The Tech Start-Up vs. The Bootstrap Lifestyle

The Tech Start-Up vs. The Bootstrap Lifestyle

Peter Demangos has started two businesses in the Human Resources sector. One was a bootstrapped insurance brokerage where they sold employee benefits programs to large clients. The other was an HR software company called Collage, where Demangos and his co-founders raised $3.5 million of investment capital and sold three years later for $15 million.

Given that Demangos was the common denominator in both companies, his story provides a unique contrast of two different approaches to starting and building a business. Demangos retained 100% of the equity in his employee benefits brokerage, and with high margins, more than a million dollars in sales, and just five employees, it funded his lifestyle. When Demangos sold, he was able to get 8 times EBITDA for the brokerage, the majority of which was paid in cash.

By contrast, Demangos held a minority stake in his tech start up Collage, yet it was a much higher sale price, so he still had a healthy windfall.

The combination was enough money for Demangos to hit “his number,” a net worth beyond which he would never feel compelled to work again. This is why the conflicting set of emotions he feels today are somewhat surprising.

Listen now, and you’ll learn:

  • Why your software company should have a technology person among the founders.
  • How memberships drove more value for Collage than revenue or profits.
  • Why hiring a marketing intelligence specialist could give the value of your business a big boost.
  • The entrepreneur’s dilemma and why it can be such a vexing challenge to overcome.
  • The unusual trigger that caused Demangos to sell both of his companies.

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