Bootstrapping to Exit, Then Raise Money and Exit Again: Wendy CEO Lance Neuhauser (Part 7)

Sramana Mitra: So, if you’re comfortable disclosing, how much money did you raise during that ten-year period from 2010-2020, and what kind of exit did you get, numerically?

Lance Newhauser: We ended up raising about $35 million for 4C specifically from 2010 to 2020. There was some debt layered on top of that as well. The final price tag on 4C was $170 million.

Sramana Mitra: All right, fabulous. Okay, we have very little time left. You’re starting another company that you’re about to launch, right?

Lance Newhauser: Yes, I am. I’ll set this up in a way that ties to something you said earlier. I ended up leaving Mediaocean in May 2022. I was on what I’d consider a 19-year entrepreneurial sprint. That’s what it felt like—there were some stints in between, but they felt like entrepreneurial moments too. It was a 19-year sprint, with four different exits: one seven-figure, one eight-figure, one nine-figure, and one ten-figure. I worked in service turnaround and growth, as well as tech turnaround and growth. And then I decided, “I need to pause, take a moment, and step back.”

I became a CEO coach and an advisor to some brilliant companies: an AI company in Canada, a brilliant retail media network in Latin America, and a few others. I focused on being an advisor instead of a consultant—consultants get homework, while advisors give homework. That was better for me at this stage in my life.

I also met a gentleman named Mark Peter Davis, who runs Interplay—a VC firm based in New York. He asked me to be an Operating Partner, and I said, “Cool.” My role was to run their foundry, come up with ideas for businesses, hire CEOs, and help guide the CEOs of these companies through their journeys.

After some time, I had coffee with Mike Mosseri from Lightbank in Chicago. He told me, “When you’re ready to start your next company, call me. We’re interested.” I looked him in the eye and said, “Mike, I’m not starting another company.” He laughed and said, “Sure you’re not.”

Sure enough, one year later, I called Mike and said, “Guess what?” He replied, “I knew it.” Lightbank ended up financing the company I started next.

In February 2023, Mark Peter Davis and I were brainstorming about Gen AI—it was everywhere. We thought about generating children’s stories with AI. At first, I figured we could build something quickly and cheaply, make it subscription-based, and hold onto the revenue as long as possible before competition arrived.

But I couldn’t stop thinking about it differently. I couldn’t stop thinking about the challenges with this idea. I grew up in a family where children’s stories played a big role. My cousin was Shel Silverstein, a famous children’s author. While I wasn’t close with him, I was very close to his mother, my Aunt Helen, who brought children’s stories into my life. My mother also worked in the children’s book industry for over 20 years. Children’s stories played a big role in my life. Plus, I have a daughter and now a son, and we’ve read and told stories together each and every night.

Here I am exploring the use of Gen AI. There’re some good things: You get personalized stories. You can see yourself represented in them. You can start to see if you have some challenges in the written form. Children gain social currency on the playground by sharing stories about beloved characters. Are we going to isolate them with personalized AI stories? Parents need validation from communal, well-known stories to feel confident about what their kids are reading. Plus, this could cut out authors and publishers with great, time-honored characters. I thought, “We can’t do this—it’s a bad idea.”

Sramana Mitra: You can’t take Harry Potter away from the equation.

Lance Newhauser: Exactly. That’s when I started thinking: reading is facing a challenge. There’s less time for it, and kids are reading less. Scholastic coined the term “decline by nine,” referring to the 40% drop in kids reading for pleasure between ages eight and nine. If they don’t read for pleasure, they may experience more anxiety, struggle in high school, and have fewer career prospects.

Parents can’t just keep telling kids to read at age nine—they have to choose it themselves. But by then, they’ve already learned to read, and they’re choosing other things—games, messaging, social media, videos. So we said, “We have to make a company in order to make reading as entertaining a choice as these other options. Can we make a technology that can make reading as entertaining?”

I pulled together my old team from 4C, and we started working on it. We brought in elements of gaming—like building things and seeing immediate feedback—into reading, along with the ability to connect with friends, celebrities, and athletes. We built a kid-safe, ethically sourced AI product, working with authors, illustrators, publishers, and early childhood education experts. Once we built a proof of concept, we knew it could work.

That’s when I called Mike, and we secured a few million dollars in funding. We pulled the team back together, and the product—called Wendy— has recently launched on the app store. We’re thrilled to take on the challenge of making reading exciting for kids again.

Sramana Mitra: That’s fantastic. After you’ve had some time with it in the market, come back and tell us how it’s going. I’d love to hear the lessons you’ve learned. It was great speaking with you, Lance.

Lance Newhauser: The pleasure was mine. Thank you so much, and thanks to all the entrepreneurs out there—it’s greatly appreciated.

Sramana Mitra: My pleasure. Let’s keep in touch. Goodbye!

This segment is part 7 in the series : Bootstrapping to Exit, Then Raise Money and Exit Again: Wendy CEO Lance Neuhauser
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