June 1, 2023

Episode 284: Chat Joglekar, CEO & Co-Founder at Baton

Chat Joglekar is an experienced executive and the CEO and co-founder of Baton, a data-enabled marketplace that empowers small business acquisitions. Baton's innovative platform allows owners to unlock liquidity in their most valuable asset, while also providing serious buyers access to a vast but fragmented asset class. Baton's goal is to become the go-to platform for SMB acquisitions, much like Zillow is for real estate.

Prior to founding Baton, Chat served as an executive at Zillow for over five years. During his tenure, he launched and grew the company's New Construction marketplace, generating over $100 million in revenue. He has also played instrumental roles in scaling iconic companies such as Spotify and Google from their earliest stages and has held leadership positions at various early-stage startups.

With the support of investors such as Bloomberg Beta, Giant Ventures, and others, Baton is excited about the potential to create the next great asset class while also supporting small businesses, which are the backbone of our economy. Baton is committed to continuing its mission to enable small business acquisitions and provide a platform for growth and success for all its users. Chat currently resides in New York City with his wife and three children.

Julian:Hey everyone. Thank you so much for joining the Behind Company Lines podcast. Today we have Chat Joglekar, CEO and co-founder of Baton. Baton is a dataenabled marketplace that empowers small business acquisitions. Chat, I'm soexcited to, to have a conversation, not only about your background and yourexperience as a founder, but also this interesting kind of micro acquisitionspace that not a lot of people, I think, Are not necessarily aware of, but are,are kind of understanding the kind of importance of small businesses and the,the necessity to continue kind of them going on through founders and ownershipsand, and even, even from a consumer standpoint.

I'm sure we've allfelt the pain of having our favorite store and all of a sudden it's no longer therebecause of some change of ownership or something like that. So I'm interestedand excited about, other aspects about how, how companies can transition andmake it smooth. And but before we get into all that good stuff, what were youdoing before you started Baton?

Chat:Yeah, I mean, probably the most relevant thing before was at Zillow for aboutsix years and just built a, a marketplace there called New Construction, whichwas really converting a marketplace from an ads business to a marketplace wherewe had new home builders get charged based on their communities that they wereputting on the site, and really had to scale it from, we took a about 20.

3 million, I think,ads business and took it to zero and then basically started this new business andI was like, I think I can get to a decent amount of revenue in the first year.But we actually got to 25 million, I think we were at like 40 some the yearafter, and then continued to grow and kind of on pace to be a hundred milliondollar business.

And went from, Iwanna say like 160. Advertisers, which were all the big guys, right? TollBrothers, Pulte, Dr. Horton to, by the time I left, I wanna say like 1500, 14,1500 advertisers. So we had like really expanded the pie, just kind of similar,right? To small businesses that if it's this ad product, it's really only kindof the.

The head and notthe tail. And we really worked to get better content on there, which was goodfor the consumers, right? The searchers but also good for us because we had justbetter quality in the marketplace. And so that was what I did. And then afterthat worked at another PropTech startup, so kind of stayed in that space.

And then kind ofduring Covid was at. Room, which is a kind of modular architecture startup. I'msure a bunch of founders on this have like jumped into a room and taken callsand, and that kind of stuff. So it, it was a bit of prop tech in the sense thatwe were trying to have this adaptive kind of ecosystem and get these things allthroughout the world.

And that wasexciting because it was frank, I, I forget now at this point, but I think wewere in, we had sold into like 30. 4 35 countries, all you know, as far asAustralia and New Zealand, but also to all of Europe and Israel and, and allover. So it was kind of a nice, I think, counterpoint to Zillow, which is hugeand amazing, but very US based and it was like a big thing when we launched.In, in Canada, so.

Julian:Yeah. Well, it's so fascinating thinking about even the Zillow experiencetaking kind of an, an added business and kind of product. I don't know how to,how to like product buying it, in a way where you're kind of creating a newYeah. Value and, and a value chain, a new experience and chat about, or discusskind of the, the one changing kind of.

It's the structureof the business, but also kind of deploying a new product and trying to findout how to differentiate that from the, typical offering that company, kind ofpromotes and has. And really kind but still kind of keeping the relationshipwith the original kind of parent company that Zillow was. What was that processlike?  

Chat:Yeah, yeah. I think it was really about there was someone, one of our advisorsat Google, long, long ago. He has this statement that has stuck with me. He'slike, you always have to find the pain. And this is in sales, right? Like, findthe pain and then solve the pain. And that's what you're gonna get paid for,that's gonna close the deals.

And I think for,for on the new construction side, right? It was really what did we see thatconsumers were trying to do? And how the eco, I would say, how the macro kindof environment was changing. And what we saw at Zillow was, Everything wasmoving to mobile, right? So you were, I I think it was close to 70% of trafficwas on mobile.

And when you thinkof these display ads, it was really like a Pulte ad, let's say, going andclicking through to a pulte.com webpage that wasn't mobile enabled. Like wewould kind of do some of these tests and we're like, This is not one, not goodfor Polty cuz they're not putting their best foot forward.

But it's also notgood for our consumers because they click in and they're like, I can't evenread what I'm supposed to do here. And we really felt that, especially withmobile apps, we needed to almost like create native content, right. And havethe content live in the platform. Cuz that's what the consumer really wanted todo.

And so that waswhat happened at Zillow over. A decade, right? Everything was about how do wemake it and connect the two sides of the ultimate market real estatemarketplace in a better and better way. And then from the pain on the newconstruction side, they were, they were trying to get leads.

And so we said,look, we're gonna get you a better lead because you're gonna have, exclusiverights to all the leads that anyone's like, oh, I'm interested in thiscommunity. Yeah, you get a hundred percent of that. You're not sharing it withanyone else. And you can convert that and the ROI will be great.

And admittedly, wehad to convince some of the bigger guys, some of the smaller builders I thinkwere like, oh, this, okay, this sounds good. And, and they, they had theirproxy for what they were doing was like, bus shelters, billboards. Because theywere very much like, we're advertising in Katy, Texas, and you would drivearound and you're like, oh, here's this new community you can drive in.

But, Zillow wasthis interesting thing where we were bringing people that were relocating.There was, that was kind of the, where people did their first, initial searchand, and so it was really about how we can connect those two sides. How cancreate something. That exists on mobile that drives a bunch of leads.

And we ultimatelycame up with this pricing model, which was based on all the zip codes in the USand how much like traffic we had on Zillow. Yeah. Was one access. It's almostlike abc and then 1 23 was the average price of the home in the community.Right. Some of them are like 150 K communities. Some are the million dollarhomes in the community.

And it basicallywent from, one to nine and one was like, I think 120, $150 a month toadvertiser community all the way to like $1,200 to advertise in number nine,where we were gonna drive a ton of leads and we kind of broke it out so that itwas ROI based, right? Where we're like, okay, if. X percent of these peopleclick on, the listing and, and turn into a lead X percent or Y per, people aregoing to connect with Dr.

Horton's community.Yeah. Then Z number of those people will actually convert. And we had somehistorical averages and we're like, look, this should be a 10 to one ROI onprofit. And it was a little bit of a leap of faith. Like I. Admitted. I tellthis story a lot. I went to Toll Brothers, I hope told brothers is not gonna belistening on this, but like they were, I sat in Horsham, pa in their boardroomand got yelled at for like 40 minutes saying This is never gonna work.

You guys areidiots. We're not gonna buy this, like all this stuff. Cuz we said, Hey, we'reshutting this one thing down. We're going. And I was like, I was nice. I waslike, I, I appreciate your concern, but please give me six months. Right? Just.Three to six months, see how it works. If it doesn't work, maybe I come back herehead in hand, like telling you, oops, sorry.

Right. And I kindof gave them that little out of like, this could all not work, but you have to.I'll come back and you can yell at me more. And they still like, I think theywere dark on Zillow for a few weeks, but then they eventually came on and, weeventually got all of this, the existing advertisers, and we started adding allthese other folks.

And then we, the,the kind of moment was, it was a small-ish ad builder in in Pennsylvania Ithink, or Florida, and they were like, please don't use this to raise ourprices, but your leads are amazing. We've already sold like X amount of, like,they were basically saying this works. And that's actually internally we hadthis like small team.

We were kind of testingit out. I went to, rich and Lloyd, like, went to senior leadership and went tomy boss at the time and basically said, I want 28 new salespeople because nowwe can cover the, the country and we're basically gonna divide up the countryinto all these regions and just go call them because like, We have that signalthat the, the, the real value is there be like you run Google AdWords, itworks.

You run Facebook,like you run things and if they work, that's when you kind of pour gas on the,on the fire. And so that's, that was like the moment.  

Julian:Yeah. I mean, you decrease significantly decreased their cost per acquisitionand also brought them closer to their client while also delivering consistentresults and like, That is, I feel like the marquee of what you wanna do as, asa product, shifting that focus and, and it's so fascinating thinking about theresistance you had, kind of closing down on one side of the business and, and,and re kind of factoring honestly the best qualities of it.

And, and in aparticular use case that did you guys uncover was just extremely valuable. Werethese just like the higher kind of marketers or ad spenders on the platform atthe time and you were like, how can we deliver? The best value to them by alsokind of controlling, the monetizing function.

Also the dynamicpricing per code. Brilliant. Obviously it's completely fair. And, and, and itworks within the real estate ecosystem, so I can see you didn't have to likeRight. Reinvent the wheel there. Super cool to see. Yeah. But yeah, kind of howwas that kind of, dropping down that function, shifting the focus and kind of,how did you identify that those were the right partners for this particularYeah. Business,  

Chat: Ithink. I mean, it, it was kind of the, the, the play at Zillow was turning stufffrom ad dollars to marketplace dollars. That's how Premier Agents started. Itwas literally a CPM model. Then it went to kind of cpc, it's like kind ofworked its way down to more of an integrated thing.

And if you thoughtabout it effectively by that point, rentals and, and new construction were kindof like the two last remaining real estate. Focus like where transactionshappened at the end, right? You sign a lease or you purchase a home that werestill on ads. And both of those, those marketplaces basically went through thistransition.

So it wasn't likerocket science, but we did have to figure out how to do it. And I think acouple things. Zillow was great at a long term orientation and with the owner,like the way the ownership worked and the way that the senior leadershipthought about stuff. They were what I call like long-term greedy, where theyreally focused on what's good for Beth, the buyer.

So we had a lot ofpersonas and there are a lot of other companies, if I went to them and I was like,Hey, I want to kill $23 million of revenue, which I think at that point wasprobably like 95% gross margin. Like, yeah, crazy amount of margin. Most peoplewould be like, shut up, get outta here.

Like, keep tryingto grow that. And I basically said, look, if we do this right, it's better forthe consumer, it's better for Beth, it's actually better for the bi. Thebuilders, like you said, like they're getting better results and better qualityresults. And it's better for us because realistically, we were probably cappedat 25, 30 million on this business.

And I was like,this is easily a hundred million dollar business, if not more. If we can exposethose long tails. So that, that was a lot of the play. And I think ultimatelyit came down to everything being there, where like the company was willing tomake the bet and take the, like, let's do this for a year.

It works, itdoesn't work. And I think the timing was right. And then we used to call, Iused to, I had a phrase or a hashtag. Which was Burn the Boats, which was kindof like the Cortez thing because I, I don't think it would've worked if we didnot kill, literally kill the Display ads business. If we still had the displaybusiness and we launched what was called promoted communities it wouldn't haveworked, right.

Toll Brotherswould've just been like, we're not gonna do that thing. We're just gonna stilldo our ads and take people off your site and have this bad experience. Webasically said, we kind of flipped it. What used to happen was you bought ads,then you got kind of listings for free. We basically said, Hey, you have to payfor the listing.

If you pay for thelisting, you can promote your community on our site. Then you can get addedpromotion and buy a native ad placement that clicks into the Zillow site orTrulia site. Yeah. Then and only if you do that, We will sell you a click outad, but like you kind of had to ladder up to that. So Toll Brothers, if theywanted to do that, had to buy the other things they were like in the way, butit also enabled them to actually see how that was doing in that intervening.

Julian:Yeah. We also were able to just like then drive traffic at that point. Right.You, you've solved this business case. You've solved kind of this valueexchange, and now it's just like all the work is driving the traffic of, whatyou've been good at already, which is. Getting people, getting eyeballs,getting consumers on.

So, yeah, I mean,it's super brilliant cuz you're essentially doing what you do best as your maincore value or business function. Yeah. But then the value is different and itjust, it, it's so funny cause I've been reading the, the a hundred millionoffer book, which is extremely popular now, and it's a, it's a lot of, figuringout what assets you have, identifying where the value is for your stakeholders,and then creating a structure to incentivize all parties.

Yes. And it soundslike, oh, like that sounds really easy. It's not, it's, it's probably thehardest thing to do as a founder to, to really deliver to your cu to, to yourcustomer.  

Chat:Yeah. And I think, people always say, right, as a founder or as a startup, youhave to be willing to be mis misunderstood for a reasonably long time becauselike, you see the vision of, like at Baton, right?

Like we see thevision of where we think the business and the market will go. It will, the, ourhope is that it's extremely self-evident to everyone. 10 years from now,they're like, oh, what do you mean That was so easy? Of course you should, it'slike Airbnb or Uber. People are like, oh, that's easy.

And you're like,yeah, if you were sitting, 15 years ago, you're gonna stay on some randomperson's, airbed in some random, like, that's not a self-evident thing, butlike it became self-evident and I think. At Zillow, the, it was at a lesserstage cuz we didn't have to create the eyeballs on the consumer side.

We were doing it inlike, I think like a bit of a laboratory where we're only moving some of the,the variables. But you still had to get, like, I had to go and get yelled at byToll Brothers cuz they're like, this isn't gonna work. We had peopleinternally, right. Sales people that are like, this is never gonna work.

I don't know whywe're doing this. I'm not gonna make you know my money because. These guys wantto buy ads from us. They don't wanna buy all this stuff. But like, again, youhave to like see the world as it's gonna be in 18 months or 24 months. Workbackwards from there and say, if we can get to that place.

Yeah. We'll allkind of to your point, right? Like, will everyone that's a player in thisecosystem actually think that's a good idea? And yeah, they may need the hump.It's like you, you want to be fit and you want to like, Run faster. You may notlike the, like waking up at five in the morning to start the run and or, the,the activation energy on some of these things is hard, but you have to get pastthat.

And I think that'sa lot of like, innovation is people that are willing to like push at somethingto get all the disparate sides. Past that activation energy, so  

Julian:Yeah. Yeah. And then delivering like immediate results always gives, likereinforces that, that, that loop. Right. Right. And it's so, it's so, yeah.

It's, it'sexciting. Yeah. It's invigorating as a founder to think about creating thatmechanism. And  

Chat:we, one, one thing we also did, right, it's, we made the contract with thebuilders. It was a minimum six month contract. And that was explicitly, andthen it went month to month. But we were like, you have to give us six months.

Right? Because ifthey did two months and they're like, I'm not seeing any, any sales from this.And then they canceled. We knew it was gonna be too early. And, and we're like,these things take time, right? Like someone has to go visit, you have to decideon a home. It's a huge purchase. All this kind of stuff, right?

A lot of things canhappen. And so we were like, we think we'll show value in three or four months,so let's make it a six month contract. So it's like those little pieces, right?Like if we had done this whole business and just made it a month to monthcontract or maybe made it a year, yeah, those might have been suboptimal,right?

Like peoplewould've been like, I'm not gonna do it cuz that's a long time for me to likebe locked in in a. I don't know if I'm gonna still have homes available in thiscommunity, all this kind of stuff, right? So you kind of put something out. Ithink you have to be really good at listening to what the feedback is comingback.

And it's always thewhole Henry Ford thing, right? Like just because they say something doesn'tmean you do exactly that, but you like understand the like objection and like,what's the objection, right? They were like, well, I don't know if we can, ifwe'll even have, lots available. In that community, and then we'd be like,okay, it doesn't mean you have to keep this community alive.

You have to keep acommunity live. And you guys have 60 communities, like right, you can clearlyhave one live for the next six months. And then they'd be like, yeah, okay,five, like five, I guess I can. Right? And, and then you can move past that.But like you, you constantly tweak stuff and like, we're doing this at, atbaton, right?

Like, We putsomething out, we see, we hear feedback, and then you're kind of tweaking alittle bit of the model and how the pricing works because it's like, it's tooexpensive and sometimes that's okay, right? We're like, that's, that's fine. Weare providing a great service to help you sell your business.

If it's tooexpensive over time, hopefully we have a way to serve you. But you know, now isnot that time, but you, you kind of figure out like what is in the realm of,possible. Successful outcomes for all sides, right? Like, can we make this workfor us in like our opportunity cost, but also does it work for the highquality, let's say listings that you get on the platform?

Those kind ofthings. You just have to constantly be thinking about this stuff. And I thinkalso not over-engineer things, but like it's a, it's a soft skill, right? To belike, okay, I've heard like 16 different things and out of those. There's oneor two things we need to tweak on the pricing or the product.

Right. And, reallypull a lot of user testing into like a few key themes, which our product teamdoes an amazing job like product and design. They'll do this, they dosynthesis, right? And they listen to all the stuff they've been on these callswith the buyers or the, the owners or the sellers.

And then they'rereally able to distill like, here's what's missing. Or they need more trustsignals. No one as a, owner was saying, I need more trust signals. They'relike, Ooh, these logos look cooler. It's like you're trying to understand what,what actually moves more people through the funnel.

Julian:Yeah. Yeah. And just o obviously, shifting gears and, and talking about baton,I'm, I'm interested thinking about, what inspired you to, to not only. Kind ofthink about this, this acquisition, micro acquisition funnel, small businesses.What inspired the idea and, and, and discuss how you're delivering on that,that mission that you set out to.

Chat:Yeah, I think, we talked a lot at the beginning of the company. It's almost likea cocktail party company cuz it's very easy to explain. Like you, you started,right? Like everyone knows a small business. They know someone who runs a smallbusiness, right? Like they have family or friends that have.

Of the restaurantor the dry cleaner, the, like it consulting for like, whatever it is. 99% ofbusinesses in America, in most countries are small businesses. And so it's veryrelatable. Or you're like, where did you get coffee today? And people be like,oh yeah. And I'm like, that's, unless it was Starbucks, it's a small business.

Right. And, and I,I think the, the real takeaway was, there are these amazing assets. That theowners have little to no idea what to do with, and they really don't know thevalue of the asset that they've created because they really think about it as acash generating. Entity, right? They're paying payroll, they're paying fortheir kids' college and the new boat or whatever it is.

But they have notinternalized that in addition to the revenue that's being created or the cashflow, there's also this asset value and that someone would want to take thatover when they want to retire. We've had like dozens at this point of examplesof owners who thought their business was worth.

10 to 50 millionand or 50 K, and then we're kind of coming to them being like, actually it'sworth 800 K or 1.3, or whatever. And you can just see they're like, wait, what?Because you  

Julian:Yeah. I was gonna say what, what's involved in that valuation process that,that they're missing? Yeah. Obviously, you can go out cash.

Cash and revenueand what that generates. Operating costs. Yeah. But that, I'm, I'm excited tohear about how you value it because of the asset of a brand now and howimportant it is Yeah. In its relationship to consumers.  

Chat:Yeah. I mean, a lot of it, and it's kind of, it's, the other piece that wasinteresting in this space is that small businesses, get purchased for anywherefrom two x to four x cash flow.

So if you thinkabout that, if you have a million bucks and you buy a business, let's say for,throwing off 250 k of cash, In four years, your entire investment is made. Ifnothing changes, there's exogenous risk and a lot of things can happen,obviously covid and pandemics and a lot of things. But ultimately a businessthat's working and going and a going concern is actually an amazing investment.

So that's whythere's a ton of buyers out there looking to acquire businesses. The kind of,like blocker is. That the supply side, which are all these owners who've builtamazing businesses, don't really think about their business as an asset. Yeah.Because I think a lot of times they just don't have access to the data, so theydon't know comps.

Right. Maybe atthe, at the local pub or the golf course, they hear someone like Joe just soldhis. Manufacturing business for 12 million bucks. And they, but like, it's alot of like apocryphal stories of like one Z twosy things. And we have tens ofthousands of sales comps in our database.

And so someone comes,a restaurant comes in, we can show them, like I was actually looking at one,it's a cupcake and donut chop in, in Virginia. And we have, four or five like.I think we have 20 comps for them, but like literally three or four that wecould give them as information that in the last like few months that have soldon revenue, cash flow, you know gross profit margin, like some of those thingsthat they just don't have access to.

And then I thinkthe other piece is they don't understand the multiple on. Their cash flow,right? Their cash flow is paying for a lot of stuff or goes into their bankaccount or pays for the kids college or whatever it is. But that's actually thething that the buyer wants, right? And it's same as a startup or same as anyother company.

It's effectively,right? A SaaS company is 10 x revenue. It's like everyone, like in startupland, we all know those things. Most. A dry cleaner doesn't know that because,Frankly, there's not a place they can go to. I mean, startups exist on, you talkand there's all the like ecosystem. It just doesn't exist.

Yeah, yeah. Becausethere is no, yeah, there's no, there's no angel list, there's no Carta, there'sno Twitter, like there's no ecosystem at a high level or no brand name. Right.Even Zillow. Yeah. Where you can go and you can. Look at the price of yourhome. Right? And I'm old enough where I can remember that, my mom was a realestate agent and her, on a Saturday morning, she would drive to the office,print out all the, like, printouts of the stuff, put it in a, in a binder inorder, and then you would kind of do the drive.

But if you are theprospective home buyer, You didn't like, there's literally nowhere else youcould go to to see that. You like the book. The binder was the only thing thatyou had to look at. I remember when there weren't even pictures in that thing.It was just like the dot matrix stuff. And now people are like, well, everyoneknow, like we would hear from some, investors.

They'd be like,well, everyone knows. What the price of their home is. And I'm like, well,everyone does now, now. Yeah, but they didn't 20 years ago, 30 years ago. Cuzif you hadn't sold your home in 30 years, how would you know? Right. And, andagain, very similar like Sally across the way they just sold their house and,but like you didn't really have a way to do the comps and so that's a lot oflike, it's a little bit of the pattern matching with the Zillow.

Like we want tobuild. Right. The little suitcase thing is, We're building the Zillow for SMBs,and it's what is your business worth if it's there and it's high quality andthere's this trusted kind of ecosystem where we vetted the listing. So it's notsomeone saying they're doing, a million dollars in top line revenue, but we'velooked at their p and l and so long-winded way to get to your question, weconnect to their QuickBooks or they upload financials.

So we see p and lon balance sheet, and then we essentially run. Discounted cash flow, salescomp, multiple industry mult, industry comps and weight those into a number,which is like, here is what this would trade at if there were a bunch of buyerslooking to buy it. Right? And, and we're pulling that together and also giving,I think, the owner great perspective on where they stack up to other folks.

Right? And again,this. This, I think this donut chop that I was looking at had extremely lowmargins. Like 8% gross profit margins versus the competitive set, which waslike 30 or 40% gross margins. And then just being able to present that to himor her, you can be like, look, you're doing a million dollars in top line, butyou're not generating profit it like you have to look if you're able togenerate profit.

You see themultiple, like let's just say for simple math it was two x right On cash flow.If let's also do simple math where like they're throwing off a hundred K in,cash flow a year, so their business is worth 200 K. You can say like, look, ifyou can get to the midpoint of where most of these other businesses are, let'ssay you get to, I don't know, 25% gross profit margin or, or profit marginwhere you're throwing off.

250 K in cashinstead of a hundred out of, out of your million dollars in sales. Like even atthe same multiple, you've taken your 200 K business to 500 K, which for a lotof owners they're like, oh, now you've given me a roadmap of 200. And you thinkof this estimate, right? Like the little chart. You're like 200 today, 500tomorrow, or in 18 months they have a, a path.

And so like that'sa lot of where we feel the unlock in this market, sitting on the supply sidewhere owners, if you give them information, one of our core values is likeinformation is power. If you give them the information. Then they can decidewhat to do with it. Do they want to grow the business? Do they wanna sell thebusiness?

Do they wanna shutit down? Whatever they want to do, it's their choice, but they should do itwith all the right information. And, we talked to hyper successful businesses, medicalpractices, who are constantly getting calls from private equity. And I've, I'vetalked to a lot of them and they're like, I'm, I'm actually scared to answer.

That call because Idon't even, I don't feel prepared to talk to them cuz maybe they give me 2million for my business, but I'm like, I don't even know what that means. Like,is that good? Is that bad? And, and so like we, it's like again, a big corevalue is the valuation is free. And this is kind of similar to like CreditKarma, right?

Like right. If you,if you take away that barrier and that hurdle, and most of these valuationscost thousands of dollars. If you make it free, you kind of bring them furtherdown the funnel. They get to a place where they're like, oh, okay, yeah. Again,for the cupcake place, I'm worth 200 k. I've put, 200 K into the business.

So that doesn'tmake sense. But if I could work on this for 18 months and get it to five or 600k, Then I'm netting out, I'm pulling out money, my irr, like we can, weactually kind of walk them through this and, and start the, like juices intheir head. And if the, the hard side of this, in marketplaces right, there'salways one side which is harder, it's supply or demand.

And in, in thismarket it is definitely the supply cuz there is a dearth of like high quality.Businesses for sale. So there's a ton of, like micro acquire or biz buy sell orwhatever. Like there's a ton more buyers on the platforms than there arelistings because there's a ton of people looking for those businesses.

Julian:And, and thinking about like, I'm just so fascinated thinking about, You'rebetting on a few things, right? You're betting on that there, there's a hugebarrier to getting information to understanding your business in comparison toothers, but that's also betting on that com that, that a lot of, you know,small business owners wanna sell, are thinking about acquisition, and you'realso thinking about, the, the demand side.

People looking toacquire businesses to, build them out as assets. And I'm curious, it allsounds, in, in the right ecosystem, super productive and, and Everyone's inline, but I What are some of the risks that you think the company faces today,out outside of, betting, making sure that all these bets kind of, pan out?

Chat:Yeah, no, and I honestly, literally, probably this time, maybe 13 months agoafter we got our, our pre-seed round, we kind of went down the funnel andwanted to answer all the questions, right? Like, We raised the round to saylike, our valuation's a thing. We thought they were a thing, but like, willpeople click on a ad or just click on a Google link and be interested?

And so that waslike we had to, we had to answer that question. Then to your point, the nextthing was like, great. I often say it's like, is it a, did we create a vitaminor did we create a painkiller? Right. Are people actually wanting to dosomething or is it kind of like, Ooh, that's cool, great bye. Which would be ina very different business now.

But the, ultimatelywhat we found is over 50% of the people coming through, once we had a call withthem, were interested in selling. Another big chunk, like 30% were interestedin growing their business. And those were the, like painkillers we could solvethose things. By connecting them to folks to help their margins or grow theirtough line on the, growth side.

And then on thesell side, we used to connect folks to brokers. So there's other partnerconnections. We now run point on those and actually help them sell. So we arekind of the broker because there's a lot like, and it was funny, it wasactually our customers. Asking for it. We didn't set out to do it.

Yeah, we, we wereon, I think Dylan, my co-founder, was probably the first recorded time where hewas giving someone evaluation and the guy was like, this sounds cool. Could yousell this for me for like 6%? And I think probably because of the real estatething. He was just like, how about 6%? Yeah. And at the time we were kind oflike, Can we, we don't act like we had to think about it.

Right? And, andultimately we thought about it and we're like, actually we can, because this isthe pain point. And we've built up a huge amount of trust with the smallbusiness owner cuz we've just explained how their business works in some waysto them. We've turned on the lights and now that we've done that, they're like,I want you to sell this for me.

I don't wanna likeget connected to someone else. Like I want Baton to do it. And so that really.It wasn't in our plan. Right? Wasn't the, like, I didn't have some magic deckthat that was always gonna be the way, but kind of back to the Zillow thing,like you hear things and you kind of, you have to be listening and thenultimately you're like, actually, can we do it?

Let's like not answeryes yet, but let's like think about it a little bit. And what are the steps?And then we kind of stepped into it. First we, we got brokers to help supportus. Then we were like, I think we can actually do this ourselves. Like we kindof worked our way and stair stepped, our way into a thing where we felt likeconfident that we could do it and, and really not disappoint our customer.

Cuz like we didn'twant to be like, yeah, we can do it. And then just fumble it because again,trust is really important to us. And so yeah, so ultimately we ended up, beingable to, to control sort of that sale process all the way through. And to yourpoint, it's like that's the thing that we're really, that's the pain that we'rereally solving.

Yeah. Because theywant someone to come in, help them find the buyers. And then, we've done a lotof buyer research as well. The buyers are like, the fact that you validated andverified their financials is amazing because, on the other sites they'rebasically listing sites. So it's kind of like Craigslist, right?

Like someone canlist a bike. I always use the bike example, but it's like the chance that yourbike a bike on Craigslist is stolen. Or mispriced or just something, right?It's like very uncertain and you wanna meet in like public cuz you're like, Idon't wanna get ju like all this stuff and there's no trust.

And that's kind ofhow the listing side are. Like a lot of buyers will say add out of the 10 leadsthat they get aren't that great because they say, someone's saying that they'rethrowing off 200 K in cash or they have to go through an LOI process and thenthey get the financials and they're like, This is not what I, what, what, whatwas told.

Julian:Yeah. It's just so brilliant thinking about, you figure out, you do all themanual things that are not scalable and I mean, you've done the playbook,right? And you're operationalizing a lot of the, a lot of the pieces that arescalable, which is information silos. Getting access to it and buildingrelationships with customers.

Once you haveenough trust, then it's just about transacting and, and then getting enoughvolume in, on both sides of the funnel to maintain. I mean, it, it's it's, it'spretty exciting also to think about how much work you're doing to, to reallyalleviate the biggest kind of, I guess, misinformation, miscommunicationbetween these two parties.

Which is, where areyou at now? What is the current value? What in comparison to others? And then,on the demand side, of course, is this business actually legit in, in havingkind of accountability to that? Which is, which is super exciting. I, I knowwe're I, I know we've, we've dove into a lot of different topics, but I want tohit you with some FAQs here before we, before we get off the show just to getsome more advice from the ponder, if that's okay.

Yeah, totally.Awesome. Cool. Always like to open it up. What's particularly hard about yourjob? Day to day?  

Chat: Ithink there's no. There's not a playbook, right? At the end of the day, you're,you're in almost every case doing something that hasn't been done before. Andlike there are rules of thumb, and, even fundraising is rule thumb, but like,you're the only company in some ways doing what you think, what you're actuallydoing.

And so I think thatpart is hard where it's. Easy enough to be like, okay, we're doing a enterprisesales function, or we're doing like out cold outreach, or there's plenty oflike things, but I think that's, that's generally the hard piece is likewhat's, what's really different about what we need to do?

And like when youthink about pricing and. How do we do it? Like should we have people in-house,right? Like let's an example, we were just talking about it yesterday. Shouldwe hire people at Baton to run these transactions? Should we have it be a 10 99employee? Very similar, right? The pattern match would be brokerages andthey're like, every real estate agent is a 10 99 employee is a small businessto themselves, right?

But does that makesense for this? Should that be the thing that we match or should it not be,and. What's similar and different. So I think it's like being able to like,look at it maybe bring in a few examples of like, here are the, the options,which are the pattern matching, but then really decide what's good for yourbusiness.

But like, yeah,lonely and I don't know if it's the right word, but it's, sometimes you're kindof, heading to the North Pole or the South Pole for the first time and it'slike there's not is an n of one or an N of two in whether this works or whetherthis doesn't.  

Julian:Yeah. Yeah. And just thinking about your experience as a founder, what, what doyou think is something that you're better at now that you wish you were, betterat earlier on?

Chat: Imean, fundraising is always this, I mean, it's, it's the, it's the gas that,that powers the, the dream and. But I think like, it, it's kind of funny, likeevery fundraising round is its own thing and it's different because thebusiness is like, you're a completely different business, like one year to thenext, which is great because that means you're doing something right.

But it also meansthe, the pitch is actually different and the like, what resonates and and Ithink also the other thing is the market changes. So how we, how you raise inone year is, is different. And that's. I think that's always been true. Soit's, it's, they're parts of things that are just more bites at the apple, butthat's like a we're a Bloomberg beta portfolio company and they have a way ofsaying that fundraising is, is one of the few one way doors that exist in acompany.

Like, if you do notfundraise, you die. If you hire someone wrong, like you can recover from that.If you do, if we pick the wrong pricing on whatever, like we can recover fromthat. Fundraising is, is like high stakes. And so I think, I, I now know, and Ithink it'll be constant learning because the next round we do will be a ton oflearning and then I'll take that into, but it's like a lot of just trying tounderstand.

And I think I havea lot of empathy, honestly, for founders and the founders in the past that I'veworked with or worked for because it's its own unique. Yeah. Like ball of, ballof hell sometimes, but also like amazingness, like I wouldn't trade it for theworld, but but it's, it's hard sometimes, so.

Julian:Yeah. Yeah. Think, I mean, thinking about like fundraising and valuations,what, what do you feel are some things that founders can start doing now toalmost like, the small business owners to better. Prepare their business foreither a, a round of funding and acquisition. What do you think founders shouldfocus on in, in kind of foundationally for their company to kind of, hitmilestones or be successful?

What if, what aresome things that you learned that company needs to, to really set themselves upfor success, regardless  

Chat:of the Yeah, I think it's always, there's the adage of it's better to be boughtthan sold. And, and so part of it's like, if you were a buyer of said company,what would you wanna see?

And think about itin almost that first principles way of like, what, what makes it, like, if it'sa VC back company, then it's like, what's a venture outcome? Which is a, one ofthe greatest companies of our generation style, like the how you have to thinkthat you're gonna be worth 10, 20 billion.

And so like a VChas to believe that. And. Do that. If you're a small business, it's like, whatdoes the buyer want to see? They want to see consistency. They want to see goodmargins, they wanna see that it's scalable. And so it's like, it's differentprobably for different businesses and when the stage you're at.

But like I thinkwe're very much in the like, what will someone effectively look at? Or they'llsee signals like, here's our growth rate. And ultimately they're just like, oh,we want in. Like how can we get in? And then you're kind of the one, like thebell at the ball kind of being like, Hey, so that's like how we think about it.

Like we want to be.Set up for success that way, and you kind of have to think and put your, walk amile in the other person's shoes.  

Julian:So, yeah. What and why fund, why did you choose to fundraise being, like ratherthan say bootstrap, or, and maybe have a lean team? Was it to go to marketquickly?

Was it to reallyscale both sides of the marketplace for sheer volume? What in particular? Yeah.Add to that decision?  

Chat:Yeah, I, I think a couple ways. One, one couple reasons. One is marketplacesare hard. Yeah. They, they, they, they don't drive real, like revenue and scalelike a SAS business, let's say for a while.

So they're justreally hard to bootstrap. And I, I was talking to a fellow founder yesterdayabout it, and it's like if you actually put a monetization product on amarketplace, Too early. It kind of kills the marketplace because it createsthis barrier on the two. Like it's a cold start problem. So last thing youwanna do is make all these monetization things.

Like this is a $30a month subscription, or this is like, that doesn't really make sense. So I thinkthat was one piece, which is like, we need the space to really design somethingand it flows into the next piece, which is like, if this works well, given youkind of do those high level TAM exercises, right?

Like, noexaggeration. This, if we do it well, should be, deca billion dollar kind ofoutcome. You look at Zillow, it's a 11, billion dollar company. And you look ata lot of other marketplaces out there, and they're even another order ofmagnitude. The market is about the same size, like all these kind of things,and you're like, in order to get there, That's a venture scale business.

So we should takethe money and, and actually get the, the insights and the help. And the supportfrom the venture space. Because I think that's the other piece, like if wedidn't need that and we could fund ourselves, we'd probably do that. But likeadmittedly, we are on a path to profitability reasonably quickly, and.

That also gives usoptionality, again, it allows us to be bought, not sold, right? Like, we're notgoing out hat in hand saying like, oops, we need money. We could very well beprofitable. And it's like, who do we want to take money from in order to reallyscale this and get, and be first to market and get, get ahead.

But it's like, onour terms at the last round we basically said we want this to be the lastround. We take because we need to the next, from now on we raise because wewant to. Right. Which is a small differentiation, but but important.  

Julian:Yeah, it was amazing. And the reason I ask that question is cuz you know, a lotof founders will learn from experiences of just like, oh, we've raised money.

And then I'm like,ah, how do I spend my dollars? But I mean, you took the inverse approach,right. Which, which I believe is right. And, and which is. Identify where thecapital will be deployed and in that timeline within this experiment, how, whatwill it gain me? And does that outweigh, the risk of scaling the business tooquickly?

Or does it, readsome kind of milestone more, more, more quickly, whether it's on a marketplaceside. So it's, it's awesome to see that, you, you strategically kind of thoughtthrough that place. Thought about how you were gonna attack your TAM and thenexecute it on a strategy.

And also inpartnering with a company like Bloomberg and the real estate or acquisitionspace. Brilliant. Because, it's completely in line. Which another thing that alot of founders talk about is choosing the right investors to, that, that areinvolved in similar types of business or companies.

Yeah, it's, it's,it's amazing to see, chat where you've built the company so far and, where's itcome now and where's it gonna go. And last question to, to ask you today iswhether it's early in your career or not, what books or people have impacted orinfluenced you the most?

Anything asfounders should go and take a look or, or, Take a listen to?  

Chat:Yeah, I mean, I've always loved Andy Grove, like high output management, Ithink. I'm a sucker for business books in general and socio like, my wifeprobably hates it cuz it's like all I read she's like, why don't you just readfiction?

And I don't reallydo that. Can't do it. I can't do it. I like, TV is my fiction. Right. And like,learning is books and yeah, I think it's a lot, it's a lot of business booksand it's, it's a bit of just layer. It's this layer cake of every time youread, like back here on this On the bench.

I have ClaireHughes Johnson scaling people who I, knew and worked with at Google. And soit's just like, again, that's like kind of this book and this workshop that youcan get into and you can always be learning. And so it's just like, pick up abook. Right? I think high, high output management was kind of foundational forme in terms of really setting the expectations.

But like the restof the books, it's, it's. Take a few points out of them and Yeah. And yeah, andthen I think it's, it's other stuff like looking at, like, looking at JeffBezos's annual shareholder. Let, like, it's a time to look at how people writeand think and like, I have a bunch of subsets that I, I, Read.

And I think it'sjust trying to keep your brain at this point where you're, and as a CEO now,like my job is to make sure the team understands the vision, make sure we havethe capital to achieve that vision, and we have resources, aka people toachieve that vision. But the really, at that vision piece, it's like I'mconstantly, it's like a sailboat, like you're constantly.

Making sure you'reheaded in the right direction and you need to like adjust something. And it'slike AI comes in. It doesn't mean we blow up everything, but it's like how,what are the jobs to be done that AI really helps me accomplish and helps thebusiness accomplish? And like, can I push the team who's maybe like heads downon like, we have to launch this one thing now I have to be that person beinglike, absolutely.

But like, let'sthink about this, or let's do a little te, whatever it is. Right. And not toget them off, off vision or off mission, but fundamentally it's really moreabout what's happening because like the world changes constantly. Right? Sojust like. Be well read is probably, yeah. And like a lot of different opinionsand not the like, generally not Twitter which is screaming sometimes a lot ofstuff.

Right. It's morelike the nuanced, thoughtful stuff, which does exist on Twitter, which is whatI love Twitter for. But but less of the all caps. Yeah. In that sense.  

Julian:Yeah. Well, I love like you mentioning, just kind of creating an ecosystem forlearning because. Someone told me a long time ago, it's, you can oftentimes seesomething working like a business model in one particular industry and, and seeits relationship or its implementation in yours.

And, and I waslike, ah, that's a, that's a great thing. And then I read Atomic Habits and Icreated this constant kind of, loop. There's audio books, there's podcasts,there's all these different materials. So I, I love to ask that questionbecause I'm just adding a couple more audio books to, to my list.

To, to crankthrough. So, Chat, it's, it's been a amazing chatting with you and, and notonly uncovering your background, your experience, but what you're working onbaton and kind of your grand vision for what you think and what your bets areon not only, business owners who want to, sell their business and create reallystrong evaluations, but also understand what they're worth.

But you know, alsokind of on the demand side, finding really legitimate assets that you caninvest in and, and grow over time and add to your portfolio as someone whoacquires businesses. So, Last little bit is give us your plugs. Where can we bea fan of you? Where can we find here? Give us your LinkedIn, your Twitters,where can we be a fan of you in, in the company you're running?

Chat:Yeah. I think mostly it's like at @joglekar. So Twitter, LinkedIn profile Ithink is like Chat Joglekar. And yeah, just come on batonmarket.com and checkus out, sign up as a buyer if you're interested. Obviously if you have a smallbusiness, Please come on and, and get valued. It's no cost and it's free.

And we want to haveevery single small business in America on the platform in short order, andthat's how you can help.  

Julian:Amazing. Chat, thank you so much for being on the show. I hope you enjoyedyourself and I'm so excited to share this audience.  

Chat:Thanks. No, had a great time. Thanks for the conversation.

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