"How I Sold My SaaS in An 8-Figure Exit" with Matt Wensing

0:00realizing that this is something that got discovered when the ink is pretty much dry we're waiting to wire you know and if this person raises their hand what's that going to do you know and so um dealing with stuff like that I mean I remember being on so this is around Christmas time I remember being at a holiday concert for my kids waiting to get in and being on the phone with the angel investor saying okay man we we're not going to change the deal that that ship has sailed this week I'm diving into the process of selling a SAS company seeing that bank transfer is

0:30something we all dream about but the process for getting to that point can be a bit of a mystery in today's chat I'm sitting down with Matt wiing to talk about how he took his business wrist pulse from start to finish the UPS the downs and the sale of it for a life-changing amount of money and if you stick around to the end you'll learn about the one thing he wishes he would have known before selling before we dive in I want to say thanks to our sponsor Quiet Light brokerage I'll tell you more about them in a bit let's get into it hey Matt thanks for coming on can you

0:59tell me a bit about risk pulse and who it was for sure uh risk pulse was the first startup I started uh now number two but uh yeah I began in 2004 on the idea built it up to being a Enterprise B2B SAS and we focus on selling supply chain analytics got it supply chain analytics so like what problem did it solve and for whom yeah uh so to give you a very specific example uh if you are the maker of beer mayonnaise uh a lot of products that you find on the grocery shelves you care a lot about shipment timings and delays and weather impacts to those and so we would

1:38calculate a risk score for every single shipment that a company like Unilever would send out and then they would use that risk score to actually adjust their Logistics got it so that's a I like that example so if I were to ask you say about your customer size and type and your price points is it like a bunch of Unilever yeah and we went up market and so we started out with you know a thousand customer customers but then we ended up with you know the 10 the 12 that represented a significant amount of our revenue and what were the price points like that these bigger customers

2:08are paying we were a um minimum five figure but aiming for six figures uh a year uh subscription price point and so at a certain point you decided to sell risk Bulls that's why you're on the show um how how big was it when you decided to sell sure so we were doing uh millions in Revenue uh we were a team of I want to say 15 plus some plus or minus some contractors so not a big company still like very you know you could fit all of us in a very large conference room still um but we were having a really big impact on the industry uh we

2:44were working with you know Marquee companies we had the right logos and we were being partnered with and talked about uh among the right people so strategically we were way more valuable than our size sort of showed if that makes sense it does make sense yeah and what was your trigger to sell it there's the upside and then there's the the potential downside so the upside was what I just said you know we were gaining Steam and traction we just landed some major Enterprise subscriptions that really uh we were we were already established but I would say in a good way we became even more established on the other hand I knew

3:22that to make it even bigger we were going to have to raise a lot more money because you just it's extremely difficult to slow build a Enterprise sales play and so when you start thinking about raising a lot of money you're like okay we're talking about trying to raise tens of millions of dollars here um that's one option the other option is you sell it and somebody else does that either way somebody's gonna have to do that but is it going to be me or is it gonna be somebody else right and then when you sell it you get the cash off the table instead of basically keeping

3:54your net worth tied up in this asset yep and so so you made this decision of I think I want to sell this what was the process for selling it like did you work with a broker did you do it on your own was it inbound interest it was inbound interest but it was a it was somebody that had become very they're well known in the industry and they were a former sort of President chief executive of a few companies he uh was close to a private Equity Group in particular that was looking for opportunities in the supply chain space and so he was kind of

4:26their you could say Scout but in a much more presidential way he was kind of like their liaison in the market figuring out what's exciting what's the future you know he was their a market expert and he came across us because of mutual colleagues and when he saw what we were working on I would say the process really started with sitting down with him and just Vision matching if you will he he was like I I love the technology I love the idea here's my view of where the world's going to be in 10 years kind of thing and then the more he got to know us the more he was like

4:59like yeah I do think that what you guys have is one very critical piece of the puzzle and and then the process starts with okay youve basically done that he's done qualification if you will for those you know for the bank and then he goes back and says hey you know one of the pieces on the on the table as this company I think we should check them out seriously right and then did you bring in on your side a broker or an investment advisor we didn't we worked with uh I would say the closest thing we had to that was was our lawyers our legal team um and there was a lot of

5:33experience in the room in that sense where you know we had a lot of our exec team was seasoned let's put it that way so and and our executive chairman had actually done probably five or 10 m&a deals in his career and so they didn't feel the need and I felt comfortable with their experience to just say okay we're gonna do this ourselves you almost had I mean this is one of the advantages of raising funding and having a a board or an Advisory board right is you have expertise that you may not need to bring in Outsiders yeah yeah I felt very comfortable with those folks on our side

6:07of the table got it yeah that's really nice and so so there's this inbound interest to acquire so from that moment where the the talk start of hey we might want to you know there's always some convenient phrasing like uh creative phrasing like maybe there's a deeper partnership that we could you know from the time that that starts and you realized oh they're kind of talking about buying us until you closed how long was that yeah I I I think it was so the deal end up closing closing in December of 2019 and I think we started having those conversations in I want to say we knew

6:43those people in 2017 knowing them at conferences in the Zeitgeist if you will knowing each other sort of like knowing somebody's out there our first conversations might have been early 2018 um but it was it was easily 24 4 month process yeah and that's for a deal of this size I imagine that is not the most unusual thing my deal was 13 months from the first conversation and I've heard people say 18 a lot what was involved in due diligence uh let's put a positive spin on it there was more trust involved on the technical side the proof was in the pudding we had happy customers they were

7:21using it it was working sort of thing what code was running to do that was of interest to some people but not nearly as interesting as the rest of diligence which which was uh we want everything about everything financially that you've ever had yep you know every contract every NDA everything crazy yep and then even when we get everything we're going to come up with three things that aren't in here and we're going to get those too and we're going to make you create stuff that you don't already have even though I mean we were very well-run operationally financially operationally ship at that point meaning we had very

7:56good people on the books we were we actually had in-house uh Finance team right so this wasn't even like oh let me go ask some you know whatever some SAS vendor like this was in-house people who this is all they did and even then it was everything and I would say you know there were there were lots of classic uh challenges around tax Nexus and employee status and when did certain people join and is every angel investor do we have signatures for every single investment all the way down to the $2,500 folks that put in the f family and friends money you know eight years ago right so

8:34it was it was everything very exhaustive so from the time the LOI was signed until the deal closed did any of the deal terms change or what maybe the offer is really did like did the sale price change from the LOI to close it tried to I I think that there was a lot of give and take on I mean I learned a lot about this in terms of there's just different buckets of consideration so the they'll call it consideration we would call that your exit money but you know there's working capital there's working capital offsets there's uh investment that comes in after the deal is done there's all these buckets of

9:16money and I do remember there was a decent there's still plenty of negotiating that happens after let of intent on like yeah sure the number is this but we're going to put you know 81% into this bucket and 19% of this bucket instead of 8020 and you're like so it's this shifting shifting allocation of maybe a similar dollar amount um but I think the dollar amount stayed within 10% of what it was originally going to be but I will say the people who represent the acquirers are always going to look for reasons to reduce it right so yeah oh you actually owe back taxes in New York state in from five years ago

9:53ah it's going to take us $50,000 to clean up and it's going to take us another you know so I think we fend it off all of that and I think it didn't move much but I do remember the buckets shifting a little mhm and with that in mind like what was the most stressful part of the process for you I think the most stressful part was just fear 11th Hour fears I I would say the most stressful part was um you know to to his credit it worked out in the end but uh we had an angel investor who was also an adviser who at the last second you know

10:23raised his hand and said wait a minute you know this advisory agreement that you signed with me in 200 13 you know if I'm reading this correctly I'm supposed to get you know this many shares not this many shares and realizing that this is something that got discovered when the ink is pretty much dry we're waiting to wire you know and if this person raises their hand what's that going to do you know and so um dealing with stuff like that I mean remember being on so this is around Christmas time I remember being at a holiday concert for my kids waiting to get in and being on the phone with a

10:58angel investor saying okay man we we're not going to change the deal that that ship has sailed how can I make this work for you on like a one toone level now we're doing like side deals just to make sure the deal closes because you can't undo you know the freighter left right so uh you can blow it up but please don't right yeah really stressful when someone else is when you're really stressful when your fate is in someone else's hands like that there you go right there you go yeah and I think the question a lot of folks are wondering Matt how much did you end up selling

11:31for I I can say that it was a couple things it was a strategic exit so the revenue multiple was High um which was which was great it was in the eight figures uh and you know that was enough for everybody to be happy with where we were at because like I said at the beginning it was either raise that tens of millions of dollars fund raise you know or exit and so if you kind of look at the math in a big scale it was like okay you're getting maybe the valuation you would have gotten on a venture multiple Venture Venture rise but you get to have the

12:05exit instead yep get to cash out and so I'd imagine around Christmas time did it close or did it close after the first of the year uh it closed around Christmas time yeah I think it was first or second week of December okay so you pick up your phone at a certain point you refresh the bank balance you know it's coming and all a sudden you're like whoa that's a lot of zeros take me to that moment how did it feel what was going through your head uh relief I definitely relief I think that uh like I said there was so much stress that to get to the

12:38high you have to kind of get back up to neutral almost emotionally and be like okay it happened then you're excited because you're like oh my gosh it's like I and and for my situation I also had uh left the company before then so I was unemployed and didn't have to go find a job uh in January or something like that and so it was um it was exciting in that sense and it was definitely you know quick backstory I bootstrapped the thing for five years then I had raised some money it was from iidea to exit it was a 15-year Journey from incorporation exit it was a 12year journey for me there was

13:19a lot of delayed gratification would be my way of putting it of my wife and family we sacrificed a lot it finally paid off uh and it was a big gamble so relief Y and it it I guess it you were already freed up to work on your current company it's us summit.com yeah um but this must have solidified some a certain sense of safety perhaps ex existential relief that oh even if Summit were to not work out we're still in pretty good shape yeah yeah yeah it was no longer a a startup must work for me to get to where I want to be uh in life and you

14:00know we we as entrepreneurs often look at the people who chose to stay at the company and not start their own thing and when they're doing better than us for a long time it can be very challenging to go did I make the right choice for sure so yeah it finally went okay it was like a slingshot and somebody finally released it and it was like okay you know we caught up and then some yeah okay are we gonna do this again yeah yeah that's always the question oh my God so money hits your bank account it was a couple years ago now did you buy any trophies any crazy

14:33you bought a Lamborghini or you know brand new house yeah so couple things on that front um one thing is we went on a ski trip we went on the ski trip of my dreams uh we invited the whole family from the Pacific Northwest to come join us at an Airbnb uh in Whistler uh it was amazing it was like just really cool to just spend the holidays together and go you know what it's literally just come join us let's have a good time and uh we so we did a Whistler ski trip together which was uh phenomenal now I would consider that a trophy in that sense

15:08because it's not something we do every year but it was one of those things of like you know yeah let's just celebrate uh this holiday that was nice um new car cuz we needed one uh paid cash which is something I know you said you've done before which was great to be like I don't have an interest payment on a car I don't have any payments on our car um and then the last thing we did which is the most substantial was uh I I know this has been covered a lot but we were still renting at the time and so we had to start my company my wife and I

15:38sacrificed our down payment on our first town home that we were going to get and we never owned our own home because I chose to start a company instead we reversed that decision and we got a place uh we put a deposit down in I think February of the of the next year and uh we just beat Co in and got a got a home for our family in Austin good for you in a minute you'll hear from Matt about the one thing he wishes he would have known before selling before we get to that I want to talk about Quiet Light brokerage quiet light has been around

16:08for I believe it's 15 years now and they have a stellar reputation in our space and that's helping buyers and sellers connect and being a broker to help folks exit their e-commerce their SAS their content sites they've been doing it for years and they're very good at it head to micron.com sell if you want to learn more about Quiet Light but also to get some microf provided resources around thinking through selling your company that's microf.com sell and is there one thing you wish you would have known before selling risk pulse in many ways the world does not want this you want this to happen but it's almost good to

16:48imagine that everything else and everybody else in the world is kind of looking for ways to either sabotage it or prevent it from happening or slow it down right you and your few people who have shares in this company are like the only ones who really want it to go faster and happen and everyone else is like you know time is actually maybe on their side right and and they don't maybe need to do this and all these things and so I think just you know it's not because they're evil but just realizing that wow you know this is going to be harder than I expect it to

17:18be in ways I don't can't predict um a little more coaching there would have been nice I certainly know it for the next time around yeah yep and you want to tell folks what your on now because you started another startup yeah yeah I started another startup uh Tiny Seed was kind enough to uh help me get it off the ground which is awesome uh taking um taking that first year to just focus on building the technology and it's called Summit um you can find it at youumm it.com and we are now narrowly focusing on serving marketers with uh a scoring engine is what we're calling it so the

17:53ability to do mathematical calculations or scoring on your contacts leads or prospects customers that integrates natively with HubSpot Salesforce intercom customer IO Etc that's uh that's what it does and it's a sass awesome Matt thanks for joining me thanks Rob if you want to hear more from Matt about building risk pulse check out episode 489 of startups for the rest of us that's my podcast that I release every week and if you enjoy hearing about exits check out this video thanks for watching I'll see you next week