How Pete's $80M Success Led to a Major Failure

We spoke to Pete in this week's episode of Moneywise.

Pete grew up in poverty and built a successful affiliate marketing business that sold for $80 million, giving him a $40 million payout. But his overconfidence led to a painful $2.5 million mistake.

Like all Moneywise episodes, Pete breaks down his net worth, income, portfolio, and monthly expenses and then I, your humble host, pick it all apart.

We also went deep on: how overconfidence after a major exit can lead to costly mistakes, the emotional impact of business failure, and redefining success beyond money.

Below you'll find my summary of the episode along with the entire transcript.

And by the way...this podcast, the concept of it came from Hampton, which is an invite-only community of entrepreneurs. It's truly a unique place where entrepreneurs can learn from each other's successes and failures. This is the place where entrepreneurs have these brutally honest conversations about wealth and success with each other. These are the kinds of conversations that don't happen in public. They happen in private. If you're a CEO, founder, or business owner, check this out. New Moneywise episodes come out weekly.

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Now, below are the notes and the full transcript.

The Numbers

• Early Background: Grew up poor, visiting food banks; initial goal was to make $40K/year
• First Business Exits: ~$500K and just under $1M from first two businesses
• Big Exit: $80M sale of affiliate marketing business (his share: $40M)
• Current Net Worth: $28M
• Current Annual Spending: ~$800K/year
  • $500K for immediate family (wife and kids)
  • $300K supporting extended family members
• Major Loss: Lost ~$2.5M on failed software company acquisition
• Portfolio Breakdown:
  • Majority in cash/treasury accounts (earning 5-5.5% interest)
  • $2M in private investments (VC, PE, real estate syndicate)
  • Some index funds (small portion)
• Post-Exit Splurge: ~$1M on private jet charters within 12-16 months after exit

From Poverty to $40M: Pete's Unexpected Journey

Pete grew up in poverty, visiting food banks and seeing family members always hustling to make ends meet. His early financial goal was modest: "If I make 40 grand, I can get a truck, I can get a house and I could get a pool and then life will be great."

He never set out to be a successful entrepreneur - he just wanted security. After being laid off from an engineering job during the housing crash, Pete discovered the FIRE (Financial Independence, Retire Early) movement and started thinking about building wealth through investing.

While working his W-2 job, Pete built side hustles in affiliate marketing that eventually became successful businesses. He had two small exits - one for about $500K and another for just under $1M - before his big win. His third business in the same industry grew to $25M in revenue with 60% profit margins before selling for $80M. Pete's share was $40M.

Despite this massive success, Pete struggled with imposter syndrome: "Even though the number was big, I'd look at other people and be like, 'oh, well, they're like a really successful entrepreneur.' Like, I just happened to fall into this."

The Overconfidence Trap: Trying to Prove His Worth

After his big exit, Pete was determined to prove he wasn't just lucky: "I actually want to validate that I am an entrepreneur. Like, I'm not just a one-hit wonder."

Despite warnings from people around him, Pete decided to buy a software company - a completely different industry from his affiliate marketing background. He ignored advice because he wanted to prove himself: "I ignored the advice as well because I'm like, okay, I actually want to validate that I am an entrepreneur."

Pete's confidence came from never having experienced significant business failure before: "Prior to this, I mean, I never had any big losses." He was so confident that he was already planning to acquire multiple software companies before even making the first one successful.

This overconfidence led to a critical mistake - trying to change everything at once: "I wanted to revamp the software. I wanted to add new features. I wanted to change all of the branding. I wanted to redo the site. I wanted to redo all the marketing... Instead of prioritizing, let's just do it all at the same time."

The Emotional Impact of Failure

The financial loss from the failed software venture was about $2.5 million - not insignificant, but manageable given Pete's wealth. However, the emotional impact was far more significant.

"I think I really focused on the emotional side of it rather than the money side of it," Pete shared. "Just really feeling like I let people down."

What made it particularly painful was disappointing his employees who had followed him from his previous company: "For me it's like, hey, I got mouths to feed. Like, it has to work." This sense of responsibility stemmed from his childhood experiences of being "parentalized" as the oldest sibling and taking care of his family.

The failure also brought harsh feedback from customers who were upset about the software being shut down: "People even started up like a little subreddit about it... I was like, man, I'm gonna start crying. This guy bought this, it was working fine. And he came in and just basically messed it all up."

This experience led Pete to question his abilities and created a fear of failure that has affected his decision-making: "I'm overanalyzing, over planning because I don't want to fail."

Redefining Success Beyond Money

The failure changed Pete's definition of success. Previously, he associated success with money and business size: "My association prior to this used to just be money or also like size of business."

Now, he values relationships more: "When I see people that are successful, it's definitely like them having like really healthy relationships, like they're having great friendships, great relationships with their family, being a great parent."

Pete is now focusing on healing from childhood trauma, spending time with his family, and thinking about how he can contribute to the world in meaningful ways: "I really enjoy helping people when there's opportunities to do that, whether it's another founder getting ready for an exit or like people talking about what they're going to do after they exit."

He's also changed his approach to business ventures, preferring to experiment on a smaller scale: "We're going to start this thing and I'm going to put 50K into it or 100K, and if it doesn't work, like, okay, that's cool. Let's learn something."

Other Key Quotes

"It was anticlimactic in a sense. It's like it was this whole frenzy through the M&A process. Then we get to the end and like we're signed, we're funded, and it's like, oh, cool."

"Maybe I don't have the Midas touch. Like everything I touch is gonna turn to gold. And then I touch something and it turned to ashes."

"Am I going to end up blowing all my money? Because I'm gonna continuously try to do things. And then if you lose several million dollars at a time, I mean, do the math and eventually you'll end up with nothing."

"There was a quote. 'A mistake that makes you humble is better than an achievement that makes you arrogant.' So I had felt like my big exit, that was my achievement that made me arrogant. And then the software company was the mistake that had made me humble."

"One of my kids had mentioned we were hanging out with some people and we were going to go on a trip, and they asked if we were going to fly in the private plane or the public plane. That was kind of embarrassing."

Links You Might Like

• The FIRE Movement
• Psychology of Imposter Syndrome in Entrepreneurs
• Why Successful Entrepreneurs Fail at Their Next Venture
• How to Make Smart Decisions After a Big Exit

Full Transcript

[00:00:01] Pete: Maybe I don't have the Midas touch. Like everything I touch is gonna turn to gold. And then I touch something and it turned to ashes.

[00:00:08] Harry Morton: Pete was on a hot streak. He sold business after business, eventually maxing out in an $80 million exit that gave him a lot of confidence. A bit too much.

[00:00:17] Pete: I ignored the advice as well because I'm like, okay, I actually want to validate that I am an entrepreneur. Like, I'm not just like a one hit wonder.

[00:00:24] Harry Morton: After his exit, Pete tried something new, but it didn't work out like he'd hoped. Instead, it resulted in a hard loss, both financially and emotionally.

[00:00:31] Pete: I'm like, oh, am I gonna end up blowing all my money? Because I'm gonna, like, continuously try to do things. And then if you lose several million dollars, like at a time, I mean, do the math and eventually you'll end up with nothing.

[00:00:42] Harry Morton: In this episode, he tells us about how overconfidence post-exit led to that loss, what exactly that loss was, what he learned from the experience, and how he's moving forward.

[00:00:57] Harry Morton: Hey, it's me, Harry Morton again. And this is money wise. Instagram is full of quick tips on getting rich, but rarely do you find advice on handling life after wealth. But those conversations are happening behind closed doors, and this podcast brings those private conversations to light on money wise. We talk to people who've made a ton of money and how it changed their lives. They get brutally honest about their finances and their expenses and portfolios, and the personal challenges that come with the success and then how they manage them. Today, you're also going to hear another voice. David Hauser. He collaborated with me on this episode and co-hosted the interview portion. And if you're a startup CEO, you've got to check out join Hamptons.com. It's a place where conversations like this about wealth are happening all the time. The kind of private conversations that just don't happen in public. So definitely go and check it out. Join Hamptons.com. So the first thing you need to know about Pete is that he never set out to be the number one entrepreneur, or even anything like that. His goal was never to build a business and get rich. It was just a hustle. And where he's from, hustling is just how you get by.

[00:01:57] Pete: So I grew up pretty poor. So going to food banks, that kind of stuff. So just always kind of seeing people struggling around me. But with that, also just seeing people working multiple jobs, you know, or someone who has a side hustle doing this, side hustle doing that. I never saw that turning into a business. It was just like, hey, you're always, you know, you're always kind of hustling to make things meet. So I was always looking for more like short term kind of arbitrage opportunities. Yeah, it would be like make hay while the sun shining is pretty much where I landed with that.

[00:02:23] Harry Morton: So, like, thinking back to your kind of childhood and growing up, did you ever think you'd become like, a big person guy? Or was it just about making money?

[00:02:32] Pete: No, I think it was always just about making money. And primarily, it was always just about survival. When you grow up with scarce resources, you're not really thinking about a year from now, five years from now, you're really more in like 24 hour cycles, like wake up every day, you know, and kind of like I'm trying to get to the end of the day and then like, you know, basically restart the cycle. Yeah. So just not a lot of long term thinking there. I would say I had always wanted to get a Chevy truck, have a house, and then have a pool in the backyard. Like once I got into high school and was like, man, this is like kind of seen, like the middle class lifestyle, like living in suburbia to me. I thought that would be great. And I think I heard like one of my friends say, oh yeah, my dad makes like 40 grand a year. So that was always my goal. If I make 40 grand, I can get a truck, like, I can get a house and I could get a pool and then life will be great.

[00:03:20] Harry Morton: Do you think that you were looking for safety or were you looking for freedom?

[00:03:24] Pete: I think at that time I was looking for safety because even in my W-2 world, like I thought, oh man, once I get a nice W-2 job and I had one, and then there was a housing crash had happened. Um, and I was working at an engineering firm, and all they were doing was housing stuff and then then ended up getting laid off. Growing up, it's like you're always waiting for the other shoe to drop, like, oh, are we going to pack everything up and move? And then I think that really carried forward. So when I got laid off from that job and I thought I was going to stay at that job forever, like I just thought like, hey, this life's going to be grand. That kind of brought up that feeling of like, okay, like, am I just going to get pulled into the boss's office and be like, hey, man, we got to make cuts. You got to go. So I think for me, at that time, I was looking more for security. I wasn't really interested in like, oh, the like, fu money or like, you know, being able to travel the world like, that stuff sounded cool, but I'm like, hey, I just want to be able to, like, have a house and then just be okay and, like, not worry about the rug being pulled out from underneath me.

[00:04:19] Harry Morton: And then he discovered something else.

[00:04:25] Pete: I've always been online, just kind of reading stuff, perusing things. And then I caught on to the fire movement early on, and then I just started like, consuming all the blogs I could find with that. And I was like, oh, well, this would be like awesome. Like. And then even at that point, I wasn't thinking necessarily in a business mindset. I was more like, hey, if I can get $2 million in investable assets, you know, and have my 3% or 4% safe withdrawal rate. So even at that point, I was just kind of like a means to the end. So I had my W2 job going on. And I also had my side hustle, which looking back was a business.

[00:05:00] Harry Morton: While still working as a W-2 job. Pete had two small exits from other companies. He'd built one for about 500 K, and then a couple years later, a second one for just under a million. But both of those businesses were in the same industry. In industry, Pete would become quickly quite good at and well known in. So he started doing it again, but this time was different.

[00:05:20] Pete: So I always viewed them more as kind of like arbitrage opportunities, like more short term stuff. That was when I was doing a lot of paid marketing. So I think once I had about six months where I was making like over 20 grand a month, there's like steadily like money rolling in. And I'm not actively doing anything right now. So I think like where I wasn't actively doing everything and there was still money coming in was like, okay, like, this is pretty cool.

[00:05:41] Harry Morton: What were you kind of paying yourself with the company? What what did that trajectory look like?

[00:05:46] Pete: I would take some distributions out to do nice stuff if I wanted to, but for the most part, what kind of fueled the growth is at this time, I still had a W-2 job, so the idea was like 100% reinvestment into the business. And then I'm just going to live off of my W-2 job. So that's how I was able to, like, hire employees and do all this other stuff. There'd be every once in a while like, hey, you know, take 20, 30 grand out of the business like that year and like, hey, you just went and did a bunch of splurge stuff with it.

[00:06:13] Harry Morton: For this company. Pete had partnered with another entrepreneur in the affiliate marketing industry and finally decided to make it his full time pursuit, which turned into a decent, stable income, generating a lot of cash.

[00:06:24] Pete: It had grown over the years, but I mean, I would say I fluctuate probably from like 10 to 20 K a month.

[00:06:29] Harry Morton: Where were you spending that money?

[00:06:31] Pete: Big one was travel. And I guess that's also outside of like donating and stuff. But we're also like no one on either side of my family has any money. So not necessarily giving money to people, but I just have like older relatives or like my dad and stuff. So it just ended up with, like I call them, they're on the payroll, you know, paying for people's medicines like, you know, making sure they're like set up with doctors. Like, I own a lot of personal real estate, but it's because I have like family members living in those. So I would say like I was spending 10 to 20 K on myself, mainly travel, because at that time we had we had paid our house off.

[00:07:03] Harry Morton: And then came the big payoff, the exit.

[00:07:06] Pete: It was 80 million. I had a partner in the business, so I ended up getting 40 million direct from the sale. And then I stayed on for another six months and got a little a little more money in those six months, too.

[00:07:17] Harry Morton: How did the exit change your view of success in yourself? Like that is a huge number.

[00:07:22] Pete: It was anticlimactic in a sense. It's like it was this whole frenzy through the M&A process. Then we get to the end and like we're signed, we're funded, and it's like, oh, cool. Like, um, luckily my wife threw me like a little party because one thing about me is I'm always very forward looking. So I'm not I never like, celebrate like wins and successes very well. So even when I had my company, um, my chief of staff, that was her job to like, hey, you know, we need to, like, celebrate this company milestone or celebrate this person. So. But it was something that's even bad for myself. So I just had always viewed myself as like getting really lucky. Like, hey, I was in the right place at the right time. But like, even though the number was big, it was like I'd look at other people and be like, oh, well, they're like a really successful entrepreneur. Like, you know, they really know what they're doing. Like, I just happened to like, fall into this is how I felt. So even at that time, we built a team up to almost 50 people, like building up something in $25 million. Top line revenue, 60% profit margin. I got 40 million in the bank. In addition to what I had, I still didn't feel like a very successful entrepreneur. Like even if I was going to go join some mastermind or something like that, like imposter syndrome was going pretty strong there.

[00:08:30] Harry Morton: I think we all struggle with that. Like even today I struggle with imposter syndrome. Like I can get up on stage and and talk about whatever and I'm like questioning myself. Do I belong here? Was I lucky in these companies? You know, I'm not the right person to be in this room or this stage or whatever. It's really hard. No matter how much money we have or don't have. Right.

[00:08:51] Pete: Yeah. And then I think one thing was, is like all of our friends, like, no one has a business like, you know, everyone's just W2 type person. So it was really weird to be like, I don't want to even tell people how much money we got. Like, and then even my wife even mentioned it made it feel kind of like a monopoly money because the numbers were so big.

[00:09:09] Harry Morton: Yeah, exactly. Did your lifestyle change at all?

[00:09:13] Pete: Like, houses, cars, all of that stuff? No, but the one thing I had wanted to do to celebrate is I'd always wanted to fly in a jet, and I wanted to go, like, get a suite at the Raiders game. Sometimes I regret taking that first jet ride because, like, I had bought like a couple Rolexes and stuff before, like before the exit, because I was like, okay, this is like what rich people do is they like, you know, you buy like a supercar, you get some watches, and I'm like, I don't even really like watches. And then I like, I don't want to wear them because I don't want to mess them up or have people think like, oh, trying to be like the big boss over here. But the one thing that got me was like flying in a jet, because it's like we pulled up, like we got on it. We went to the game. Someone picked us up, brought us there. Then brought us back. And I was like, man, this is sweet. So probably like within maybe like 12 to 16 months post exit. I mean, we probably spent like $1 million in like chartering.

[00:10:03] Harry Morton: Pete was getting used to this new life and the opportunities it brought him. But things can get a bit weird after an exit like that. On the one hand, you have this sense of accomplishment and pride in your ability and what you've done. And then there's the other side of it. You remember that old Ikea commercial? Start the car, start the car. Start the car. Start the car.

[00:10:24] Harry Morton: Yeah, it feels like that. Like you just got lucky, faked your way through something and made off with way more than you were supposed to. In reality, there's a balance now. You didn't cheat anybody out. You got what you deserved. But it's about recognizing how it came to be. There is skill, ambition, perseverance and all of the traits that a good founder needs. However, there's also a luck component. The key is staying aware of that balance. If you feel too much like it's luck, you're bound to start feeling insecure and protective. And if you lean too far the other way, you end up making mistakes like the one Pete made. So let's get to that. To do that, we return to that spending bit. Pete was starting to spend big, especially with all the chartered jets, but he was running into a problem.

[00:11:09] Pete: So I'm probably not the best investor in the world. So for me I was like, okay, I know I'm like losing money, keeping a lot of it in cash. So I'd always had a little bit of money in like index funds, but I never would put like, like a big chunk in there because I was like, okay, the risk part is my business. And then the rest is just like, gonna be chill at that time. Like I had just stuck it all in, all in cash. So found some different banks that have like treasury accounts and stuff. So I can like put like ten mil here, put like five mil over here and then and then also, I mean the interest rates were really good too. So I didn't, I didn't feel like, okay, well I'm getting five, 5.5% on my money. And I know like inflation is eating into it a into it a little bit, but it's better than like getting half a percent or 1%. So then I kind of just put it in there like, you know what, I'll just like figure this stuff out later. I have about $2 million in private investments. And to be honest with you, like, I don't really understand any of that stuff. It was one of those other rich people things where it's like, okay, like.

[00:12:03] Harry Morton: Funds or like private equity or something like that, or.

[00:12:06] Pete: Yeah, like a few VC things and then a few like private equity things like a real estate syndicate. Just because like to me, I'm like, oh, well, like rich people must be investing in all like behind the scenes, like pull the curtain back and like, oh, how are they really making money? It's like, not this boglehead stuff. There's got to be like, like this other super optimized way to make money. And then, yeah, like investing in a fund that's like buying whiskey barrels or I'm like, hey, well, I like whiskey or like one's buying like athletes like future earnings or whatever. And I was like, well, I like sports and like it just seemed cool. And then, yeah, now having all of those, I'm like, yeah, I don't am I ever going to get any of that money back?

[00:12:46] Harry Morton: So he's not feeling cut out for investing, which is fair. Just because you're good at building a business doesn't automatically mean you're good with money overall. We just talked about that a few episodes ago with Ryan Begelman, and this is where we get into Pete's big mistake. But to get the full story, we have to go back a bit before he actually got that $40 million.

[00:13:04] Pete: The sales process for the company took about two years, and I had a partner, and at the time when we were going through the sales process, we weren't speaking directly. So we were speaking through attorneys because we had a partnership dispute. So it was kind of like a three way negotiation, which was very difficult. And I think I had gotten to the point where I had wanted this to have something of my own, like a so I could run it exactly how I wanted to run it. But also I felt like it wasn't just going to blow up because like, we decided to, like, dissolve the company or, you know, got into like a big lawsuit or something like that. So I had been kind of lightly looking and also some, some of the comments we were getting from people. And I was overstaffed in the sense of running the existing business. But I was staffed up because I had a bunch of different, like, future projects going on. But there are things where you're going to need to work on them for like two years before you're really going to see traction in any of them. And acquirers, that wasn't really like, attractive to them. They wanted like the core business that was kicking off the cash and what kind of teams needed for that. I had become really attached to the team, too, so I kind of felt like their father in a way, in the sense of like, okay, well, I don't want to be this dude that like, cashes out, gets the big check, and then like, half the team doesn't have a job after that. So like, multiple motivations was like, hey, if I can get something of my own, then I can slowly start bringing these quote unquote extra people over into this other company. So when we exit, like no one's losing their job.

[00:14:27] Harry Morton: And that intention to help some of his employees keep working for him is an important part of the story. We'll talk more about it in a bit, but I don't want to pose this idea to buy a new company as if that action itself was the mistake. It wasn't. The mistake is actually more of a series of mistakes he made along the way, which we'll talk about first. Let's learn more about the type of business he ended up buying. His first three companies were in online marketing, but he wanted to try something new.

[00:14:51] Pete: I wanted to do something different, like grass is always greener. Basically, my business model was like, we are 100% dependent on on Google and then affiliate partners. So the thing was, is like it's a cash cow. But I it got back to my days of growing up is like make hay while the sun is shining. I was looking for a business. One of the requirements was something that had recurring revenue. So even if my traffic channels got shut off, I wasn't just like, okay, revenue goes to zero. And then also like being in some mastermind communities and stuff, it's like, oh man, this like software and SaaS stuff sounds like awesome. And I'm like, oh, well, I already know how to do marketing. I'll just like hire some programming people and they could do the software stuff and like everything's going to be like peachy. And then also the other thing I wanted to have is I wanted to have something where like we were providing value to the world. So before I felt like this professional middleman, like I was almost figuring myself unnecessary at some point because it's like, hey, I'm like just this, like middle connector to things, but I don't actually interact with the end user at all.

[00:15:48] Harry Morton: And did you feel confident making that change? Like, it seems like a very different business.

[00:15:53] Pete: Yeah. Because I mean, prior to this, I mean, I never had any big losses. So we, you know, we try something like, oh, launch this new site. It doesn't work out cool. Like we got this other site going on, but it wasn't like we lost a bunch of time and money. Also, one of the ways I grew my, um, content marketing business was by making acquisitions within the same space. So in my mind, I was like, well, I'm good at like, buying stuff from just like a, you know, kind of like a solo owner, like a founder that has no team and then like pouring a bunch of resources on it and growing it. Obviously, I'd never had done that in the software space, but doing it in the content space, I was definitely like, if you would have asked me, like, I couldn't tell you the path exactly like how it was going to work, but I could tell you that that it was going to work, and so much so that I was actually having this investment thesis because this was when everyone was doing kind of like holding companies. So I was like, okay, I'm gonna like, I'm gonna have programmers, we're gonna have shared services. We're gonna end up with like 5 to 10 of these software businesses. And like, you know, we have a marketing team and all this stuff, and we'll share them across sites. But, I mean, I was so confident that I was like, okay, well, once this one goes like I was already looking for the next one and I hadn't even, like scaled up this one or even done anything with it yet.

[00:17:04] Harry Morton: So were the people around you as confident or was it just you?

[00:17:08] Pete: My team was confident in the sense of like, that's what I was portraying and communicating to people. I would say some people around me were like, hey man, what are you doing? Because some people were like, hey, are you sure you should be doing this? Like, maybe you should take some time off? Other people were like, software is kind of hard like and then I even had like my previous COO, he had told me like, hey, you've already made it, dude. Like, don't go out there like risking stuff. And plus he told me like, hey, I think you're like pretty burnt out too.

[00:17:33] Harry Morton: And so people are asking you like around you like, hey, are you sure? Were you just that confident? You're like, I'm not going to listen.

[00:17:41] Pete: Yeah. And then I think there was something to it too, in the sense of like I had always ignored advice because I always I was like, oh, well, that probably applies to most people. But like at this point, like, not to myself and then also to I think, like sometimes when people give me advice, even if I knew it was good advice, I almost wanted to just prove that I could do it my way and that, like, I ignored the advice as well, just because I'm like, okay, I actually want to like, validate that I am an entrepreneur. Like, I'm not just like a one hit wonder, like, hey, I can go out there and I can do something completely different. And like, I could scale this up and like, hey, I'm this because I look at people like, oh, they're a serial entrepreneur. Like, okay, to me that's like, they can have more than just one hit. And I'm like, okay, well, I'm going to like take my entrepreneurial skills over here and prove to others. And I think also more, more importantly to myself, that I actually am an entrepreneur. Like I belong in the room.

[00:18:36] Harry Morton: So let's take a minute to talk about the problem here. It wasn't that Pete was eager to try something new. In fact, he had analyzed the skills he had that crossed over and understood where his weaknesses were. A great start. But there are two main mistakes here. One, because Pete had already had a lot of success. He felt as though his instincts were solid and was inclined to follow them. Because of that, he ignored the advice around him. That's fair