In this episode, the M&A Launchpad Podcast hosts a detailed conversation with David Sinkinson about his experience founding and growing a public safety software company with his brother. The discussion navigates through their journey from bootstrapping the startup, achieving significant revenue growth, overcoming setbacks, and eventually negotiating a major acquisition.
David shares key insights on startup methodologies like the lean model canvas, iterating and scaling efficiently, managing customer feedback, and effective strategies for achieving a successful exit. The episode also offers a glimpse into the acquisition process, from initial approaches and negotiations to due diligence and closing the deal, providing valuable lessons for both aspiring and experienced entrepreneurs.
In this podcast episode, we discuss:
- Startup Journey: David Sinkinson shares his experience of founding and growing a public safety software company, navigating challenges from bootstrapping to significant revenue growth, and ultimately achieving a major acquisition.
- Entrepreneurial Insights: Key methodologies discussed include the lean model canvas, efficient scaling, managing customer feedback, and strategies for successful exits.
- Acquisition Process: The episode provides a detailed look at acquisitions, covering initial negotiations, due diligence, and closing the deal.
Time stamp:
00:00 Introduction to Today’s Episode
01:28 Importance of Financial Health in Business Acquisitions
01:54 Bootstrapping a Public Safety Software Company
03:38 First Sale and Pricing Strategy
05:50 How to Start Up the Start Up
14:20 Competing with Industry Giants
22:05 The Big Payoff of a Sale
27:11 The Final Deal and Closing
32:35 Launching a Podcast and Writing a Book
34:33 Rocket Round
You can connect with David on LinkedIn: https://www.linkedin.com/in/davidsinkinson/
Additional Resources:
- Request a complimentary consultation with an M&A or financial expert for Quality of Earnings from O’Connell Advisory Group. – https://oconnelladvisorygroup.com/contact/
- Access our archive of video interviews on YouTube
- Get in touch with show hosts Casey Minshew and Feras Moussa at – info@equitylaunchpad.com
- Looking to invest in M&A opportunities or partner with an advisor to acquire, scale or sell your business? Visit Equity Launchpad
Transcript
Introduction to Today’s Episode
0:00 all right on today’s episode we
0:01 interviewed David sinkinson where we
0:03 really dived into what it looks like to
0:05 go from creating a startup from scratch
0:07 with a brother and really going off and
0:09 getting a strong eight figure exit and
0:11 really some of the the mistakes that are
0:13 made along the way some of the positive
0:15 things along the way and really how to
0:16 think about growing that business and
0:18 then ultimately what it looks like to be
0:19 acquired and some of the things to
0:20 consider there so Casey what were some
0:22 of your bigger takeaways you know when
0:24 you think about our podcast being about
0:25 lower Middle Market businesses and all
0:27 that good stuff you also want to talk
0:29 about these exits what is the mindset of
0:31 somebody
0:32 exiting yeah person buying and there’s
0:34 also a lot of startup behaviors that you
0:37 do when you buy one of these companies
0:39 right which is iterate learn lean model
0:42 canvas all of these things could be a
0:43 part of it and we touch on every little
0:45 thing in this podcast about that and
0:47 then also you know man when you have a
0:49 big exit like that just to meet somebody
0:50 very humble who’s created his startup
0:52 different podcast I mean this is a very
0:54 good very good yeah absolutely you know
0:56 and despite being a startup to your
0:57 point Casey we did dive in a little bit
0:59 on kind of again some how some of those
1:01 principles still apply to a lower
1:02 mid-level business and kind of some of
1:04 the things to consider and some how do
1:06 you iterate and measure results and make
1:07 decisions and all those things and last
1:09 but not least right again putting
1:11 yourself in the buyer shoes right in
1:13 this example I mean David walked away
1:15 from the first offer from the same buyer
1:17 right they got the offer they wanted of
1:19 patience decided to walk away came back
1:20 a year later stronger and was able to go
1:22 get a much better offer and so lots of
1:24 nuggets on this
1:25[Music]
Importance of Financial Health in Business Acquisitions
1:28 one hey guys go ahead and just pause the
1:30 podcast for a second when you’re buying
1:31 a business you need to ensure the
1:33 financial health of the company quality
1:35 of earnings is Mission critical it
1:36 doesn’t matter what size business you’re
1:38 buy Patrick oconnell Advisory Group
1:40 they’re dynamic they do a great job
1:42 they’re to look over your shoulder
1:43 they’re going to make sure that you’re
1:44 doing the right thing and this guy’s
1:45 done over 200 buyers successfully just
1:47 like you so reach out to them and it’s
1:49 oconnell advisory group.com click the
1:52 link in our show notes can’t live
1:53 without this hey David welcome to the
Bootstrapping a Public Safety Software Company
1:55 show thanks for having me guys I’m
1:56 really excited to be here now looking
1:58 forward to interview another fellow sass
2:00 some kind of software friends so you
2:02 know maybe before just to get started go
2:04 ahead and just give us a little bit of
2:05 background on just kind of what you’ve
2:07 done yeah absolutely so I bootstrapped a
2:10 software company with my brother which
2:12 is a little bit weird so started he’s
2:14 actually 10 years older than me but
2:16 still ended up working out pretty well
2:18 and we bootstrapped a company that was
2:20 in the public safety space so public
2:22 safety software it’s kind of a niche
2:24 market and basically our product was
2:26 this what we called a mobile safety app
2:29 we launched this thing back in 2011 so
2:30 like the app stores were about a year
2:32 old and so you know pretty early you
2:34 know sort of the rising tide lifts all
2:35 boats sort of thing for the mobile app
2:37 market and basically how it worked is if
2:39 you were an end user and you out of
2:41 school because that was primarily where
2:43 we did a lot of business was in higher
2:44 education you basically press a button
2:46 and it would send you location in real
2:47 time to the campus security or campus
2:48 police force you there and they could
2:50 come and help you and it would all stem
2:52 sort of out of this discussion I had cuz
2:54 I was working at my alma matter and we
2:56 did an audit of these Blue Light
2:57 emergency polls um most universities and
2:59 colleges have them you probably know
3:00 what I’m talking about and a lot of them
3:02 were broken and so I just sort of
3:03 pitched like hey what if we had a mobile
3:05 app where you could do that and like up
3:07 you kind of a early concept and we
3:09 rolled with it and what was different
3:11 about us too as I should say is we
3:12 weren’t just like one app so the company
3:14 was called app armor but we actually
3:16 sort of created like an assembly line
3:18 for custom branded sort of personal
3:20 safety mobile app so if you went to UCLA
3:22 we called UCLA brew and safe if you went
3:24 to NYU it’ be called safe NYU if you
3:26 went to Princeton it’ be safe Princeton
3:27 so on and so forth so yeah so like ended
3:30 up being a really important part for our
3:32 customers we had a really quick success
3:34 growing internationally and did really
3:37 well got it and so you know we’ll talk
First Sale and Pricing Strategy
3:39 about that exit here in a little bit but
3:41 really just to kind of you know you saw
3:42 the Gap in just the blue lights on
3:44 campuses right the app pretty simple
3:46 right push a button get notified now is
3:50 the you know I guess what was that first
3:52 sale that you guys did right and at what
3:54 point did you think okay maybe there is
3:55 something here and how did you even go
3:57 about knowing how to price that right
3:59 because
4:00 your customer was really the school
4:01 right you’re not doing the direct end
4:04 user retail you’re selling to the school
4:05 directly right that’s right like if you
4:07 tried to sell this directly to Consumers
4:09 I’m pretty sure you’d fail in fact I
4:11 knew multiple companies that did try to
4:12 do that and did largely fail because
4:15 safety is like one of those things it’s
4:16 like you don’t buy like a home security
4:17 system till you’ve been broken into it’s
4:20 kind of like one of those things until
4:21 something kind of bad happens to you you
4:22 don’t really think about your personal
4:23 safety all the time I will say that our
4:25 first sale was basically me being in
4:27 that sort of like conference room I was
4:28 on this campus I think it was campus
4:30 safety working group okay fun name I’m
4:32 sitting there there’s committee members
4:34 from you know different parts of the
4:35 University that our first client and
4:37 yeah I just you know right place at the
4:38 right time and I will say too the app
4:40 did start out as that basic function but
4:42 we quickly learned in working really
4:44 closely and iterating that version one
4:46 with the customer that there was
4:48 actually quite a few other features they
4:49 wanted in all we had actually 50
4:51 different features on the platform but
4:53 another big one was like emergency
4:54 alerts for people on campus you know if
4:56 there’s a bomb threat a shooting you
4:58 know a major health event or maybe
4:59 Global pandemic there are various
5:01 reasons why you want to mass notify
5:02 people and so having that as an option
5:04 through the mobile app as well as other
5:06 functions where you could share your
5:07 location real time in terms of pricing
5:10 we always based it on the size of the
5:12 institution the number of potential
5:14 users they could have on the app this is
5:16 kind of an accepted standard in that
5:19 market we actually based it on another
5:21 piece of software that’s called an
5:22 emergency notification system where you
5:24 guys you guys get Amber Alerts you know
5:27 or maybe mass text messages or like
5:28 weather alerts all the time those Mass
5:30 notifications we ended up actually
5:32 building a complimentary tool later on
5:33 in our company’s life to compete up
5:35 Market we can get into that later if you
5:37 want but that that pricing always worked
5:39 based on the size of an institution so
5:41 if you were a small two-year Community
5:43 College versus Vanderbilt University
5:46 you’re GNA pay a really really different
5:48 price so so talk to me real quick
How to Start Up the Start Up
5:50 because I I I’ve done several startups
5:52 myself right and I’ve been in that
5:54 startup World moved to the acquisition
5:56 World thinking hey it’s going to be an
5:57 easier process and not always easier
6:00 right at least you don’t have to come up
6:01 with the revenue idea but I imagine you
6:04 guys had that lean model canvas
6:06 mentality did you guys when you and your
6:07 brother sat down and said okay here’s
6:09 the problem we’re going to solve you
6:10 know how did that all come together for
6:12 you like did you guys use a certain
6:13 methodology or is it just like oh my god
6:16 let’s build it and figure it out as we
6:17 go I was a lot of the latter to be
6:20 honest we did so I do think that so
6:23 first off we’re both kind of business
6:24 book junkies and one of my favorite
6:26 books ever is the Lean Startup by Eric
6:28 re and that’s all that mvp rapid
6:31 iteration the build measure learn loops
6:34 and so we did a lot of that with our
6:35 customers particularly our first you
6:37 know five six seven customers uh by that
6:40 I mean of course major institutions but
6:42 those major institutions had a lot of
6:43 feedback for us that was really really
6:45 important and sort of tailoring the
6:48 product to the needs of what the buyers
6:50 needed so those campus security and
6:52 campus police groups on those campuses
6:55 then over time they also of course
6:57 Incorporated feedback that they were
6:58 getting from end users so from people
6:59 who are actually using the app where it
7:01 was making a meaningful difference and
7:02 helping them stay safe those folks were
7:05 also providing really good feedback so
7:06 we would take that information we put it
7:08 together so Chris and I actually wrote a
7:10 book called startup different and one of
7:12 the things though that is really
7:13 challenging and we have a chart for this
7:15 it’s kind of like a curve going downward
7:17 is like when you first start working
7:18 with a customer you know that feedback
7:20 is super high quality and it’s super
7:23 General it helps for the entire Market
7:25 as you go to market then as time goes on
7:28 the feedback slowly becomes more
7:30 specific to that customer and then in
7:32 the end it’s it’s like way too specific
7:34 or sometimes even contradictory to stuff
7:36 we got before and so managing that
7:38 relationship was really really
7:40 challenging and then basically going to
7:42 Market but also kind of being like okay
7:44 guys we really appreciate the feedback
7:45 we think we’ve got everything we need
7:47 from you we still want to be friends and
7:48 you’re still going to be our customers
7:49 but we’re going to cut you off from
7:50 Custom development that was always a
7:52 challenging conversation yeah that lean
7:55 so like taking it from an acquisition
7:57 standpoint right so Baris and I acquired
7:59 a business last year it’s had 155
8:01 employees metal plating 50 years 50 60
8:04 years old dirty grungy everything you
8:07 can imagine right we come in and and of
8:09 course similar to like a startup right
8:12 you you make out your list of what we
8:14 call that low-lying fruit what are the
8:15 things we can improve upon and you build
8:18 upon and when we came into this first
8:20 part of this year right we started exper
8:23 we brought in a somebody to run the
8:24 company and then he had his Playbook on
8:27 how to execute and get things done well
8:29 long story short everything that could
8:31 have been challenging this year was
8:32 challenging everything that we thought
8:34 we were doing was like oh you got met
8:36 with like all these things breaking down
8:38 and challenges and weather related long
8:40 story short we met with one of the GMS
8:42 the other day and you know I had this
8:44 conversation with it’s almost the lean
8:46 it’s That Lean Startup mentality I’m
8:48 like look you know this is a an existing
8:51 business however your division is very
8:53 like it still needs to grow it’s still
8:56 that mentality where we need to sell and
8:58 be focused on sales and he kind of came
9:00 back to me and was like listen he’s like
9:02 I’m starting to see what you guys are
9:03 doing and I’m like look if this was a
9:05 startup because it kind of is right we
9:07 would learn iterate we would come back
9:09 we would adjust we would pivot we would
9:11 move and we’ve almost taken this group
9:13 of people that have been doing the same
9:15 thing for a very long time through that
9:17 whole startup exercise pretty freaking
9:19 amazing to just be into that lean model
9:22 Canvas even with an existing business
9:24 now it’s been stressful know I’ll bet
9:27 that doesn’t sound super Pleasant got to
9:28 be it’s very stressful but it’s very
9:31 similar in the sense of where you’re
9:32 constantly redefining like hey you move
9:35 it didn’t work you got to learn you got
9:37 to Pivot you got to keep moving yeah I I
9:39 think the really impressive thing about
9:41 that lean canvas approach is that it can
9:43 apply to a lot of different parts of
9:45 your business it doesn’t have to just be
9:47 a product specific thing like what
9:49 you’re trying to do is improve your
9:51 scale improve the way you go to market
9:53 improve the way you build the thing
9:55 improve the way you deal with employees
9:57 like you can actually do quite a bit
9:59 through that process what you’re doing
10:02 though is overall is finding ways to
10:04 vastly improve your profitability and
10:06 sometimes it takes you know an
10:07 acquisition new people to come in with a
10:10 totally different lens to say well why
10:12 are you doing it this way well that’s
10:13 the way we’ve always done it well you
10:14 can do it a lot better like you can do
10:16 better than that you can do it
10:17 differently and that was a big thing and
10:19I think for us when we were thinking
10:20 about how can we keep moving our company
10:22 forward we were absolutely obsessed with
10:26 making these like little bets making
10:27 small changes little tweaks putting them
10:29 out there whether that was again
10:30 something internal or external measuring
10:32 the results seeing if it went well and
10:35 then doubling down on it if it went well
10:36 or moving on if it didn’t work and that
10:38 was a really really good strategy for us
10:41 that we had you know 50 60%
10:43 profitability in our business at our
10:45 Peak we did very very well and I think
10:47 it was very much because we were
10:48 obsessed with creating systems and and
10:50 structuring our business in as lean a
10:53 method as possible and when you think
10:55 about that so when you talk about
10:56 systems and structure are you talking
10:58 about like your organization the people
11:00 that work for you you’re talking about
11:02 the actual application of your app what
11:04 were those two things a bit of both
11:06 right so I think on the one hand
11:07 sometimes when I use the word systems
11:09 it’s a little bit confusing because I’m
11:10 also in ass SAS company but actually a
11:13 lot of the time I’m just talking like it
11:14 can be a silly as you make changes to
11:17 your CRM your customer relationship
11:19 management software that actually makes
11:21 your salese a little bit more efficient
11:23 as they go through their day making
11:24 quotes or doing whatever it is like
11:26 that’s like a very minor thing but
11:28 improving these proc CES and these
11:30 systems is super important now for the
11:32 mobile application of course this was
11:33 like a constant thing we would obviously
11:35 be trying to leverage like new industry
11:37 tools the thing with the software as you
11:39 guys are going to know is that it’s a
11:40 bit of a moving Target things
11:42 continuously improve and change and we
11:44 were always trying to keep up with those
11:47 changes make our software as up to- dat
11:49 as possible avoiding sort of Legacy code
11:52 and if you want we can definitely talk
11:53 about tech debt and how awful it is but
11:56 it was one of those things where I think
11:58 that again we just just took that
11:59 approach of Rapid iteration and applied
12:03 it to our business broadly yeah so maybe
12:06 you know at its core though right your
12:08 business was really it sounds like you
12:10 had a core app that you then white
12:12 labeled flavors of right and so you kind
12:15 of had this balance of how do you keep
12:16 the core maintained while also giving
12:17 enough customizations to the customers
12:19 right that was essentially the core of
12:20 the business right yeah that’s correct
12:22 and we if I can really quick we actually
12:25 did some interesting stuff to make this
12:28 more so I’ll
12:29 give good excuse me I give a good
12:31 example of an innovation we did that
12:33 made it so that the custo like we were
12:35 much more scalable suddenly so our first
12:37 few customers they had to like email us
12:39 to be like hey we want to do this to the
12:40 app we want to add a button here we
12:41 change color here and we were like holy
12:43 crap like we can’t manage this this
12:45 immediately doesn’t work as a business
12:47 especially for the amounts we were
12:48 charging in the early days so we created
12:50 our content management system for our
12:52 native mobile apps so that the
12:54 organization could pop in there make
12:56 those changes that they needed and then
12:58 that was something that immediately
13:00 scaled us to the next level immediately
13:02 we could be like okay we can you know
13:04 maybe in some cases when we would
13:05 implement we would do their first
13:06 version but then after that it was sort
13:08 of like a handoff like okay good luck if
13:10 you need us here’s the support email
13:12 address and you know phone number
13:14 whatever but most of the time they could
Competing with Industry Giants
14:21 valuable part of the market is this
14:23 emergency notifications thing there’s
14:24 actually somebody at every University
14:26 and college in the world for the most
14:28 part at least the Western world where
14:29 they they’re called an emergency
14:30 director man you know Emergency
14:32 Management coordinator something like
14:34 that and their job is basically like
14:35 twofold one have emergency plans when
14:38 things go wrong sometimes this job is
14:40 very important if it’s like a research
14:41 University and they’ve got a bunch of
14:43 stuff that has to be super cold and like
14:45 the generators fail and then all that
14:47 stuff dies like that’s like those are
14:50 the people who are trying to be like
14:51 okay we have to have emergency
14:52 generators we have to have like
14:53 infrastructure like they’re thinking
14:54 about those problems the other thing
14:56 though they do is when something goes
14:57 wrong they need to be able to notify and
14:59 connect to people so in our early days
15:02 the mobile app was I mean again this was
15:04 like 2011 the app worked on black on
15:06 BlackBerry you know just putting this in
15:08 perspective no I know exactly what
15:10 you’re talking I was they’re developing
15:11 in that same time frame so we would just
15:13 it’s just a blanket push notification to
15:15 all push subscribers to that app
15:17 remember each app was its own instance
15:19 so we could very easily categorize okay
15:21 we have we know we have approximately I
15:22 don’t know uh 5,000 users on Android you
15:25 know 10,000 on iPhone there’s an
15:28 emergency in there there’s an online
15:30 dashboard console that the institution
15:32 could use in the back end that’s where
15:34 they did the content management for
15:35 example and that’s also where they could
15:36 send mass notifications s the app so
15:38 push notifications specifically for the
15:40 mobile app because that’s the end point
15:41 later on we would sell more stuff we
15:44 proliferated our product because we
15:45 looked up Market at our competitors and
15:48 because amazingly we had competitors
15:49 first off such a niche market but we had
15:52 some and looking up Market they were
15:54 doing this emergency notification they
15:56 sent text messages they sent emails they
15:58 sent voice calls they computer screens
15:59 they did all this other stuff and we
16:01 were like we can do this like and by the
16:03 way their software looks kind of old
16:05 because it was old a lot of it came out
16:07 in like 2005 2006 we saw one that was
16:09 built on Cold Fusion so we’re like okay
16:12 let’s take a shot not heard of cold
16:14 fusion in a while yeah there you go
16:15 right so we took a shot at it and we did
16:18 really well and it was so complimentary
16:21 to our existing customer base because
16:22 they were looking for ways to do Mass
16:23 notifications and we could have it all
16:25 integrated in one place all One
16:26 dashboard all one workflow in our system
16:30 as opposed to normally it would be you
16:31 had to go through multiple different
16:33 systems so send an alert on system a
16:35 that does emails and phone calls the
16:36 next system does text messages this
16:38 system does whatever for us it was like
16:40 okay now welcome to One dashboard we can
16:42 do all this place all this stuff in one
16:44 it was a very compelling value prop over
16:46 time and we started to actually displace
16:48 our competitors with software that they
16:50 sort of considered safe like this was
16:52 their bread and butter and that was you
16:54 know getting into the acquisition game
16:55 here a little bit we were really
16:57 stepping on their toes and they were
16:58 starting notice and that was our
17:00 intention we were trying to kind of piss
17:01 them off a little bit no it’s by Design
17:02 I mean you know in that world you’re
17:04 going to have to get to an omni app
17:05 right like it’s not going to be the
17:06 oneoff that solves anything it’s going
17:08 to and then you even start to get even
17:10 in your space once you’ve solved all of
17:12 the safety related stuff then you have
17:14 the bigger stuff which is like all of
17:15 the you know the the blackboards or
17:17 whatever it is that schools use where
17:18 every student is installing this app and
17:20 now you you know you have kind of that
17:21 deoration between our students
17:23 installing three apps or they installing
17:24 two you those guys start to eat you up
17:26 and consolidate so consolidation you
17:28 know it fun so yeah sounds like you have
17:29 a story to tell here yeah sorry I just
17:32 like I think you Blackboard right like
17:33 just like just like all of a sudden
17:35 start shaking so basically yeah we ran
17:37 into them all the time in the market
17:39 because they were basically the dominant
17:40 lmso learning management system so they
17:41 were basically like kind of garbage and
17:43 dated and they still stuck around really
17:45 most people didn’t like them which was
17:48 like very funny to me I would talk to
17:49 them be like oh we don’t have to talk to
17:50 Blackboard and they had actually created
17:52 like a really crummy Mass medication
17:54 system and even worse sort of mobile app
17:56 component so in a way it was actually
17:58 kind of good because they sort of
17:59 educated the market that these functions
18:02 are complicated and don’t work that well
18:04 so when we showed up and we’re like oh
18:05 we can do massification better than
18:07 Blackboard customer says show me and I
18:09 in the first five minutes of a demo me
18:10 or my salese would be like you know we’d
18:12 go through we send a mass notification
18:13 we could hit the person’s phone who was
18:14 on the demo with us you know we’re doing
18:16 all kinds of cool stuff and they go wow
18:18 that’s so much so much easier I’m like
18:19 yeah and it was kind of this you know
18:21 that’s kind of your best case scenario I
18:22 feel like for a lot of goto Market
18:24 strategies if if you can find a
18:26 competitor big or small or whatever but
18:28 that I educates them sort of poorly or
18:31 leaves them with a bad taste in their
18:33 mouth that’s a great opportunity to go
18:35 in and just crush them and we did and it
18:37 wasn’t just us for what it’s worth but
18:38 we did do really really well competing
18:40 against Blackboard in the specific like
18:42 safety security Public Safety component
18:45 of their software platform and that
18:47 actually led to a lot of deals I
18:48 remember they actually started
18:49 discontinuing their Mass edication
18:50 functionality and mobile safety sort of
18:52 functionality I think around like 2018
18:54 they were just like kind of walking away
18:55 from it or at least not supporting it
18:57 anymore which is basically dead and it
18:59 was just like a Feeding Frenzy for all
19:01 these other Mass edication companies and
19:03 us because it was just these customers
19:05 were no longer supported so so pretty
19:07 amazing so so 2011 right this is where
19:10 you and your brother start off it’s just
19:12 you two yeah right so what what year did
19:15 you look at your your brother and go wow
19:16 we are no longer a startup we are
19:19 officially in business oh they
19:22 sold um but a little bit before just a
19:25 touch I would say um so I remember we
19:28 were in a business co-working space and
19:30 I remember they used to put on these
19:32 like beer clocks on Thursday it was
19:34 really fun they actually taught us a lot
19:35 about company culture it was great and
19:36 so we go in there we’re having some
19:37 beers and I was talking to the person
19:39 who was running the co-working place and
19:40 I said you know it’s really excited we
19:41 made our first million dollars okay and
19:44 this was probably I don’t know a year
19:45 four or five and she turns to me and
19:48 looks at me goes the first million is
19:49 the hardest one just no just dead fired
19:52 it right at me I was like I don’t know
19:54 it was pretty hard I can’t imagine the
19:55 next thing be easy that year I think we
19:57 got to two million we started to see we
19:59 actually were were one of the 500
20:01 fastest growing companies in Canada
20:02 which is kind of like the world’s you
20:04 know smallest big screen TV but still
20:05 I’m pretty happy about it ex and we we
20:08 ended up being we were like 30th for
20:10 software in Canada like we were doing
20:11 really really well we had 400%
20:13 year-over-year growth so we’re just
20:14 exploding all of a sudden and we sort of
20:17 if you think about like Jeffrey Morris
20:18 crossing the chasm like we crossed the
20:20 chasm we had got to that early majority
20:22 we were like we were just here we go
20:24 that’s when I was like okay this is the
20:25 real deal now we’re you cross the for
20:28those listeners it’s usually not one
20:29 Chasm though right I literally I did
20:32 another podcast interview the other day
20:33 where I was being interviewed and you
20:35 know I like to say you get with any
20:37 company you get to these different
20:38 points where you have to make the next
20:40 leap and you know yeah you’re going to
20:41 be uncomfortable you’re taking a lot of
20:43 risk but once you get past it then
20:44 things get easier until you hit the next
20:46 Chasm so each company kind of has his
20:47 different phrases and so I think that’s
20:49 true actually I would say this one’s
20:51 like the initial one of the biggest ones
20:53 is that you know the I’m GNA get early
20:55 adopters to the early majority because
20:57 you just don’t have that much Revenue
20:59 yet so when you get there it just feels
21:00 a lot more comfortable when you suddenly
21:02 like okay you know our marketing budget
21:03 can be hundreds of thousands millions of
21:05 dollars all of a sudden that that’s
21:06 totally doable whereas before you’re
21:09 kind of you know you’re eat you’re
21:10 eating less well if if that makes sense
21:13 absolutely and then and then as you go
21:15 up though as you go up that uh you know
21:17 I have it right
21:18 here if as you go video cross gasm right
21:22 there good as you go up that sorry I
21:25 want to talk in the mic as you go up
21:27 that chart I think that what happens is
21:28 you learn that the things that you did
21:30 before to get you to that point no
21:32 longer serve you and you have to change
21:34 and it’s really difficult because that’s
21:36 what got you there it’s really
21:38 uncomfortable to go to that next phase I
21:41 totally agree with you actually I funny
21:43 so we did our we did our annual planning
21:45 with the leadership this week actually
21:46 Monday Tuesday and one of the big things
21:47 I kind of pound in everyone’s head is
The Big Payoff of a Sale
22:05 right because I think most of our
22:07 listeners here are like wow amazing
22:09 startup growth but let’s get into the
22:11 m&a stuff because I imagine that is
22:13 where you know one all of your dreams
22:16 came true right all the hard work the
22:18 payoff but like let’s talk about like
22:20 how did like what happened how long did
22:24 it take I mean give us all the good
22:25 stuff that we can get into on the exit
22:28 side sure let me start with a quick
22:30 story so we had had a weird thing happen
22:32 we had somebody come through our sales
22:33 funnel and they had this website they
22:36 looked like semi-legitimate we have been
22:37 trying to grow in the corporate space
22:38 because big companies have a lot of
22:40 people they have big campuses they need
22:41 to notify them and have tools anyway so
22:43 we’re like okay like this seems like
22:44 kind of legit they’re going through a
22:45 sales process like very quickly like a
22:47 little bit unusual and then they get to
22:49 the legal contract and they signed it
22:50 within an hour this this never happens
22:52 like a contract review is a two and a
22:54 half week kind of thing at a big
22:56 organization and so I was like okay this
22:58 is this smells rotten what’s going on
23:00 and so we look them up and we we Google
23:01 their company and it’s it’s funny there
23:03 was their company and then there was
23:05 another company with a slightly
23:06 different name with the exact same
23:07 website okay so I was like this is
23:10 sketchy I go to I was like we’re being
23:13 frauded somehow I don’t know exactly how
23:16 but some there this person’s up to
23:17 something so we go and we look at the
23:19 website we look that they’re basically
23:20 identical except at the very last page
23:22 the about us of the fraudulent website
23:26 was the address of one of our
23:27 competitors
23:30 okay and I was like huh that’s
23:34 interesting and so like a couple of
23:37 things I could have done so first off I
23:38 was like okay well first off this guy
23:40 was just trying to get our information
23:42 steal our stuff learn our pricing do all
23:44 that kind of thing clearly working for
23:45 that other company whether they like
23:47 told him to do this or not wasn’t really
23:48 sure but I emailed the CEO of one of our
23:50 competitors was like Hey heads up we
23:52 found this
23:53 might want to deal with that
23:55 we’re not gonna and you know just kind
23:56 of a shot across the bout right of that
23:59 company to be more that of the the
24:01 company that like that
24:03 competitor kind of a shot across the B
24:05 like that’s like a warning shot like hey
24:06 knock it off right and but the other
24:09 thing that I did I was like okay this
24:10 person though could be screwing up
24:12 things for our other competitors but
24:14 instead what I decided to do rather than
24:15 just like let this person keep doing
24:17 that was I actually reached out to a few
24:19 other strategics and their CEOs and said
24:22 hey guys we found this this happened to
24:24 us this is some BS heads up and that was
24:26 my first interaction one of the was
24:28 anyway it was my first interaction with
24:29 the company that bought us okay this was
24:31 two years before we were acquired wow
24:33 yeah so I kind of like built Rapport
24:36 credibility trustworthiness by accident
24:39 I kind of wanted to be bought obviously
24:41 but I just did it in advance I didn’t
24:43 really know if it was going to lead
24:44 anything but it’s important when you
24:46 understand our story because in our
24:47 story we didn’t go and Shop our company
24:49 we didn’t have Bankers we didn’t go
24:50 through this process so instead what we
24:52 did we basically had these ongoing sort
24:54 of side conversations with different
24:56 strategics now we weren’t colluding or
24:57 anything like you know you win this deal
24:59 we’ll win that deal that kind of thing
25:00 it wasn’t like that it was very much
25:02 these KY kind of weird conversations
25:05 with them about like what are you
25:06 thinking and one day we got an email
25:08 from a company called TCB and Technology
25:10 crossover Ventures it’s a large private
25:12 Equity Group I think they originally
25:13 invested in Netflix like so they they’re
25:15 fine and they owned one of our larger
25:17 strategic competitors raave mobile
25:19 safety and they said hey are you guys
25:21 interested in selling and this is when
25:22 we first started talking to them and I
25:23 noticed them we were getting our door
25:24 bang down from different companies
25:25 companies that buy companies that buy
25:27 businesses that are profitable and by
25:28 this point we had been doing about 7
25:30 million ARR and you know 60% profit
25:33 margin so like very healthy
25:34 profitability so they saw we were doing
25:36 and they said you know do you want to be
25:37 sold and so we went down this
25:39 conversation and my co-founder makes a
25:40 famously big blunder if you guys sales
25:43 guys are have many I’m sure youve worked
25:45 with plenty of them one trick with sales
25:47 is you never put a number out there and
25:49 they literally asked him verbatim hey
25:51 what would you be willing to sell for
25:53 and without even skipping a beat we were
25:54 on a zoom call and I was in a different
25:55 place otherwise I would have kicked him
25:57 physically he goes oh 20
25:58 just just blurts it right out and I said
26:01 oh God like you never do that you want
26:03 to say my answer was going to be as much
26:04 as we could possibly get as much as you
26:06 think it’s worth you know I mean
26:07 something like that anyway so then we
26:09 get an offer for $20 million
26:11 unsurprisingly Big Lots of strings
26:14 attached all wait 20 million and your
26:15 Revenue was what and your your was like
26:17 7 million million your Revenue was 7
26:19 million and you said 60% profit margin
26:22 so 3x so if you you know if you just cap
26:24 that out right they’re at a 6X multiple
26:26 right six and a half so we kind of like
26:29 or I was like this is horrible because
26:31 we had this good opportunity kind of
26:32 like worked into this weird thing anyway
26:34 so we kind of like tried to push them
26:36 back for more but it wasn’t going to
26:37 work out because they had kind of like
26:38 they thought they were going to get a
26:39 really good deal like they were like
26:40 kind of in on that now they thought they
26:42 met our number so we said no we said no
26:45 we actually walked and we said we’re
26:47 going to bet on ourselves we’re going to
26:48 try and boost our numbers and we’ll see
26:50 you in a year’s time I should say I
26:51 guess accurately that was we were at
26:53 about six six million by that point and
26:55 then next year we were at 7 million so
26:56 we bet on ourselves we had a really good
26:57 year and we came back to them and they
26:59 had had a really bad year so they had
27:01 missed their sales targets for two years
27:04 basically because of the pandemic and
27:05 you know for private Equity that’s not
27:06 going to work and they’re going to spin
27:08 that company and sell it off really soon
27:09 and we kind of knew that too we could
27:10 just kind of tell so we went back to
The Final Deal and Closing
27:12 them they doubled the offer $40 million
27:13 if you do it really really soon we want
27:15 to fit you into our company launch in
27:17 January of that year this was in
27:19 November of the year before so November
27:21 of 2021 and yeah we said we’d do it and
27:24 we were off waited patience one year you
27:26 made another $20 million and so yourself
27:29 but the question is how do they not feel
27:30 like they’re going to offer 40 and
27:31 you’re going to say you know what we
27:32 changed our mind yeah I was right I mean
27:35 I think there’s got to be a like a
27:36 certain level of desperation I think
27:38 also though too like remember back in
27:40 like 2021 like money was like really
27:41 cheap you know it was and they I think
27:45 were also really prioritized like they
27:47 were the kind of private Equity Group
27:48 where they wanted to spin off that
27:49 company really soon they were at like
27:51 four years of owning them like you’re in
27:53 that five year three to five year window
27:55 like private exp groups are looking to
27:56 you know make their investment and I
27:59 think they just were like we need those
28:00 numbers to boost these numbers and then
28:03 We’re Off to the Races so but we I think
28:06 they also knew that if we if they
28:07 doubled the offer we weren’t going to
28:08 walk we were gonna take that exciting
28:11 did y’all close what was the what was
28:12 the actual closing date close date was
28:14 February 1st 2022 we went through due
28:16 diligence over Christmas time I remember
28:18 on Christmas Eve at 11:00 p.m meeting
28:21 with our lawyers so that was you know
28:23 Santa might have been on the roof and
28:25 yeah you know we got it done and you had
28:26 an army of lawyers and an army of
28:28 accountants and we got it done awesome
28:30 and so so maybe just to kind of to put a
28:32 bow on that so did you set the 40
28:35 million price point or they just said
28:36 hey we’ll double it they just said hey
28:38 we’ll double it and we didn’t your
28:40 brother wasn’t doing the negotiations at
28:41 that time right you just left him off
28:43 was onail I was on the email I was like
28:45 Chris for the love of God say nothing I
28:48 love my brother by the way but he just
28:50 he’s he’s not a great salesp person he’s
28:52 an incredible coder amazing coder so you
28:55 went through due diligence and man it
28:58 was done so how many employees did yall
28:59 end up selling with how many employees
29:01 did you have yeah so we had 20 employees
29:03 like head counted 20 so small firm you
29:05 know your brother and 18 other people
29:07 yeah correct yeah that’s right did you
29:09 guys do the traditional everybody got
29:11 some equity and all that good stuff or
29:13 was it was everybody growing it for the
29:15 growth so we had three things that we
29:17 were worried about we were worried about
29:18 our technology uh we were worried about
29:20 our people and we were worried about our
29:21 customers so these were like our sort of
29:23 outside of the purchase price these are
29:24 like our altruistic goals and the for
29:27 the people yeah everybody got rais
29:29 everybody got better benefits right away
29:31 because we were a smaller company and we
29:32 had decent benefits but like the company
29:34 that we were being absorbed into had
29:36 really really good benefits so that was
29:37 good and key employees got yeah some
29:40 effectively like equity in the business
29:42 so in the new business or in the current
29:43 one the new one so but you guys as part
29:47 of the way you guys had structur it you
29:48 guys were able to kind of you know it
29:50 wasn’t like a traditional startup where
29:51 everybody’s getting a compact a base and
29:53 a bunch of equity right you you guys
29:54 kept that you gave them the bases and
29:56 then as part of the new deal people kind
29:58 of got the upside there cap table was
30:00 super clean it was me and my brother
30:02 nice that’s awesome and then um and I
30:04 guess so speaking of I mean what was
30:06 some of the claws that were put in to
30:09 you know in the New Deal right to keep
30:11 you guys on board and obviously they
30:13 compensated your team so they’re still
30:14 motivated but you know you have to stick
30:16 around for a year or two I mean clearly
30:19 the original actually this is one other
30:21 thing too on the 20 million dollar deal
30:22 so the original deal that we turned down
30:23 the other thing that was happening is I
30:25 was expecting my first kid and I was
30:26 really really worried about being tied
30:28 to big sales targets and not sleeping at
30:30 night so was kind of anyway so there
30:33 were other reasons it also though had a
30:35 very intense earnout period it was I
30:37 think like two years or something like
30:38 that that sounds aggressive I think it
30:40 was like a year and a half which isn’t
30:41 crazy for the world of earn outs but in
30:43 the context of happened in the end our
30:45 final earnout was three months but we
30:48 stayed around we stayed around because
30:50 we knew that well we wanted to make sure
30:52 that our company and our people and our
30:54 technology would continue to thrive and
30:56 be worked into that new EOS system
30:59 before we left and we also knew that
31:02 like well we assumed anyway and later
31:04 confirmed that they were going to turn
31:06 around and sell that company and they
31:07 did they sold the company to Motorola
31:09 Solutions for $560 million and so we
31:12 participated a little bit in that we did
31:14 not get $560 million we got got a little
31:17 bit of money in there too which made it
31:19 worthwhile for us to stick around as
31:20 well but I think all in all we really
31:22 wanted to make sure that the company was
31:24 in a good place by the time we left so I
31:28 mean that is like the story that is that
31:30 is the Epic story of startup to just you
31:33 know what a total of nine years you said
31:35 with you and your brother yeah about
31:36 nine years yeah y are still I take it
31:38 good friends still brothers or yeah we
31:40 still hang out you always Brothers but
31:43 not sure if you like each other right no
31:45 we’re good we’re good I think you know
31:47 we’ll probably start another business at
31:48 some point you know because we just work
31:50 really well together and it’s not to say
31:51 we didn’t have our fights because damn
31:53 we had our fights I’m reading this book
31:55 by Adam grant called think again and
31:57 there’s this whole concept of like
31:59 constructive disagreement and I realized
32:02 that we were very much in this like you
32:03 can get hot but not angry at each other
32:06 that was very much the way my brother
32:07 and I would work in some of the more
32:09 like stressful decision-making we would
32:11 find data we would keep talking but we
32:13 would generally disagree and try to work
32:15 through what do we think is the best
32:16 path and some of our best decisions came
32:18 from a lot of conflict yeah whereas some
32:20 of our you know counterintuitively some
32:21 of our worst decisions came from where
32:23 we were both like yeah that’s a great
32:24 idea right away without validating it
32:26 just like yeah yeah that’s good that’s
32:27 good it’s good let’s go and that usually
32:29 was the bad stuff so totally so talk to
32:32 us real quick because I know we’re going
32:34 to be coming up to the end here you got
Launching a Podcast and Writing a Book
32:36 you took your Concepts and you created a
32:38 podcast and you wrote a book so tell us
32:40 about it yeah so let’s start with
32:43 podcast so my podcast called startup
32:45 different I actually host it uh with my
32:47 brother I’m the chief podcast officer so
32:49 I really want to make sure I had a
32:50 stupid title so I got it um and uh yeah
32:54 so we interview entrepreneurs um
32:56 Founders from all stages from you know
32:58 early early Revenue to exited multiple
33:01 times uh it’s been a lot of fun it’s a
33:03 fun show and then otherwise that we also
33:05 have uh our book called startup
33:07 different the mythbusting blueprint for
33:08 your multi-million dollar business
33:10 that’s available on Amazon or Indo like
33:12 wherever you find your your books online
33:14 and it’s basically a chronological story
33:16 of our company we bust 33 different
33:18 startup myths and it’s pretty light like
33:20there’s references to like Zoolander and
33:22 stuff in there so it’s a nice read
33:23 you’re G to enjoy yourself so zooland is
33:26 one of the good ones we’ll put to that
33:28 in the show notes for the listeners so
33:29 thank you appreciate that yeah and then
33:31 maybe one last question before we kind
33:32 of move on to the rock around too know
33:34 for the for the employees that got the
33:36 equity in the next you know in the
33:38 company that acquired you and then they
33:40 got bought was that life-changing for
33:41 them it wasn’t but it was a significant
33:44 amount of money anyway I think it made
33:46 it like fun I think they like that they
33:49 got it but you know and I should say too
33:5 1like key employees versus all employees
33:53 there was some differences there but but
33:55 all in all yeah I I think that at least
33:57 for those folks I think what was
33:59 interesting is my my team went from
34:01 being most of them were hired right out
34:02 of school that’s just how we like to
34:04 hire we brought them up we kind of I
34:06 like sports analogy for this they were
34:07 like the farm team you know we brought
34:09 them up to the big leagues and then they
34:11 moved into a company that was 10 times
34:12 bigger than us and then they moved into
34:13 a company that was a hundred times
34:14 bigger than that so for their careers I
34:17 think there’s a humongous amount of
34:19 benefit there for them exact no
34:20 absolutely even my software company I
34:22 mean our our our devs I mean you get
34:24 well rounded at a startup right you
34:26 learn up and down the St back you’re not
34:28 just one piece and you can get get a job
34:29 almost anywhere and so I mean it’s Kudos
34:31 so totally agree awesome all right so
Rocket Round
34:33 let’s jump into our rocket round all
34:36 right this is where we ask our guest
34:39 three questions and get to know a little
34:41 bit more about them all right so David
34:42 what do you like to do best in your free
34:44 time yeah uh I’m gonna go you gonna
34:47 think this is really weird and it’s cool
34:48 but uh I like to make Saro bread hey I
34:51 was learning how to make that too so I
34:53 got so pizza making Neil bton pizza was
34:56 my co Hobby oh nice I got an got really
34:59 good at the neopan and I learned a lot
35:00 more about how souro are made that’s
35:02 awesome remember everybody was like
35:03 really into it during the pandemic like
35:05 there was like a whole s like crazy
35:06 early in the pandemic so I’ve been doing
35:08 it before then I did it before school
35:12 you’re an OG so had to teach it’s funny
35:15 my my CFO she’s Canadian so I’ve taught
35:16 her two phrases right one of them is OG
35:18 she didn’t know that one her daughter
35:20 and kids knew that the other one you’d
35:21 appreciate this one hockey stick growth
35:23 so oh of course I’m like come on
35:25 Canadians should know the hockey stick
35:26 thing but I guess that’s more of a tech
35:27 Tech term that we I know that for sure I
35:29 think that like if you talk to I I I do
35:32 a lot of the startup mentorship here in
35:34 Toronto Canada and it’s so funny because
35:36 you see that chart at some point in the
35:37 deck right at some point you could see
35:39 that AB it was pretty fun anyway all
35:42 right so souro bread so next time I’m in
35:44 Canada we will yeah happily get you a
35:46 loaf so do it all right next question
35:49 most memorable moment in your business
35:51 Journey yeah I mean there’s like so many
35:53 different moments I think I I was
35:55 wondering if I should go with something
35:57 negative or positive I’m going to go
35:58 with positive because I’m an optimistic
36:00 kind of guy so I I can remember when uh
36:05 basically we had we competed for this
36:07 really difficult to get RFP so request
36:09 for proposal for in the State of Florida
36:11 and in Florida they had had the terrible
36:13 uh Parkland shooting and they they came
36:15 up with this tender for an app that
36:17 would be basically an app where you
36:18 could report suspicious activity and it
36:20 would be linked to law enforcement and
36:22 uh and that kind of stuff and it was it
36:24 was a dog fight of an RFP uh we had
36:26 people call us pretending to be the
36:28 decision committee being like oh you
36:29 weren’t selected don’t don’t check
36:31 anymore see you later bye uh like we had
36:33 crazy stuff happen anyway uh we ended up
36:35 winning it it was a huge moment for us
36:37 both from a revenue and I think a
36:38 credibility perspective and this is a
36:41 bit of a political thing to say but at
36:42 the time the president of the United
36:44 States actually tweeted about the work
36:45 the State of Florida was doing and
36:46 featured the app in their tweet and that
36:49 is the now uh president-elect of the
36:51 United States pres guess was like
36:53 2016 what didn’t he tweet about though
36:55 not take it away from you no offense but
36:58 he’s tweeted about just about everything
36:59 that there could be tweeted about you
37:00 know what he definitely didn’t write it
37:03 like somebody wrote it for it was like
37:04 so nice and well worded I’m like this is
37:06 not yeah that’s not no no no awesome all
37:09 right so what is your favorite tool or
37:11 resource right now I am all into chat
37:15 GPT I love it I have my own gpts like I
37:19 pay for chat GPT which is like kind of
37:21 weird I guess and I have I I can ask a
37:24 different questions about the podcast I
37:25 can ask her to spit allall this thing I
37:26 can do it’s it’s just great it’s just
37:29 such a fun tool and I find it very very
37:31 helpful at a lot of the different things
37:33 I can do during my business we had a lot
37:36 of different tools that I leaned on
37:38 pretty heavily one of them just because
37:40 it’s a bit more obscure I’ll throw it
37:41 out there as a tool that we used to use
37:43 and because we competed with a lot of
37:44 public contracts so because universities
37:46 and colleges in many cases rep public
37:48 there was this tool called govspend and
37:50 we could actually look up the contract
37:52 that that school had for emergency
37:53 notifications and which vendor it was
37:55 when they won it when the terms were up
37:57 and that was such a powerful tool for us
37:58 to go to market it was probably that on
38:00 the utility space that’s one of our
38:01 verticals absolutely it’s really good
38:04 highly recommend also wasn’t that
38:05 expensive for the value you get out of
38:07 it is insane so love it yeah perfect
38:11 well I think that brings us to the end
38:12 of the episode David thank you for
38:14 sharing I mean wealth of information on
38:16 that one and how can people get a hold
38:17 of you yeah you can find us on social
38:19 it’s all at startup different you can
38:21 find me on LinkedIn David sson easy
38:23 enough to find them if you’re looking
38:24 for the title it’s the chief podcast
38:25 officer one is is me and yeah of course
38:28 check out the book on Amazon and the
38:29 podcast is wherever get your podcast
38:31 perfect and we’ll link those in the show
38:32 notes thank you for spending some time
38:33 with us it was a great story and uh man
38:35 to all your success I’m gonna get the
38:37 book thanks guys I really appreciate
38:38 that that’s awesome thank you for
38:41 listening to the m&a Launchpad podcast
38:43 if you’ve enjoyed today’s podcast and
38:44 would like to support us please leave us
38:46 a rating and a review after you listen
38:48 I’m Casey mchu and I look forward to
38:49 talking with you next week
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