CarAdvice founder’s journey from $35 start-up to reported $35 million sale
Within a decade, Alborz Fallah went from investing $35 in a domain name to selling his business for a reported $35 million. Here he shares some key lessons for other business owners.
Have a passion for what you do, excel at what you do and, above all, get your timing right. CarAdvice founder Alborz Fallah on how he went from $35 to $35 million – and what other business owners looking to sell might consider.
CarAdvice is one of those digital economy success stories that launch a thousand business plans.
The story, often told by the press, goes like this: a 21-year-old car fan, Alborz Fallah, spends $35 registering the domain name CarAdvice and starts reviewing vehicles and offering car advice in his spare time.
Within a year, he is able to resign from his day job and start travelling the world test-driving automobiles. Within a decade, he sells his business to Channel Nine, also known as Nine Digital, for a reported $35 million.
Do what you love
It would be a mistake to attribute Alborz Fallah’s success to luck. A born entrepreneur, he had started over a dozen businesses by the time he launched CarAdvice in 2006, working from his parents’ Brisbane home.
Nonetheless, even he had no concept of just how big things would get.
“I don’t understand or recommend the idea of starting a business with the end goal of being able to sell it for lots of money,” Fallah says.
“People do that, but I think it’s much easier to start a business because you’re passionate about something and you’re solving a problem. I started a car-review business because I love reviewing cars. I was also helping people with their problem of deciding what vehicle to buy. I still love it when I get emails saying, ‘Thanks to you guys, I picked the right car.’
Consider sharing equity
Fallah admits to being something of a Generation Y start-up founder ‘cliché’.
“I’ve so far achieved my goal of never owning a suit,” he laughs. “The people who work [at CarAdvice] can choose their hours and bring their dog into the office if they like. And, yes, there is a ping pong table.”
Some two years ago, Fallah transferred 15 per cent of his equity to various long-serving and senior staff.
“I did that after, rather than before, the business took off,” he says. “Partly to recognise the staff’s contribution and partly because, to the established players, CarAdvice was a threat so they had started offering ridiculous salaries to tempt our people away. I believe in growing with a great team.”
Focus on core business
After enduring an advertising downturn following the GFC in 2008, Fallah says he first started thinking about selling in 2012.
“The thought process was, ‘Let’s look for a strategic partner to buy into CarAdvice’,” Fallah explains.
“But either because we weren’t ready or the market wasn’t, nothing came of it. A conscious decision was then made at board level to shelve the sale plan and double down on our core business.
“In the following four years we invested heavily in people, doubling our staff from around 15 to 35, invested heavily in producing great video content and tripled revenue.”
Weigh up different sale types
“By the time 2016 arrived I was 32 with a couple of kids and the staff who had equity were interested in being able to pay off their mortgages,” Fallah says.
“It’s not that we had to change anything; it was a profitable business enjoying strong growth. But it’s an uncertain world and the other shareholders and I wanted to realise our share value.
“CarAdvice spent $1 million preparing for an IPO, so I was serious about listing, but then people started expressing interest. Channel Nine made a competitive offer. I decided I’d prefer to sell a majority stake to it for a guaranteed amount than endure the scrutiny, and share price ups and downs, that come with being a publicly-listed company.”
Aside from a very healthy bank balance, Fallah says things haven’t changed much post-sale.
“I’m still involved in the company and will remain so for the three year earn-out period, and potentially longer if I’m wanted,” he says. “Channel Nine now have the final say but they’ve been smart enough to leave CarAdvice alone to keep doing what made it such an attractive acquisition target.”
Time your sale
Looking back, Fallah says the biggest stroke of luck he had was a lack of interest when he first contemplated selling.
“I’m glad we didn’t get a realistic offer and I suspect there are some people who are sad they didn’t make an offer.”
Fallah is now planning on devoting some of his time to mentoring start-up owners. He’ll give them the following advice about selling out.
Considering selling your business? 5 things to consider: Alborz Fallah
- Accept that Australia is not Silicon Valley; be realistic. “It’s unlikely you’re going to come up with a great idea, provide proof of concept then sell your start-up for billions within a couple of years. Be realistic.”
- Think about whether an IPO is the right option for you. “Start-up founders obsess about IPOs but if you’ve got a buyer offering a reasonable price to take a large equity share, why put yourself in a situation where you have to wake up every morning sweating about the share price?”
- If it’s an earn-out arrangement, talk to others who’ve been bought out by your potential purchaser. “If you’re locked in for years in your earn-out, you want to be confident you’ll be happy with the post-sale situation.”
- Whether it’s selling the business or any other issue, seek advice. “I made lots of mistakes I could have avoided if I had just taken 10 minutes to speak to someone who had the experience I lacked.”
- Don’t limit your dreams. “Never in a million years would I have picked Channel 9 as a buyer when CarAdvice first started. Remember that potential acquirers can come from anywhere, so don’t limit yourself.”