How 2 twenty-somethings built (and sold) a $75m media empire…

Welcome to The Wise Exit (brought to you by Exitwise).

This week, we’re telling the story of Alex Lieberman and Austin Rief, two college friends who built The Morning Brew from 0 → $75M valuation.

We’re big fans of their story for many reasons (not the least of which being the fact that 3/4 partners here at Exitwise are alumni of University of Michigan, where Alex and Austin started the Brew 😀)

Without further ado, let’s dive in…

Nail Your Niche

The story starts in Ann Arbor, home to The University of Michigan, in 2015. There, Alex was a senior at the Ross School of Business.

Since he already had a job lined up at Morgan Stanley, he was only taking a couple classes. This meant he had some free time to scratch the entrepreneurial itch he always wanted to.

So he started a small newsletter about finance to share with his friends at Michigan. Morning Brew now operates a variety of newsletters across different verticals along with 3,000,0000+ subscribers, but back then it was a simple PDF attached to an email.

The idea was simple: start a newsletter for young professionals because the older folks over at Wall Street Journal and The Financial Times were completely ignoring them.

Following another University of Michigan alum Dave Portnoy, who built Barstool for sports “degenerates” like himself, Alex and Austin built Morning Brew for people like them.

Get Scrappy and Experiment

In the first 2 years of the Brew, they only made $500.

At Michigan, Alex and Austin would go from classroom-to-classroom presenting about Morning Brew and collecting handwritten email addresses.

When they started on paid acquisition, they started with advertising in other newsletters. This was still a very new channel at the time—not as prestigious or overused as Facebook.

“In 2018 the newsletter monetization market was nascent. Everyone was underpricing their ads. We were able to buy ads at a 50-75% discount on what was charged a year later,” wrote Rief. “We bought ads in every newsletter that would let us.”

Then, in 2018, they had a major breakthrough when promoted Instagram stories came out. ”We couldn’t spend money fast enough [...] We were getting subscribers for 10 cents each. We were refreshing ads manager every 15 minutes and the subscribers just kept coming. While those crazy numbers only lasted a week, it changed the trajectory of Morning Brew growth forever.”

From there, the Brew ventured out into new verticals:

• Newsletters like Emerging Tech Brew, HR Brew, etc.

• Podcasts like Business Casual, Morning Brew Daily, etc.

• Courses like the Morning Brew Accelerator

A Business Insider Buyout: Details of the Deal

In 2020, a majority share of Morning Brew was acquired in an all-cash deal by Business Insider.

The deal valued the company at a cool $75m.

The Morning Brew team first reached out to Business Insider back in 2018 about a potential content syndication partnership, and the relationship grew from there.

With the acquisition, the Brew added a fresh new audience of 2.5 million primarily millennials and Gen-Zers to Business Insider’s growingly legacy audience. Not to mention, Morning Brew was expected to bring in $20 million in revenue and $6 million in profit in 2020.

It was an extremely attractive deal for the team at the Brew as they were able to maintain their brand and keep their voice and style fully intact and independent of Insider Inc. (the parent company of both Business Insider and paid research division eMarketer)

Lieberman and Rief said they were also attracted to Insider’s "history of welcoming entrepreneurs with open arms and empowering them to build their businesses independently."

From the outside, the deal makes a lot of sense.

Lieberman and Rief also retained a sizable minority stake and had earn-out clauses built onto the deal.

Both are still active at the company with Lieberman moving to executive chairman and Rief moving to the CEO position.

Lessons To Dwell On

Alex and Austin may only be in their 20s, but the two are wise beyond their years.

They were incredible at spotting gaps in the market and jumping at opportunities.

A few key lessons we can take from their story:

1. Existing partners/clients/vendors could be your buyer: Business Insider was already working with Morning Brew in a content syndication arrangement before purchasing the majority stake in the company. Maintain good relationships and keep an open mind toward how existing partnerships could evolve into something more.

2. An audience is always a valuable asset: No matter the business, building and owning distribution is a tremendously good idea. Not only will it help you secure attention for your current product or service, but it could be a huge selling point when it comes time to exit.

Cashing Out: A Conversation With Kenan Saleh

Every exit has a story... and we're here to help tell them…

In October 2018, as a student at Wharton, Kenan Saleh co-founded Halo Cars, a transportation ad network.

After striking a business development deal with Lyft, one of the largest ride sharing platforms in the world at the time, Kenan and his team made the decision to sell Halo Cars to Lyft.

In this our conversation with Kenan, we cover:

• His decision to sell Halo Cars to Lyft so early in his entrepreneurial journey

• How mentally and emotionally difficult due diligence is after signing an LOI during M&A

• His advice for other founders thinking about the M&A process, and how his experience will influence his next venture

M&A News 📰

E-bikes: Lavoie, which makes upscale e-scooters based on McLaren’s Formula 1 tech, acquired the bankrupt Dutch e-bike maker VanMoof for “tens of millions”.

Aerospace: Aerospace manufacturer Barnes acquired MB Aerospace, a leading provider of precision aero-engine component manufacturing and repair services, for $740 million.

Energy: Watts, one of the world’s leading manufacturers of plumbing, heating, and water quality products, acquired Bradley Corporation, a manufacturer of commercial and industrial washroom and emergency safety products, for $303 million.

That’s it for this week.

Tune in next Wednesday for another edition of The Wise Exit, and have a great rest of the week 👋