Sam Sherman: How to Manage and Thrive in a Crisis

Full Transcript:

Sean Cantwell: Hi, guys. I’m Sean Cantwell, and welcome back to Season two of Scaling Success, a podcast geared towards entrepreneurs, where we discuss a range of topics that contribute to building a valuable, and long-lasting business. If you’re new to the podcast, please give us a follow on Spotify, and YouTube.

Sean Cantwell: We have a great guest for you today. I’m thrilled to welcome Sam Sherman, founder, and CEO of Broker Genius, a price-optimization technology business for the live-event industry. Sam is an incredibly bright, and scrappy entrepreneur who had an idea and turned it into a profitable business with hundreds of customers, and then the pandemic hit. The live-event industry shut down completely with the onset of COVID-19, and that led to serious challenges for the entire industry.

Sean Cantwell: Entrepreneurship is sometimes glamorized in our society, but it can also be incredibly hard, even in good times. I’m excited to talk to Sam today about managing through a crisis and how he was able to manage that and also position the company for a bright future on the other on the other side of what were very challenging times.

Sean Cantwell: By way of background, Volition Capital is an investor in Broker Genius, so I have gotten to know Sam quite well over the past four-plus years. Sam, welcome to the podcast. If you would, please introduce yourself, and share some background on Broker Genius, if you would. Thanks.

Sam Sherman: Sure, sure. Thank you for the intro, Sean. Thanks for having me on. My name is Sam Sherman. I’m the CEO and founder of Broker Genius. I started the company in 2013 after having kind of dabbled in the business myself as kind of an amateur ticket broker for a year prior to that. So, back in 2012, I had a bunch of friends, and family members that were buying and selling season tickets and having success, and that was attractive because I really- I loved sports, and I also love data, and marketplaces. The intersection of all that seemed like a really cool opportunity.

Sam Sherman: So, back in 2012, I was working full time for an out-of-home media company in business development, and sales, and I was looking for an opportunity to just go into the market. This was right when Peyton Manning was coming back from injury, and he was going to sign with either the Broncos or the 49ers. I called up the Broncos ticket office like a day or two before he ended up signing and kind of thought maybe he would sign there and got a list of all the inventory that was available, which was down to only very expensive premium club inventory and basically was just asking this rep if he could give me any kind of inside information, like was it unofficial, or whatever? Ultimately, he’s like, “Listen, as soon as it’s- if it’s going to happen, I’ll send you an email, and maybe that’ll be like an hour before ESPN picks it up.”

Sam Sherman: That’s what happened. I still have that email framed on my wall. The subject line was “It just happened.” So, I called him up, and I maxed out all of my credit cards on Broncos tickets, and that’s how I got started. Ultimately, as I started to buy more, and more inventory, I started to see a lot of inefficiencies in the market, particularly around pricing, because even though I was making a really nice amount of money, and good margins, I also saw that I was oftentimes leaving a lot on the table, and that’s basically how Broker Genius evolved from there.

Sean Cantwell: That’s amazing. Your entrepreneurial story is similar to many entrepreneurs I’ve met and ones that we’ve invested, in that you just saw a problem, and an inefficiency in the market, and you decided to solve it. A lot of people see problems, and inefficiencies, and have ideas but don’t necessarily have the follow through to actually commit, and start a business, and take on all the challenges that go along with building a business. Have you always been an entrepreneur, or were you kind of an accidental entrepreneur in this case?

Sam Sherman: I would say I was always an entrepreneur at heart. I knew it from the time I was a kid. My older sister tells the story, when I was six or seven, we were living in Memphis, Tennessee, and apparently, I convinced her that the pinecones in our backyard were very valuable and were these special scented leaves. So, we went door to door trying to sell them. So, I got my first failures also out of the way very quickly, too. But, I think I always had that kind of entrepreneurial spirit.

Sam Sherman: I had been involved with, from the time I was 19, 20 years old, many different types of startups. Many of them were complete failures. Some of them had some moderate levels of success. But it put me in a position and on a track to a) do what I knew I always wanted to do, which was to become a successful entrepreneur, hopefully, at some point, and also really to learn from all those different mistakes and failures that I had had over time, which certainly helped me to get to where we are now.

Sean Cantwell: How would you describe, Sam, what it means to be an entrepreneur and some of the traits that are necessary for success?

Sam Sherman: I think the first thing is, to me, bearing the risk, and the responsibility because I know a lot of really talented, and smart people that that would say, “I never want to own my own business,” and the number-one reason that I hear from people is that they just don’t want that stress and that responsibility and to take that risk. So, I think that the first thing is to being able to bear the risk, and the responsibility. That’s a prerequisite, I would say, to being an entrepreneur.

Sam Sherman: The other thing is, to me, it means being able to take a vision and to turn a vision into a reality. You spoke about this a little bit earlier about, you know, the execution is of the main difference between… A lot of people have good ideas, but it’s execution. I think that having the vision, but then just being able to figure it out and how to hack it. “Okay, I’ve got to get from A to B; how do I do it? I’ve never done it before. I’m going to do a little research. I’m going to talk to people. We’re going to figure it out. We’re just going to do it.” So, it’s the drive to turn the vision into a reality.

Sam Sherman: Also, there is leadership that is required. It’s sometimes uncomfortable, but putting yourself in a position to be a leader and being a leader, I think, is really important. Like I said before, I think the most important thing, to me, about being an entrepreneur is to really believe that success comes from failure and that learning from mistakes is really how you end up hopefully achieving greatness over time. I don’t think there’s another possible way to do it other than that, and I think that’s the number-one hallmark of being an entrepreneur. Just on that note, I just recently watched this documentary on Elon Musk, and SpaceX, and going to the Space Station-

Sean Cantwell: I watched that, too.

Sam Sherman: I thought it was amazing to hear him contrast NASA’s approach versus SpaceX approach, and Elon Musk’s approach in everything that he does, where he says the same thing, that failure is an integral part of of success. To me, it’s just- it’s something that I’ve seen so clearly, so many times. So, to me, that’s the number one.

Sean Cantwell: Great. So, you talk about the responsibility, and stresses sometimes that go along with being an entrepreneur. Talk to us a little bit about March 2020 and how that changed your life. We talked a little bit about Broker Genius and how it was impacted by the onset of the pandemic, but maybe just describe for the audience how that impacted the business and really the next two years leading up to this point since then.

Sam Sherman: Broker Genius’s revenue, as you mentioned before, we are an automated dynamic-pricing technology, pricing-optimization technology for event ticket sales for ticket resellers. So, 100% of our revenue is tied to event ticket sales. Two or three weeks prior to March 11, we had obviously all been.. Again, I think everybody remembers what it was like a little bit before COVID hit. I remember, first of all, just looking back like how naïve I was, in terms of like all the signs, and the writing was on the wall. I don’t think I was alone in this. I really kind of felt like somehow this was going to have a very minor impact in the United States.

Sam Sherman: On March 11, I was in the office with John Lucier, my CFO… Without him, I would not have been able to get through this. We were, on March 11, kind of just planning… We weren’t concerned. We were just kind of starting to look at, hey, do we need to adjust our numbers? We had a forecast. Do we need to recalibrate a little bit? Maybe we need to take down our 2020 goals by about 10%-15%. That’s how we were thinking about it on March 11.

Sam Sherman: It was about 6:00 or so; 6:00 or 7:00 in the evening, and all of a sudden, I got a ping on my phone that Rudy Gobert had just tested positive for COVID, and they just postpone the game. I remember watching the documentary on the Columbia shuttle disaster where, in the room, you see all the NASA people and the director is like, “Lock the doors.” That ‘Lock the Doors’ moment, that was what it was like for John and I where, all of a sudden, like that it was going from do we need to adjust budget and forecast by 10% to are we literally going to have to just cut a majority of our staff like immediately? It just came on so sudden; it was so surreal, but that’s basically how it all started for us on March 11. Definitely will never forget where I was when that happened.

Sean Cantwell: I think probably shortly after the ‘Lock the Doors’ moment, I remember getting a call from you, and John. I was in an airport, in the Salt Lake City Airport. I can still remember. You mentioned that Rudy Gobert had tested positive, and then the NBA obviously, shortly thereafter, decided to suspend play. So, that did certainly change the projections for that year and beyond.

Sean Cantwell: So, this is a perfect example, Sam, of the unexpected realities, and challenges that go along with the burden of wearing the crown, and being the guy in charge. You have responsibilities to a lot of people – your investors, your employees, your customers. What’s your next move? How do you think about the path ahead and really prioritizing the large number of things that need to be addressed and put into action?

Sam Sherman: Like I said, the first thing was just coming to grips with this is not a movie, and this is reality, and then it was very quick into action mode. I think that, in many ways, some of the challenges that we had been through prior to COVID really prepared, in a way, John, and I for making the hard decisions, where I was not prepared prior to that. So, I think that, in hindsight, that was actually- some of those challenging times, again, prior to COVID, where we had gone through different high growth, and then we had some contraction, and we had to adapt then.

Sam Sherman: That kind of prepared us for getting into action mode and just being like, “Okay, we’re taking a hard look at the numbers. How deep do we need to cut?” and really looking at it from a just, “We’ve got to preserve cash; we’ve got to be able to survive.” So, the first thing was: here’s how much money we had in the bank. At the time we had the equivalent of about three months of cash compared to what our March 2020 overhead was. So, if we had no revenue, that means we were out of cash in three months.

Sam Sherman: At that point, we knew that revenue was going to zero pretty much the next day. We had no idea how long it was going to go to zero, and that was part of the challenge… In the beginning, no one really knew- even if you were taking a brutally honest look at things, no one really knew how to forecast because obviously we had the responsibility of, and felt the responsibility of all of our staff, our employees. We obviously did not want to cut and didn’t certainly didn’t want to cut deep.

Sam Sherman: That was basically how- What drove everything was here’s the cash number. We need to come up with what we think, today, is a realistic model for how long events are going to stay at zero, and what does that mean to cash, and how deep do we need to cut? What are we going to do with everybody else during this time? That’s how we spent our time early on. On the one hand, we were looking at surviving and not going into bankruptcy. 

Sam Sherman: On the other hand, we were also then looking at, okay, well, we’re doing this so that, on the other side, we’re going to have a business. If we’re going to do that, we also need to make sure that we have the right people that are still going to be with us that we can rebuild the business, hopefully, whether it was three months, or four months. At the time, we thought maybe three to four months, five months. We certainly did not think it was going to be well over a year with no live events, but that’s kind of how… So, it was cutting deep, preserving cash, and making sure that we have the right talent and can keep the right people on the other side of things. That was how we kind of [CROSSTALK]

Sean Cantwell: You talked about some of the just tactical things you needed to face head on, and in some cases, maybe it was obvious, but there’s also people involved. I know you well enough to know you’re a very empathetic person. You have a high IQ. You also have a high EQ. Just as a leader, sometimes you’re forced to make hard decisions. How do you manage that balance between doing what you know intellectually is the answer, and perhaps the only answer, with just making hard decisions and sometimes separations with people you’ve had emotional connections with?

Sam Sherman: Yeah, that’s a really hard one, Sean. Probably the hardest thing for me that I’ve had to learn over the last nine years or so was being able- was that in order to be successful, to be an entrepreneur did not just mean riding the waves during the good times of growth and that separating emotions… I certainly made many mistakes in the past, where I let emotions make the wrong decision for me, in terms of the wrong promotions, or not acting quickly enough for an employee that wasn’t the right fit for the company or anything that really was a difficult decision along those lines.

Sam Sherman: I would say, in general, I just learned how to… At a certain point, you do have to kind of turn it off a little bit. You have to just look at things from here’s the decision; I’ve got to make the decision. I obviously always treated people with respect, but there’s a determination – this needs to be done, and you’ve just got to go do it. Once you are forced into that a few times, you get better at it, and you kind of learn from it, when you’re having to make a decision like that that involves termination or something along those lines. It’s certainly, for me, still the most difficult thing as a CEO.

Sean Cantwell: Sam, I sit in a very fortunate seat where I get to meet a lot of entrepreneurs, and a lot of starting businesses, and a variety of different industries. One of the things I admire most about entrepreneurs is just the ability to see opportunity and pursue that opportunity, irrespective of the resources available to you at that point in time, and the ability to maintain optimism and find answers to problems as they present themselves. I think, as an investor, and this is true of many investors – I’ve said this before – we’re really good at looking at a situation and identifying all the reasons why it’s going to fail.

Sean Cantwell: The entrepreneur actually has to find answers and figure out how you’re going to turn those failures into successes. My question for you is, when you’re in the tunnel, the depths of these really challenging times, you’ve got three months of cash, and gosh, okay, you’ve got to make reductions. You’ve also got to figure out how to finance this business for the indefinite future. Where did you find the strength and the optimism to see the bright side, and continue to envision a business that could succeed and thrive on the other side of what was a very unfortunate, and unpredictable event?

Sam Sherman: I would say probably, for me, the number-one anchor was my wife during the time. It was obviously- on a very personal level, we had really all of our- really everything tied to this business, so there was really not much of a safety net outside of [INAUDIBLE]. So, my wife’s being really not just the voice of reason, and encouragement, but also… It wasn’t a question to her; like, we’re getting through this. So, a lot of it was feeding off of that.

Sam Sherman: Internally, I also just did see- I did see this as something that, if we can just survive, I really see opportunity on the other side of the horizon because there was all this disruption that was going to happen in the industry, all these different participants, and the market share was going to change, and all these different things were going to change. As I’ve seen over the course of the years that I’ve been doing this, change, it’s scary, but it also leads to big opportunities. I felt like we were strongly positioned, if we could survive. I think it was the belief that there was going to be a brighter day. There were a lot of dark times, so it wasn’t like I felt that all the time, but always I would come back to that that we’re going to get through this, and there’s going to be a much brighter day on the other side of this.

Sean Cantwell: Well, you’re very fortunate to have a strong woman by your side. She is a very wise woman. I have not had the good fortune of meeting her, but on the many occasions where you have referenced her advice, I always find myself thinking, “That is awesome advice. That is spot on.” It’s always great to be surrounded by folks that help you persevere through some of those more challenging times. From your vantage point sitting here today, in May of 2022, what are some of the moves you made over the last couple of years that you think were impactful towards positioning the company for success once live events did return? 

Sam Sherman: I think there’s really a few major things. The first was that, as hard and as unfortunate as it was that we had to cut about 80% of our staff, where we were at the time was then thinking about the 20% that we were going to just ride this out with. Of course, in doing so, you’re really looking to keep all of your A players, the people that are just the crème de la crème. That was very unique because it was the first time afterwards, when we had made those decisions, gotten through the worst of it, then, all of a sudden, as the market started to rebound, and our volume started to come back to 20%, 50%, 100% of our levels, and all of a sudden, we were able to do with way less staff what took way more people before by having just awesome- just the best of the best…

Sam Sherman: Also, from a cultural perspective, and again, I would say this – again this is one of the fortunate benefits on having been on the other side of this because nobody’s going to do this proactively – it created a culture to where everybody was so passionate, and believed in the company so much after having gone through that together. Also, everybody carried their weight so much that the accountability that everybody had towards each other wasn’t something that you had to tell people. It was just something that that’s the way we do things here is that we’re all going to jump in. We’re just going to figure it out; we’re going to be great; we’re going to get through this; we’re going to grow, and the culture changed as a result. 

Sam Sherman: So, we became leaner. We just became a much more talented workforce, and that’s still paying dividends today. So, that’s one major- that’s the first, I think, and number one. Also, I was really fortunate, to – because of COVID, in many ways – do a merger with another company in our space, and that merger was critical to our success today. My new partner, Drew Gainor, which is the founder of the company that we merged with, Seat Scouts- I don’t think it ever would have happened outside of COVID, and that’s paying huge dividends for us, as well. Being, again, a much more lean, a much more talented organization, having the combination of this other company, were all pieces that positioned us for success. 

Sean Cantwell: Those are really interesting insights. I agree with the point on the merger. Sometimes, those challenging environments create opportunity, and you need to have the conviction to act on it. In this case, you did, and Drew did, and I think it’s been a good partnership. You mentioned an interesting point – how there’s the unfortunate reality of a headcount reduction. You then have a leaner team. Live events come back, volume comes back, and you find yourself delivering the same productivity, with a much smaller team, which leads to much higher profit generation.

Sean Cantwell: At the outset, Sam, you mentioned that part of being an entrepreneur is learning from your failures and taking those and getting better. What advice do you have for entrepreneurs that, perhaps, they raised a round of financing, and they’re ready to scale up the organization? What lessons did you learn that you would apply the next time about how you would think about how quickly to scale the organization, and perhaps how you would try to maintain that scrappy culture, startup culture, as you get bigger?

Sam Sherman: It’s a great question. I was actually recently having a one-on-one with one of the members of my team that’s been with the company now for I think about seven or eight years, so has seen the company through many different iterations – extremely high growth; retraction; back to high growth; COVID; then, high growth again. One of the things that he said to me that I think is really true was that he was saying that this feels different because we’re growing. We’re doing really well, thankfully, right now, but it feels like it’s sustainable growth. This is coming from just someone that’s not necessarily privy to everything on the executive level, but just it feels like we’re growing really responsibly with sustainability.

Sam Sherman: In the past, I think, Sean, it might have been you… I remember hearing growth covers up a lot of things; high growth covers up a lot of things. I know that to be the case because it’s like, when the numbers- when you’re growing like a rocket ship, that’s all anybody’s going to focus on. Nobody’s going to care about the problems then, but as soon as those things are gone, those problems are going to surface very, very fast, and it’s really easy to lose sight of things that are problems…

Sam Sherman: I remember once comparing it to right before you need to have a root canal, you had that nagging feeling in your tooth. “Maybe I should get this checked out. There might be a cavity…” and you just kind of put it off. Then, at a certain point, now you need a root canal, you know? Even during the high-growth times, when you know- Only an entrepreneur, only an entrepreneur knows; like you know when you know. But if you know, and it’s in the back of your head, and you’re just putting things off and not dealing with them, it’s going to come back. In my experience, it’s always come back to hurt me worse versus just dealing with it. If you have something that’s not going right, you’ve got to pause, deal with it, and then move on, even when you’re in the high-growth mode. To me, that’s the number-one lesson, I think.

Sean Cantwell: When you first have success, it’s exciting and, heck, in some ways, it’s maybe a metaphor for the last 10 years. There’s this bull-market run and there’s a lot of investors, and entrepreneurs, everything they do, it works, right? Then, you have a failure, and it kind of changes your perspective. Have you noticed that your perspective has changed and, perhaps, do you find yourself taking a more balanced approach towards certain puzzles that you’re trying to solve?

Sam Sherman: Yeah, definitely. I think that I’m very fortunate to have a very talented board, which I only started appreciating after having a board. Quite honestly, when we first put the board together, it was kind of like I had to put a board together for governance, and whatever. Then, after seeing the impact that some board members were actually making, and you know, Sean, because you’re on my board and seeing the advice that they’re able to give and really giving a different perspective, I think that, in many ways, early on, in different situations, I wasn’t willing to… I was a little too optimistic at times, right? Usually, I think it goes – not every time, but probably very often – it goes along with that entrepreneurial spirit, is to see the glass half full, which is a good quality, but not at the expense of not seeing reality.

Sam Sherman: Learning how to balance that and really taking a hard look at things is certainly something that took time for me. It wasn’t first- it was second nature. It wasn’t second… It took a little bit more. I would say that’s something that’s always stuck out is that I was able to learn from that, with the board, and take the more balanced… You’re saying has my perspective changed? It’s changed in that way. When I’m looking at things, I’m really trying to make sure that I’m not being overly optimistic and taking a hard look and then also making sure that I’m asking the advice of people that aren’t sitting in my seat and might see it from and often do see it from a different point of view. Then, taking that feedback and incorporating it into, finally my own point of view. So, yeah…

Sean Cantwell: So, Sam, you mentioned March 2020, and Rudy Gobert testing positive, and everything that ensued after that, and revenue going to zero for a period of time. At Volition, when we were looking at the year-over-year growth comps for our portfolio companies, there was a rough patch there because you had a high growth, profitable business whose end market just disappeared.

Sean Cantwell: Now, live events have come back, and you’re on the other end of that scale – one of the highest-growth companies, and the year-over-year growth is exceptional, and each month is better than the next. Maybe just describe for our audience a little bit the industry you play in and just live events, in general. What is the state of live events? Probably most of our listeners, and viewers are perhaps thinking about summer concert series or attending football games. What is the state of the industry today?

Sam Sherman: The state of the industry, right now, is extremely healthy. The numbers that we’re seeing, right now, both on the consumer-demand side, and then also the lineup of new events, new tours, artists that are coming out, it is phenomenal. So, again, there’s a lot. You need both sides. You need strong consumer demand. You also need a lot of people to be going and having events. That’s leading, right now, to the highest profitability that we’ve ever seen in the industry.

Sam Sherman: In fact, we just did an analysis in our quarterly board meeting where we looked at, over the last five months – pre-COVID to now – in concerts, and margins were 36% now. At the same time, pre-COVID, they were about 29%. So, the industry is selling- the tickets are selling at the highest prices that we’ve ever seen. Even when you factor in for inflation, they’re still selling at the most profitable they’ve ever been. I think that that shows the, I guess a lot of people would call it pent-up demand from COVID.

Sam Sherman: I think, though, even before COVID, there was a growing willingness and desire for people to spend money on live experiences and live entertainment, and I think that certainly there is a ‘pent-up demand’ element to it, but I think that we’re starting to get past the ‘pent-up demand’ phase of like, hey, live events are back. It’s like a novelty again. We’re kind of at the tail end of that and yet, still, we see tremendously strong demand. I think that, again, consumers are willing to pay for experiences, and we see that as a continuing trend. I don’t think that’s going to be replaced by digital, or AI. I think people need live experiences. So, overall, we feel very optimistic about the state of the event industry.

Sean Cantwell: Great. Sam, your customers are professional ticket brokers. You talked a little bit about the industry. What’s in store for your customers and the target market going forward? What message do you have for them? 

Sam Sherman: I think that the message, first of all, is that everybody- we all went through this together. We all went through really hard times together. So, it’s very gratifying to see our customers being very profitable right now. Remember, they’re making up also for a year-plus of zero revenue, too, and zero profitability, so we’re really happy to see their success, and their success is certainly part of our success. 

Sam Sherman: Right now, our focus is to enable our clients to have the best automation in the industry so that they can continue to grow and that we can all continue to grow together. We’ve got some really cool technology coming out right now. It’s exciting for me. On the data side of things, we’ve been focused so long on harnessing the power of our data to be able to provide benefits for our customers, and we’re very close to launching some game-changing technology that will totally change the way that event tickets are priced. We’ve already shared some of that with them, but it’s going to be a really exciting three months of our roadmap as we are starting to come out with some of this new technology.

Sean Cantwell: All right, great. Well, I do have an advanced view into some of that, and I think your customers should be excited. One thing I’ve shared with you, Sam, but I’ll also share with our audience is many lesser entrepreneurs would have given up when faced with the set of circumstances you faced – the prospect of zero revenue for an extended period of time; three months of cash, as you mentioned, and you were able to endure an extended period of time with no live events. You managed to put together a merger which really strengthened the product roadmap. You got the company financed; you made personal sacrifices in order to help do that. 

Sean Cantwell: It’s really exciting, and satisfying, from my vantage point, to see you experiencing some of the success that you deserve. I know, really, at the root of all of that is your commitment to the industry, and your customers, and the hope and intent to provide them with a really good experience and enable them to improve their businesses and generate more profits.

 Sean Cantwell: Thank you, Sam, for sharing some of your personal experiences. I hope our listeners will benefit from that. As I mentioned, sometimes entrepreneurship is glamorized, but heck, I spend a lot of time with entrepreneurs, and there’s a lot of sleepless nights; there’s a lot of stress that goes along with it, but it’s as much about the journey as it is the destination.