Entrepreneurs Who Cash Out Look for Meaningful Second Acts
Originally posted on New York Times by Darren Dahl
In 2009, Jonathan Carson and his business partner, Eric Kurtzman, sold their company, KCC, for more than $100 million. They both signed three-year contracts to continue managing the business, a web platform based in Los Angeles that was meant to make the process of restructuring through Chapter 11 bankruptcy more efficient.
But after his contract expired in 2012, Mr. Carson found it difficult to continue an entrepreneurial approach within the confines of a large public company, and he decided to move on. What happened next surprised him: He began to realize how much of his identity was wrapped up in being a business owner.
While he used to be away for weeks at a time for work, he was now at home more, which required adjustments on the part of his wife and three children. “I realized that when you sell your company you go through an identity shift both professionally and personally,” Mr. Carson, 42, said. “It wasn’t a bad thing or a good thing. But it was an adjustment.”
The transition had him asking himself questions he had never considered: If he was no longer a business owner, what was he? And what was he going to do with his time? Mr. Carson’s questions are increasingly common among successful entrepreneurs who, after selling a business, decide they are too young to retire.
“In the past, getting to early retirement was a badge of success,” said Marc Freedman, founder of Encore.org, an organization that helps people find opportunities in the second half of life. “Now many find themselves in an identity free fall as their first acts conclude. They realize their sense of self was tied up in the important work they were doing. They become what we jokingly call a P.I.P., a ‘previously important person.’ ”
Consider the challenge for these people of attending a cocktail party and being asked what they do. Do they say what they did, or what they do now? These concerns have led some former business owners to redeploy their skills and resources in a second act — but not necessarily in the same way they did the first time around.
While an entrepreneur’s first act is generally about building something impressive and making money, said Jennifer Kalita, a consultant and business coach in the Washington area, the second act is typically more personal and less focused on money. “The entrepreneur has already proven something to himself and others,” she said. “He and we know he can do it. The second act is more about what he wants to do — for his customers, for the environment, and for the legacy he wishes to leave.”
For example, Jay Coen Gilbert, 47, a founder of the footwear and apparel lineAND1, sold his company and founded B Lab, the driver behind the B Corp movement that promotes businesses that try to have a positive impact on society or on the environment. And Chris Crane, 63, led his commercial real estate database company, Comps InfoSystems, through a successful initial public offering and then went on to found Edify, a nonprofit organization in San Diego that lends money to profit-seeking private schools in countries like Rwanda and Liberia.
After the sale of KCC, Mr. Carson had a chance conversation with a family friend who helped him realize that he wanted to build another company, but one with a social mission. The opportunity came from another friend who had tinkered with a technology that could produce potable water from moisture in the air.
They started a business called Skywell. “The more I thought about it, the more excited I got about building something again,” Mr. Carson said, noting that Mr. Kurtzman, his partner at KCC, had also become a part owner in the new company. “We are going to have a positive impact on the global water crisis through focused entrepreneurship,” he said, “and we’re going to have a lot of fun.”
Before creating Encore, Mr. Freedman, 56, helped found Experience Corps, an organization that aims to help young people out of poverty by pairing them with older adults acting as mentors. It was through that work that Mr. Freedman became convinced that older people represented an untapped source of human capital. This idea led him to form Encore (previously named Civic Ventures), to expand Experience Corps and to pursue the broader mission of encouraging people in their 50s, 60s and 70s to use their skills in sectors like education, health and the environment.
The organization formed a partnership in 2011 with the MetLife Foundation and Penn Schoen Berland to conduct a research project called Encore Entrepreneurs: Creating Jobs, Meeting Needs, which suggested that about 25 million people between the ages of 44 and 70 were interested in starting a business.
From a sample of people surveyed, the research extrapolated that more than 12 million wanted to make a positive social impact through entrepreneurship.
Two examples of former business owners starting out in a new direction are Ronald Cordes, 55, and Brian O’Toole, 56, who met in college and went on to found AssetMark Investment Services, a financial planning firm. AssetMark was successful and disruptive because it was one of the first firms to abandon commissions based on transactions, in favor of charging clients a single management fee. They sold the business in 2006.
Mr. O’Toole used part of his share of the proceeds to buy a stake in a company in Northern California that produces organic worm compost. Started by a retired airline captain, Jack Chambers, the company has since changed its name from theSonoma Valley Worm Farm to TerraVesco.
After seeing the farm on a PBS program, Mr. O’Toole visited Mr. Chambers in 2012 and got excited about trying to disrupt the market for chemical fertilizers. Four months later, he offered to become Mr. Chambers’s business partner. “I felt too young to retire,” Mr. O’Toole said. “In my case, making worm compost fit into the sustainability lens I was thinking and reading about. All the things that happened in my first career have led me to this place.”
TerraVesco operates out of its original facility in California, but thanks to a recent $1.6 million investment round, the company has begun construction on a second facility. The company’s sales have doubled in the two years since Mr. O’Toole joined, selling primarily to local businesses like vineyards. Mr. O’Toole said he sees global potential. “We believe traditional agriculture has reached its limit and we offer an organic soil probiotic alternative,” he said. “Creating healthy soil leads to healthy plants, which then creates healthy people.”
In 2007, Mr. Cordes used his share of the AssetMark sale to start a family foundation, the Cordes Foundation, that finances social ventures around the world, mainly by lending money to microfinance organizations.
One company in which his foundation has invested is ThinkImpact, which takes university students to Africa and Latin America to learn about economic development. Working with young entrepreneurs like Saul Garlick, the founder of ThinkImpact, Mr. Cordes said, has allowed him to serve as a mentor and also to learn skills, like a deeper understanding of social media.
“It’s exciting to realize that you can think about pivoting into a second act that lets you use your skills to work toward a greater purpose,” Mr. Cordes said. “I like to say that I spent my first act focused on building the best business in the world while my second act is building the best businesses for the world.”