Ep. 12 How Synapse Survived After Multiple Co-founders Walked Away

Welcome everyone to another episode of Down, But Not Out. Today I'm joined by Ryan Austin, Ryan is  the founder and CEO of Synapse a Toronto-based learning and development operations software  that has offices in the US, Mexico, and Africa a long-time entrepreneur Ryan has started several  companies dating back to 2005. Right before starting his current company, Ryan exited GoFish  Cam after successfully building the company from 2014 to 2019. Ryan thanks for being on the show. Thanks for having me, Nick. Absolutely and I'm not sure  if my introduction sufficed but please go ahead and tell  give us a bit of your background leading up to Synapse and your Down, But Not Out story. Yeah, no problem I mean I would define myself as an entrepreneur first. I wasn't very good  at school I tried university for three years and it just didn't work out for me  and I kind of turned my dorm room into this like mini campus shop and got in trouble  and had to figure out like okay well how do I do this, so that's when I built my first tech company  because I took everything online and it's been kind of a journey since. I mean one company led me  to working at a company called World Trade Group where at the time I noticed that this company's  competitors offered corporate training services and they didn't so I pitched the board, I was  leading a few sales teams I pitched the board on building a new revenue stream for them and became  Senior Vice President of training Americas and that's how I kind of by default fell into learning  and development and learned about that. Awesome and then I mentioned GoFish Cam  where was that in the journey? Was that part of another, like was that while you were doing  this other job as well or how did that fit in? Yeah so after you know prior to joining World  Trade Group I started a company and ended up didn't working out yeah and so just to  save up again I joined WTG, World Trade Group and they were later acquired by private equity and you  know rather than sifting through the changes you know I did really good I had I did really  well building out this new revenue stream so I kind of built back up where I felt comfortable  to going back to entrepreneurship I felt that I got some new learnings etc and at the time  I wanted to get back into tech but I wasn't yet sure what I wanted to do so I started consulting  and learning and development because I knew how to make money there just as a cash flow business  and figured that I would help companies, you know we built out a corporate training services company  I co-founded it with somebody named Josh and started building it out and it was more of a  cash flow company, it wasn't recurring revenue so like every month was a new month type of thing. Hard business to build. Yeah and I started looking  at investing in diversifying and I went to actually a wedding, with a  friend's wedding, and I had a friend named Reza and he's like I really want to be an entrepreneur  let's come up with ideas on this trip and we were on this catamaran,  and you know I grew up as a like an angler I love fishing and and we're back at catamaran,  everybody's partying and the the local catamaran staff members they were fishing off the back  while we were going back inland and and they caught this fish and it got off the  line and they're like oh I wonder what it was and I'm like well what if you could see underwater  you know with some sort of camera and so then I went to reserve and I'm like hey Reza  this is the idea, we did research, we didn't sae people, like the competition, with people like  welding GoPros onto fishing lures and stuff like that and we're like okay there must be  something here and so I just- Reza was an engineer so he started building prototypes out of like the  Raspberry Pi and stuff like that and it was like you know nothing to what it ended up being but  came to the time where resume had to put money in to take this prototype to actual like  proper prototype and he basically got cold feet and was like you know what I can't invest that  much money into building this like it's too much for me and I'm like oh Reza like this is what  entrepreneur, you say you want to be entrepreneur it's about taking the risk, you got to come in and  figure out the pieces after but he got cold feet and bailed and I already signed a contract to get  this prototype built with a engineering firm and and coincidentally around that time my brother,  Brandon, was graduating university and came to me and he's like I want to be an entrepreneur. Does everyone come to you and say that? No, but you know I'm happy for the right  people to like pay forward give help out where I can I got a lot of help from mentors along the way  my brother's like want to be an entrepreneur graduated university in Ottawa and I'm like  well what are you gonna do and he's like I'm not sure and I'm like well I have this GoFish  Cam thing and I'm like it was never meant to be my full-time job I'll give it to you  and I'll invest a bit to get it going and I'll teach you how to fundraise and all of that and you  operate it and I'll like teach you how to be a CEO essentially, and so that was a deal and he came  and moved and slept on my couch and built GoFish Cam and several years later we sold the company. So it's a pretty cool story but GoFish Cam was almost, oh I wouldn't say, yeah, it was definitely  in trouble after your engineer left and you didn't really want it as a full-time job and your brother  just so happened to be at the perfect time to take it over. Were you a part of daily operations still  there while you were running the consulting firm? Yeah I was running the consulting firm because  you know my thesis with the consulting firm was to actually learn about problems and  learning and development to find a tech play because the learning and development function  was so behind other functions in like just digital transformation or how modern teams operate etc and  so I was still digging into that and so I was more of an advisor, like CEO coach to my brother. Yeah. And you know like an investor  and just taught him what I knew there was a lot of yelling and but it worked it was a good formula,  like brothers can build businesses successfully, it's so hard to get into these yelling matches and  which leads me to you know you asked me about telling the story with and so the one I chose  was with Synapse. So Josh and I started to and Josh is like one of my best friends today still  right and so we started this consulting company, started making money from it, and I you know I was  never content running a services business and so even though we were running it and we made  it successful we got it to a few million dollars in like 12 months and I was just never satisfied  you know like I was not like hey this is like what my life is or the mission I want to be a part of  so I was okay to kind of let everything go and pursue the next big thing we got into some  accelerator based off of some like you know this thesis around potential software we could do and I  moved to New York and then eventually to Texas and you know we were doing the services and trying to  figure out the texting at the same time and at some point we said okay we think we know what we  we want to build we need a tech Co-Founder so we got to introduced to somebody in Texas named  Sebastian you know he kind of joined up and so Josh, Sebastian, and I kind of went off and  started working to build this prototype and at the beginning everything's so exciting and  whatnot and then you know reality sits in building tech companies is really really hard right  and you have to not pay yourself longer than you thought it would take right, what you thought  might take three months of not receiving salary or a payroll could be like 12 months or 24 months  and so it becomes really hard and you have to make choices like where am I going to pay rent from,  in my case I had a line of credit and so I was using that and you know and  Josh had some income and Sebastian had some income and we pay ourselves where we can  this was pre-product right like we were building the product so we didn't even have sales  but we eventually got to a point where we started sales but you know this was like a very early  version of the software we're selling to enterprises the people who were buying from  us were first mover innovators like untraditional enterprise buyers and we we didn't have funding  so we you know we early days and so we were like borrowing money against contracts and then paying  off those loans like 30 days after because of net 30 payment terms to pay engineers and  salaries or whatnot and you know we weren't sure if we'd be able to raise money with this company  at some point we needed to because we needed to get ahead of the company needs and and whatnot  and it was a hard time I mean we had to make hard decisions to the point where josh and I  both agreed that we had complementary skill sets and you know if we were trying to figure out  how do we survive another day you know we recognize that probably both of us it didn't  make sense for both of us to be in the company and like you know that this was a friend who  moved it to from Canada to the US we co-founded another company together we built this together  and yeah and we kind of had to like look at each other and just be honest and so- That's a tough conversation for sure. Yeah and you know the conversations get  way tougher right and so we mutually kind of talked about it and unfortunately like,  well Josh and I both agreed that I should stay on and he'll leave and we ended up doing a deal where  he ended up going and running the services company you know we stopped doing services  when we launched our software we said we can't do both and so yeah we said as hard as it's going to  be like you can't do services and software together for our business model and so we  just needed to rip off the band-aid and so he left and I stayed behind with Sebastian and we tried to  get it to a place we still had no money we weren't paying ourselves. We were paying the engineers and  you know at some point sebastian said like you know he was 10 years older than me and wanted to  have a family and stuff and said like I can't do this anymore so I have to figure out like  you know where do we go from here or like how do I make income or whatnot and we're kind of  striking out at the time with an investment like we raised a little bit of angel money but  you know it wasn't like significant we were close to the end of that and that money needed to be to  the engineers because it was like the fiduciary responsible thing to do was to keep like always  make sure you're keeping the lights on and paying your people versus yourself sometimes right and so  long story short we decided that the company should move to either New York or Canada  and that's where we should set up shop. And you're in Texas still at this point? Yeah exactly and I knew a group called the DMZ in Toronto and they're like come here we'll help you  give you some office space etc help you tap into some of the mentors figure things out  so Sebastian was supposed to move back to supposed to move to Canada and then like a few months after  I moved down basically said like hey look like you know I don't think I'm going to move want to be  with like grow my family here in Texas talk to my wife about it and like I have an exciting  offer from Amazon and you know at my point in life sounds like I should just go and do that so  ended up being like me plus like now you know two Co-Founders down and  me and like four engineers in Mexico and they're not technical in that sense either no oh yeah  so now I'm like you know company has like 10 customers for engineers, no technical co-founder,  like barely any money and it's like hey how do you figure it out from here, so yeah heads down  and just did what I know best like fail fail sale sale sale sale sales and so I moved the company,  I moved to canada unofficially back at the end of 2018 just to see how things would go yeah and  I sold my socks off and I got the company to a pretty interesting level where we started having  money could hire somebody so right away you know I was closest to bastion there was no hardship right  away talked to to him to you know help me recruit for a technical like the head of engineering and  we ended up finding somebody named Lumi who who joined us at the time it's like bp avenge and  and he started managing the team and then we started building it out from there  but now we got to some interesting numbers where it was like okay we have a new  technical person in place and those were like hard three months but you know oh yeah  it built a lot of pressure in my marriage my wife like you know like very emotional  personally and business-wise and just had to figure it out like you know life throws curveballs  at you and sometimes you just have to look at it and be like this won't defeat me and like you  won't know how to overcome it you won't know what to do but you just take it day by day and try and  figure it out and control what you can control and it's super stressful right but just that belief  in being persistent and you never know what's like around the corner like what what can happen  anyways we did these speed dating things at the CMZ place and I met a VC who got interested and  then they dug into us and realized that we had a really messy cap table obviously Co-Founders and What did you keep did they retain all ownership of josh and Sebastian  afterward or was there some divest investing of shares that had happened how did that work? Yeah so I actually I got some advice from like that  other story but through GoFish Cam I connected with Kevin O'Leary at some point from Shark Tank  and I met one of his like fun like heads and he they're in Toronto and went for lunch and  told them about this issue and he actually recommended something that ended up working  which I would recommend to any Co-Founders dealing with something like this which was a blessing yeah  you know we we didn't have the money to pay out Josh and Sebastian all at once like we  were just barely making it by and and you know obviously they participated in the company up to  a certain spot so we got some data points around like what could the company's valuation be and  basically structured a deal with them where we'd pay them that portion of money times their equity  but we vested it like a mortgage over 25 years yeah so monthly we'll start paying you monthly  this amount of money over 25 years but with accelerants so if we raise the feed round  we'd accelerate x percent of that when we raise our series a round we'll accelerate  another 50 of what's outstanding when we raise our series b round we'll pay the remainder off  but in exchange you have to give back the sell the equity back to the company. Yeah that was my question. Yeah and unlike every company  and well at the time it was just me right so yeah like plus some of the angel investors who like  got popped off because of it but primarily I was the major shareholder so it mostly came back to  me at the time because we're in the early days you instructor different ways obviously  you know it gets more complicated if you have more shareholders or investors or  whatnot but depending on how you're performing I guess yeah it's your negotiation power. Yeah  that's a good takeaway if you need to get rid of a Co-Founder or two and they want to exit early on. Yeah and I wouldn't say get rid and I know you didn't intentionally mean it like that  but I'm saying some people need to not you yeah I'm sensitive about it because again josh like  one of my best friends and like this was a very hard decision for all of us and Sebastian but  that was like hard conversation number a thousand but for the sake of this story number two because  it was like we can't the company's paralyzed we can't raise money with the cap table as is so  either I walk away right which I would prefer not to do but the company's dead at this point  yeah or you have to do this there's no there's no can I keep a little bit and we do this  we have to like just do it super clean to give the company the best chance of succeeding with  venture capital fundraising and at this stage you know like several years into it  without like making money and living off saving it was like I can't personally go on  trying to run this like you know like Josh is doing his new thing Sebastian has a nice job like  you know I also have to put be fair to myself in this circumstance and not put myself in a  in a in a losing outcome where like I'm making an already very hard job even harder right so I was  serious I was about to walk away from the company and yeah even like you personally you said it was  messy for VCs as well so this could have been a move that potentially saved the company or from  your own regard of wanting to stay in but also you wouldn't have been able to really raise them. For sure yeah completely. Yeah and it was a good win-win scenario where  it was fair to the Co-Founders you know what's fair so if the company didn't make it because it  was treated as severance they would have to get paid out before any investor its income  right so it actually put them in a position to protect like what they would be owed over anybody  else which was good for them too and I felt good about that even right like if I don't execute well  and I fail you guys win and I lose yeah but if I win you also win everyone wins yeah so yeah I mean  you know worked out and fast forward like we're like 40 employees now and starting to crush it. So where are you and you're raising as well we're private companies so we're still cheat stage  company and you know we were thinking of doing our series a but something else happened where we were  I can't really talk about it yet there's gonna be an announcement soon but  we were able to get equity non-dilutives and so I postponed that raise to you know this  was like substantial money without the cost of dilution so like venture debt can you say that  somewhat something to do with like the government and things Okay I'm in London, I'm in Canada too so I think I have an idea. Okay cool yeah yeah so I mean I  put it this way I got really good at doing grants during COVID and kind of learned the ins and outs  of that and and we've had fortunate outcomes which is great like we can invest back into  Canada talent and also build a global tech company at the same time and so yeah I mean so we ended up  postponing series a because we got some money and this year is our growth year next year will be our  scale year and you know like I was with Josh over the weekend and we were talking about it and you  know having beer so it's fun to stay in touch and keep things fair and be on good terms with people  at the same time but you know like face hardship and diversity in the eyes and say [ __ ] you and  survive yeah and that maneuver that was I don't know what I'd call it maneuver but that tactic  that structure that deal structure is really what saved the company I think definitely important  so I think the takeaway is like especially when you're facing hardship and you feel like things  are dead you really don't know what's on the other side you can't be stupid about it so if the  market's not speaking to you and you're getting bad information and there's just nothing there  like do what Kevin O'Leary says take it take it out back and shoot it right. Yeah like kill the company because time is your most valuable resource as an entrepreneur  you'll do something next right and you'll take the learnings from that and apply it  the market speaking team is really really hard sometimes you need to be patient and  be persistent and this is like really hard stuff like you get depression you feel lonely  you know so you just talk to people openly about what you're feeling  try and get advice it's not going to be solved overnight it could take 12 months  could take 24 months listen to the market the market's speaking to you and you believe in it  keep going figure it out day by day by day and at some point the magic will happen where things  start to turn around right and if you look at a lot of the most successful companies i  know everybody here is like this company's a billion dollars that's a billion dollars  like you know there's a company called Docebo it's a learning management system started by professor  in Italy and they didn't do anything for like eight years ten years they were they had nothing  and now they're like a three billion dollar company that's on the public market right it  took them 12 years 15 years or something like that so these things take time and you just have to be  smart enough to know what small data points you get at any given time which like listen to the  market and use the data to make your next move and figure out and it's not going to come easy  you have to dig it's stressful it's like finding a needle in a haystack but if you're persistent  you'll figure it out and if there's something really there it will end up working out right  yeah I think that's a fine balance between knowing if you have something  and you need to wait or if you need to take it out back and shoot it so yeah. I think that's smart yeah I think that's a good takeaway from everybody  and we're on a bit of a crunch so we'll wrap it up there Ryan I appreciate you sharing your story  I hope everyone enjoyed this episode if you did leave us a review also subscribe to the  show to be alerted of new episodes and like and share on social media help us spread the  word of Down, But Not Out all right thank you, everybody, thank you Ryan. Thanks Nick see you