dusty and said, "Hey, I got this website, can you help me make sure it doesn't get hacked? Let's build a secure version of hosting, otherwise it's going to go on GoDaddy or something like that." In that product, that thing became Flywheel, this hosting product. And once we had built it and the site was online and it was working and running smoothly, this realization that we can't be the only ones in the world that have this problem.
Ben Lueders:
So when you built that solution really for this one big-
Dusty Davidson:
Totally.
Ben Lueders:
And you just baked the cost of that into the cost of the project basically?
Dusty Davidson:
Yeah, yeah. No, I actually vividly remember saying, "I'll split the money," I don't need to worry about that as much as I worry about six months from now getting a call from the client saying that something's wrong with the website.
Ben Lueders:
The site has turned into a Russian Sealise website.
Dusty Davidson:
That was the common example back then. So-
Ben Lueders:
It happens.
Dusty Davidson:
That problem was pretty acute for us at the time but with our relationships in Omaha and just creative agencies in general, it was pretty obvious that WordPress was becoming so prevalent and creative agencies just want to spend time designing, not worrying about hosting.
Ben Lueders:
Oh gosh, yes.
Dusty Davidson:
...obviously and we felt like there was a product there and that's what became Flywheel.
Ben Lueders:
That's very cool. So when we talk about Flywheel then, have this idea basically, you created it to solve a problem that you had and it's like, hey, maybe we could do something with this. When you decided to make it a company, make it a service, actually make it into something, did you always have in the back of your mind that you wanted to sell it someday? I'm really talking to people who might be thinking about selling their company or think about starting a company to sell, is that something that you should go into the company thinking or is that something that develops over time?
Rick Knudtson:
I think it's the nature of the style of company. So if you're a service company, you might not go into it think you're going to sell. I think the reason why you started it, in a lot of cases, I've known lots of people who started agencies or development firms, they started because they like me, they hate their job and it's a way they can make more money and do the work that they want to do and work with the people they want to work with.
Ben Lueders:
That's what I'm doing.
Rick Knudtson:
Number one, baseline. And they never go into it because they're going to sell. And also, those businesses are more challenging to sell often because it's based on your work, your time and so if you don't build great process, then it's harder to sell those businesses. With a company like Flywheel or Triple C, let's say to Flywheel, these are recurring revenue businesses, they're subscription businesses, if you do it, you don't have to be doing the work to make the money. That lends itself to being able to sell more easily. A, I think that's one thing.
Two is, because of that you also, you're committing early on to raising venture capital dollars. You're saying, hey, in order to grow, we need to take on investors to do it and if we're going to take on investors then, roughly speaking, you're committing to selling. And so I don't know that it was explicit, we didn't sit down day one and be like, we are selling this company. But I think everybody knew that because of the type of company you're building and the type of partners that you're bringing on board, it's inevitable someday. And at the same time, and we can get into this, you know that it's always an option or that that's always the thing, but you have no idea what it means, you never even think about it. It hits you in the face when it shows up and you're like, oh shit, right. We were selling, that's a thing. Because you're just so focused on building and growing in teams and product and customers, you don't think about it ever.
Ben Lueders:
But at the same time, when Flywheel was exploding and was the cool, sexy company in Omaha, I'm sure you had people coming to you wanting to buy, right? Did you guys get multiple offers over the years, or how was that experience?
Rick Knudtson:
Yeah, you get to a certain size and then once a month somebody-
Dusty Davidson:
It's true.
Rick Knudtson:
...emails you or calls you or texts you and is like, we'd like to buy you or partner with you or whatever. And we were silly enough sometimes to go down that path and be like, yes, people want us. And so you'd go down and you'd find out that they don't want to pay what you're worth or whatever the case is, and you just wasted a lot of time. And so we got pretty good at just being like, yeah, yeah, that's a distraction.
Dusty Davidson:
Yeah. When people asked, why did you sell the company? That's alluded to this idea that yeah, it's the type of company, you raise venture capital money. What a lot of people don't realize is that the second you do that, you are signing up to give the money back at some point, it's an investor. And there's lots of ways to do that, maybe simplest form is to sell a company, but maybe you could find another investor to buy out that investor or something. But I think that when you have a company that you can on paper say, I'll take a dollar and I can earn you too predictively, then it's a good reason to take investment, which is what Flywheel became. You're detached from hourly rates in the agency world, so it really is about investing in the company and therefore producing a bigger result over time.
So you signed up for it the second that you signed a paper that said there's an investor in the company, at some point you have to return that money. And so it's not that we didn't know that that was a thing in the future, but it was a reality. So you try to build a big good business on paper and you try to find great investors over time. And we always said to the company even, let's build something that we don't have to think about that. If you build a good business, things tend to work themselves out and that was always our approach. But we had multiple people over time.
Rick Knudtson:
Yeah. And we would always come to you and they'd be like, and I'll make up numbers, but they come to just be like, "We'll give you 10 million for business today." We'd be like, "No, our business's worth 20 million, we'd sell today for $20 million." And they were like, "No way, that's way too much." And we at the time were, let's say doubling in size every year and we did that for almost entire life of a Flywheel. So whatever we were doing at the time, we would say, "We're worth double what you think we're worth." And they'd be like, "No." And they'd be like, "Well, we'll just wait a year."
Dusty Davidson:
"We'll just wait 12 months." And they'll show you that we are worth that.
Rick Knudtson:
And then what happened is, so the next year, they'd come back and they'd be like, "Well, we'll give you 20 million now." And you're like, "No, you're not listening. If we're doing it, it's 40 million now." And the longer you wait, in a growing business, a SaaS business especially, that's the nature of it. And when the markets are hot and there's lots of factors, but over the period of Flywheel, yeah, we doubled in size nearly every year and so you end up with a lot of people that want to buy, but they want to buy it yesterday's price. And we fell prey to that for, or we were distracted by that a couple of times, but then we learned to be like, listen, put your heads down, build a great team, build a great product, acquire a lot of customers, treat them well and good things will happen.
Ben Lueders:
So spoiler alert, Flywheel was acquired by WP Engine, eventually. What year was that? How long has that been?
Rick Knudtson:
June of '19?
Dusty Davidson:
Yep.
Ben Lueders:
Okay, of 2019. And so tell the story of that, I think that'd be really helpful for our listeners to just hear how that goes. How do they approach you, what do those conversations look like and I'd love to know just more about the particulars of how that went down? How much did you sell for, that's what everyone wants to know, right?
Rick Knudtson:
Somewhere between a million and a billion?
Dusty Davidson:
Yeah, yeah, yeah. Roughly speaking.
Rick Knudtson:
I don't think there's any right or average or standard way that these kind of things go down but we weren't expecting to sell in fact. We had a board meeting this day and we had decided that we're not selling for 18 months and then we went to that party, that the happy hour after the board meeting and I remember getting a text from the CEO of WP Engine, who I had met once or twice probably at conferences. We weren't friends, we didn't have to talk a lot, but-
Ben Lueders:
Enough to have the phone number.
Rick Knudtson:
Well, an email, this is on my phone. It's like, "Hey Dusty, love what you're doing. We'd love to find a way to partner more." It's just the abstractest way to say we want to buy you. And this is the board, the Flywheel board, we're at happy hour and I would just turn to Rick and I was like, well this is weird, thanks.
Ben Lueders:
I guess we're selling.
Rick Knudtson:
And then honestly, 60 days later, we had sold the company.
Ben Lueders:
Wow!
Rick Knudtson:
It went very quickly. And that's unusual, but there's lots of-
Ben Lueders:
You know more, that seems like such a big thing.
Dusty Davidson:
It is one of those things that it wasn't the first email that we got that. Over many years, we probably had realistically maybe a half dozen that were relatively serious.
Rick Knudtson:
Serious, yeah.
Dusty Davidson:
Serious enough to get maybe to the point where we could tell that they weren't going to pay the price that we wanted or whatever the situation was. But we'd encounter WP Engine in the past, this email came in and we knew what it meant and the question at that point-
Rick Knudtson:
Partnership.
Dusty Davidson:
Yeah, partnership, right. But at that point we, like Dusty alluded to, we were already well-versed enough in this process of getting this type of email that we wanted to cut to the chase to be honest. We were like, well, we're not going to worry about this unless it's a real thing. We had great respect for WP Engine in the market, they were the leader, they had built good products, we had good respect from that perspective. So I think that that's why it moved fast, is we told them, we're not, what's this mean? Are we going to have a real conversation or not? And that's why I think it moved fast, is that we did cut to the chase. They did as well and-
Rick Knudtson:
Nobody wants to waste time and-
Ben Lueders:
No, no, no.
Rick Knudtson:
And if everybody's reasonably sophisticated about it, nobody wants to waste time. And so you get to, in fact, they came back with a price that was awful.
Dusty Davidson:
Yeah, they did.
Ben Lueders:
Oh, initially?
Dusty Davidson:
I remember that night vividly.
Rick Knudtson:
I remember that night as well.
Dusty Davidson:
...because we'd already talked to our board, we already convinced us as partners and the team leadership group that we were going to sell the company and they were going to make a reasonable offer. And here we are, we get the offer, we're like, that's not even close.
Ben Lueders:
So back up though. You don't have to say how much if you don't feel comfortable, but I am curious, how did you know how much you were worth? How one know how to evaluate themselves? It sounds like you saw that number, you knew instantly, you all knew we were worth more than this. How do you know?
Rick Knudtson:
I think there's two ways, at least as I think about it. One is that, you get to a certain scale and you're a certain type of company, then you can look at the public markets. You can say we are a software as a service company that's growing quickly, that's doing 25 million a year. You can look to the public markets and say, well there's not 25 million companies in the public markets, but there's a hundred million dollar companies in the public markets that are worth a billion dollars or they're worth 1.2 billion. You can look at what the public market signal is For companies like us, that's probably number one. And so if somebody comes back with a low ball offer, you can literally just be like, well that's not what the market is [inaudible 00:22:18]-
Ben Lueders:
For example, that say otherwise.
Dusty Davidson:
That say otherwise, yeah.
Ben Lueders:
That's probably pretty common though that you get a low ball at first, so you work your way up. Is that what you did?
Rick Knudtson:
Yeah, if I was buying a company, that's exactly what I'd do.
Ben Lueders:
No one's blaming them. [inaudible 00:22:31]
Rick Knudtson:
It's not about the approach in this and I'm super-
Ben Lueders:
Were you insulted or you just-
Dusty Davidson:
We were very insulted.
Rick Knudtson:
In the moment, we were very insulted.
Dusty Davidson:
I remember-
Ben Lueders:
But totally understood?
Rick Knudtson:
It's double-sided chess.
Dusty Davidson:
It was $5,000.
Rick Knudtson:
Yeah, yeah, yeah.
Ben Lueders:
Okay.
Rick Knudtson:
I just...
Dusty Davidson:
$1 , Bob.
Rick Knudtson:
This, it's like double-sided chess. Everybody knows the game, right? And the other component of it that's really important, and I think this is important both for the audience and for people who are looking to be in this position, it's you got to understand as founders, what's your number? You can do the math, you can do it in your head on if this then this for my family. And we've talked at length about, we have a fiduciary responsibility first to our families to provide and make sure that we don't do something stupid because if it goes to zero, that's a problem.
Dusty Davidson:
You've been working for 10 years of your life, I've no investments in my life. This is literally my entire net worth-
Rick Knudtson:
No 401k-
Dusty Davidson:
...wrapped up in this thing.
Rick Knudtson:
So you can't-
Ben Lueders:
Very similar to my story.
Rick Knudtson:
Yeah, you know, so you are, yes, there's a market price, but you also are thinking, well I've worked so hard for this, my family has supported me during this time-
Ben Lueders:
I'm sure late nights and not seeing them on weekends sometimes.
Rick Knudtson:
It has to be this number. So you-
Dusty Davidson:
Personally.
Rick Knudtson:
Got it.
Dusty Davidson:
...can certainly write that number down.
Ben Lueders:
So did the three of you have the same number in mind or did you agree?
Dusty Davidson:
I think roughly, yeah.
Rick Knudtson:
Yeah, roughly.
Ben Lueders:
Okay, got it. That's good.
Rick Knudtson:
That's an important conversation though, like that on day one. No?
Dusty Davidson:
It was helpful by the way, that-
Rick Knudtson:
Over time though, yes.
Dusty Davidson:
...none of the three of us had ever had real success before. So if somebody has no money and somebody has a hundred million dollars in the bank, then those numbers are different, right? Somebody's like, I would-
Ben Lueders:
I'm not good at math, but I can-
Rick Knudtson:
Has to have a B or in math.
Dusty Davidson:
I'd be like, it's boring if it's not this and you're like, that would be life changing for me. So it's helpful in that case that all three partners, I think had we're in roughly the same economic position, which was to say that a life-changing amount of money is, and also, I would say that none of the three of us had egos to the point. You run into a lot in founders and software companies, there's egos that'll say, well you might be way past life-changing money, but you're going to shoot for the moon because that's not enough or there's an ego component. And none of the three of us had that, I think that we very much were aligned on wait, once we hit a certain threshold and it's real, because you can make up numbers and you can think about it in the abstract a lot, but well, once it's a burdened hand, then you come back to it and say, man, where do your real principles lie? Where's your real fiduciary responsibility?
Rick Knudtson:
We also had, I did anyway, had a really good respect for what we'd built. I understood that it was rare, understood that it was in some ways a card house. It's first time entrepreneurs scaling something, so you're sitting on something that you are watching grow organically around you. And I certainly looked around often and be thinking, holy crap, what did we create? And for me, I was what? 30 when we sold 20, 23 when we started the company, with no experience. So I think a little bit for me was just along for the ride to experience this thing and I had a great amount of respect for, this is not me, this is bigger than me, I'm lucky enough to be here. And for that reason, you don't have this ego where it's clearly I could run this thing for 10 more years, we can get this thing to wherever you want to go. And I was like, we created something really special.
Ben Lueders:
On that, can you tell me, in building something like Flywheel, which at the time of the acquisition, how big were you? How many employees approximately?
Rick Knudtson:
250, 300.
Ben Lueders:
Okay, 250. I can barely wrap my mind around that.
Dusty Davidson:
Same.
Ben Lueders:
10 employees. And I can feel the pressure though of, man, these people are depending on me, we're depending on one another, this thing is growing bigger than I ever thought. So I'm just curious from your guys' perspective, what was that pressure? What was that, obviously you had super fun times because I've seen the NERF fights and all this kind of stuff, but I also know it's hard to do this, to build a company that scales and looks good to someone that someone might want to buy. So how was that for the however many years, seven, eight years?
Rick Knudtson:
It's tough, it's all the things that you say and it creates anxiety and stress and all of the things that go along with that. I think that I can speak for myself, I think I'm driven by that. I think that you're, and it does get better. When you're 10 people, you feel the pressure of individual payroll, right? When you're 300 people, you feel the pressure of, if I had to lay off a third of my staff, it would be-
Ben Lueders:
You start thinking in percentages and yeah.
Rick Knudtson:
Yeah. And so it's less, and yet you still don't forget the individual, it's weird to say. But it's less fragile, that's for sure and you've got scale and predictability, then it's less about making individual bad decisions and it's more about what are the right big strategic decisions. And so some people that wears on to the point where it's debilitating and I think others, I put Rick and I in that category, of, it's motivating in a way, but it's tough. And a 300-person company has completely different problems than a 30-person company and so, one of the things that you realize is that, what are the things that you actually enjoy? And it's not even the pressure that's the problem, it's like, well, is it even fun anymore?
And I don't know that it seems to be fun, it's just different problems. So where you're building and you're in the trenches and it's you know everybody and you're like, hey, everybody's hanging out, that's when you're at 30 or a 10. At 300, you're hanging out with the leadership team and it's a totally different dynamic. And you see that at every inflection point and we were along for that for a long time and got to witness that and it takes different toll along the way. And there were lots of people that came to us over the years to ask us if we want to sell and their number one question would be, are you tired? This is a good-
Ben Lueders:
Do I look tired? Is that what...
Rick Knudtson:
I would always say, no, I'm not tired, I'm on a rocket ship.
Dusty Davidson:
That's blast and we're having a blast.
Rick Knudtson:
Whether that was true or not, is not important.
Dusty Davidson:
It was true. It was true sometimes and other times it wasn't.
Rick Knudtson:
But I think a lot of people get tired and it's okay to be tired, I think. We didn't sell because we were tired, we sold because we had an amazing deal at the right time. You always want to sell at what Jason Limp, I'll steal it from him, would describe as a local maximum. Meaning, if you're at a maximum peak of value now, it might be that you're not going to be back to that peak for another four or five years. And so if you're there today on a time adjusted basis, you might want to sell, not because you're tired, not because you don't believe it's going to get here, but because if that's going to take five years-
Dusty Davidson:
Usually, when that happens, you feel more confident about your business than ever. You don't want to sell because you're like, ah, I'm riding high.
Ben Lueders:
I still got, yeah, there's still room.
Dusty Davidson:
We have so much to do, and that's probably the right time to sell at times.
Ben Lueders:
Interesting.
Dusty Davidson:
Because that's when the most value is.
Rick Knudtson:
And so you might sell at a peak and you-
Dusty Davidson:
It's easy to sell when you're not excited about the future. I think that is usually the case when you're like, I am tired, please take the company. At that point, you've just devalued the company.
Rick Knudtson:
And you get taken advantage of.
Dusty Davidson:
Yeah, exactly.
Ben Lueders:
So one thing that pops into my head and pop popped into my head when I first heard about the WP Engine acquisition-
Dusty Davidson:
Obviously.
Rick Knudtson:
This is amazing.
Ben Lueders:
That was the first thing?
Dusty Davidson:
Well, no.
Rick Knudtson:
Oh my gosh, I don't have to awkwardly see Dusty and Rick and tell them that I host with WP.
Ben Lueders:
Got it. That was actually, that's true. So sidebar, the developer, our Bright Mix, the guys at Plum Web Strategy, they're always been WP Engine guys. And it's like, no, we should do Flywheel, I'm like, oh no, we do WP Engine. And it's like, yay, we-
Rick Knudtson:
We do flywheel now! That's great.
Dusty Davidson:
I didn't say hi to Dusty, ring at the coffee shop now.
Ben Lueders:
That's right, we don't have to avoid democratically anymore.
Rick Knudtson:
That's funny.
Ben Lueders:
That's felt a lot better. But obviously, and for anyone who's thinking about selling their company, they're probably going to be most favorable to their competition, the chance of you getting bought by someone who is a competitor of you, the chances are probably pretty good. Was there a feeling of like, oh man, we're selling out or with WP Engine at all? Or was it like, no, we're different in some ways and this makes sense?
Rick Knudtson:
Well, I think number one, interestingly enough, we had never... We'd run the math, we'd been like, who's going to buy us? We were like, would Adobe buy us? Would Microsoft buy us, we'd go down the list of, would some big private equity firm buy us? We'd never, ever, ever, were we like, man, maybe WP Engine would buy us.
Ben Lueders:
Really?
Rick Knudtson:
Never.
Ben Lueders:
Why?
Rick Knudtson:
I think in part because of point number two, which is we were just in the trenches with him. We were walking around the office today and we were like, the sales team was in that corner, right? You're like, all day, every day, WP Engine's number one, we're number two, all day, every day, our job was to sell against WP Engine.
Dusty Davidson:
And you're selling against them everyday.
Ben Lueders:
They were the bad guys, yeah, yeah.
Rick Knudtson:
In fact, we had salespeople that we surprised everyone with the sale, of course, you can't tell the teams until it's done. And I remember our top sales rep coming up to me after we made the announcement being like, I don't know what to do now.
Ben Lueders:
I get it though.
Rick Knudtson:
I don't have a-
Ben Lueders:
I get it.
Rick Knudtson:
Wait, they're the good guy now?
Ben Lueders:
Yeah.
Rick Knudtson:
And so-
Ben Lueders:
No, I totally get it.
Rick Knudtson:
That's the weirdest thing about selling to competitors, yesterday we're enemies, but now I got to convince the team that we're friends.
Ben Lueders:
How hid you do it? Or did you do it? How did that go?
Dusty Davidson:
As long as you have a healthy respect, I think it's the culture that you build internally where competitors aren't necessarily bad to be bad. And in a lot of ways, they do great things for you because they push you. And I think the WP Engine certainly did that. We had different segments of the market, they were up in the enterprise a little bit, or at least upper market and we were selling to freelancers and small creative agencies. So that worked well but we still ran into them all the time. But I ran the sales team for a long time, it wasn't about WP Engine's terrible, it was more like, yeah, there's differences here.
And when you come together, if you've actually built that culture where you have a really strong respect for this competitor-
Rick Knudtson:
Then it's easier.
Dusty Davidson:
You can say, hey, look how amazing we can build things together now, we can run this market. And I think that's what we did in, I think in a different culture where it's a little bit more, I think it's very easy to lead people with an enemy.
Ben Lueders:
Oh yeah, for sure.
Dusty Davidson:
And that certainly wasn't what we did with WP Engine. WP Engine was never an enemy, it was a healthy respect. And if was an enemy, we would have [inaudible 00:34:06]
Ben Lueders:
You need that competition though, you need that edge. We've done that before, people that they're not even really our enemy, but it's still fun to be like, we got to do better than so, what's so and so doing, and-
Dusty Davidson:
That's health.
Ben Lueders:
...we just got to- yeah, healthy sense of competition.
Dusty Davidson:
Yep, that's right.
Ben Lueders:
That's not bad.
Dusty Davidson:
So I think that all of that selling to the competition is a good outcome, I think we have competing in overlapping products so then it creates a sense after the fact of, okay, what now? But overall, I think that's right, I think that. And if you look at it just from a pure market share perspective, I think it's really smart because if you're number one and number two in the market and you combine forces, and you serve different segments-
Ben Lueders:
Segments, yeah.
Dusty Davidson:
...like Flywheel did, I think it's really smart. The fact that we never considered it, I think is it speaks to the fact that you're just building a company and-
Rick Knudtson:
Oh, shows us how naive we are?
Dusty Davidson:
Yeah, we're dope. We're just a couple of-
Rick Knudtson:
Just weird, WP Engine of all people?
Ben Lueders:
You were like, Microsoft, Adobe.
Rick Knudtson:
Yeah, yeah, really.
Ben Lueders:
What a [inaudible 00:35:16].
Rick Knudtson:
But we did have a ton of respect, we had a ton of respect for the CEO and we had a ton of respect for the company and the founder, Jason Cohen, the founder-
Ben Lueders:
He's brilliant.
Rick Knudtson:
He was brilliant. We'd loved his blog and his writing for years and it was fun. It was fun to get to meet him and hang out with him and become friends with him, all these things. So if you can find a competitor that is like that, then it's a really good, I think it can be a really good outcome.
Ben Lueders:
So you announced that this is happening to the whole team and then to the world, what's life like after that point? You guys stayed there for a bit and then how long did you guys stay before you exited?
Dusty Davidson:
I think life after the acquisition, certainly the announcement, it's a little bit surreal. You've been tied to this thing for many years of your life and-
Ben Lueders:
Part of your identity in some ways.
Dusty Davidson:
Yeah, it was absolutely. And for me, I never worked really anywhere else. I worked at Bright Max for about a year and this was it for me. So it's a tough transition, trying to be a good steward to the acquisition of course, I was very bought into what WP Engine was going to do with the company and over the course of maybe the first almost 12 months, we operated separately as a division and hands off, so that was easy enough. But then you start integrating and you're trying to build a strategy together and we helped the teams through that process. I think that was the one thing that we were most concerned about, we have people that have built their careers at our company, so making sure that they felt confident in what WP Engine was going to do with the product.
What their vision was for the market even, just how they're going to treat employees, all these types of things, that was most important. And I think that we had as a leadership team, made a pact that this is the most important thing, is leading our teams through this transition, which was about 12 months after the company got acquired.
Rick Knudtson:
Yeah, 12 to 18 months. And I think we didn't need to stay, it's interesting. Lots of people are like, how long did you need to stay? And it depends, different acquisitions work out differently in terms of how that works. But there was no real, there's no handcuffs, there's no reason to be there. We were there for the teams and we were there to make sure that this thing that we built would find a good landing and a good home. And that, to Rick's point, that process took about 12 or 18 months and by 18 months, it's credit to the Flywheel leadership team I think and the entire team mostly. I would say that most of the team was there through that transition and the Flywheel leadership team was entirely there for almost 18 months and then all left. I think everybody was like, it's in a good spot and then 10 people on the Flywheel leadership team all left at the same time knowing that it was in a really good spot.
Ben Lueders:
So you sell and you guys, after 12 to 18 months, you guys have exited. Do you guys take a bunch of time off before you did anything else? What did you do, just traveled or what, you just sleep for a few months or cry? What do you do? What do former founders do? Or had you already started your next company? You can't give it up.
Rick Knudtson:
I'm cursed.
Ben Lueders:
You're broken?
Rick Knudtson:
So my wife would've said, take a year off.
Ben Lueders:
Yeah, yeah, yeah. Well, my wife would've said the same.
Rick Knudtson:
Yeah, and it was probably the right answer to be honest. But wasn't what I did, I was working on a company called Workshop right now, Dusty's involved in that. He's an investor, he's on the board and his workshop's helping companies, pretty large companies, thousands of employees, build more engaged in line teams through internal comms solutions. So working with our internal communications teams to build really great engaging content for their teams and really through the lens of the world's different now, tech space and digital communications, super important for these teams all over the world now. Thousands of employees, lots of them fully remote. So that's what came out of my experience at WP Engine, was seeing this problem firsthand and wanting to attack that thing. I took zero days off, I literally quit WP Engine and the next day I started [inaudible 00:39:45]-
Ben Lueders:
Rick! You're broken, man. No! No!
Rick Knudtson:
I wouldn't recommend it.
Ben Lueders:
Your wife, I would cry in the corner.
Rick Knudtson:
But-
Ben Lueders:
Oh, Rick.
Rick Knudtson:
But I will say that shes Still gives me crap about it, but I always say-
Ben Lueders:
As she should, as she should.
Rick Knudtson:
If you fast forward 12 months from now and you think about, man, I'd love to be here in life, start right now because I'm so happy. Two years has went by, it's been a hard two years building a new company, you forget what it's like to be at the ground floor again. But man, I'm so glad that we started two years ago because we're so far more down the road. So I don't regret it but yeah, I didn't take a day off. I'm tired weirdly, I guess.
Ben Lueders:
Dusty, how about you? You exit and then?
Dusty Davidson:
I think that I thought I needed something else. When you have a lot of people in your ear saying, well, you're an entrepreneur, you're an entrepreneur. You started all these things so-
Ben Lueders:
What's next? What's next?
Dusty Davidson:
...what's next? What's next? And-
Rick Knudtson:
Even I was saying that.
Dusty Davidson:
Even Rick's saying that. No shit. And so-
Rick Knudtson:
I feel like the devil on his shoulder.
Ben Lueders:
A hundred percent, I like you, let's build, let's build. Let's build something, are we going to build again?
Dusty Davidson:
And you get into it and you realize man-
Ben Lueders:
That's funny.
Dusty Davidson:
...I built Bright Mix and Triple C and they both have, well, Triple C's done very well and Flywheel did very well of course. But it takes a toll and so then I think that me personally, what I realized is that my job towards the end of Flywheel had gotten to the point where I was not doing much day-to-day work at all and instead was focused on strategy and on teams and on helping to align people or whatever it is, and just provide edits and provide snippets of inspiration or whatever it might be. And if you think about starting something over again, that's not the job actually. The job in the early days is, it's a grind and it's doing work. And I don't believe that I have that in me again, and that's okay because I don't think it's actually where I'm most useful.
The world has moved on in lots of ways and there's lots of people that are hungrier and that are more driven and that have more energy to do those things. But that took some work, I thought for sure, yes, I'm just going to start something else again and well we'll go do this or whatever. And what you find is, for me, I like investing, I like being on boards so I get to work with Rick and the team and strategy stuff. I get to work with my friend Karen at Alpaca, I get to work with my friend Erin at Pet Friendly. You get to be involved in these companies at a level that I'm probably best suited for and then I get to spend a lot of time with my family. And-
Ben Lueders:
That's awesome.
Rick Knudtson:
You went from Bright Mix to Silicon Prairie News to Triple C to Flywheel over the course of what, 15 years maybe?
Dusty Davidson:
15 years, yeah.
Ben Lueders:
Wow.
Dusty Davidson:
And it's all the life of the entrepreneur, right? So it's like, it's all a hundred percent on. And my problem is also people talk about work-life balance and I don't have that gene, so it's not my fault, it's my genes', man.
Ben Lueders:
That's the way you were made.
Rick Knudtson:
It's my genes.
Dusty Davidson:
I got bad genes or good jeans. I don't know, I don't know. [inaudible 00:43:16] And so-
Ben Lueders:
It's funny.
Dusty Davidson:
Yeah, so I have a thing where I'm 110% or zero. So anyway, so that's how I've thought about it, the evolution of that, where you're like, you go from, you should definitely do this because that's what people are telling you that's what you think your identity is or whatever it is to the point where now man, I get to take my daughter to school, I get to work out, I get to pick her up and I get to help my friends build cool companies and that's pretty good.
Rick Knudtson:
Sounds pretty good to me.
Dusty Davidson:
Hopefully they make me a lot more money.
Rick Knudtson:
I'm working on it.
Ben Lueders:
Nice. So what are all the different companies that you're working with right now? You said Alpaca-
Dusty Davidson:
I invest in a bunch. Investing is super interesting, you get to dabble in a lot of different things, but you don't get to help very much in a lot of cases. But there's four companies I work with that I am material invested in and then can be I think more helpful. And one of course is Workshop and two is Pet Friendly. My friend, Aaron Shetty, runs a pet wellness company, a pet wellness subscription company. John Henry Müller is there, as we talked about, to bring it full circle.
Ben Lueders:
John Müller?
Dusty Davidson:
A company called Viden X, which is in the law enforcement and child advocacy SaaS company space. And Alpaca, which my friend Karen runs, is a subscription boxes that support teachers. And so that stuff is, it's like I said, I get to talk smart and then have lunch and then be like, well, good luck.
Ben Lueders:
Is that what you always dreamed?
Dusty Davidson:
I don't know what I always dreamed, I was a software engineer, I could write in code. I bought a 3D printer, man, now I get to work on my 3D printer.
Ben Lueders:
Oh, okay. So that's how you scratched that itch?
Dusty Davidson:
Yeah, I'm a problem solver in that way. I like tinkering, but what did I always dream? I never dreamed this, I was a software engineer and so you take it a day at a time and a bit.
Ben Lueders:
Yeah, that's interesting. When I think of you, obviously I first saw you with the Silicon Prairie News big Omaha sphere as a more inspirational type leader of people and stuff. And I never thought of you so much as a software engineer, I guess. So to me, it's not super surprising that you're in this role where you're able to help guide and shape and that kind of a thing.
Dusty Davidson:
That's fair. And I think that does lend itself. The Silicon Prairie News days are that in a lot of ways, I think it's bringing people together and helping them be successful, I think it's good. We spent many years out of that at Flywheel, like heads down. I didn't pay any attention to that while we were the company and so it's fun to be back in that and helping people realize their own success, I think is pretty cool.
Ben Lueders:
Yeah. What's something you guys are looking forward to this year? Anything? Personal, professional?
Rick Knudtson:
I think that the work-life balance thing is something that I have a better respect for this time around building the software company. And I think that what we lacked at Flywheel we made up with just by working longer hours, less experience means you just work harder.
Dusty Davidson:
We were 25 though.
Rick Knudtson:
Oh, did you mean-
Dusty Davidson:
It's so interesting.
Rick Knudtson:
Totally. You didn't even have those other poles. So I've really enjoyed this balance in my life around building something that I'm very passionate about and putting the time at work and then I have a family as well and coming home and trying to shut off and enjoy that. And trying to be healthy in every aspect of life, I don't think that was true 10 years ago necessarily. So yeah, I think Workshop's doing well, so I'm looking forward to a fun year building a company and just believing in the process and then also just going home and enjoying family time. And I think that's possible, I think there's lots of worlds in which that some people might disagree with that or again, when you're younger, yeah, when you're younger, I think that it's hard to do that because you don't even... I feel like if Dusty were to build a company-
Dusty Davidson:
You're also dumber when you're younger, so-
Rick Knudtson:
Exactly.
Dusty Davidson:
...you actually make up for it with hard work.
Rick Knudtson:
A hundred percent.
Dusty Davidson:
And so now that you're older, you can actually have more family time because you just are smarter.
Rick Knudtson:
Also, if you-
Dusty Davidson:
I'm serious.
Rick Knudtson:
Yeah. One problem that people have, I think, and you see it in scaling companies is, you hear it's the cliche, should I be the start smartest person in the room? Of course not, but I think a lot of people actually have a visceral response to that where I don't want to not be the smartest person. If you can actually accept that and build a great team, it's really fun to just be a part of this experience. And it doesn't require you to work 80 hours a week if you have the team around you and you believe in really strong delegation and working with the team in strategic ways. So I'm excited about just a healthy year building a company and working on something. I'm very passionate about, making progress.
Ben Lueders:
And I imagine too, when you're younger, in the early days, your first thing, there's an urgency too there or a feast or a famine a thing, where there's a lot more, at least for me, I remember when I started Fruitful, we had literally nothing. And it's like we were living from contract to contract and there was just so much at stake that there just, there was a level of stress there that you would never want to replicate. And then now, looking back 10 years, it's like we're in a much more stable spot and there's just much better support, more hands on deck.
Rick Knudtson:
For what it's worth, if you ask my wife, she would say, I still work too much. It's like I'm opening my laptop last night and now answering emails. And it's what I enjoy doing, it's not like, yeah.
Ben Lueders:
I'm doing this for fun, okay. Yeah, this is my hobby.
Dusty Davidson:
Well, this is my hobby.
Ben Lueders:
[inaudible 00:49:04] watches TV on a hundred inch television. What more do you want? What more do you want?
Dusty Davidson:
For MTV though [inaudible 00:49:13]. The size of a small house.
Rick Knudtson:
But I think the difference is, that it's not required. I think that at Flywheel during the scale up phase, there was no other answer. We tell the story often about how we were a hosting company, so half of the value in our product was doing support for customers. If you had emailed and you had a question about WordPress or our servers, we had to answer those, that was part of the product. For the first four years of the company. Me, Dusty and Tony literally did 12, 24 hour shifts or whatever, doing support. So overnight, I would sleep on the couch and I'm sure Dusty did the same because my wife kicked me out of the bedroom. I'd sleep on the couch, I'd have an alarm on my phone. If someone sent an email in at 2:00 AM, it would buzz me and I still have PTSD every time I get that alarm on my phone and we'd wake up and we'd answer tickets. So we'd typically for one week at a time, each of us would work from about 1:00 to 7:00 AM for four years.
Ben Lueders:
These are the good old days, that's what-
Rick Knudtson:
The good old days.
Ben Lueders:
That's what they call that, yeah.
Dusty Davidson:
I think it's the stuff that people don't see actually is the reality in that, that's the work that's required at that age now. But I think to Rick's other point, we could have been a little bit more strategic about that.
Rick Knudtson:
I don't know, we didn't have any money. All you had is, all you had is... We're young and dumb, we didn't [inaudible 00:50:37]. The thing is, in the early days, all you have is time and grit. Those are the things that-
Dusty Davidson:
It does take that.
Rick Knudtson:
...that you have. And now, you're dumb but you've got time and grit, those are the things. And then now at this age, and I see others who have left Flywheel to go on to do great things, have similar paths. Is, you can be smarter about it in part because you, because of one's success, you have access to more money and so with money you can afford better and more team members of course. And so you get that luxury, I think now in a way that when you're in twenties and you're starting your first thing and you've-
Dusty Davidson:
You haven't proven anything.
Rick Knudtson:
...you've proven nothing. The only thing you have is your ability to work hard and-
Ben Lueders:
A hundred percent.
Rick Knudtson:
And I think Viden is certainly is a story of absolute hard work that turned out I think pretty well.
Ben Lueders:
Dusty, rick, thanks so much for being on Growing a Fruitful Brand. What's the best way for people listening to follow you guys today?
Rick Knudtson:
Do you even use Twitter these days?
Dusty Davidson:
Oh, noon.
Rick Knudtson:
What's the [inaudible 00:52:02]
Ben Lueders:
Are you on TikTok? Are you on...
Rick Knudtson:
I would say, I'm working on a company called Workshop here in Omaha, trying to build a cool software company in Omaha again. So follow Workshop-
Ben Lueders:
UseWorkshop.com, is that right?
Rick Knudtson:
UseWorkshop.com.
Ben Lueders:
Yeah, check it out. Check it out. Especially if you're a big, big company, it's probably not ideal for a company of 10.
Rick Knudtson:
Yeah. But I know that people that are listening, friends that work at big companies, holler at him.
Dusty Davidson:
I'm Dusty D on Twitter. I don't post or do anything, but I'm on Twitter constantly soon.
Rick Knudtson:
You can follow me.
Ben Lueders:
It's very exciting.
Dusty Davidson:
You can send me a message, wherever it is.
Rick Knudtson:
His podcast is coming out soon.
Ben Lueders:
That's right, that's right.
Dusty Davidson:
[inaudible 00:52:38]
Ben Lueders:
Well, we'll definitely keep y'all posted, but thanks so much you guys. If you found today's show helpful, don't forget to subscribe and consider sharing it with someone who might also enjoy it. If you'd like to work with Fruitful on a branding website or messaging project of your own, you can always reach out on our website, fruitful.design. So until next time, don't forget to grow something good.
