Startup Acquisition Stories w/ Joe Speiser – Partner at HamptonVC

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Transcription-

Joe Speiser:
All right.

Andrew Gazdecki:
All right. Welcome to the Acquire podcast. I’m here with Joe Speiser, probably a Acquire legend at this point. How you doing, Joe?

Joe Speiser:
I’m doing good. I’m doing good.

Andrew Gazdecki:
Joe, I told you before we started recording, I didn’t have any pre-canned questions, but tell me about what you’ve been doing on Acquire. How many companies have you Acquired so far or sold?

Joe Speiser:
Oh, on Acquire alone? I think we’re at four right now, three or four.

Andrew Gazdecki:
Nice. Which one would you say is your favorite?

Joe Speiser:
Well, it’s always the biggest one.

Andrew Gazdecki:
Well, it’s talking about that one.

Joe Speiser:
Yeah. Yeah. We Acquired a company called Brax. It was in 2019. We held it for 18 months and got a crazy return.
That company was interesting because it had a ton of development. It had a ton of great customers. It had good technology, but a lot of technical debt that had to be paid down. They weren’t doing any customer service at all.
It was managing big data for advertising clients. It was slowly falling apart, but it was the only real tool in the space that these clients relied on. So when we came in there, we said, “Oh, wow. There’s so much that we can do with this.”
We spent 18 months, new tech team, customer service, all that jazz, paying down all that technical debt. It was significantly more than we thought, but in the end, we ended up selling it for over 10 times what we paid. So, that was a fun win.
That kind of got me interested in buying for the first time. That was the first one I ever bought. Outside of that, I was just the typical entrepreneur, where you start something and you scale it or it flames out. That’s the only path.
This was the first time I was like, oh, I could actually buy something from someone else, where they put the sweat equity in for the first X amount of months or years to figure out product market fit, to get everything running, get all the trip sequences going, all the stuff annoying to do.
It kind of opened up my eyes to, wow, there’s a whole other ecosystem out there. That’s when I started buying a bunch of these small guys and playing around with them.

Andrew Gazdecki:
Nice. Are you doing this full time, where you’re buying companies, holding them for, let’s call it a year, at 18 months and then reselling them, is your strategy?

Joe Speiser:
I didn’t have one when I started. I just liked the idea of buying that one company, because it fit right into my sweet spot. I have a lot of ad tech experience.
But then after that I was like, yeah, we could actually do this over and over again. Can we replicate this strategy? So, we started buying other things that I had no experience in.
We bought one that was a Shopify app. I’ve bought things on Shopify, but I’ve never developed for Shopify before. So, that was a really interesting one to take over.
On the first or second day we took that one over, and I was so excited, right away we get hit with, your account lost half of the four star reviews for incentivizing reviews and whatnot. I was like, oh my God. The timing couldn’t have been any worse.
That happens when you buy something. Usually, all the shit hits the fan in the first few weeks. Although it’s frustrating and annoying out of the gate, it’s also good to get all the dirty laundry out in the beginning and not drag it out. Just kind of get it out of the way, pay it all down.
But anyway, we ended up holding that one for six months and doubling our money. I didn’t like this space. I don’t like being reliant on one platform. So, having Shopify as the overlord that could decide to de-list you or take away your reviews, was really scary to me after my experience with Facebook and a previous company.
I spent the six months building it. The Shopify extension didn’t even have a website. So it was no website, a ton of customers who loved it. Again, good customer service in this case, but no site.
The UI was horrible. It was hideous. So, we had a new designer come in, redo the whole thing, make it look pretty, and then we just sold it six months later. So yeah, it was a fun flip.

Andrew Gazdecki:
What’s your favorite part through all this? Is it the buying? Is it the selling? Is it the growing?

Joe Speiser:
I love the hunt. I love hunting for something. It’s so exciting to send out your LOIs and see what comes back and negotiate them and come up with these fun structures. I think that’s really cool.
Then it’s the first six to 12 months of getting your hands dirty. I’m the customer service rep. I’m the project manager. I don’t code.
I never have, but I’m on all the standup calls and talking through all the issues with the devs. I’m in Jira every day. So yeah, I love those beginning stages.
I think for me, companies under 30 people are a ton of fun, once you break that 30 plus mark. I’m sure you’re experiencing this too.
It’s like, you no longer have everyone directly reporting to you. You have middle management. Politics start coming into the equation. Little less so now, with everyone being remote. That was really a in-office kind of thing. Yeah. So I like companies under 30 people, just a lot of fun for me.

Andrew Gazdecki:
I would agree with that, wholeheartedly. Did you have a larger company previously?

Joe Speiser:
Yeah. Yeah. Yeah. Before I started buying these SaaS companies, I had a company called LittleThings. We were up to 120 people in Manhattan.

Andrew Gazdecki:
You were a CEO, I assume.

Joe Speiser:
Yeah. Yeah, yeah. We had, I don’t even remember how many square feet in Midtown, but it was enough to cost a million dollars a year in lease, all these video studios going.
It was my baby. I loved that company. It was so much fun. I was hoping to go on to do huge things with it. We were doing 60, 70 million a year in revenue.
Then Facebook just dropped the hammer on us one day and kind of destroyed our business, which was my point with Shopify. I’m very nervous because of that. I’m very nervous to put all eggs in that one basket.
Right now, I’m building a Twitter influence. I’m building Twitter followers. I love playing on Twitter, but I’m thinking to myself, when does Twitter just decide to change their algorithm?
Maybe I don’t see tweets from Andrew anymore or from Joe. Maybe I see something else that Twitter wants to push out, which kind of leads you to, you got to build your own newsletter.
You got to take your followers off of the platforms and own them yourself. Just something that I’ve picked up over the years.

Andrew Gazdecki:
I like that. Yeah. Own your audience, rather than it, I guess, could be the term.

Joe Speiser:
Yeah. You’re renting it. Yeah. I had 50 million followers on Facebook at one point, but they were rented. Facebook decided to take them back. Right?

Andrew Gazdecki:
50 million, holy shit. Just to wind the tape back, for people listening, are you okay disclosing just the size of the businesses that you were talking about? The first business, was it a seven figure exit, six figure?

Joe Speiser:
Yeah. The first business, we bought for low six figures and sold for seven figures.

Andrew Gazdecki:
What was the second one?

Joe Speiser:
Second we bought for six figures and sold for six figures. That was a six month one. Yeah. Yeah, that was the double.

Andrew Gazdecki:
You’re killing it, man.

Joe Speiser:
That’s tiny. I mean, the thing is, this is the hobby. This doesn’t pay the bills. I’m looking for much bigger, I don’t know, elephants to hunt.
Look, I mean, at some point, one of these small SaaS companies that I’m flipping, will turn into something significantly bigger. It’s just, the likelihood of that is pretty high. It’s just a matter of finding that one.

Andrew Gazdecki:
Tell me more about the hunt. You like hunting. I like that.

Joe Speiser:
Yeah, I do like hunting.

Andrew Gazdecki:
What do you look for, to start? What are the main qualities or attributes that gets you excited? Aside from, obviously price is probably in there, but what gets you super excited when you come across a good acquisition opportunity?

Joe Speiser:
It’s the same for me, when I look for real estate properties to buy. I like to start also with the oldest. So I sort from oldest first, to see who’s been sitting out there for the longest? Who’s going to be the most desperate? Who’s the last girl at the dance, who is all alone in the corner?
Typically, they’re willing to negotiate significantly more on price than someone else. So, I do that.
I also tend to look at the overall reviews for each company. The more negative the reviews are from customers, the more likely I’m going to be interested.
I know that sounds really perverse. It doesn’t make a lot of sense to a lot of people, but it has to be for certain reasons.
Typically, what I find is when founders give up on a project, it may have been an amazing product, but they no longer service the customer.
So, customer service gets overwhelmed. Maybe there’s no one doing customer service, and no one’s answering these emails. So, you get all these one-star reviews on whatever platform they’re on. It just destroys the reputation of the software.
Then I come in and say, wow, what they have is actually really cool. Maybe if they answered their emails and got back to customers and fixed the bugs, they’d actually have something worthwhile again.
So I do love to look at one-star review type products. Now, again, it has to be for that reason. It can’t be because there’s no need for the product or it was a scam or whatnot.
I’ve done that for on the Chrome store. I’ve sorted by the worst reviews. I’ve done that in Shopify as well. Those are the ones I target.

Andrew Gazdecki:
Nice. Okay. You find. You hunt. Joe, you just went hunting. You found something you’d like to maybe bring home. How do you structure your deals? Are they all cash? Are they a mixture? What does an offer from Joe typically look like?

Joe Speiser:
Yeah. Usually, I get emotional when I shouldn’t, so I like to move very quickly. ‘Cause once I start getting the gears going and I’m going to send LOI for this, I start building a whole plan of how I’m going to take it over and how I’m going to build this thing out.
So, I don’t like to put a lot of hair in the deal. I like to tell the founder the truth, which is, I’ve done a bunch of these before. I move really fast. I can have this closed within 48 hours, a week at most.
I don’t have a lawyer that does any of this. I do all the legal myself. It’s not terribly complicated, when I could use your forms off your site. We all agreed to not touch them and mark them up. We just fill in the variables, and you go from there.
So, it really just comes down to diligence. That’s not terribly difficult to do. I don’t understand why it takes companies a month to do diligence.
Again, I’m not buying the company, I’m buying the asset. So there’s also a very, very big distinction there. I get none of the liabilities, none of the debt, none of the issues that typically go along with things.

Andrew Gazdecki:
No employee contracts, all that fun stuff.

Joe Speiser:
Exactly. I’m buying a desk from them. It could be software. It could be a desk. There’s no difference, but there’s no tentacles to that. There’s no strings that someone can pull in the future in and cause a problem. So diligence-wise, I tend to move very quick.
I have my own funds, so I don’t need to raise. I don’t need an SBA loan, which slows things down pretty dramatically. So, I could offer them a lowball offer, but all cash, all upfront, within 48 hours.
For people who’ve been sitting there for a while, trying to sell their SaaS, that’s really attractive to them, even if it’s at a lower price. So, that tends to win me a lot more deals.
I think most people who drag their feet over many, many weeks and have to do a ton of diligence and have to get a loan…

Andrew Gazdecki:
Yeah. Time kills deals. I’ve also heard from sellers too. Every time they interact with you, it’s been nothing but a pleasure. So I think your reputation speaks for yourself as well, which probably helps, I’m guessing.

Joe Speiser:
Just be honest. If you tell someone you’re going to do something, do it. Don’t screw people over.
I’ve been in situations. I have never been screwed on Acquire yet, so knock on wood all around me here.

Andrew Gazdecki:
You’re literally in [inaudible 00:11:55] box. Remember those listening?

Joe Speiser:
The last one I bought off Acquire was super, super small. I just wired him the money, which I normally do. I don’t usually use escrow. I probably should.

Andrew Gazdecki:
You should.

Joe Speiser:
I should, I should. I’m too trusting, but a lot of these guys have social profiles. I feel like, why would they ruin their reputation? But definitely use escrow.
In this case, it was so small, I didn’t want to waste their time and my time. So, I just borrowed the money.
The guy went radio silent. I started panicking. I’m like, man, I’m such an ass. How did I do this? I know better.
He resurfaced two days later. He was sick with COVID or something. He apologized and everything was perfectly fine. He transferred me like he was supposed to.
But for that 48 hours, I was sweating. Oh man, I’m such an ass. Why did I do that? Even after all these transactions, I feel like I still can make a mistake like that. But yeah, it worked out great. [inaudible 00:12:49]

Andrew Gazdecki:
If you need a referral to an escrow agent, I can get you in pretty cheap.

Joe Speiser:
No, I know where they are. I know who they are. It’s just like, I’m lazy. I just want to move fast. Those two things prevent me from always using escrow.
If the deal’s big enough, then I absolutely will. But for some of these smaller ones, it just didn’t make sense.

Andrew Gazdecki:
In my head, you’re doing big things. I mean, you’re buying applications for six figures, selling them for seven figures. What’s on the big map for Joe? What’s big in your head? What’s next for you, man?

Joe Speiser:
Yeah. Yeah. As I said, as I buy all these small SaaS, I’m assuming at some point, one of them will tickle my fancy and be like, all right, this is the one I want to put in many years.
That’s the other thing, is I get very bored of these smaller companies after two years. I’m like, all right, I don’t want to do the same thing anymore. S.
I have a partner who also helps out a bunch. He helps manage it. But in terms of bigger pictures, so either one of these SaaS go gangbusters and takes off, and I don’t sell it for seven figures. I sell it for eight or nine figures.
What I think will really happen, is the other stuff I’m working on. I have a whole other slew of things outside of SaaS, that I do that, also take a ton of time, whether it’s real estate. I have a whole networking thing I’m working on. They’re all blowing up as well.
So, I feel like I have a lot of different things going on at once, which is what I like. I like that controlled chaos, just a ton of stuff happening and trying to keep it all together.

Andrew Gazdecki:
Nice. Do you have any deals in the pipeline right now, that you’re looking at or anything closing? Or are you kind of on standby right now?

Joe Speiser:
No. I just bought a SaaS. I bought two, actually, small ones, two months ago. I merge them together. Now I’m redoing the GUI. Hopefully it’ll be done… I don’t even know. What are we in August now? By the end of August. I can go out and Twitter and show everyone what I’ve been working on.

Andrew Gazdecki:
Nice. So you’re a serial Acquirer, man. There’s a new term we need to think of for you.

Joe Speiser:
You guys make it so easy. It’s like checking out at Amazon. I just put it in my cart.

Andrew Gazdecki:
I appreciate that. I guess my next question would be, I assume you talk to a lot of sellers. So for founders listening to this, what are maybe some yellow flags that you’ve seen come up or turn you off or just basic, maybe advice for founders looking to sell their business, that would give you more confidence that this is going to work out good?

Joe Speiser:
I guess, just consistency in the data that they’re quoting. If they say one thing, and I find online it’s something else.
Even in Acquire, there’s a bunch of different places to upload your data, as a seller. You got to make sure all the data matches.
You can’t say one place, it’s a $10 acquisition, another place it’s $5. We’re losing 20,000 a month or we’re making 10,000 a month. It has to be consistent.
So, I’d say that’s pretty key. Be honest with the competitive set. Anyone who’s looking to buy a company off Acquire, I imagine has already done some diligence and knows what the competitive set is.
So, if you’re not honest with who your competitors are, I think that’s a little weird too.
Everyone always says the same thing about why they’re selling, which is like, you can see through it. Oh, I want to do something else. I’m bored of this, which I get.
It could be honest, but more times than not, it’s for a specific reason you’re selling. Like, your skillset doesn’t allow you to go any further with it. You’ve tried X, Y, and Z. It’s no longer working.
I love when the founders are super honest, like, “Hey, I’m a developer. I freaking hate marketing. I got it to this stage. I don’t want to be buying Facebook ads or shilling it on Twitter. I just am done. I want to move on. I want to solve another technical problem.”
I like that. That makes me like, okay, I’m a great marketer, at least I think I’m an okay marketer. I can take over from where this guy left off.
So be honest with the reason you’re looking to sell it? I think that’s a good one for me, at least.

Andrew Gazdecki:
Nice. I guess for people looking to get to where you are, what’s some things you wish you knew before you started acquiring? I assume you just dived in. Is that correct?

Joe Speiser:
Yeah. Yeah. Yeah, no, it was like, it was just a hobby. It’s like, all right, let me just buy one for fun.

Andrew Gazdecki:
And then so [inaudible 00:17:14]

Joe Speiser:
I needed something do after my… Yeah. I need something to do after my last startup.

Andrew Gazdecki:
No big deal.

Joe Speiser:
Yeah. So I just bought one.

Andrew Gazdecki:
If you had any advice… I know you’ve given out a ton, but new buyer, they’re like, where should I even start? Where would you point them, if you had two resources? Your Twitter account can be one.

Joe Speiser:
I’ve been loving Twitter. There’s just so much good information on there. I feel like the crash course on Twitter that you can… for really anything.
I don’t care if it’s real estate or SaaS or finance or crypto. All the data’s there, and there’s some amazing people to follow. So yeah, SaaS is one of them.
There’s just a ton of really good threads on how to buy a SaaS and how to use an SBA loan, which I’ve never done. I’m so envious, because I think it’s free money the government’s hacking out to you.
Yeah. So, I’d say focus on Twitter and then also find a mentor. I think that is also something that people don’t talk about enough. Getting a mentor who’s already done this is game changing. ‘Cause it fast forwards you through all the mistakes that you would’ve made. It saves you a ton of time and money.

Andrew Gazdecki:
I completely agree with that. I have a CEO coach. For my first business, it was a business called Business Apps. I had two angel investors.
One of them would basically answer… I’d email him every day. I felt bad for him. He was the CEO of a company called Build.com. It’s like a thousand person company.
But yeah, that’s kind of how entrepreneurship works, is you’ve got to find that initial mentor. I’ve always found the best way is to just start doing cool shit. And then get someone who’s like, “Oh Joe, that’s rad, what you’re doing. I’m also doing this both. Maybe two more zeros on it.” That’s what I always tell people when they’re like, “Where do I find a mentor?”

Joe Speiser:
I mean, but that’s reactive though. I wouldn’t want to wait for someone to come to me. You need someone right away. You got to be proactive. You got to hit your DMs. Hit them on DM on Twitter. Find the people that you look up to.
I mean, obviously don’t shoot for the stars. You’re not going to get a celebrity to mentor you out of the gate. If you can, great, but I wouldn’t suggest that.
You need someone who’s successful, but not celebrity successful. Otherwise, their DMs are probably flooded.
Sam Parr, who I was just talking to a couple minutes ago, before we get on this, he said he gets 500 DMs a day.

Andrew Gazdecki:
He needs to shut those off.

Joe Speiser:
Right. No, but he doesn’t answer them. He answers 1% of them. He barely looks at it. So if you’re trying to get a mentor like Sam, he’s never even going to see the DM. Even if it’s an amazing one, he just won’t see it.
So, you got to set your sites somewhere between where you are and where you want to be, in the middle there.

Andrew Gazdecki:
I like that. I guess, final questions, there’s been a lot of flux with the market. Is there anything that you’re getting excited about?
In terms of, venture capital markets are down. Pretty much everything’s down, actually. We’re recording this August 9th. So, pretty much everything is down. But that also opens up some opportunities, in terms of acquisitions on both the buy and sell side.

Joe Speiser:
Yeah. I think some of the best companies have started during downturns. It’s the best time. We’re not there yet.
We’re talking about a downturn ’cause the stock mark is down and crypto’s down. But in terms of unemployment, it’s still at an all-time low or very close to an all-time low. So, every everyone who wants a job has a job.
So when you’re trying to hire for your startup, it is still really competitive and really difficult.
During a downturn, when you have a startup, usually you can just find amazing talent and they’re begging for a job.
That’s not the case here. Everyone has a job, who wants a job and is really talented. So, we definitely haven’t seen the worst of it yet.
Maybe it gets worse. Maybe it never does. I hope it doesn’t. But in terms of starting up in downturn, that is the best time, if there is a real downturn. I don’t think we’re fully there yet.
The one thing I have started to see is, all the VC-backed companies, they’re all begging for more money now. I do a bunch of angel investing. Almost every single contact that has reached out, has asked for a bridge round or some sort of emergency cash infusion.
They’re all looking at somewhere between six and eight months of runway before they run out of cash. So, they have to either do a down round, or they’re going to have to shut down. So, it’s going to get very ugly very quickly. Again, we’re not there yet.
I’ve started to see valuations come down a little bit in the private market, in terms of the Acquire sales, but still nowhere where they should be. They should keep going.
The other thing I’m looking for is, I’m waiting for that company that raised 30, 40 million and now burned through it all, but built an amazing piece tech, to go on Acquire and sell for a million or two.
It’s inevitable. It will happen. I think we’re probably, again, less than 12 months away from that. That’s when things get really interesting.
If you could pick up a $40 million company for a million bucks, make it into a break even or slightly profitable and run that for the next five years, I think you’d have a really good outcome.

Andrew Gazdecki:
Yeah. I had a call recently, with what felt like the fucking… Sorry. Sorry for swearing. The Grim Reaper. He had a restructuring company where basically, they helped sell companies in bankruptcy.
We’re going to have a quasi-partnership. So, you might be seeing some of those. He was forecasting 500 this year. It’s a obvious, very cyclical business. It doesn’t happen in a bull market, but I don’t know. After that call, I was like, whew,

Joe Speiser:
No, it’s not that bad out there. I lived through dot com bust. There was a great site by this guy named Pud. It was called FuckedCompany.com.
It was a tech blog that just chronicled all the layoffs and shutdowns of every tech company out there. It was gangbusters. Everyone at every company would kind of keep it on all day and keep refreshing it, to see if they had their job or not. It was crazy.
We don’t have that this time because it’s not that big of a deal yet. I think it’s again, we’re starting to see layoffs starting, but we’re not seeing mass startups going defunct.
They still have a lot of cash from the previous rounds. So, we have to wait for that to burn out first.

Andrew Gazdecki:
Yeah. My personal take, just to clarify is, I’m an optimist. So, I think it’s going to be a lot better than some of the doom and gloom posts I’m sure a lot of people have read, just because of the way CEOs are adjusting how they’re operating their company. Reducing staff or focusing on profitability, which I think is going to be a net benefit for just every business.
A thought I’ve had is, not being able to raise that next round of funding, could be the best thing to happen to thousands of startups.

Joe Speiser:
Yeah. Yeah. Yeah.

Andrew Gazdecki:
But yeah, when you have a call with the Grim Reaper of restructuring a asset sale company [inaudible 00:24:27]

Joe Speiser:
Yeah. That’s painful. No, what I would do is, to elephant hunt again, I would contact Ramp and Brex because they see everyone’s bank account. They see the debt. They know who’s about to go under and who’s not, and it’s in their best interest to not lose money.
I’d do some deal with them. Be like, “Hey, if any startups are going under and you want to make your money back, you want your debt paid back, give me a shout in who it is. I’ll look to buy the asset. I’ll make sure you’re paid back. I’ll help you out.”
I think that’s a great place to start in terms of lead gen, if you want to take down a 40, $50 million defunct startup.

Andrew Gazdecki:
That’s smart. Okay, final questions. Do you have a favorite book or podcast? You can’t say My First Millions ’cause that’s your buddy’s.

Joe Speiser:
I love My First Millions. Now, I have a newsletter I just started, because I don’t want Twitter to own all of my eyeballs. It’s called SaaSWeapon.com. Little cheesy name, but I like it.

Andrew Gazdecki:
I like it. I’ll plug it down.

Joe Speiser:
Cool.

Andrew Gazdecki:
Any entrepreneurs you look up to? If you have any, who are some entrepreneurs that have maybe inspired you along your journey?

Joe Speiser:
There’s one guy who actually just joined our network, Sieva. He’s all over Twitter, but he runs Enduring Ventures. He’s buying old school businesses, kind of like Cody Sanchez, but a little bigger scale, I think.
So random. He bought a Harley Davidson rental company in Hawaii, the only motorcycle rental company in Hawaii. So, he has monopoly on all motorcycles, if you want to rent one, on the entire islands. It just prints money. I think it’s really interesting to hear about and learn about those businesses, so yeah.

Andrew Gazdecki:
I had a chat with him. Yeah. He was telling me he owns a pool company. He owns a broadband company, UpCounsel.com.

Joe Speiser:
Yep. Yep.

Andrew Gazdecki:
Yeah, he’s a beast.

Joe Speiser:
It’s so cool. But then you have the guys and Andrew Wilkinson, at Tiny Capital or Tiny Co. I always confused the two.

Andrew Gazdecki:
I think they’re Tiny.

Joe Speiser:
It’s just Tiny now. Yeah, he upgraded. He bought the domain maybe. But he has 10 SaaS, companies all built around a job board and the Dribbble empire.
He’s built a massive company off that. He’s done really well. He has people running each one of them, so it’s not him doing it. I think that’s like what I’ve been doing, but a hundred times greater.

Andrew Gazdecki:
You’ve been [inaudible 00:27:02]

Joe Speiser:
Well, he doesn’t sell them. I sell them off. He just keeps them. He keeps them going and gets the profits of each one and buys another one and another one. I keep flipping them.
At some point, I think it does make sense to hold onto the ones you really like and use those profits to buy the next one, the next one, like the Berkshire model. I mean, take the profits from one to buy the next and never sell.

Andrew Gazdecki:
Love it. Well, Joe, this has been an awesome conversation, man. I appreciate you making the time.

Joe Speiser:
Yeah, it was fun.

Andrew Gazdecki:
If people want to get in touch with you, where should they go, SaaSWeapon.com?

Joe Speiser:
Twitter is probably the fastest. I actually read my DMs and reply to them. I’m not as popular as Tampar is.

Andrew Gazdecki:
Let’s try and change that, man. All right, dude. Well, good chatting, man. Congrats on all the success.