Dominic Wells Shares How to Raise Millions for Ecommerce Deals

 Summary

In this conversation, Jon Stoddard interviews Dominic Wells about his company Onfolio, which is preparing for an IPO on NASDAQ. They discuss the company's strategy of acquiring online businesses, the capital raising process, and the operational efficiencies that come with being a holding company. Dominic shares insights into their acquisition strategy, the importance of team dynamics, and the challenges faced during the IPO process. The conversation also touches on financial performance, market competition, and the future growth potential of Onfolio.

Takeaways

Onfolio is a holding company focused on acquiring online businesses.
The IPO is seen as a way to raise capital and increase visibility.
Acquisitions are targeted at businesses with profits between $250K to $1.5 million.
Operational efficiency is key, with a strong internal team for marketing and SEO.
Successful case studies highlight the potential for growth in acquired businesses.
Financial projections suggest a path to profitability post-IPO.
Balancing the needs of a growing company with current operational costs is a challenge.
Team dynamics play a crucial role in executing the company's vision.
Market competition is present, but Onfolio has a unique position in the space.
Future growth is seen as limitless, with aspirations for a billion-dollar market cap.

 Watch the Interview:

Transcript

Jon Stoddard (00:00.492)
Welcome to the top &A entrepreneurs. Today I've got a special guest back is Dominic Wells. Dominic was one of my first top &A guest on my podcast. And today we're to be talking about his company Onfolio, which is going public. So welcome back, Dominic. How are you? Yeah, I'm good. Thanks. Yeah. Great to be back. It's been what? Like a year, I think, since I was last time.

Yeah, it's been a little over a year. Now you've got some big news that you're raising capital because you're going IPO on the NASDAQ and you're raising capital for Onfolio. So let's talk about that. So what's Onfolio from the last time we talked to today? What does it look like? Yeah, I mean, it hasn't changed a lot since we last talked. But for those people who haven't seen that talk, it's essentially we're a holding company. We buy online businesses.

no real specific vertical, like we're not an Amazon aggregator or something. We plan to hold those businesses for the long term rather than try and flip them. Part of the reason we're going public is we think it would give us increased deal flow, increased visibility. You can use the stock symbol as a currency. It attracts more talent to work for you and your companies.

Yeah, we're using the IPO as a as a opportunity to raise capital as well. Now, how much are you trying to raise? Eight point five million. Eight point five million. And how's that going? So, yeah, I don't know if I can talk about the exact numbers, but it's been like we're right in the middle of the roadshow now. So it's yeah, some people love it. Some people don't love it. It's kind of the way it goes. But yeah, it's it's it's going. Now, are you talking to?

retail investors or institutional investors? Both. So we're working with EF Hutton who are our underwriter and they have institutional clients, have funds, family offices, and they also have retail clients as well. it's kind of been everything. lot of, know, given the size that we are and the money we're trying to raise, it's been mostly family offices or small institutions. Yeah.

Jon Stoddard (02:08.846)
And what are you using? I understand it's warrants. You're trying to raise, use these warrants and why warrants? It's not just warrants. It's also, it's a unit offering. So you get one share and two warrants for every unit. The warrants are just there. I mean, it's kind of from what I understand. I've not done an IPO before, but it seems like a lot of IPOs it's kind of standard to include a warrant or two warrants. It just gives extra incentive for the IPO investors. Like maybe people think why

why don't I just buy your shares after the IPO once you're already traded? And it's because well, then they wouldn't come with a warrant. But that there's acute warrants are dilutive, but investors actually like to use them to leverage their positions in a security like hedging and it's a downside to also. Yeah, yeah, I think some people, again, I don't really know too much about everyone's individual strategy, but some people will probably buy the they'll buy the unit, maybe they sell the share, and then they keep the warrants as

kind of like a call option, I guess. Whereas others use the warrants just as extra incentives. And yeah, they're dilutive, but they also raise capital. So it's kind of a, it's just like, maybe instead of raising 8.5, we actually end up raising more like 24. It's just the remaining 16 sort of drips in over the next couple of years as people exercise the warrants. So let's talk about the strategy and what makes the bell ring for you. And that's acquiring.

smaller companies, is there a range that you're going to try to acquire? Yeah, kind of like one to five million acquisition size. So that would be say 250K to 1.5 million at E-Billa. Now are these profitable, unprofitable, distressed or what? Yeah, profitable. Yeah. So that's kind of the point of what we do. It's typically we pay no more than four times earnings. So

EBITDA, profit, seller discretionary earnings often called in the space. So for business profits, 250K a year, we might get it for sort of 750K to a million. And that's kind of the beauty of what we do because yeah, we always try and grow these businesses afterwards, but if we don't grow them, we can still expect 20 to 30 % cash returns. And if our cost of capital is

Jon Stoddard (04:33.741)
we expect it to be, I don't know, eight to 12%. Then it gives quite a margin for us to keep scaling that. And where are you finding these acquisitions? Everywhere, some of them find us as well. we, you know, all the familiar brokerages like Empire Flippers, F.E. International, Quiet Light, and then we also do some direct outreach. don't, like some people kind of just span the internet to see who's interested in selling and then decide if they want to buy that business. Whereas we,

see businesses we like and we reach out to them. We also have people who know that we're a buyer in the space. So they come to us either as, as a broker or just like an actual seller who's trying to avoid a broker. Now what's that approach look like for a business that's not interested in selling? I understand what the broker they're ready to sell, but somebody that's not interested in what's that approach. It's just like, Hey, we like your business. Are you interested in selling? That's, that's essentially.

Like we don't word it exactly like that, but that's kind of the, the concept. And sometimes people say, I want to sell one day, but not right now. And sometimes they, we've actually had one or two people who have said, yeah, actually I am thinking of selling. Like, what are you, you know, what have you got for me? So yes, kind of, especially if we know them. So a lot of the people we target, maybe we actually have a relationship with them already. And we say, Hey, have you thought about selling? Sometimes they have.

I think them knowing us makes it a lot easier because how many people get spammed? Like, hey, do you want to sell your business? you're not even sure if it's legit, so you don't even reply. Whereas when we know people or they know us, that's like half the battle already. But it's a little bit different today now that you've got some currency. Can you offer shares for an acquisition? And there's that.

Because a lot of people are going come up today and say, hey, well, your public company, Public Retraded, I'd like some options. Yeah, yeah, and we can. And sometimes we will offer that. Sometimes maybe giving some options helps seal the deal. You know, like if someone else is only offering cash and we're offering cash plus warrants, I guess it's about the cost of capital or for us, depending on how, you know, price of our shares at any given time.

Jon Stoddard (06:54.893)
Is it better for us to raise debt and offer cash or is it better for us to use shares? In some situations, think shares will be better and in some situations they won't be. So, but yeah, we absolutely have that option, which is pretty cool. Yeah, that could actually sweeten the deal. You raising this 8 million plus, is that to acquire companies? What is going to be, what are you going to use the capital for? Yes, the vast majority will be for acquisitions. Some of it will be, you know, a little bit of working capital.

DNR insurance, stuff like that. But yeah, the vast majority will be for acquisitions. Now, how is the deal stack or the offer change if you have $8 million in your bank account and you're public, so you have public information, you start up making these offers to companies and they know how much cash you have and said, look, we'll sell it for 5X, not 4X. mean, what's the deal stack look like also? We won't know until we're public. But yeah, one of our theories is that

people will either be more willing to sell to us because they know we're actually a real buyer. They can see our SEC filings and stuff, or some people will be more willing to do seller financing, either like, you know, finance a larger percentage of it or finance it over a longer period of time. And I think just the increased visibility will help with deal flow in the first place. So we might actually get more people approaching us because, you know, people have heard of us. So I think there's a lot of.

a lot of benefits, until, we're actually public and we see how it plays out, won't know for sure. As far as your deal flow now, what does that look like? Are you requiring one business per month or is it six per year? What does that look like? And right now we're not acquiring anything because we're kind of in limbo until we finished the IPO, but we're not really targeting, okay, we're to acquire 20 businesses next year, or we're going to.

acquire a business every month, it's really how quickly and safely can we deploy our capital on the right deals. So is that 10 deals a year or is it 10 deals a month? It really depends what's out there. So the most important thing is that we just deploy the money the best way we can rather than trying to hit a certain speed. in reality,

Jon Stoddard (09:20.855)
But I just have no way of knowing because it really depends what business we see. what was your around buying the smaller companies, one to 5 million, because let's say that, you know, you'll buy a bunch of these, you know, let's say you 10 of these or one a month, it gets to one a month, right. And that gets you to, let's say $1 million each, and that's $12 million. But your bandwidth is stretched to the limit, versus saying, let's go buy

a $10 million business, just one, because you're doing the same thing to each one of those. Yeah, it's a good question. I think at some point we may increase the deal size. I think a key thing is that we don't want one particular deal to be too large percentage of our revenue or our EBITDA. So, you know, if we've got 10 million revenue and there's a business out there for 100 million, maybe that's too big for us. So we have to...

slowly increase our overall revenue so we can buy a big one and still be diversified. I think if we had one business that was a huge chunk, the market would just think of us as that business rather than a holding company. So yeah, over time we may increase the size because yeah, like you say, like running a $10 million business isn't really that different from even like a $500,000 one. So as you increase the deal size expenses and

like labor and stuff should go down. Yeah, let's talk about that. So I was looking at your deck and mighty deals you purchased acquisition price, 750K profits, 300K. And what you do is because of your experience and your team, you come in and you look at it and goes, where is it not working? You expand verticals, increase margins, reduced expenses.

How do you look at business? know exactly what to do. I mean, you never know exactly what to do. Like with mighty deals, we didn't know some of the stuff we tried didn't work. Some of the stuff we discovered afterwards that maybe this was a better idea or that was a better idea. But when you've looked at hundreds of deals and you've run dozens of businesses, you kind of get a rough idea and you get a good idea of it's probably going to be one of these 10 things. So let's start there with mighty deals.

Jon Stoddard (11:37.791)
It was kind of obvious because there was a million people on the email list and the seller of the business didn't do a ton of email marketing. So it just seems like, okay, that's an obvious place to start. expanding the verticals made sense because it was very much, there were a lot of similar deals there, but then competitors out there were a lot broader. So we thought, okay, let's start expanding verticals. And that's something we actually haven't done that.

greater job at yet, we could have expanded faster. Yeah, we also have people on our team. There's people who are good at email. There's people who are good at paid traffic. There's people who are good at SEO. So if we see a business, like there's one we did due diligence on recently, it's got no SEO and it's got a lot of paid traffic. So the person on our team who's good at paid traffic, we say, you know, can you look at this business, tell us what the risks are, but also see if there's any opportunities. And then the same with the SEO, we say, well, this one doesn't really have much SEO.

do you think we can add that in? And so by kind of like divide and conquering the due diligence, you get a pretty good picture of what you think is going to work. And if it doesn't work, that is okay. you, yeah, try something else, but also we paid a pretty decent price for that business. So if it doesn't work, as long as it doesn't die, then like all good. There's a margin of safety in there. Yeah, exactly. Let's go back to this and

So Vital Reaction Supplements website, molecular hydrogen tablets. You acquired that for, you know, small price, like 120K. How did you fix that? It looks like you expanded customer markets. Tell me how you did that. Yeah. So we didn't really fix that because it wasn't broken, but yeah, how we, essentially a large part of the people who could benefit from molecular hydrogen tablets or inhalers are athletes. And

the business wasn't marketing to athletes. we actually have had a couple of celebrity athletes buy the products, but apart from that, no one was really marketing to them. So we did some content marketing really just around education, but like geared for athletes. The idea was to try and rank in Google for that, but also paid advertising. also, as well as that, we expanded the product line, added a few more products in, got a

Jon Stoddard (13:55.853)
Different manufacturer, a faster manufacturer. Cause one of the biggest problems actually was, the Japanese company we were using sometimes just took forever to correspond with us about shipments and stuff. then we also did better email marketing. It's kind of a common theme. Just do more email marketing is a very common thing we do. What else? Yeah. Just, yeah. The previous owner of the business didn't have any.

like abandoned cart sequence. didn't even have any one click upsells, which is very common with Shopify. So now we do it where if someone buys one tablet, one bottle of tablets, it's like, do you want three? And that works very, very well. So just stuff that's like, yeah, I mean, we give them a discount. So it, instead of our margin being like $20 per bottle, it becomes 15, but the average order value went from

$25 to $100 or something crazy like that. So it's well worth it. Abraham, right? Increase the number of customers, increase the size of the car, increase the frequency of purchase. Yeah. So it's stuff that to us is like obvious, but maybe the seller either didn't, there's kind of two reasons. There's two things. One, the seller doesn't want to do it for some reason, like they're anti-upsells or B, they don't know how or C. They just get their upper limit, right? Yeah. Yeah. Or that, yeah, they just,

They tried it, but they didn't do a good job because no one can be great at everything. Right. And all things dogs. Where did you find that? That's a acquisition price, 120. You increased profits 300%. That's pretty amazing. Where'd you guys find that? Well, we bought one business off a broker in 2019 and the seller came back to us and he said, Hey, I've also got all things dogs. Do you want to buy that? And this was probably about one year later.

And we said, yeah, because it was a good website. So that's what I mean. Sometimes people just come to us directly because they know we're a good buyer and they don't want to pay 15 % to a broker. How are you buying these? Are you buying 100 % of the company or 80 % with 20 % seller financing? What? Well, we always buy 100%, but yeah, sometimes it's 100 % cash upfront. Sometimes it's 20. Vital Reaction was actually 100 % seller financed. So that was pretty good.

Jon Stoddard (16:20.755)
Mighty Deals was like 500k upfront and then the rest over the next couple of months. But All Things Dogs was a smaller one. So yeah, that was all cash. Actually, no, it wasn't. I think we did over three months. I think we did like 70%. And then two months later, we did 10%. And then three months later, the other 10 like that. Yeah. One thing we've heard has changed a lot in the 2022 markets is you can get the sellers to finance more.

and for longer periods, but we haven't really tested that yet because we're kind of in limbo until we IPO. Right, right, right. Are any of the in your portfolio, know, Jack Welch, you said if you're not performing in a certain level, below 10%, we get rid of the product line. Do you have any of those that you just say we can't fix? You got to get rid of them. Yeah. I mean, we've sold a lot of our smaller businesses. So in 2019, we were running

we were managing websites for a lot of clients and we were managing some of our own websites that were like making one grand a month or two grand a month. So once we raised money and started making bigger acquisitions, we said, okay, let's get rid of the smaller ones that are not worth our time. So we let some of our clients go and we sold off some of our smaller assets. And I think we'll probably continue to do that as we increase our size.

What was the thinking around not selling? Let's say, you know, you, you manage 15 businesses and you hold them for the longterm, but some of these businesses are a super niche capped out upper limit. You know, they'll never get above 3 million, no matter how much more money you put in paid advertising, no matter how much more you do SEO or, or email mark. We bought it for a hundred thousand. Now it's worth 500. Let's sell it.

What was the thesis around not doing that strategy versus hold them? I think in that case, probably would because, you know, then the question becomes, okay, if we sell it now, we can get four times earnings for it. Let's say maybe three times, maybe five times. Can we, will this business stay alive if we do nothing with it for six years? Like if it will, maybe we should just cashflow it. If it won't, maybe we should get rid of it. And then the other question is,

Jon Stoddard (18:45.985)
can we deploy that money somewhere else? So can we buy, can we sell that business for 500K in your example, take that 500K, buy a business that does have upside and grow it that way. So yeah, I think in that case we would sell. So when I said earlier, we don't, we're not looking to sell, it's more of a, approach because if you approach it like, Hey, I'm looking to flip businesses, then first of all, there's actually a significant

different amount of like legislation that you have to be compliant with, also taxes. Yeah. There's like the whole 1940 investment company act and stuff that you have to start paying attention to if you're going out there flipping businesses. But it's also when you're flipping businesses, you tend to look rubbish businesses. Like I want to find a bad business that I can fix up. our thesis is more, we want to buy businesses that we would be happy to hold forever because then you buy good businesses.

It's a very Warren Buffett philosophy. So it's not like we, we discovered this, but yeah, there will be times where it makes sense for us to sell a business, but it's just not how it's not the end goal that we have in mind when we're doing our due diligence. Yeah. I mean, I think the story on Warren Buffett buying seized candy, you know, I think, I don't know, $8 million or something. Did that have an upper limit? You know, he didn't know it was just a well-run business that he kept forever.

It's thrown off for a billion dollars in cash over the last 20, 30 years. Do you guys, have you guys raised capital before on your? Yeah. Three times. Three times. that was it. That was, I'm looking on this, they asked Juan, it was a private placement and series they preferred. What happens to those investors? Do they, they, they stay long convert to warrants or what, what, happens to those guys? Yeah. I mean,

three of our raises, two of them were common shares, one was preferred shares. So the preferred shares are separate. They're not involved, they're not convertible. They're just straight preferred, straight interest. And they'll just continue to be preferred shareholders. Common shareholders will continue to be common shareholders. So they'll, you know, hopefully do very well for themselves because they bought cheaper in a private raise than hopefully their shares will trade. yeah, they'll, some of them,

Jon Stoddard (21:10.251)
their shares will be restricted because they either own a significant amount or they only bought them a year ago. Whereas others bought two years ago, three years ago, and maybe they only have like 10,000 shares. So those will be unrestricted. yeah, but they're the same class of shares that we're IPOing. Yeah. Do you have a date on that IPO? As soon as we've...

reach the level of 8.5 million that we're trying to get to. So it's not like, we set the date and we hope we raise. It's more like we're road showing, we're speaking to investors and some investors say, yep, I'm in 500k, a million, something like that, 100k, whatever. then as soon as we get to like, okay, we've got 8.5 and commitments, then the next day the investment bank work with all those clients.

raise the money and we IPO and then the shares trade the day after on NASDAQ. Let's talk about your team. You've got, if I pronounce it correctly, SB Van Heerden, Adam Treanor and Jack Hawkins. So how did you meet SB who seems to be your kind of... Yeah, we were in some of the same circles basically and I...

When I very started on Folio, I realized quite early on, need someone to take care of the ops because we were growing quite fast and I'm not great at operations myself. So I just like, I posted a job ad and she already knew me and she saw it and she applied. And because I kind of peripherally knew her as well, it was just a natural conversation that we had and she seemed like the right fit. So, so I offered her the job. So she's been with on Folio since pretty much the beginning.

And what does Adam trainer do? He's chief operations officer. Yeah. So he, just, promoted him in January or February. He was originally a portfolio manager. I've known Adam for years. He was, he was actually running vital reaction and I hired him away from vital reaction. And the owner said, do you want to buy it? Cause he didn't want to replace Adam. Yes. Adam was originally just running vital reaction and a couple of our other businesses. And now.

Jon Stoddard (23:22.601)
his job is really working with the portfolio managers and the in-house team. So like we have an internal SEO team, a digital marketing team, graphic design team, stuff like that. So Adam helps make sure it all works together. And then myself and Esby, I'm like more of the long-term high-level vision and she's the, how do we actually...

put that into a tangible short-term vision. And then Adam is like, okay, how do I actually make their vision work? So it's kind of a natural way it plays together. And then you've got Yuri Bialik, head of strategy and acquisitions. He's a young guy, 37. Well, I he's only 29. Yeah, Yuri looks lot older than 37. Yeah, SB. I mean, I guess we're all pretty young. I only just turned 37 as well. So, yeah, is pretty young. A lot younger than I am. So your director is Robert Lipstein.

audit committee, Jack Hawkins, the third chief financial officer, and let's see a couple other directors, Lawrence, David McKeegan, and Robert Lipstein. Are these your directors, mentors, advisors that you run your challenges through or a business thesis through? Yes. And no, like I have other, so like we have Joel Arberman, who's a strategic advisor. He's more of the

like the bridge between us and the investment bank. And he's worked in public markets for 40 years. So he's the advisor really helping us understand like, do we need to do to be public? What do the market want to see that kind of thing? The board, they give great advice as well. The board's real job is to represent the shareholders and make sure we're doing a good job. So we have board meetings, we update them on what we're doing.

but because they all have so much experience, they give advice and they question our decisions and they suggest alternatives and stuff. I wasn't really hiring them thinking, I need mentors. I was hiring them thinking I need a board and I need a board that's got audit committee experience and public company experience because like you pointed out, we're a young team. So we need people who have the experience. Another board member, didn't mention Mark Schwartz.

Jon Stoddard (25:41.407)
He's worked with a lot of big companies. worked with Starbucks when they had like five stores, I think. they have all those, they've seen a lot of things we haven't seen. They have experience that we don't have. So they kind of mentor us just as a result of that wealth of knowledge that they have. Where are the efficiencies? If you're buying an efficient store, a mighty deals, you know, a variety of different types of e-commerce content type, does this...

where are the efficiencies of scaling it? Because each one's gonna need something different. Whereas the, know, somebody that's expert in email, you might not have on staff or somebody who's expert in SEO, you might not have on staff. Yeah, well, we do. We have one of things we've been doing is building out those internal teams. no, it was a good question. One thing we've started doing, because all of those are very disparate businesses, but...

we're going to start building mini portfolios around a theme. So maybe we have like five SEO service agencies or we have five or 10 just agencies and then maybe a few things related to fish keeping and maybe a few things related to molecular hydrogen supplements so that over time we start getting those efficiencies which could be in the business model or the like the

type of business or it could be in the actual vertical. But one connection they all have already is that digital marketing is like the main driver of the business. So even though they're completely different topics and industries, they're all still digital businesses that rely on digital marketing. with those efficiencies, they kind of, yeah, because of that. as I mentioned, we've built out the SEO team, we've built out a paid traffic team and an email marketing team.

as we buy more businesses, that team won't necessarily need to expand. So the efficiency has come into play there. Okay. Let's talk about something really specific. I'm sure the investors kind of zero in on this is that your fiscal year ended 31 compared to fiscal year ended 32. Your revenue went from 751,000 to 1.8 million. Cost of revenue was 14,000 to 1 million. Professional fees,

Jon Stoddard (28:01.645)
31,000 to 208,000. I suspect that's a big increase is to all the attorneys to the filings, et cetera, to go public. Yeah. For the professional fees, yeah. For the cost of revenue, which went from, yeah, was a big jump from- 12,000 to 1 million, which is a little bit. Yeah. It's a little big. I mean, if you look at it, the revenue 1.8 and the cost of revenue 1 million, that's a 40 % profit margin, which is-

we've seen in similar holding companies. So we're comfortable with that. But the reason for the huge jump was, Mightydeals was acquired and Vital Reaction was acquired in like December, 2020. So none of its cost of revenue is, and Mightydeals was March, 2021. none of their cost of revenue was in 2020. So.

not only that, but included in our cost of revenue, which is something when we were going through the audit, the audits, wanted to make sure we, we included all of the labor costs. So it's not cost of goods, which some people look at it, they think it's cost of goods, but it's cost of revenue. So it includes, for example, if we have a client and we're doing SEO for that client, and that's a team member who puts 40 hours in, then that's included in the cost. And so throughout 2021, we

just expanded our team significantly as well in anticipation of going public and everything. So that's where the huge jump from like 14,000 to 1 million came from. And then professional fees is yeah, that's pretty much almost entirely the audit and the guy who prepared the S1 and all of those fees. Yeah. So your general administrative went from 1.8 million to 2.479 million, which is the

biggest percentage of your sales, 246%. What was the reason for that jump? Sorry, which line was that? General administrative costs, 1.851 million to 2.479. It's kind of the same. basically, I mean, we can try and answer it again, but it's basically we've been enhancing the team size in anticipation of having all this money to deploy our acquisitions basically. And when does that, look, this is not a

Jon Stoddard (30:21.101)
a problem because Amazon was unprofitable for over six years and they turned the profit. So what is that? When do you turn the corner? We're so optimized. We've got a great Ferrari. We're going into the 24 hour Lamar. Nice analogy. I have to be careful about making projections and, and, know, predictions and stuff with marketing and IPO, but

If we look at the cash loss in 2021 was about 1.1 million, total was 1.8 million loss because there was about 700K in like stock options and so like non-cash expenses. And then if you think, okay, raising 8.5 so net proceeds would be about 7.3 after people take their cuts and legal fees and so on. 7.3, if we...

deploy that at the same multiple that we've historically been able to acquire businesses, we think that could bring in about 1.8 million in profit. So that's enough to turn the corner and be a profitable company. So then it's just the question of how quickly can we deploy it or how quickly can we find the businesses that we wanna buy?

And then from there, each new acquisition only adds profit because what was responsible for that 1.1 million cash loss was legal costs of going public, audit costs, which are mostly ongoing, but we've had to audit three years. So they're a little bit higher than the ongoing costs would be. And massively expanding the team in order in anticipation of having these new acquisitions.

But the team is good now. I'm sure we'll hire more people as time goes by, but the core team can handle a lot more acquisitions. How many more acquisitions do you think you can handle? Five, ten?

Jon Stoddard (32:30.207)
No, more than that. Well, again, it depends on the business, but a lot of businesses come with a team and the majority of their expenses baked into the PNL already. So we might add one person to a business here or someone who's running three businesses. Now we're on four businesses, but we could probably acquire quite a few without getting our expenses from 1 million to 2 million, for example. And if we can buy these businesses with non-dilutive capital.

then it's just only gonna be adding profit for shareholders. So the plan post IPO is to deploy the IPO capital, but then use debt to fund further acquisitions. And another thing we think that will happen when we're public is cheaper cost of capital or just availability of capital will increase. Your balance sheet looks pretty strong cash and equivalence. This is from your S1 section 52. You've got $1.7 million. What concerns you?

I mean, what is the biggest concern for you aside from, you know, what the S1 shows is like, you know, Yeah, we have to put a lot of risks in the S1. of risk in here, you know, acquire additional capital, cannot predict future capital needs. And there's like 20, 30 of these. What keeps you up at night about this? The challenge right now is that we're kind of running two companies. There's the company that's losing money and so can't hire this person or shouldn't spend that money.

And there's the company that is about to IPO and have a bunch of money and will become profitable, you know, hopefully quite soon after the IPO. And so it should hire those people because why wait if you need them now, for example. So that's a challenge. So I guess what keeps me up at night is making sure I can balance that after we IPO and everything's all good and you know, we're executing our thesis. I think, I think we've got a straightforward path. I just have to make sure that there's no missteps.

You it's like you're trying to get across a river. There's, there's stones that you can step on to get across it. But the stones are slippery. So you need to make sure you don't fall in. Like I'm not worried about Google or I'm not worried about this because we're diversified. That's kind of what we're trying to do here. So, I don't have any like specific risks. It's more, yeah. So I'm not kept up at night by anything, but it's more, know, what do I need to be wary of? It's just making sure that we continue to execute well.

Jon Stoddard (34:52.673)
and deploy capital well and the rest should take care of itself. So I have a question after interviewing like 65 people, there's a common thing to some of these very successful &A entrepreneurs is that they are part of a mentor mastermind like YPO or entrepreneurs organization or something. Are you part of any group that...

you know, you're hanging around guys or girls or people that are building a hundred million dollar businesses. Yeah. I'm part of two. First one I've been a part of since 2015, which is the dynamite circle. it's, I've never heard of that. Yeah. It's more for lifestyle entrepreneurs. It's like where I came from. There's not many people there trying to do what I'm trying to do. So I'm just part of it because, well, first of all, it's actually a decent source of deal play. There's a lot of people that are building the types of businesses I want to acquire.

but it's also a good source of talent and just you get exposed to lots of different business models. And then a couple of years ago I joined one called Baby Bathwater, which is not the best name in the world, but it's a good community. What was it again? Baby Bathwater. It's like, throw the baby out with the bathwater. That's the kind of mantra they live by. But there's people in there who are like running billion dollar businesses or 300 million and.

that exposes me to a lot of different ways of thinking and a lot of different people. And they're not all digital either, like there's dentists in there, for example, people that made money in oil, people that have done e-commerce, software, AI. it just kind of

increases my awareness of what's possible in business. But there's, I'm not in a group of people who are doing exactly what I'm doing, which is probably going to have to change at some point, but yeah. Yeah. Let me ask you about the competition. Are you running into anybody? you know, Andrew Wilkinson over at e-commerce, guys, interactive core, red ventures, Thrasio, Thrasio lay off a lot of people. Yeah.

Jon Stoddard (37:08.493)
Yeah, I heard that. not really. I IAC are obviously way bigger than us and we're not competing for deal flow or anything. Yeah. Thrasio, we may bump into more because they were originally like, you know, just an Amazon aggregator and we pretty much buy everything except Amazon businesses. So we had no overlap, but I know Thrasio are trying to, or they actually are, I think expanding into e-commerce and they just bought,

a conference business. So yeah, maybe in the future we'll compete for DealFlo. WeCommerce, they focus on Shopify apps and we don't. So we're kind of alone in our space, but of course every business we buy, there's usually a few different people trying to buy it. Yeah, there's no one that I'm kind of like shaking my fist at or anything. know, competition could be status quo.

people don't wanna sell to a bigger organization, they wanna sell to another monopod person, right? Yeah, guess there's, yeah, I mean, people don't wanna sell to the big bad public company type thing. No, I think the competition is more each of our individual businesses has its competitors, but us as a holding company, maybe don't have competitors, if that makes sense. Right, right. So.

You and I talked last year and we talked about your origin story where you used to be an ex-teacher. How have you changed around being a teacher now to a holding company going public? Who's stopping you well teach in a lot of ways. I still teach in a lot of ways. I put out a lot of content educating people.

I think very differently. I think more like an investor these days or a capital allocator. Whereas when I was a teacher, I didn't even know what those things were. And it's just been a... I think what I've always done is sort of analyze what's happening around me and evolve what I'm doing based on that. So if you look at my first business and then...

Jon Stoddard (39:27.723)
coming up with the idea for Onfolio and then Onfolio was very different three or four years ago and then that evolved. It's always been see what's working and see what people are interested in and then kind of evolve that. And when I was an English teacher, I just turned up and taught English and left. it's kind of hard for me to answer that question actually. Well, you're probably gonna think about that. So let me ask you about you pitching.

institutional investors, what was kind some of the hardest questions you could answer they didn't like, couldn't answer, know, like expose some kind of weaknesses in your pitch or your business model? I think the hardest is some people just don't get it. And that's not like dismissing people who don't get it. It's just some people, so some people would

get halfway through our pitch and they're like, yeah, this is great. Like I'm going to invest something. And they ask us questions like the same questions you've been asking me. Like, do you keep the team on board after you hire, after you hire or where do you find businesses or, you know, how do you grow these businesses? And then you get other people that don't really care about that. And they just want to dig into the financials and they might ask me some of the questions you asked and we answer them. And some people are like, okay, that makes sense. And others just think we're lying.

But the real hardest challenge is people hear your pitch and they're like, okay. And they just, you can tell they just, it didn't resonate with them. And that's frustrating because you, know, deep down we're like, no, no, no, this is a good investment. Like we're great, but if they don't see it, then what, can you do? You just have to try to learn from that and figure out how you can change the pitch to help more people get it. And I think we have, we, as we've been doing our road show, I think we've

not only got better at it, but I think we've had a higher percentage of positive calls as we've done it. So yeah, it's kind of an iterative process. you had to close anybody say, hey, you know, why, why should investors invest in your portfolio? What do mean by close them? Tell me why I should invest in you. You know, it's you, right? Yeah, I mean, that's kind of the whole road show, I guess. But

Jon Stoddard (41:48.493)
Some people would say, why should I invest in this versus something else, for example? And again, some people get it, some people don't, but the basic narrative we give is that we're a company that has operating leverage and we have financing leverage. So the financing leverage I've talked about a couple of times, we can get capital for say 10 % and

deploy and earn 20%. So that's the leverage. And then we have the operating leverage where we've built the team and each new acquisition shouldn't require us to scale our operations even more. And if you think about those numbers and that fact, and then you ask yourself how much capital is there out there for us and how many acquisitions are there out there for us, then it should be fairly, again, I have to be careful what I say, but should be

fairly easy to start to put things together and where on folio can be in three, five, 10 years. that's, know, people either get it or they don't. And if they don't, I'm not really sure what more, what more I can say because it's like, it's kind of that simple. You're in or you're out. So let me go back to when you say should, when you bring on a new acquisition and it needs these four things, you're just hoping that

you don't have to hire more people? Is that what your concern is? In the due diligence, that's what we're looking for. We don't acquire it and hope. Like we'll know before we acquire it. But sometimes you see an acquisition where it's a good business, but it doesn't have half the people that you need. So then you think, well, do I still want to buy it? And if I do, how do I price that in? And so when I say it shouldn't need more, it's like, maybe we see a business where

the CEO is going to leave, but they've priced that into the business. So we think, okay, yeah, we're going to have to pay a new CEO, but that's priced in.

Jon Stoddard (43:47.789)
If we get to a profitable state from deploying the IPO funds, then every new bit, it's not like buying another 10 businesses is going to mean we're losing money again. Like once we get to that state, every business is just going to be adding profit. And we don't know exactly how much because some of them we might need to hire a CEO or a paid ads expert, but most of them.

that's either gonna be priced in or those people are already in the business. Yeah. Do you have a HR kind of contact or team that you work with that said, we're going to need a CEO for this. I mean, we have an internal H, I guess you mean more like recruiting. somebody's going to need somebody leaves. You buy a company, the CEO leaves and then you need to replace them. We do. Yeah. And we also just have an ever increasing network.

people that we think would be good CEOs. So one of the buckets that I work on as well as raising capital and deal flow is, treat recruitment as like a sales funnel. So I'm always trying to put content out there to get potential future employees to become aware of on Folio and to get a feel for what we do. And there's a lot of people who are like, hey, what you're building is what I'd love to build. Maybe I'll just do it with you instead. so.

then we say, we just bought a business, we need someone to run it. There's usually a few candidates that we already have in mind. And if we put something out there, people will respond to it as well. And so all of these, you're not, are you hiring firing CEOs? They're running individually or they're all together and you're sharing resources or crop? Yeah, it's a bit of both. It depends on the business.

Some businesses just need one guy running them and some businesses one guy can run four. And some businesses say, I wanna hire my own SEO person and other businesses say, hey, I'm gonna use Onfolio's SEO team. And that's one of the toughest things to get right, but we've spent like two years iterating on it. it's, yeah, I mean, I don't think it's ever gonna be perfect, but it's flexible anyway. So. Yeah. Where do you wanna go with this?

Jon Stoddard (46:07.019)
Hey, do you want a market cap of $50 million, Nasdaq, 100 million? Where do you want to go? I don't think there's a ceiling. So I kind of want to just grow as high as we can. I think 100 million market cap, sure. 300, sure. A billion, I think it's possible. I can't say, I'm going to go out and build a billion dollar market cap, but I think it's possible. as long as we are...

Yeah, execute well, like I mentioned, then I think we can achieve that. Brilliant. Dominic, I greatly appreciate the time explaining your opportunity to me. Thank you so much. And this is the second interview Dominic has done with me, one 12 months apart. So thank you so much, Dominic. Yeah. Thanks so much for having me again. Yeah. We'll see you again in a year.