78. The Pitfalls on The Path to Exit
In this episode, we discuss: The pitfalls on the path to exit. We are joined by Dirk Sahlmer, Head of Origination at saas.group.
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We chat about the following with Dirk Sahlmer:
- How should leaders balance ambitious growth metrics with the realities of current team capacity?
- When does leadership involvement cross the line into micromanagement—and how can you avoid it?
- Can offshoring and distributed teams truly maintain a unified culture and performance standard?
- What does a “bootstrap future” look like, and is it a viable model for scaling sustainably?
- How can a central operations team best support rapid growth without slowing innovation?
References
- https://www.linkedin.com/in/dirksahlmer/
- https://www.saas.wtf
Biography
Dirk Sahlmer is the Head of Origination at saas.group, a serial acquirer of small, capital-efficient SaaS companies. Known for his insightful LinkedIn posts and newsletter articles on SaaS industry trends and M&A topics, he is a respected voice in the SaaS community.
To learn more about Beth and Brandon or to find out about sponsorship opportunities click here.
Summary
00:07:06 – Measuring progress towards the future vision
00:10:30 – Leadership decisions in action
00:13:13 – Workforce shifts and offshoring
00:17:57 – The “bootstrap future”
00:20:49 – Building a central operations team
00:22:59 – Avoiding micromanagement
This podcast uses the following third-party services for analysis:
Podcorn - https://podcorn.com/privacy
Transcript
Thanks for
Speaker:watching!
Speaker:Hello everyone and welcome to
Speaker:another episode of the operations
Speaker:room, a podcast for COOs.
Speaker:I am Brandon Mencinga joined by my
Speaker:lovely co-spent the years as always.
Speaker:How are you doing this morning?
Speaker:I feel very tired.
Speaker:Don't know if there's any reason for
Speaker:it, but that's where I'm gonna go.
Speaker:So what constitutes the tiredness as
Speaker:of this particular week.
Speaker:So I don't know about you, but I
Speaker:feel like, or I know because I now
Speaker:have an Apple Watch that tells me
Speaker:everything, that I
Speaker:sleep less the lighter it gets,
Speaker:even though the room has blackout
Speaker:blinds, somehow I'm
Speaker:just up.
Speaker:Your body is sensing it, sensing
Speaker:the shift.
Speaker:It is. And so in the winter,
Speaker:I think I sleep about an average of
Speaker:nine hours a night.
Speaker:And right now, yeah.
Speaker:Nine?
Speaker:What?
Speaker:It's lovely.
Speaker:And right now I'm getting about
Speaker:seven.
Speaker:One of the things we don't talk
Speaker:about in summertime, we're all so
Speaker:excited to have it in some natural
Speaker:light and a bit of vitamin D that we
Speaker:forget that we don t actually sleep.
Speaker:Part of the joy.
Speaker:I went to the rooftop of our
Speaker:office that I'm in now and the
Speaker:rooftop, I think in London sometimes
Speaker:you don't expect a lot from these
Speaker:rooftops, but the rooftop was
Speaker:spectacular. They had like three
Speaker:couches, two of those like swinging
Speaker:things, they're not couches but what
Speaker:do they call those things? Little
Speaker:pods, I guess, like greenery
Speaker:outside and just like
Speaker:beautiful sun.
Speaker:The view wasn't that great, but it
Speaker:was just awesome for like a
Speaker:lunchtime chill
Speaker:So you're back in proper London
Speaker:then. Our new offices or
Speaker:the UiPath offices are
Speaker:in the center of the city on
Speaker:Bishopsgate.
Speaker:We're on the 50th floor.
Speaker:Fiftyth Thor.
Speaker:Jesus. Where's Bishop's Gate?
Speaker:Bishop's Gate is where Salesforce
Speaker:Tower is, and it just has a
Speaker:row of tall buildings now.
Speaker:So that sounds super corporate,
Speaker:massive skyscrapers, and you're on
Speaker:the 50th floor.
Speaker:It's a pretty amazing view.
Speaker:We look down on the Gherkin
Speaker:from where we are, and it's
Speaker:south-facing, so you can see all the
Speaker:way to Canary Wharf and the
Speaker:Thames and everything, but very
Speaker:hot.
Speaker:You get the view in the morning, and
Speaker:then the sun comes around, and all
Speaker:of the shades go up, and you could
Speaker:be anywhere.
Speaker:You'd have no idea.
Speaker:So what's happening? So the
Speaker:acquisition has happened.
Speaker:So we haven't chatted in quite some
Speaker:time. How are things checking out?
Speaker:I don't really know how much I can
Speaker:share and what is worth sharing.
Speaker:Everybody's very friendly, very
Speaker:nice, very helpful, but they're just
Speaker:a lot of everybody's and trying to
Speaker:figure out who the right everyone is
Speaker:to talk to is still a
Speaker:challenge.
Speaker:I think when we got bought by
Speaker:Microsoft, that was actually one of
Speaker:the most problematic areas.
Speaker:We're like this miniature SwiftKey
Speaker:in London separated from the
Speaker:mothership. Just trying to figure
Speaker:out who we're supposed to be talking
Speaker:to about all sorts of things was
Speaker:madness. Trying to find people,
Speaker:teams, who we needed to ask
Speaker:for certain things was full on.
Speaker:The one benefit that we have is
Speaker:a quarter of the company is based in
Speaker:Bucharest and therefore
Speaker:it's only a two hour time difference
Speaker:and we're not dealing with eight
Speaker:hours because I can imagine with
Speaker:Microsoft you're spending a lot of
Speaker:time waiting for people to wake up.
Speaker:So we've got a great topic for
Speaker:today, which is the pitfalls on the
Speaker:path to exit.
Speaker:And we have an amazing guest for
Speaker:this, which is Dirk Solmer.
Speaker:He is the head of origination.
Speaker:I always love this terminology for
Speaker:VCs or people that buy these
Speaker:companies, head of Origination, in
Speaker:any event. He works for the SaaS
Speaker:group, SaaS.group as it
Speaker:were. So with Dirk, he
Speaker:talked about this fundamental idea
Speaker:of bringing your business in order
Speaker:to make it acquirable.
Speaker:And by bringing your businesses in
Speaker:order, he was talking about
Speaker:reporting, KPIs,
Speaker:documentation or processes.
Speaker:For that smaller kind of
Speaker:acquisition, reducing the key man
Speaker:risk and
Speaker:also saying that if he's
Speaker:trying to acquire a company of that
Speaker:nature and it takes them forever to
Speaker:respond to things or there's a lack
Speaker:of clarity around their numbers or
Speaker:whatever, it just makes him as part
Speaker:of the acquirer super nervous
Speaker:and it does not help that
Speaker:company wanting to be bought in this
Speaker:case. I'm just wondering what you
Speaker:make of this idea of bringing your
Speaker:business in order and how
Speaker:important that is.
Speaker:As a COO, it's obviously very
Speaker:important and basically the reason
Speaker:why we're there.
Speaker:Without it, we're not doing our job
Speaker:very well.
Speaker:Doesn't mean it's always easy,
Speaker:but it's part of
Speaker:professionalizing the business.
Speaker:I guess the bigger question is,
Speaker:what's the priority order?
Speaker:Actually, and as a side note, one
Speaker:company ago, at the leadership
Speaker:level, there was like pushback
Speaker:on pulling our shit together for
Speaker:a fundraising event in this case.
Speaker:So not an acquisition, but it was
Speaker:for fundraising purposes.
Speaker:Why would we proactively build
Speaker:like a due diligence room and spend
Speaker:the time and effort to do this
Speaker:stuff? Why don't we just wait until
Speaker:we're asked for whatever
Speaker:documentation?
Speaker:And I remember having this.
Speaker:Debate back and forth with this
Speaker:person and ultimately they
Speaker:won. So we ended up kind of doing
Speaker:this like responsive thing, if you
Speaker:want to call that.
Speaker:And as you'd imagine, the outcome
Speaker:was the fundraising event didn't
Speaker:take three months or four months.
Speaker:It took like nine months because of
Speaker:this ridiculous like all of the
Speaker:place situation that was happening
Speaker:at the time.
Speaker:So to your point as an operations
Speaker:professional, you know, getting
Speaker:burned first-hand of
Speaker:seeing what that looks like and the
Speaker:mess that's created, you now, I'm
Speaker:very adamant these days You
Speaker:know it is entirely possible to
Speaker:three months for a fundraise maybe
Speaker:not for an exit or for an M&A in
Speaker:this case but definitely from a
Speaker:fundraised standpoint get your shit
Speaker:in order pull the stuff together
Speaker:make sure you have it there like you
Speaker:mentioned on some previous podcast.
Speaker:Even before that just like having a
Speaker:dd room there where
Speaker:as you progressively build stuff in
Speaker:your company and monthly p&l
Speaker:statements at the end of the month
Speaker:and so on just drop them in there so
Speaker:by the time you should get to this
Speaker:stuff it's not like a huge
Speaker:exercise.
Speaker:So there's that side of it.
Speaker:And then also it just,
Speaker:one is that they have the
Speaker:information, but the reason why
Speaker:fundraisers or acquirers will
Speaker:be freaking out is if none of it's
Speaker:pulled together, then they'll be
Speaker:wondering how you run your business
Speaker:and if there's any
Speaker:clarity in the day-to-day
Speaker:operations.
Speaker:And so I don't think it should just
Speaker:be about gathering it
Speaker:ready for a fundraise, but it
Speaker:should also be that you are
Speaker:operating the business with some
Speaker:KPIs.
Speaker:That are reasonable and you're
Speaker:checking.
Speaker:And maybe it's not, you know, small
Speaker:business doesn't need all of the
Speaker:reporting in the world, but there
Speaker:should be some level of consistent
Speaker:reporting and a cycle
Speaker:of the team getting together
Speaker:to look at those numbers and
Speaker:course correct.
Speaker:Yeah, and then getting to your point
Speaker:just around the prioritization of
Speaker:what's important in that DD room or
Speaker:what's like the bigger lifts, I
Speaker:guess, how would you describe that?
Speaker:What should we think about?
Speaker:So the one that companies seem to
Speaker:really struggle with in
Speaker:that size that I can see,
Speaker:particularly the smaller, like the
Speaker:sub five million, let's say,
Speaker:is just having a good business model
Speaker:that they can share.
Speaker:Because oftentimes there's no
Speaker:finance resource.
Speaker:You're using a bookkeeper to send
Speaker:invoices.
Speaker:I've seen where companies have
Speaker:bookkeepers that have no SaaS
Speaker:experience. So they're not like
Speaker:really building a budget that is
Speaker:based on SaaS.
Speaker:Or you work with these outsource
Speaker:CFO companies and
Speaker:then they build too big and too
Speaker:complicated a budget and
Speaker:model that you can't understand and
Speaker:isn't tied to your actual
Speaker:growth metrics.
Speaker:And so it's either like invest in
Speaker:a finance person and get a
Speaker:budget that's a real budget that
Speaker:has a budget and
Speaker:model that has all the financial
Speaker:metrics that it should or at a
Speaker:minimum have a model
Speaker:that reflects your business drivers
Speaker:even if it doesn't have.
Speaker:A real P&L and balance sheet
Speaker:and cash flow.
Speaker:Even if you don't have that level of
Speaker:understanding to at least have
Speaker:a model of if I have these many
Speaker:people or this many leads,
Speaker:how much money am I going to make?
Speaker:Sorry, by business model, you mean
Speaker:is like manifested in a financial
Speaker:forecast of some sort that actually
Speaker:shows how the drivers
Speaker:of how you make money parlays itself
Speaker:into an actual future.
Speaker:And then how you're performing
Speaker:against that future.
Speaker:It's interesting, the current
Speaker:company that I've joined, it is
Speaker:absolutely remarkable.
Speaker:They are late series A on the
Speaker:cusp of a series B, 80
Speaker:people, quite a bit of revenue
Speaker:coming down the pipe right now, a
Speaker:great pipeline in front of it.
Speaker:The entire financial back end
Speaker:of the company was essentially the
Speaker:CEO founder with six different
Speaker:spreadsheets and a junior
Speaker:operations person doing all the
Speaker:payables and receivables knowledge
Speaker:as, and a third person kind of
Speaker:doing like.
Speaker:Revenue ARR or reconciliation type
Speaker:stuff in between the three of them,
Speaker:they've got to the stage of the
Speaker:company's evolution.
Speaker:As we're heading towards the series
Speaker:B, we definitely need to hire
Speaker:a head of finance or a finance
Speaker:director to come in to kind of look
Speaker:at what is actually happening and
Speaker:just make sure that...
Speaker:The background-looking side of the
Speaker:company, the controller side of
Speaker:things, all of it's in place
Speaker:in terms of the track record of the
Speaker:the company.
Speaker:And then financial forecast wise,
Speaker:really leveling up our financial
Speaker:forecast to ensure that it really
Speaker:represents the reality of the
Speaker:business as we kind of head into the
Speaker:Series B where we can, as you said,
Speaker:take the business model and
Speaker:represent it in a way that is
Speaker:very clear, hopefully fairly
Speaker:accurate, gives the investor
Speaker:or potential investors really good
Speaker:confidence in the potential of
Speaker:the
Speaker:And that's definitely on the
Speaker:five million plus in terms of if you
Speaker:have like, if you're looking for a
Speaker:acquirer, I think grouping zero
Speaker:to 10 together or two
Speaker:to 10, you need to professionalize
Speaker:somewhere on your journey from
Speaker:five upwards, unless
Speaker:all you're doing are super huge
Speaker:deals and you have five customers.
Speaker:Like there's a level of complexity
Speaker:that starts to come in before
Speaker:10 that you need get ready for.
Speaker:What would be the second big one,
Speaker:do you think?
Speaker:Your monthly reporting
Speaker:pack, demonstrating
Speaker:how you run the business and that
Speaker:you're on top of the business.
Speaker:So whatever your MBR
Speaker:equivalent is, and even
Speaker:if it's like one scorecard,
Speaker:that's enough.
Speaker:So it's kind of like a board pack,
Speaker:but a bit lighter weight.
Speaker:You don't have to share all of it,
Speaker:but share some sort of continuity
Speaker:of this is what we look at.
Speaker:And these are the types of
Speaker:discussions that we have.
Speaker:Ideally with targets
Speaker:against those numbers.
Speaker:Again, to show some planning.
Speaker:So how many leads have you
Speaker:created?
Speaker:What are your daily active users,
Speaker:monthly active users?
Speaker:Whatever, some sort of thing.
Speaker:What's your shipping?
Speaker:The scorecard of your top KPIs,
Speaker:or one performance
Speaker:metric per department,
Speaker:or as you've gotten together, or
Speaker:your OKRs, whatever it is.
Speaker:That you use as a management
Speaker:team to decide whether or not you're
Speaker:going in the right direction.
Speaker:As an example, in your Leadership
Speaker:Weekly you have a scorecard or
Speaker:health metrics that you're looking
Speaker:at that's tracked week to week
Speaker:or whatever it is, month to month,
Speaker:and having that historical archive
Speaker:of that clearly laid out
Speaker:and dropped somewhere where
Speaker:they can see what you're discussing.
Speaker:Yeah, I mean, or not even in a
Speaker:historic, because I think if for
Speaker:historic, you could just use your
Speaker:board pack as long as your board
Speaker:pack has something in it.
Speaker:I would even just have an example of
Speaker:how you've run the last quarter or,
Speaker:you know, talk through how
Speaker:you operate the business so that
Speaker:you look somewhat grown
Speaker:up.
Speaker:Okay, so more of like
Speaker:talking points.
Speaker:You know, you could just have like
Speaker:an example of one.
Speaker:So in our monthly business review or
Speaker:weekly business review, this is what
Speaker:we look at.
Speaker:These are the types of conversations
Speaker:we have.
Speaker:And then the other thing is,
Speaker:you're always going to be asked for
Speaker:customer references.
Speaker:And so make sure that you know
Speaker:which customers are the ones
Speaker:that would be good references
Speaker:and just kind of
Speaker:treat them quite well.
Speaker:You know you have your...
Speaker:Champion customers, I don't want to
Speaker:call them, like your gold star
Speaker:customers, the ones that for
Speaker:whatever reason you click with,
Speaker:they're early adopters, they like
Speaker:you, you like them,
Speaker:they'll say anything you need them
Speaker:to say to a fundraiser or
Speaker:an investor or acquirer,
Speaker:take them out to dinner regularly,
Speaker:know if they're having a new baby
Speaker:and give them a present, like just
Speaker:make them feel special, not all the
Speaker:time, but just keep them happy and
Speaker:ready and
Speaker:able to do this last
Speaker:minute.
Speaker:Customer references for you.
Speaker:All right, so let's park it here.
Speaker:Let's move on to our conversation
Speaker:with Mr. Dirk Solmer.
Speaker:I thought it would be quite good to
Speaker:kick off with, I mean,
Speaker:I can share all of the mistakes that
Speaker:we made along the way.
Speaker:And I think probably one of them was
Speaker:not a mistake, but didn't realize
Speaker:the complexity of
Speaker:having an Indian entity as
Speaker:part of it.
Speaker:I thought would be quite helpful to
Speaker:start with like, what are the
Speaker:mistakes that you see people make
Speaker:that makes the actual acquisition
Speaker:really hard that you
Speaker:could maybe fix
Speaker:ahead of time?
Speaker:I mean, you already mentioned one
Speaker:point, it's like the entity
Speaker:set up.
Speaker:What we sometimes see is that
Speaker:people think to maybe,
Speaker:so if you ask customers, you need to
Speaker:set up another US entity.
Speaker:And maybe even move some people
Speaker:there, employ some people there.
Speaker:Then you move to another market,
Speaker:set up an office and an entity
Speaker:there, which makes the whole
Speaker:conglomerate, even just for a small
Speaker:SaaS, very complex.
Speaker:And we already walked away from some
Speaker:opportunities just because it
Speaker:was too complex.
Speaker:Like the IP was in one entity,
Speaker:employees were employed through
Speaker:another entity.
Speaker:And then they had some nearshoring
Speaker:or offshoring teams sitting
Speaker:somewhere else.
Speaker:So it's the The easier you
Speaker:make it for an acquirer to
Speaker:understand your business and to
Speaker:close the actual transaction, the
Speaker:higher the probability to close.
Speaker:Then also documentation of
Speaker:processes, reducing key
Speaker:man risks, so just like
Speaker:an acquirer comes in and they
Speaker:see how the business works,
Speaker:like how the reporting lines are,
Speaker:which processes are in place that
Speaker:not everything is dependent on
Speaker:the founders or even like
Speaker:some key employees.
Speaker:This makes your business look much
Speaker:better in front of investors and
Speaker:makes it easier for them to review
Speaker:and analyze and understand what's
Speaker:going on.
Speaker:What is it that you can preemptively
Speaker:work on to ensure that you get the
Speaker:maximum valuation?
Speaker:I mean, I talked about the
Speaker:documentation already, so that also
Speaker:replies, of course, to like code
Speaker:base and technical things,
Speaker:then prepare your numbers.
Speaker:So if you don't have like
Speaker:a CFO already, or someone who's
Speaker:helping you with financials and your
Speaker:KPIs, implement proper reporting,
Speaker:proper metrics tracking, so you can
Speaker:deliver the most important KPIs.
Speaker:Because this is always the
Speaker:first obstacle in the first call
Speaker:if I ask founders, sellers.
Speaker:We'll see you next time. About most
Speaker:basic SaaS KPIs and they just can't
Speaker:provide it.
Speaker:And then they say, Hey, let
Speaker:me look this up for you.
Speaker:And it takes them three weeks.
Speaker:So you always have to understand
Speaker:that you're creating a bias on
Speaker:buyer's side.
Speaker:So the more they're thinking, okay,
Speaker:you don't have your business in
Speaker:order or you can't deliver
Speaker:things on short notice,
Speaker:the more suspicious it seems.
Speaker:And the deeper they might dig or
Speaker:they might just walk away the deal
Speaker:because they think it's just a mess
Speaker:and they will never...
Speaker:Get through it.
Speaker:All of a sudden I realized we should
Speaker:probably provide a bit of context on
Speaker:the size of businesses we're talking
Speaker:about, stage,
Speaker:what your thesis is around
Speaker:acquiring, and maybe take
Speaker:it a step back so people have more
Speaker:context.
Speaker:With Salesforce, we are mainly
Speaker:targeting small
Speaker:capital efficient companies
Speaker:and the revenue ranges between 2
Speaker:and 10 million.
Speaker:So I would say the smallest
Speaker:team size we ever acquired was just
Speaker:two people.
Speaker:And the biggest we ever required was
Speaker:around 30, 35.
Speaker:It's rather small.
Speaker:It's not those typical scale
Speaker:ups, 100, 200,
Speaker:300 people.
Speaker:So, we're mainly focusing on
Speaker:smaller companies.
Speaker:I think you also have to
Speaker:take into account that M&A is our
Speaker:bread and butter. So we're doing
Speaker:five to 10 transactions a
Speaker:year. So if I talk about
Speaker:acquisitions and the process, that
Speaker:means we have a well-oiled machine.
Speaker:We're doing this every day and
Speaker:it's the core of our model.
Speaker:When you sell to a strategic
Speaker:who has never done it before or
Speaker:a strategic that does maybe one
Speaker:transaction every three years,
Speaker:then it's a totally different game.
Speaker:It takes longer.
Speaker:It's more complex.
Speaker:What you also need to add is we
Speaker:acquire companies and we keep them
Speaker:as is.
Speaker:So we keep the same team.
Speaker:Usually we keep to the same brand,
Speaker:the same name. So the company itself
Speaker:stays as is, and of course there's
Speaker:integration projects.
Speaker:You connect them to internal
Speaker:communication channels like Slack,
Speaker:uh, Google workspace and so on.
Speaker:We do not need to evaluate like
Speaker:products, synergies, tech
Speaker:stacks, technical integrations and
Speaker:so.
Speaker:I would say if you compare it to a
Speaker:strategic exit it's much more
Speaker:straightforward and much easier
Speaker:and less time consuming.
Speaker:I think if you're starting to a
Speaker:strategic at the end of the day it
Speaker:could take a year or longer while
Speaker:it only takes weeks.
Speaker:So there's a whole bunch of
Speaker:companies that are either seed
Speaker:funded or series A funded where
Speaker:they're in that five to 10 million
Speaker:pound range and all of them are
Speaker:struggling. They don't have the
Speaker:right metric set for series B or
Speaker:a follow on round.
Speaker:They're not quite profitable, but
Speaker:they're almost profitable.
Speaker:They've got decent revenue, they've
Speaker:got a decent customer base, like
Speaker:some level of PMF, but there like
Speaker:floating and there's like nowhere to
Speaker:really go essentially.
Speaker:So when you look at companies like
Speaker:that, either what do you recommend
Speaker:them to do or if you're
Speaker:looking at acquiring those kinds of
Speaker:companies, what are you actually
Speaker:looking for to decipher if
Speaker:there's something there.
Speaker:Yeah, so I think the issue with
Speaker:those kinds of companies is that
Speaker:they can't do that mindset shift
Speaker:from growing at all costs and
Speaker:potentially overspending
Speaker:to becoming more frugal, more
Speaker:sustainable.
Speaker:This is also why we
Speaker:don't necessarily want to do those
Speaker:deals. We also look at what I
Speaker:would call failed VC cases, but the
Speaker:usual problem is they are not
Speaker:capital efficient enough because
Speaker:they're coming from a background of
Speaker:there was more money than they
Speaker:earned, and they spent it on
Speaker:things which...
Speaker:Haven't had necessarily the biggest
Speaker:ROI.
Speaker:And so what I encourage
Speaker:those companies to do is to
Speaker:have a plan B.
Speaker:Let's call it bootstrap future,
Speaker:where you really trim down the
Speaker:company to what's really needed
Speaker:to run it.
Speaker:And I mean, you can still like go
Speaker:from there and start hiring again,
Speaker:if the company continues to grow,
Speaker:but you can't keep like a
Speaker:high burn multiple or.
Speaker:High S&M spent
Speaker:if your company is
Speaker:growing like 10, 20% versus maybe
Speaker:100, 150% before.
Speaker:I would say it totally
Speaker:makes sense. I would even encourage
Speaker:it to very early stage companies,
Speaker:but to have a plan B with
Speaker:concrete action points,
Speaker:what are the main cost items,
Speaker:what do I really need, and
Speaker:how long does it take me to
Speaker:cut it back?
Speaker:Staff cost is usually the
Speaker:highest cost item,
Speaker:unfortunately.
Speaker:But then there are other things
Speaker:like SaaS tools you haven't used
Speaker:a lot, or you're
Speaker:going to conferences that
Speaker:don't bring any sales, but cost you
Speaker:a lot for the booth and everything
Speaker:and to bring people there.
Speaker:So it really makes sense to have
Speaker:such a list of action items
Speaker:if you need it.
Speaker:Does that mean that you're mostly
Speaker:acquiring bootstrapped companies?
Speaker:Is that part of your thesis?
Speaker:Yeah, I would say some companies
Speaker:are also lightly VC
Speaker:funded. So they raised like a
Speaker:pre-seed round seed round and then
Speaker:they realized, okay, this
Speaker:is not becoming a skyrocket
Speaker:thing and then focus more on
Speaker:profitability and growing this
Speaker:sustainably with lower
Speaker:growth rates ultimately.
Speaker:But I think series A stage
Speaker:is basically the
Speaker:point where you need to decide if
Speaker:you really want to go big or
Speaker:focus more on a sustainable
Speaker:path because...
Speaker:Post Series A, the valuations are
Speaker:crazy. You have a high liquidation
Speaker:preference, you've raised a lot of
Speaker:money, and if you then don't
Speaker:make it, then I have
Speaker:some conversations with founders.
Speaker:They would just walk home with zero
Speaker:dollars on exit, even though they
Speaker:put in blood, sweat, and tears for
Speaker:like almost a decade, which is
Speaker:sad.
Speaker:And so how does your
Speaker:model work?
Speaker:Do you buy companies and
Speaker:then take out the back office
Speaker:for synergies and
Speaker:then they're profitable
Speaker:and use the cash that they generate
Speaker:to buy the next company?
Speaker:Yeah, it's very close to what you're
Speaker:saying.
Speaker:So as I said, we buy those companies
Speaker:as is. So we keep everything,
Speaker:the team, the brand, the name, and
Speaker:those companies usually are
Speaker:under-optimized in certain areas.
Speaker:I mean, you cannot be an expert in
Speaker:everything.
Speaker:Like even SaaS Group is not an
Speaker:expert on everything.
Speaker:But we see certain synergies,
Speaker:but we also see potential
Speaker:for improvements in, for example,
Speaker:pricing, in sales and marketing,
Speaker:in other things.
Speaker:And so we buy those companies with
Speaker:a certain hypothesis to help them
Speaker:grow to the next level, and then we
Speaker:have a central operations team.
Speaker:It's around 50 to 60 people
Speaker:internally with product experts,
Speaker:with marketing experts, pricing
Speaker:experts, internal BI,
Speaker:internal AI, and then just
Speaker:standard things like HR,
Speaker:finance accounting.
Speaker:So most founders I
Speaker:talk to, they don't like
Speaker:admin topics that much.
Speaker:Uh, so.
Speaker:They are happy to give it away
Speaker:and then we are trying to help
Speaker:very hands on.
Speaker:But with the existing teams, so
Speaker:usually they have some marketing
Speaker:folks or product folks
Speaker:and we just support them with
Speaker:expertise and resources.
Speaker:And you basically keep their
Speaker:engineers.
Speaker:Correct. Yes.
Speaker:I would say the typical profile of
Speaker:those companies is very
Speaker:good tech foundation.
Speaker:So strong product in a niche,
Speaker:very sticky clients.
Speaker:So the foundation is great, but
Speaker:then they are under optimized
Speaker:in GTM, like go to
Speaker:market and maybe they've
Speaker:never tackled internationalization
Speaker:or they are struggling
Speaker:with it. And then these are the
Speaker:topics where we can help with if we
Speaker:see the potential and.
Speaker:At the same time, it also provides
Speaker:an exit for the founders because
Speaker:that's usually outside
Speaker:of their comfort zone because they
Speaker:never started to build something.
Speaker:So then if we circle back to the
Speaker:beginning of the conversation, so
Speaker:you've identified a company or a set
Speaker:of companies that are interesting to
Speaker:you on first pass, and when you
Speaker:start going through the due
Speaker:diligence and kind of quasi-buying
Speaker:process with the founder or the CEO
Speaker:of the board or whatever, what are
Speaker:the different things, the different
Speaker:areas that make you nervous along
Speaker:that pathway? So you pointed one out
Speaker:previously, which is SaaS metrics
Speaker:and reporting, they don't know what
Speaker:they're doing, they're very, very
Speaker:slow, they have to take three weeks
Speaker:to get a non-recurring, whatever,
Speaker:an NDR number type of thing.
Speaker:What else in that plot makes you
Speaker:nervous that you see where it makes
Speaker:you think twice?
Speaker:I would say one
Speaker:common theme is key man risk
Speaker:that, for example, the founder is
Speaker:doing still all sales
Speaker:calls and stuff like that.
Speaker:So this is maybe hard to transfer
Speaker:or at least an execution
Speaker:risk for us.
Speaker:Also if the founder, is like
Speaker:a micromanager and basically like
Speaker:involved in all day to day topics,
Speaker:but it also depends on the deal
Speaker:structure preferences.
Speaker:So if this founder.
Speaker:Wants to leave ASAP,
Speaker:then it's maybe an issue if this
Speaker:founder says, hey, I would like to
Speaker:partner up with you and stay for two
Speaker:plus years.
Speaker:Then it's a different thing because
Speaker:then we can work on a proper
Speaker:transition and maybe hire a
Speaker:successor or promote from
Speaker:within.
Speaker:Another deal breaker is
Speaker:technical debt or like
Speaker:if the code base is a total mess,
Speaker:so we will always do a tech due and
Speaker:if this product is
Speaker:like 10th.
Speaker:15-20 years old and has
Speaker:never been updated to most recent
Speaker:frameworks.
Speaker:We even had a case where you
Speaker:struggle to hire developers for the
Speaker:coding language that was used.
Speaker:This would also be a deal breaker
Speaker:for us, a customer concentration.
Speaker:It's a bit of a double-edged sword
Speaker:because as a startup,
Speaker:you're probably happy to sign that
Speaker:big client and that
Speaker:maybe makes up half of your revenue.
Speaker:But if you're entering M&A
Speaker:conversations, then it becomes an
Speaker:issue because...
Speaker:Let's assume you have a
Speaker:five million business but two
Speaker:million of that revenue comes from
Speaker:just one client or maybe three
Speaker:million comes from top five clients.
Speaker:That's a risk for us if they churn,
Speaker:even if they have multi-year
Speaker:contracts and so we would always
Speaker:factor in a discount or even
Speaker:say okay this is too big of a risk
Speaker:and wouldn't do the
Speaker:deal.
Speaker:So if you had to, from your point of
Speaker:view, lay out what you think would
Speaker:be the ideal expectations for
Speaker:operations within that company that
Speaker:you would want to see or want that
Speaker:operator to be focused on, can
Speaker:you give us a broader scope of what
Speaker:you'd think those areas would be?
Speaker:The more that is documented and the
Speaker:more things that are clear to
Speaker:a buyer, when you look at those
Speaker:companies more in-depth,
Speaker:the better it is.
Speaker:It definitely helps if someone like
Speaker:a CEO type of person
Speaker:already prepares everything
Speaker:and gets stuff together.
Speaker:In the due diligence, we have a
Speaker:checklist with 200 items,
Speaker:all the company data, incorporation
Speaker:documents, et cetera, like numbers,
Speaker:vendor contracts.
Speaker:Open source frameworks used,
Speaker:et cetera, et cetera, tech stack,
Speaker:org charts, and all that
Speaker:stuff. So it would be good for
Speaker:such a person to already like bring
Speaker:everything together instead
Speaker:of waiting for the buyer to request
Speaker:it. And I mean, there are, you
Speaker:just need to, to Google it.
Speaker:There are lots of checklists
Speaker:publicly available.
Speaker:Just take one, bring everything
Speaker:together.
Speaker:And I means for our target group,
Speaker:they often don't have it, something
Speaker:is not applicable on that
Speaker:checklist.
Speaker:They need to create it on short
Speaker:notice.
Speaker:And we are, I would say, not that
Speaker:strict. So sometimes we are just
Speaker:fine with like five sentences
Speaker:in a Google Doc to explain how
Speaker:the current situation is.
Speaker:But if you really aim to
Speaker:sell to a strategic acquirer, they
Speaker:may be more strict
Speaker:about such
Speaker:Lot of the content, I guess, that
Speaker:people are looking for is the same
Speaker:that you need for a fundraise.
Speaker:And so we've talked about
Speaker:fundraising in the past and keeping
Speaker:a data room or
Speaker:a VDR open all
Speaker:the time so that it's just easier to
Speaker:do a fundraiser, easier to do an
Speaker:acquisition.
Speaker:So for listeners, I'd recommend if
Speaker:you have a board, your redacted
Speaker:board notes go in
Speaker:already because you can redact it
Speaker:straight after the meeting and you
Speaker:don't have to go back and.
Speaker:Go through all of your minutes and
Speaker:take things out.
Speaker:Then your key contracts, both
Speaker:supplier and customer key contracts.
Speaker:Key employment contracts,
Speaker:insurance certificates,
Speaker:list of the technology that
Speaker:you use.
Speaker:If you just keep some of these
Speaker:documents live and updated
Speaker:as you grow, it's a lot easier
Speaker:when the list lands.
Speaker:Your management accounts every
Speaker:month and the most recent
Speaker:version of your model.
Speaker:And I think that would be at
Speaker:least enough to get people started
Speaker:while you gather the rest.
Speaker:Agrees.
Speaker:And I mean, you also have to
Speaker:consider for strategic
Speaker:acquirers, for example, they may
Speaker:have like five companies
Speaker:on their priority list.
Speaker:They are looking to acquire maybe
Speaker:even five direct competitors
Speaker:and they only want to acquire one
Speaker:and they are talking to all five.
Speaker:So if you are faster in delivering
Speaker:and they get
Speaker:started on yours, they may
Speaker:deprioritize others.
Speaker:So speed is sometimes
Speaker:key here.
Speaker:And there's the saying time kills
Speaker:deals and I can confirm
Speaker:it. So if it takes you weeks
Speaker:to deliver also for us
Speaker:as a serial acquirer, as I
Speaker:said, we want to do a couple of
Speaker:deals every year.
Speaker:If it takes six, eight weeks to,
Speaker:um, deliver just the basic stuff,
Speaker:we may need to jump on another
Speaker:opportunity that's coming in and
Speaker:deprioritize yours.
Speaker:And then you make it a chance
Speaker:further down the line if we close
Speaker:that transaction or, or if it
Speaker:fell through.
Speaker:Or you may never get a chance again
Speaker:because we just moved on and
Speaker:priorities have changed.
Speaker:So I'd like to change direction
Speaker:for a little bit because of my
Speaker:operations hat on and learn a
Speaker:bit more about those 50 people
Speaker:in your business that are running
Speaker:these other businesses.
Speaker:Like you have a COO, you have CFO,
Speaker:do you do all of your legals in
Speaker:house? Do you do your DD in house,
Speaker:like what have you created as your
Speaker:own business to be very efficient
Speaker:at acquiring others and then running
Speaker:them afterwards?
Speaker:Yeah. So we are still a very
Speaker:small M&A team to start with maybe.
Speaker:So we have seven people.
Speaker:We have two juniors mainly
Speaker:for lead generation then two
Speaker:more senior people, including me
Speaker:to do the first discovery calls
Speaker:and to drive opportunities
Speaker:into later stages.
Speaker:Then we have Our head of M&A
Speaker:and my other colleague who's
Speaker:associate director, they are
Speaker:for deal execution.
Speaker:So if I say, look,
Speaker:we agreed on high level terms,
Speaker:they're looking to sell, business
Speaker:seems to be a fit for us, then
Speaker:they would take over and structure
Speaker:the diligence process and
Speaker:create like an investment
Speaker:hypothesis.
Speaker:Then we have one integration person.
Speaker:So he takes care of all the
Speaker:integration projects once we are
Speaker:about to close a new transaction.
Speaker:Internally, the biggest team is
Speaker:marketing because that's usually
Speaker:the under-optimized area I was
Speaker:talking about earlier.
Speaker:What I forgot to mention is we also
Speaker:mainly focus on product-led
Speaker:growth companies, not so much
Speaker:enterprise SaaS solutions that
Speaker:have a longer sales cycle.
Speaker:We do not necessarily need to
Speaker:help companies with outbound sales
Speaker:and scaling the sales but rather
Speaker:like marketing meaning.
Speaker:SEO, PPC kind of things.
Speaker:So this is our biggest team with
Speaker:almost 20 people.
Speaker:Then we have a smaller
Speaker:product team. I think it's around
Speaker:five to 10 people with designers,
Speaker:UI designers, and product
Speaker:experts. And so it's always
Speaker:about providing sparring.
Speaker:It's never, hey, we tell you what
Speaker:features to build, or we
Speaker:build product for you even.
Speaker:It is always like, hey you can ask
Speaker:us anytime.
Speaker:In the due diligence process, we
Speaker:would define maybe some small tweaks
Speaker:we would due to the product.
Speaker:Improving, for example, the
Speaker:onboarding process, activation
Speaker:process, and so on.
Speaker:But it's never, hey, we take over
Speaker:for you.
Speaker:Yeah, with HR, I mean, they are
Speaker:taking care of all the employment
Speaker:contracts and all HR related
Speaker:topics.
Speaker:We also have in-house recruiters.
Speaker:So basically, the companies we
Speaker:acquire just need to provide a job
Speaker:description, hop on a quick call
Speaker:with the recruiters, tell them what
Speaker:they need, and then they will go out
Speaker:and source great candidates.
Speaker:What you said, monthly management
Speaker:accounts, et cetera, is for
Speaker:our finance team.
Speaker:So they will take care of that.
Speaker:Every company gets their monthly
Speaker:financials prepared.
Speaker:We have a small AI team.
Speaker:Again, they are not building AI
Speaker:features for you, but they can
Speaker:talk to you and discuss low-hanging
Speaker:fruits where you can build AI
Speaker:features rather than maybe just
Speaker:sprinkling some AI fairy dust
Speaker:over it.
Speaker:What?
Speaker:Just AI fairy dust?
Speaker:That's the solution to everything,
Speaker:isn't it?
Speaker:Yes. So what else do we have?
Speaker:A small BI team.
Speaker:So we have a unified dashboard for
Speaker:all brands. So we can see how the
Speaker:brands are performing, how the MRR
Speaker:is growing, what their retention
Speaker:is. You can even run court analysis.
Speaker:So it's a bit like a
Speaker:cockpit where you can see all
Speaker:numbers from the brands.
Speaker:And they also help with the
Speaker:diligence topics.
Speaker:And so regarding to the second part
Speaker:of your question, how does the
Speaker:diligence work? We try to make as
Speaker:much as possible in-house.
Speaker:Because what we want to avoid is
Speaker:hire someone who just does
Speaker:a checkbox exercise and provides
Speaker:us with a long report.
Speaker:We pay for it and
Speaker:people never look at it again.
Speaker:So we want to understand the
Speaker:business ourselves and really dig
Speaker:deeper.
Speaker:We have a legal general counsel,
Speaker:but it's just a fractional general
Speaker:counsel.
Speaker:So depending on where we do the
Speaker:acquisition, it depends a lot on
Speaker:the geography.
Speaker:I work together with local people.
Speaker:I mean, I don't know what your
Speaker:process is like, but I guess with a
Speaker:strategic, like, I am in
Speaker:awe of the lawyers, the hours
Speaker:they work and how they always stay
Speaker:so fresh, I didn't know how they do
Speaker:it. And then they do over and over
Speaker:again. It's like my idea of hell.
Speaker:I want to ask another question about
Speaker:your internal systems.
Speaker:If that's okay, Brandon, we're
Speaker:always on the hunt for good
Speaker:technology. And we're at a point
Speaker:right now where there's
Speaker:some new, better improved
Speaker:things coming out.
Speaker:And I'm always curious about the
Speaker:disruptors. So what are you using
Speaker:back office wise?
Speaker:For the due diligence process,
Speaker:I mean, some M&A brokers we work
Speaker:with sometimes, they are
Speaker:not happy about it, but we actually
Speaker:use G-Drive for the due diligence
Speaker:process and not some
Speaker:data room software that's even
Speaker:more secure.
Speaker:I think data rooms have pretty much
Speaker:died for the mid-market and smaller
Speaker:businesses. I think everything's
Speaker:Google or SharePoint.
Speaker:And then when it comes to BI
Speaker:dashboards and reporting, what are
Speaker:you using there?
Speaker:Yeah, we are using Metabase
Speaker:for setting up the dashboards.
Speaker:I probably get inbound
Speaker:messages two, three
Speaker:a month about people trying to
Speaker:sell me BI tools.
Speaker:Our BI team opted for Metabases and
Speaker:it works just great.
Speaker:A lot of our companies are
Speaker:on Stripe, so it's
Speaker:very easy to set up those dashboards
Speaker:if we make a new acquisition
Speaker:and they
Speaker:are quite happy with it.
Speaker:Do you get to save some money on
Speaker:your Stripe fees?
Speaker:Can you actually negotiate on mass
Speaker:or is it impossible to ever
Speaker:negotiate with Stripe to get some?
Speaker:Yes, funnily enough, the
Speaker:announcement is still to
Speaker:come, but we negotiated with
Speaker:Stripe. I think there's now like
Speaker:a partnership agreement.
Speaker:So we get.
Speaker:Better terms than you would get
Speaker:yourself with your small SaaS
Speaker:business. So there's some
Speaker:optimization potential.
Speaker:I mean, it will not save you like
Speaker:hundreds of thousands of euros, but
Speaker:it can become quite expensive.
Speaker:So I think we've got pretty good
Speaker:terms and we also tried it for
Speaker:other businesses.
Speaker:So because we don't integrate
Speaker:solutions into each other and
Speaker:don't do like cross-selling
Speaker:upselling synergies, at least
Speaker:not to date, we have
Speaker:like other synergies that you
Speaker:wouldn't in the on the website
Speaker:or somewhere else.
Speaker:So as an example, Scrape API, our
Speaker:scraping company is being used by
Speaker:all of our SEO software
Speaker:companies, for example.
Speaker:So we're trying to dogfood a lot of
Speaker:our solutions internally where it's
Speaker:possible.
Speaker:And so we also try to negotiate
Speaker:because now as a group, you have
Speaker:more leverage in those kind of
Speaker:negotiations, also for hosting.
Speaker:So maybe coming back to how you
Speaker:describe your organization and your
Speaker:role within it, I'm very curious
Speaker:because you kind of do more at the
Speaker:top of funnel.
Speaker:Have you had any kind of just like
Speaker:really surprises where down funnel
Speaker:when due diligence is happening, you
Speaker:really have a great company on the
Speaker:hook, so to speak, and things blow
Speaker:up right at the very end?
Speaker:Yeah, I mean, the good thing, or
Speaker:to frame it maybe differently, we
Speaker:always try to avoid those
Speaker:things to happen because if
Speaker:it blows up at the end
Speaker:of the process, that means a lot of
Speaker:people were getting involved
Speaker:and we spend a lot of time on it.
Speaker:So we try to do more and
Speaker:more very early in the funnel to
Speaker:disqualify companies so nobody
Speaker:else is getting involved in wasting
Speaker:the time with it.
Speaker:It's still not possible.
Speaker:I mean you will always have those
Speaker:cases I would say very early when
Speaker:I started my job at SaaS Group, this
Speaker:was already four years ago,
Speaker:there was a late stage
Speaker:discussion with the founders.
Speaker:We already identified growth
Speaker:levers and how we can support them
Speaker:and everything.
Speaker:And then the founder at the end
Speaker:said, Oh yeah, these are all
Speaker:great ideas.
Speaker:I will now do them myself.
Speaker:He basically bailed
Speaker:out and executed on all those topics
Speaker:we discussed himself.
Speaker:I don't know if it worked out.
Speaker:He then ultimately sold to
Speaker:another company.
Speaker:We also had one case,
Speaker:the founder was hesitant to sign a
Speaker:non-compete and then very late in
Speaker:the process,
Speaker:we learned that he already set up a
Speaker:new entity and was basically...
Speaker:In the process of building a direct
Speaker:competitor, which was more modern
Speaker:than the business he was about to
Speaker:sell to us.
Speaker:And in this case, we walked away.
Speaker:We had a MarTech business where we
Speaker:learned that most of the customers
Speaker:are gun shops and
Speaker:betting platforms.
Speaker:Also, we couldn't get comfortable
Speaker:with, unfortunately.
Speaker:So yeah, very funny stories
Speaker:sometimes, but it also works
Speaker:the other way around.
Speaker:So sometimes you think, ah, this
Speaker:is not an ideal fit.
Speaker:And the more you learn, the more,
Speaker:you think okay, this is a really
Speaker:good fit.
Speaker:So yeah. But these are some, some
Speaker:interesting businesses,
Speaker:but again, we have
Speaker:still a pretty high conversion rate
Speaker:from like, we signed
Speaker:an LOI to we close the
Speaker:deal. We also want to maintain a
Speaker:very good reputation in the market,
Speaker:not just inflationary.
Speaker:Sign some LOIs and then figure out
Speaker:how the business looks like
Speaker:afterwards.
Speaker:So there's a lot of stuff happening
Speaker:pre-LOI already.
Speaker:So has that a trend
Speaker:that's also happened in
Speaker:exits as that's happened in
Speaker:fundraising? Like when I first
Speaker:started being involved in
Speaker:fundraising, I don't know, 10,
Speaker:12 years ago,
Speaker:you would get the LOI fairly
Speaker:early and then all
Speaker:the DD happened afterwards.
Speaker:And now there's
Speaker:a huge amount of DD that happens
Speaker:pre LOI and it's not called DD, but
Speaker:like it's a lot of the stuff that
Speaker:happened post.
Speaker:And so then from LOI to close,
Speaker:it really is mostly just like deep
Speaker:financials, deep tech and
Speaker:the legals. And so it's much
Speaker:shorter.
Speaker:Is that the same that's happening
Speaker:for exits?
Speaker:Yes, in our case,
Speaker:it is like that.
Speaker:So we do a lot of stuff
Speaker:pre-LOI to really
Speaker:know, okay, LOI means
Speaker:handshake and there's like
Speaker:a 95% of
Speaker:deal closing ultimately.
Speaker:So we call it pre-LOIDD and
Speaker:what happens post-LOIs is mostly
Speaker:confirmatory.
Speaker:So how we usually go about
Speaker:it is we analyze
Speaker:high level stuff in the M&A team.
Speaker:We build an investment case, so we
Speaker:have different kinds of cases we
Speaker:evaluate, and this defines what's
Speaker:going to happen in the subsequent
Speaker:steps. So what are we going to
Speaker:prove?
Speaker:What is the data we are requesting
Speaker:first?
Speaker:And what are the boxes we
Speaker:need to check to move forward
Speaker:with an LOI?
Speaker:So to mention a few, so, we have, I
Speaker:think, four categories.
Speaker:One is growth continuation, so a
Speaker:business that's looking pretty
Speaker:decent, good retention, good growth
Speaker:rates, sustainable.
Speaker:Where we say, okay, we could also
Speaker:just be hands-off and
Speaker:it will not tank tomorrow.
Speaker:But we still see maybe small
Speaker:improvements and tweaks we can make.
Speaker:Then there's growth redesign where
Speaker:we say okay, with our
Speaker:help, we can probably bring this
Speaker:business in a better shape.
Speaker:So increase growth rates because
Speaker:their marketing is maybe inefficient
Speaker:or they're not doing the right
Speaker:marketing and we see some
Speaker:opportunities. With Growth Redesign,
Speaker:we would also evaluate what are the
Speaker:concrete growth levers.
Speaker:And what's the execution risk for
Speaker:those growth levels?
Speaker:So, for example,
Speaker:internationalization, price
Speaker:increases, improved marketing,
Speaker:and so on. And then we have profit
Speaker:continuation.
Speaker:That's like what the name already
Speaker:says, a company has
Speaker:higher profit margins,
Speaker:low to no growth, but pretty
Speaker:high retention for a PLG SaaS
Speaker:business.
Speaker:The last one is restructuring,
Speaker:how we call it.
Speaker:So that's, for example,
Speaker:a failed VC case that comes to us.
Speaker:Has 10, 15 million
Speaker:maybe liquidation preferences,
Speaker:hasn't come that far.
Speaker:So also just like maybe two, three,
Speaker:five million AR in
Speaker:a very inefficient way in our
Speaker:opinion, but we see potential
Speaker:to put it on sustainable feed and
Speaker:go from there.
Speaker:And then it requires a bit more
Speaker:involvement from our side.
Speaker:That means we probably need to
Speaker:let go people.
Speaker:We need to cut costs, maybe close
Speaker:down the office, switch
Speaker:hosting provider.
Speaker:Cut down sales and marketing spend
Speaker:and so on. So this is higher
Speaker:risk, high execution risk,
Speaker:more involvement, and we really need
Speaker:to be confident that we can turn it
Speaker:around because otherwise we would
Speaker:just pass on it.
Speaker:And does that mean that you have
Speaker:different valuations based
Speaker:on the different hypotheses?
Speaker:Yes, correct.
Speaker:And then maybe a smaller,
Speaker:fifth one would be an add-on
Speaker:acquisition.
Speaker:So if we have an existing company
Speaker:that's doing well and
Speaker:it could make sense to run an
Speaker:add on acquisition strategy, then we
Speaker:would maybe also look at acquiring
Speaker:smaller targets, maybe
Speaker:just have a few hundred KAR
Speaker:or so, if it makes sense.
Speaker:And this would...
Speaker:Maybe deviate from our model,
Speaker:keeping brand name and everything
Speaker:intact, this would more be like,
Speaker:okay, we merged it with one of our
Speaker:existing brands.
Speaker:So can you give like just a bit of a
Speaker:range for the failed VC model in
Speaker:terms of the multiple that you would
Speaker:provide? So let's just assume
Speaker:standard stuff, which is like almost
Speaker:profitable.
Speaker:They're going at, let's say, I don't
Speaker:know, like 30% year-on-year, they've
Speaker:got five million pounds revenue.
Speaker:What do you make of that?
Speaker:Yeah. So I would say those
Speaker:smaller SaaS transactions in
Speaker:general, like not only the failed VC
Speaker:cases, but those
Speaker:deals are usually between one
Speaker:and five X revenue.
Speaker:Unless you have like top-notch
Speaker:KPIs, everything is well documented,
Speaker:the business is in the best shape
Speaker:ever, and it's a slightly strategic
Speaker:acquisition maybe, it's
Speaker:just hard to get like beyond five
Speaker:and for a restructured deal,
Speaker:I think you wouldn't get
Speaker:more than maybe 1.5X.
Speaker:So if it's like a really bad shape,
Speaker:very inefficient and
Speaker:someone really needs to invest time
Speaker:and money to bring this
Speaker:back on a good growth path,
Speaker:that's sustainable.
Speaker:Oh, the market has changed.
Speaker:Remember those heady days of 2021.
Speaker:Versus now, wait, I mean, those kind
Speaker:of sound like a lot of the multiples
Speaker:here on the market.
Speaker:If you're lucky, you can maybe get a
Speaker:2x, but it's definitely not 5.
Speaker:Unless you're like a super fast
Speaker:growing true AI company, but then
Speaker:those aren't the ones that you're
Speaker:acquiring at the moment, but those
Speaker:are where you see some of those
Speaker:multiples now.
Speaker:If our listeners can only take
Speaker:one thing away,
Speaker:what is it?
Speaker:So before you're entering exit
Speaker:conversations, bring your
Speaker:business in order,
Speaker:come prepared,
Speaker:and know what you want.
Speaker:If it's a mess and prepare
Speaker:the data, we talked about it,
Speaker:prepare the stuff, maybe even keep
Speaker:like a data room up to date every
Speaker:month, every quarter, whatever.
Speaker:And yeah, know what do you want?
Speaker:Because if sellers or startups
Speaker:are talking to and they say like,
Speaker:yeah, we don't really know what we
Speaker:want. Just offer something and
Speaker:then we can go from there.
Speaker:That's not something that's super
Speaker:helpful. So if you know, okay, I'm
Speaker:looking for a partner for the next
Speaker:growth phase and we know we are weak
Speaker:in those areas and we need someone
Speaker:to help us in these regards, that's
Speaker:much better.
Speaker:Also, if you say, hey,
Speaker:I am not exiting below 5X revenue,
Speaker:that also makes it much easier
Speaker:for us to evaluate against
Speaker:it.
Speaker:So yeah, in regards to deal
Speaker:preferences and price expectations,
Speaker:it's super helpful because it's.
Speaker:Just helps both sides save some time
Speaker:if it's not a fit.
Speaker:Perfect. All right. It is time to
Speaker:wrap for the operations room.
Speaker:Thank you, Dirk, for joining us as a
Speaker:guest and we will see you next week.
