The SaaS Venture

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[INTRO music]

00:10 Aaron Weiche: Episode 17, Selling GatherUp - part two, the process.

00:16 [INTRO]: Welcome to the SaaS Venture podcast, sharing the adventure of leading and growing a bootstrap SaaS company. Hear the experiences, challenges, wins and losses shared in each episode, from Aaron Weiche of GatherUp and Darren Shaw of Whitespark. Let's go! 

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00:44 AW: Welcome to the SaaS Venture podcast. I'm Aaron.

00:47 Darren Shaw: And I'm Darren.

00:48 AW: And we are diving into part two of our three-part series on the acquisition of GatherUp from the end of 2019. If you haven't had the chance, part one of the series is the why, laying out things within the decision process, how to, things to consider and think about prepping your company to sell, just a number of aspects with this and today we're kind of hoping to transition into some more of the process items and small things, and being able to share just even how some of those things felt at the time. So looking forward to that but before we dive into that, Darren, it's been a few weeks since we've talked. What's new with Whitespark? 

01:30 DS: What's new? Let's see, it's not really too much new. We just keep forging ahead with a lot of our product developments. Man, we have so many things that are so close right now, I'm just really excited about these launches that are upcoming, brand new local citation finder, a whole new account system. These are just on the cusp of being launched and it's funny because we have this local citation finder and it's been quite neglected for years as we build other things in the company. And it's truly... We get 300 free users signing up for that every week.

02:04 AW: Nice.

02:04 DS: And a lot of those are converting, but it's amazing to me that they're converting to the existing product because it's old, it's outdated, the data's not great, but and so, I look at that and I think I can't wait to launch the new one. And I think when we launch the new one, our churn rate will plummet. Our sign-up rate will drastically increase. I think it's gonna be huge for the company. So yeah, got lots of things on the go right now, busy with that, I don't have any trips planned until June. So yeah, I'm gonna see you in Minneapolis in June, that'll be good.

02:37 AW: Yeah. Minnesota search will have a great time as always, have a few beers.

02:41 DS: Yep, looking forward to it.

02:42 AW: Maybe come up with another crazy idea to start a podcast or something.

02:46 DS: Yeah, we'll start a different podcast.

[laughter]

02:50 AW: That's awesome. And I know the feeling with where you're at when your right on the cusp of launching things that was me towards the end of December and then January whereas we had three, four features that were kinda log jam together and then they were starting to shake loose. And then really we just had to start mapping out like, okay, what's our cadence of releasing one of them kind of every two weeks so that we have the right marketing message. And the team could focus on launching it the right way and landing the right way, and then calm the waters and then cycle back to the next one. 

We've been in that sequence here from mid-January and it'll keep going through the end of this month, so it's so fun when you have features coming out that you know will make an impact in getting to put them out there.

03:37 DS: It's a funny thing that I'm trying to get better at but I have this tendency like once we start building something, I just wanna keep adding stuff to it. I'm like, "Oh, we could do this, and we could do this, and we could do that," and then the project scope just keeps creeping and we never launch the damn thing. [chuckle] So I'm trying to get to this part where like, "Shut up," it's like, "Okay, Darren, you got ideas, you put them on the phase two list and we're gonna get this core functionality released." And then the beauty is you've got multiple releases and you got multiple opportunities to push more marketing and more just promoting of the product every time. 

So if I just kept working on it, then we'd have one big massive release or we do the basic release and then five other releases after that as we keep adding all these extra functions that I wanna build.

04:24 AW: I've actually gotten a lot better at that in the last year. I used to be very similar to what you're describing where it's like, "And one more thing, and one more thing, and one more thing." And now, I've done a much better job of saying like, "No, this is gonna be the V1 of this. Here's the dates we need to hit and then we will look at fast follow items or V2 items," things like that. And if anything I've found myself saying no to some of the things that the team is like, we should do this or consider this or whatever else. And it's been a strange reversal 'cause I used to be the one where they are just... I could see their eye, I could feel their eyes rolling when I was like, "Hey, I got one more thing we need to squeeze in here in the next few days."

05:10 DS: Yep, totally. Yeah, we implemented a new process in our development on our dev team. So it's like a Monday planning call and a Friday retrospective call and we try to keep them short and it's just like on Monday, it's like, "Okay, you guys, what are you doing?" We have our ClickUp boards where we look at all the potential tasks we could do, and they just, they pick the ones that are doable within that week. 

Then on the end of the week, we look at it and we're like, "Did you get it done? If you didn't, what went wrong? Where were some of the challenges?" And sometimes they get more things done, and they squeeze it in. But this weekly really focused, "This is the goal for the week." I'm trying to block out everything else. It's like if something else comes up, it's like, "Put it on the list. We'll look at it next week." And so we're really trying to keep the team focused on the core goals and the core milestones and it's been helpful.

06:03 AW: Yeah, awesome, good for you, keep it up. The discipline and prioritization and saying no is so powerful.

06:11 DS: Yep, anything you just go on the list and we'll get to it one day, but right now, this is what we're focused on.

06:16 AW: The ever-expanding list. That's something we can talk about some time.

06:20 DS: Yep, totally. How's everything going with you? How's everything at GatherUp post-sale? It's all going great and continue to grow the business. You just had a huge feature released. The social sharing stuff looks awesome.

06:33 AW: Yeah, super excited about that. We started that feature late last September. It was one of those where made a call. We had it slated later but with the drop of schema stars in search results from the review widget, we really felt like we wanted to get a marketing feature back out there that was a visible and tangible, got people excited. So social sharing was probably more slated to start work right about now but instead, we push that ahead of some other things. 

It's a great feature, basically gives you one more way to use your reviews and that we created a feature so it would turn your review into a visual image that you can then share on social media channels. And it's fun to have... I'm kind of putting together a post where what we're really saying is a review just isn't a review and with GatherUp, we can amplify it five different ways. And so you really wanna maximize that review instead of like, "Alright, we got it. Here it sits on the shelf in our Google My Business reviews," but it's really helping people understand like, "Here's how you use it on your website, here's how you can use it socially, here's how you can use it on this specific page and in this way," to really get people to maximize those hard-earned reviews.

07:54 DS: Super smart. I remember I used to always think about how people would get testimonials and they just put them on their website and they would always ask for testimonials. And so my thinking was, "Don't ask for a testimonial, ask for a review." You get the review, now it's already on a public profile like on your Google listing or Facebook or whatever, and now you can use that on your website too.

08:15 AW: Yep, absolutely, multi... You can make a review the Swiss Army knife. That's for sure, if you have your head around it the right way and we're just trying to point as many of those ways out and yeah, that social sharing feature. I think that's something we can do an episode on 'cause there's really some... I really challenge myself to think about that feature differently even when we created it 'cause people had asked for social sharing from us for a long time, but I really wanted to do it in a way that was attention-grabbing, excited people. Social media is a visual medium and I feel like we did a great job of finding the right way to embrace that and give people a really great marketing feature.

08:55 DS: Yeah, I'd be interested in following up on that one too. I'm curious to find out what percentage of your user base adopts the feature and actually uses it. It's the kind of thing where you've got to engage and actually take the time to generate, press the buttons, and make it happen. So I'm curious if you have any logging set up to see how many people are using the feature and then maybe some what are some action plans to try encourage them to use the future down the road.

09:22 AW: Yeah, absolutely. We can get into that down the road.

09:24 DS: Future episode.

09:25 AW: Yep, making note.

09:25 DS: Yeah, making note.

09:27 AW: Alright, so with that, let's dive into the main course of today and that's talking about the process as mentioned and hopefully as you listen in Episode 16, we talked about the why of Selling GatherUp. And today, I just kinda wanted to talk about and allow you, Darren to ask some questions as well about the process, more of the bullet-pointed items that you can expect in a transaction, at least sharing what we encountered with GatherUp. And so to kinda rewind what really kicked it off is we're at MozCon in July. I had our sponsor booth out there. 

During the conference, had a call set up with our contact at Alpine Software Group and we usually every six to eight months, we're having a call with them. We have had three or four, and it was just a normal check-in, building relationship, them asking how we're doing, how do things look for you guys moving forward, all of those different pieces, and just walking around in between the break at MozCon doing the call and at the end of the 15, 20 minute call, just wrapped up with them saying, "Hey, we're serious. We would like to put a number in front of you guys and make a real offer."

10:45 DS: Nice.

10:46 AW: Yeah, okay, and they were like...

10:48 DS: You were the only one on that call so they just mentioned that to you? 

10:51 AW: No, it's myself and Don. We were the two that were usually doing them with him. So Don Campbell and I on the call, one of our original co-founders. And yeah, they basically just needed three or four pieces and said, "Hey, we'll have a verbal offer to you in three to four days if you can hand these things across."

11:11 DS: So at this point, you must have been sharing financials and stuff in order for them to consider an offer.

11:16 AW: Yep, yeah. We shared a 2018 and 2019 P&L with them so gave them at that time about 18 months of history for how we are doing, and yeah, between that and then just kind of a scrubbed client list so they could see the accounts and sizes without the name to it just to understand the spread of what was there. And those are really the two main items that were there.

11:45 DS: Were they interested in your organizational structure? Who are all your employees and what are the roles and all that kind of stuff? Did you have to share that stuff too? 

11:56 AW: Yeah, not right off the bat, but that definitely came into play. So it's like that happened within the four days, they made the verbal offer. We discussed again, as we talked about last episode, we kinda already had... We had a line drawn in the sand of what we'd be interested in this was above that line, so we're like, "Alright, yeah, we're definitely interested," and we set up a face-to-face meeting for about two weeks down the road after getting the verbal offer.

12:25 DS: I was gonna ask one thing. When you... So I'm just like, okay, what is it that makes one of these companies decide, "Oh yeah, this is a company we wanna make an offer for." And I'm curious about your growth rate over the two years of financials you gave them. And so, did you have 100%, 300% growth over that period or something like that? 

12:44 AW: So what a lot of them... Well, everybody kinda has their own but I think Alpine Software group definitely was anchored to the Rule of 40. And if you understand the Rule of 40, it's your growth rate and profit margin exceeding 40%. And for us, we were well above that. Our growth rate was usually around that 40% year over year and a healthy profit margin as well. So we definitely fit into that piece, and this again where it was helpful and came in that they had already purchased a competitor of ours so they understood the space and the opportunity, and not just the metrics of a SaaS business but they really understood the metrics of a reputation management business in the SaaS space.

13:32 DS: Yep, yep. Alright, cool.

13:34 AW: Yeah, so then next the four of us, Don, Thomas, Mike and myself, we flew out to San Francisco and here we had three quarters of a day planned out. So it was talking a little bit more in-depth about the business as a whole, answering high level questions on customers and tech stack, taking a look at the... That's where we shared an org chart and a breakdown of the company and calling out certain performers and things like that with it so a much deeper level with it. It wasn't too difficult for us just because we'd always been very transparent and we had a lot of our stuff in order, so it was really easy for us to talk about a lot of those things and lay them out. And it was a nice kind of introduction too and understanding how they were thinking what they thought about us. Started to give some insight to what was important to them and why they looked at us and the positioning of their offer and things like that.

14:38 DS: Were there any surprising things in that meeting where you were like, "Oh, we didn't think about this from a sales perspective," that came up, you're like, "Oh, we're gonna have to go and get that stuff organized"? 

14:47 AW: Yeah, not so much. I mean the one thing that... A couple of things that were really interesting to me is one, in between the two weeks and in compiling this stuff together, it really made... And I would say myself and Mike, we really started to think a lot about their offer and what do we feel like we're actually worth. 'Cause now you have this number and there's so much, it's not like you get this handbook that says like, "Hey, your company should be worth this," or "this multiple," or whatever. You get some industry benchmarks and different things like that but it really allowed us to dig a little bit deeper on it. 

We actually went to that meeting with already getting everyone on the same page. Mike and I were very gung-ho and Thomas and Don ended up kind of agreeing and say, "Hey, you guys feel that way. We'll let you lead the way," and it really put a lot of confidence in our corner when I looked at it. I felt like we were pretty unique in where we are sitting as far as like who else in our space could be acquired and understanding that was definitely huge on your confidence side.

16:00 AW: And so we went in and we had a counter to our offer that was roughly about a 20% increase from where we started, so it was a sizeable gain to the offer and put that out there at the end of our meeting with our contact and he's like, "Alright, today was great. Liked everything we heard. Let me bring that back to our team." And then, yeah, they called the next day and said that they agreed to our counter and the structure. The deal all stayed the same and everything else, and they were interested to put together the letter of intent.

16:36 DS: It's gotta be so hard to like, okay, so they give you an offer, you think, "Okay, well, I think we're worth a bit more than that." You're gonna counter with the 20% increase, and then they accept it right away. You're like, "Dang, we should have done 30." [laughter] Did that ever cross your mind? Did we get the numbers right? Did you get as much as you feel like it was worth? 

16:56 AW: Yeah, I didn't feel that way but you definitely felt scary thinking like, okay, they gave you this number that... Was it a good number, right? It obviously grabbed our attention. It met the minimum needs we had already outlined but it is scary then going in at the end and saying like, "Okay, we feel the number is this." And you really don't know even though you can have a good feeling, you can like the conversations, but what if that number took you to the point where they said, "You know what, at that number, we're just not interested, and we actually... We were wavering a little bit, so we'll actually just pull the offer off the table."

17:36 DS: Yeah, for sure.

17:37 AW: That is a possibility. Now, when you can emotionally step out of it, you realize that that probably is a little bit silly. But at the time...

17:47 DS: Yeah, they would counter if they didn't like it.

17:49 AW: Yeah, at the time, you feel so much emotion about it. You have excitement, you have fear, you have unknown, you have all these different things that thinking logically is really hard in this entire process.

18:01 DS: Right, right.

18:02 AW: And a couple of things that I really kept in mind is one, I had read Rand Fishkin's book on Lost and Founder and his history of the HubSpot offer and that offer being I think, if I remember the numbers right, they offered him 18 or 20 million, and he countered with 25 or maybe more. And they ended up not coming to terms and Rand massively regretted it because after taking on funding and everything else, they would have never personally made that much money again.

18:36 DS: Yeah, that was the golden opportunity, missed it.

18:38 AW: Yeah. And that was really helpful to... That was in the back of my mind, where I was like, "Be strong in what you feel like you're worth, but if you have a bird in the hand, don't squeeze that bird and crush it either."

18:49 DS: Yeah, right.

18:52 AW: It definitely is helpful. I even, I sent Rand an email. He didn't reply, but I just said, "Hey, because of you sharing that just know that it was helpful in our process to have this perspective of somebody who... " Good for him, that he felt that confident, but he obviously regretted it later that he probably should have moved forward with it. He just... It's hard. Your judgment can get clouded between emotion and maybe some greed, the fear of the unknown, all of those different things with it.

19:22 DS: Yep, yep. I'm surprised he didn't reply.

19:24 AW: Yeah. [laughter] He's usually would with it. I don't know, maybe I hit a spam folder, who knows? But anyway, I wanted to give him props for sharing his story and let him know that it actually mattered in a significant transaction of the same nature.

19:39 DS: Totally. Yeah. Yeah, I've got that book. I've read the first chapter but you know how books are, they just sit on your side table and you... I got a lot of first chapters read.

19:47 AW: Yup, so do I. But that one I read all the way through. I'm glad I did. So once that happened, the next thing that we did internally that I would stress to people, especially if you have partners, multiple shareholders is, we had our CFO put a mockup of flow of funds. 'Cause you have this number and it's really easy to look at it and say, "Oh, here's my percent, and it's of this number." But there's a lot of other things inside of that number in what gets taken off the top in legal fees, escrow, different things like that and then...

20:20 DS: Taxes.

20:21 AW: Yeah, taxes based on people's partner shares, where those things come from. So you really need to run through that if you have any waterfall in your tap table and things like that, so that you're able to understand like, alright, what does that number actually look like to me and am I still okay with that number? 

20:39 DS: Right. So what's gonna go in my bank account? Yeah, totally.

20:41 AW: Yup, yup. So just considering that within all of the different pieces that's there because it definitely ends up usually being a different number if you have multiple people at the table than just straight looking at, "Oh, it's this number and I get 30% of it," or whatever that might be.

20:57 DS: Can you talk about what the legal fees are in terms of, I don't know, percentage or that kind of stuff? Are there brokerage fees? Are there other fees that you don't even know about until you kinda go through the process? 

21:10 AW: Yeah. So we didn't have a broker. At this point once we had the verbal, then we went and said, "Okay, let's get an attorney to do this." We talked with Don, being in California, he had a couple of people that we'd either worked with before in drafting some agreements and he kinda went and talked to them. We had an attorney here in Minneapolis that used to be our attorney at my last agency, Spyder Trap I was at. And Spyder Trap had actually been acquired prior, and then Barb's CFO had worked with that attorney on that, so we brought him to the table on it. And yeah, we just kinda had to make a decision. A little bit of it was based on ballparks that they gave us. When you're looking at... Here, it's kinda hard to describe with the numbers, but in our case it was a six-figure expenditure based on sale price but there's a lot of difference in what the six-figure expenditure was from one to the other.

22:06 AW: And so it just kinda came down to us, like trust and comfort level and ultimately we went with Steve Kozachok, our attorney and... With the firm in Minnesota because Barb had worked with him before. We knew Barb would be doing a lion share of the work. I knew Steve as well from when he was our attorney at Spyder Trap so we set a high level of comfort there. He had done a number of transactions. We felt good about it and the short there is, he was awesome throughout the process and really did a great job for us and was really a pleasure to work with, and made himself very available to us throughout the process 'cause there's definitely some Sunday night at 9:00 PM calls when we could get everybody together on something while it was in motion.

22:46 DS: Yeah, you're lucky you had that 'cause I can imagine if I was trying to sell right now, I'd be like, "Oh, I guess I'm gonna have to find a good lawyer that knows how to do this," and it'd be a bit of a crap shoot. I would ask around and see if I can get some advice but, particularly being Canadian, I couldn't ask any of my US SaaS friends for advice. So yeah, it's good that you had that in place.

23:04 AW: Yes. It was definitely, definitely helpful but it great if we already had it in place but we made quick work of it, made a decision and it worked out very well. So once we had that wrapped up, then they jumped into giving us the letter of intent. I wanna say it was probably from the time the first verbal, then had our meetings, whatever else. It was probably around mid-August when the letter of intent was actually put together. Now, the LOI is like, this is your first official doc. It's a shorter, four or five pages and it's really the high level of... It kinda guides what the purchase agreement, which is gonna be much larger and much more detailed, looks like. So it's in that the letter of intent, this is where, yes, having a great attorney is helpful. 

Steve did a great job in explaining things to us 'cause there's a lot of right? "Alright, help us understand the legalese of this. If we decide this way or we ask for this... Just a normal, what are common give and takes? What do others ask for? What should we be thinking about?" And he did a really good job of helping frame that up and helping us understand the role it played in the process, what to ask for, what should be important to us, getting our input on it and then being able to make some revisions to that.

24:16 DS: Can you give me an example of what are some of these things that you should ask for that he was advising you on? And you're like, "Oh, yeah. I didn't think of that." I'm just curious what are some things that people might overlook if they didn't have a good lawyer? 

24:28 AW: Yeah, some of it comes into the cycle of reps and warranties. So how are they gonna go through your numbers and pick certain things out and what are you gonna be held accountable for, post-purchase? And things like that. Looking at things, we had a number of things regarding our team. So it's like, just to make sure, they said, "Hey, we're gonna keep your team intact and everything else." But we're also like, "Okay, once you have control, you can do whatever you want." So if you don't honor that, we wanna have written in, like, "Here's the severance package. If someone is terminated within X days of the sale, if it's non-performance based." So how do we create a safeguard for our employees there that if they decide, well, we don't want that person on payroll or we wanna cut what your payroll is or people in certain roles, that they were gonna walk away well taken care of and have good runway to find their next opportunity.

25:24 DS: Smart, yes. That's the kind of stuff that a lawyer will catch and help you think about and make sure you have that in place. Was there anything in the agreement that was like, warranties like, "Oh, if we end up buying the company and this, this or this happens we can reverse the deal," were there any clauses like that in any of your... Either in your purchase agreement or your LOI? 

25:44 AW: S1: Yeah, you're gonna have certain things with that. It's not so much reverse the deal but it just gets into who's gonna pay if that happens? Because really, you're trying to slice and dice. We're either buying and we're assuming this responsibility or we're buying, but we're not gonna assume this responsibility. If this is... We already see this could be a possible issue, a tax issue or something like that and you are gonna be responsible for that. We're not gonna take that on. So there are definitely pieces like that to it.

26:17 DS: Yeah, makes sense.

26:18 AW: Non-compete timing, things like that. Those are all pieces that you get a little bit more detailed on and take a look at. Like I said, again, it's like the high level, most important things and elements of that are in that letter of intent. Now in comparison, it's like, alright. A couple of back and forths, we agree on the letter of intent and then kinda starts like the full process. And then once you get going on that, then the attorneys from their side start putting together the purchase agreement. Now, the purchase agreement ends up being, I don't know if I can remember in our case, but it's probably somewhere between 60 to 80 pages. So over a 10x factor and then it is, it's every little detail and every little element to all the things that are there.

27:05 DS: That sounds painful. Man, I find a 10-page legal document painful enough, but geez, that sounds... So much reading and so much, the legalese, and it's just... I do not enjoy slogging through legal documents of that size.

27:19 AW: Yep, and that's where it comes in, again, having a great attorney, having great advice, someone that you can trust to read every word, so maybe you don't have to read every word. You can get the summary where Steve would come to us, our attorney, and say, "Alright, out of these things, here's the 11 things that I think you guys should care about based on everything we've discussed and what I know you want out of this and what's important to you. And so let's talk about these 11. Let me explain them. Let's talk about your position, and let's figure out if there's ones we wanna go back to them on and ask for something different or frame it up or a different time, or amount, whatever that might be."

27:54 DS: Yeah, it's Steve's job to read it carefully and think about all the potential things that could impact you as your... You're his client. So he wants to make sure that it all works out in the best way for you.

28:05 AW: Yep, absolutely.

28:06 DS: Yeah, makes sense.

28:07 AW: And within this process, too, I definitely can say this is a part, emotionally, where you move from a lot of excitement to a lot of pressure. Because one, you create this data room... We touched about a little bit this on the last one but you end up with 100 plus items that they want all uploaded in there. And in our case, we had 80-90% of these, well put together and organized but then there's definitely a bunch that Barber, our CFO, was wrangling and tracking down and where are they, and things that maybe from deeper in the history had a number of versions and what are the right versions and how do we get those together? Cap tables have changed, new partners came on, things like that.

28:51 AW: And between the culmination of all these things and getting everything hardened and getting it delivered and uploaded and creating a spreadsheet and saying like, "Okay. Thomas, you're in charge of these 12 technical items getting them together. Aaron, you're gonna take these 14 items, customer contracts," all of these kind of things. And so it really becomes a team effort to help put those together and everybody to do their pieces and shares and you have... We are probably doing every two to three days, doing a call, looking at that list, what's needed, what's still out there, how do we get it, those kind of things. And you feel the pressure of that. That's when you start to feel like if we don't bring all of this to the table, will the price change? Will they start to think differently? What are those pieces to it? 

29:38 DS: Yeah, 'cause at this point the purchase agreement is not signed, right? You're just kinda putting all the pieces together and refining the agreement. Yeah, that would be a stressful time. That sounds like a lot of different things, like 100 point list of things you have to gather and get together for them? Man.

29:51 AW: It is. It's a very long list. It's just like your incorporation and legal documents, tax returns and anything related to that, your contracts with customers, your agreements with every service you use, NDAs, your employment agreements, other vendors. It's just like anything you've ever signed, agreed to and rightfully so, anything that they would have to honor or know existed or know it took place, they wanna see all of that to be able to assess all of it, make sure it's in line. What's their risk, what are they looking at? How long does it last? Any of those kind of things.

30:26 DS: They're just looking any red flags, I can imagine it's like, "Oh, they've got this weird service agreement with this company." And that could be a problem or a conflict or whatever.

30:33 AW: Yeah, absolutely.

30:34 DS: Yeah, makes sense.

30:36 AW: And then within this time frame, too... So Barb our CFO and I, we had made a trip or two on top of calls doing this out in person to do some of this as well. Going through your financials, answering questions out of the P&L, going through client lists, sitting down with other members of their team and you start to see... I didn't fully realize it, at the time. It took a couple of days after it but then I started to realize what they were mostly looking to do then is, model out. Okay, we buy these guys, what does the next year look like? And so you could see they were even starting their transition of, and rightfully so, they have to go back to their investors and say, "Alright, here is why we're making this investment. Here's how we think this investment is gonna pay off and pay out over the next year, two years."

31:23 DS: Yeah, they're trying to project all of that and figure out what their return's gonna be, yeah.

31:27 AW: Yep. And it's hard... In your mind, you view some of it as an interrogation where it's like they're doing it to maybe not do the deal or lower the price or all these other things. But in our case, you just started to realize like, no, it's just so they have all the facts so they can properly project what this is and they make sure that they have their hands and arms around it the right way more than anything else. And that definitely took me a little bit and then I had to kinda try to preach that to the rest of our partners just because everybody comes in with their own angle on trust and are they gonna try to do this and depending upon what horror stories you've read about... And it happens. Transactions fall apart and all those other things. So it's hard not to be influenced by some of that fear. But as you... As I start to see some of these pieces come together, it was trying to get everybody else on board like, "Here's the why in why they're doing this. It's not to blow the deal up. It's not to try to claw back money out of it. It's not to try to lower the price. 

It's to really get their arms around, once we get this, what are we gonna do to maximize it even more?" And they have due diligence to go back to their investors and do their own reporting, and proposals and all those kind of things to make everyone on their side providing the money comfortable with the deal.

32:49 DS: Yeah, totally. They absolutely have to justify it and they have to have a plan in place for how they're going to turn their investment into three, four, 10 times, that. That's their goal, so yeah.

33:01 AW: Absolutely.

33:01 DS: We got to think about it from that perspective. And they're gonna, of course, need all of that information. And then I could feel that myself, if I was in that position being like, "Ugh. All of this work," and "Why do they want all this?" And starting to stress about it, but yeah. I think that's a pretty solid point that you have to think about it from their perspective and what their goal is with this acquisition.

33:21 AW: Yep. And then it just gets more important to like what does your gut tell you about the group that you're talking to and who you're doing business with. And right from the start, our contact at Alpine Software group, Jake Brodsky was always on the up and up, always straightforward, anytime if communication got off on email, he and I would get on a call and we'd each explain our why and we would easily be back on the same page. My hope is that anyone doing this, you end up with a stand-up person like Jake was on our side because it made it really easy for me not to focus on all the what-ifs and to be able to focus on the why we're doing this. They're being true to their word. I understand where they're coming from. They understand where we're coming from when we make an ask, and that just makes it so much easier. And I know, but there's probably plenty of deals that just don't have those elements and I feel for that 'cause it's already stressful without hide and seek, and some dishonesty, and hand tricks to try to throw people off or get their attention somewhere else.

34:22 DS: Yeah. How much time passed between the letter of intent and the signing of the full purchase agreement? 

34:27 AW: Yeah, so first letter of intent, like I said, was mid-August, and then our final signing was basically October 31st. It was Halloween Day.

34:37 DS: Right, like three and a half months.

34:40 AW: Yep, yep. Pretty fast track. We were on track to close a little bit earlier but we hit a hurdle in the middle and, without going into details, it was one that everybody worked together and was multi-faceted to work through. But the thing I just tell people, expect there to be some hurdles. I feel like we had our stuff in really good order for the size company we were, how long we'd been around, things like that. I feel like we always operated from a very high quality, well-organized, well-process standpoint. And we still hit some stuff where it's just like... And you just have to have your mind around like, "This is not going to be a straight point A to point B. There's gonna be some curves in it. And just as you do in business, come at it solution-focused. Be ready to do the work, to communicate, keep everybody on track, keep communicating and you can likely find a resolution as long as it's like coming from the right place, with the right things in mind."

35:40 DS: Yeah, makes sense. Okay, you're working on getting all these documents together, what are some of the other stuff that they're asking for you? 

35:46 AW: Yeah, the technical audit. So this is where they go and kinda embed themselves in your environment. They're looking for, what open source software your using, what other software that contains licenses, do you have everything in place? How much of it is your own created code, to some extent? How solid does it look? They're asking a lot of questions around your methodologies, and development, what outages have you had, things like that. They're assessing the reliability and things like that. That side we felt pretty good. 

I've been in the world of development and websites and apps and things like that for long enough where I felt very confident that our stuff was good. And I shared this last time, after that part of it, they definitely complimented us and said, of their 20+ acquisitions, we were right there as if not the best of what they had gone through before. So, huge kudos to our team and just everybody's dedication to quality on that side. But that became one of the big positives for us.

36:51 DS: Do they assess your documentation? 

36:54 AW: Oh, Yeah.

36:54 DS: Like your code documentation? 

36:56 AW: Yep, yeah. They really look at every aspect of it. And I don't even know all of the aspects that they would look at it internally, but configuration, documentation, process, security, performance, all of those things, they wanna understand as much of that as possible, because... And I know, to some extent they've probably have had a few purchases where if you don't do enough digging, you get in and once you open up the hood, then it's like, "Oh, okay. We gotta rebuild here on some of these aspects."

37:26 DS: I've heard that, yeah, I actually heard that with some acquisitions where they bought the company and they're like, "Oh great. Now we're gonna spend the next two years rebuilding this from scratch 'cause he's got so much technical debt in."

37:35 AW: Yeah, yep. And time is money. Another thing that we started to do is they wanted the, they came and said, "Hey we wanna talk to customers in this area." And so roughly somewhere around 10 to 15 of our customers. And I know you ended up being one of those.

37:56 DS: Yeah, I had one of those calls.

37:56 AW: Yep, and how we just positioned it, we did a reach out and just said like, Hey, We're bringing on this form to assess how our clients feel about us. They're gonna do an interview with you, it's a 20-30 minute conversation. So just making it look natural to our customers and asking them would they be willing to help and give their feedback and opinion on it.

38:15 DS: I was so positive on that call. It's probably the reason you guys closed the deal. I had so many good things to say.

[laughter]

38:20 AW: Dinner and beers coming your way this summer.

38:23 DS: Great. [laughter]

38:25 AW: Yeah, and that obviously, it was actually kind of fun. Got to read the transcripts of those after everything closed.

38:32 DS: Oh, that's good.

38:32 AW: Yeah, and overwhelmingly positive and it's... In that form and being a little bit longer, even though I feel like we have great relationships, we hear from a lot of our customers, we use our product to ask our customers how they feel about us. So it's in that. It was cool to read all that and to be able to share it across our team as well, just to see how customers felt.

38:56 AW: Then by now we're in mid-October, we're coming close to the end of it. At this point, you kinda transition and you realize that major hurdles have been dealt with, were on track, you're trying to find an outline of closed date, and you start to look forward, right? And for me, I had to really start putting a lot of thought around like, "Okay, what does the end of this purchase look like 'cause I've never done it before? So what are the elements within the purchase agreement in itself?" And then you start thinking about the transition items that are there.

39:26 DS: For sure.

39:27 AW: And there's all kinds of small details that you realize are gonna change, gonna be different, and then you start thinking about the communication of this. And to me, this was something that was really important to us so you have to start aligning and kind of putting together a framework like "Okay, if we're gonna sign papers on this day, then the next day, we're gonna do one-on-ones with all of our employees and lay everything out for them," because you're not talking... We chose not to tell any of them through this process because of it can be a large distraction. You can cause people to panic and be worried like "Oh, if we sell then my job will be eliminated so I'd rather just go find another job."

40:07 AW: So there's definitely a lot of reasons why you wouldn't wanna go to your entire team and say, "Hey, we're working on selling and it's gonna be a great thing. And for the next 90 days or more, it's gonna be drawn out but don't worry, we'll take care of it", right. You're better off to, in my opinion, just do the work, handle that side. That's part of your job as an owner and an executive is to shield them from that. Put the company on the right track. Negotiate things that are in their favor and all of those pieces.

40:35 DS: Yeah, yeah totally.

40:37 AW: And then after that, then communication with the clients, and then the public information as well. At this point, it was really coming up with, and to me, this was like a whole new level of stress because now it's like, alright, you're telling our team of 20 and you feel some stress from that, you feel some excitement with it too because you're giving them good news in a couple of different ways, but then knowing you're gonna send out an email to your thousands of customers, that's scary. And what's gonna come back from that, how are they gonna feel about it? All of those different things. And the last piece, once you go public, that's totally the easy part, and man, did that feel a lot better? But from the time we sign to it being public was 15 days.

41:21 DS: Yeah, it's just like two-week sort of period of just limbo. It's like "it's done, but we can't tell anybody", sort of awkward situation.

41:29 AW: And so when we signed that day, and had everything signed and then Mike Blumenthal and Paul and I since we were both staying on, we just started jumping on Slack, and grabbing our people. We had put everyone in list together, we had put together kind of a script that said like "Alright, we're selling, here to, here's why we're doing it. Your job isn't going anywhere. Our great team is part of the reason that they wanted us." We'd also set aside a percentage of the sale as a bonus to employees.

41:58 DS: Nice, I was wondering about that.

42:00 AW: Yeah.

42:00 AW: And we basically had two different things: One was length of time with the company, we gave a dollar amount for every year they'd been with us and then we also had an impact bonus when we looked at how did they contribute, how did that contribute to growth, did they help bring other people on, what have they done for us? Things like that, and so it was cool. Some of our people got more than their year of salary out of this bonus.

42:28 DS: Amazing, but yeah, everyone was probably pretty happy about it, right? Did anyone have any notable concerns where you're like "Oh yeah, I didn't think about that." Either they're an employee or a customer that was maybe not so happy about the deal, or was everybody happy the deal? 

42:44 AW: I mean, there's a few from each bucket. You definitely have people who are more anxious about things like that. Overwhelmingly, from our team and this made me feel really good as a person and as a leader, overwhelmingly, most of them said when we asked about questions, fears, we're doing this thing like, "Hey, we know you just got this news and let's be honest, we're still working our way through it 90 days later, but is there anything top of mind?" And overwhelmingly, a majority of them replied to that with, "I trust you guys and I trust you to make the right decisions and so I trust you on this, and we'll find out on some of the other things, but I don't think for a second, you'd make a decision that would put us in harm or in a bad spot.

43:31 AW: And that to me was like, that was really gratifying even more so than... Yes, it was great to give financial rewards to people who had been with the company a long time and hopefully help propel them further in life, retirement, day-to-day living whatever that is. We had one team member that was like, "Man, I've been saving to buy a house, this puts me over the top so helping someone by a house out of that was awesome." We had more than a couple of people cry, very common, where they would just say, "Can you repeat that amount again?" They wanted to make sure that they heard it correctly.

44:04 AW: Yeah, so that part was really cool, and that took a lot of weight off my shoulders for about 24 hours and then six days later was the announcement to our customers, which that one just based on mass was much harder. And I can say there again, I probably got, the email came directly from me, and I probably had about 30 to 40 replies were "Congrats, couldn't happen to a nicer group. We're excited for you guys, we're excited you're staying on board." Things like that, just very supportive, right? They're working for the same things in their own business, and they totally took a stance of instead of "Oh, how might this impact me?" They're just like, "I celebrate you as an entrepreneur and as a business person. That was really cool.

44:47 DS: Nice, yeah, there wasn't a single customer that was concerned about it, or...

44:52 AW: No, we totally did. So funny enough, after I send it, the first email I get, 10 seconds later, I get a reply that's just a one-line "Cancel my account right now... "

45:02 DS: Are you kidding me? As a joke, right? [chuckle]

45:05 AW: No, not a joke and the thing was, the company Alpine Software Group had already purchased our competitor GradeUs. This cust...

45:14 DS: Oh, and then they switched? 

45:16 AW: S2: Yes, this customer was with grade us didn't like them switched to us, so they immediately had the opinion that we were gonna merge all those things, even though all of our messaging said, we're staying separate companies, there will be efficiencies that we will have together, but we're staying different brands, our solutions have variances, teams like all that kind of stuff. But, yeah, and so, in getting that the first 10 seconds I was like, "Am I might about to get 1000 more of these", right? I was like, "Oh my gosh." yeah.

45:43 DS: And so did you talk him out of it or did he cancel? 

45:46 AW: I asked her, tell me why you feel this way. I tried to... I don't wanna lose you. Let me help reinforce this, what else can I do. And there really wasn't any... At the end after three or four emails I was like, alright, I don't need to take up more of your time. I understand you're very firm in where you are. If you change your mind, please do. I would love the opportunity to show you. We're being honest in our word. But that one was a lost cause and there was, I probably had three or four other emails with some concern, and things like that. But again, the overwhelming and with thousands, you're going to have that, you're absolutely going to have that.

46:22 DS: Yeah, yeah, it's amazing. I'm surprised that any of that happened, I don't know, it's just a weird response, in my opinion.

46:30 AW: Yeah. Well, I mean be prepared for anything when you email thousands of people. [chuckle]

46:35 DS: Yeah, totally.

46:35 AW: Yeah. So interesting enough, on the one thing I do wanna share. So when everything comes to a close, there's basically a closing call, right, and it's a handful of minutes call with everyone from each side, legal on each side, those of owning the process on each side, and it's each side saying like, yep, we have all of our paperwork, we have everything we're in agreement. Same for this side, yep, we have everything, we're in agreement. And it's basically just to get a verbal from everyone, the okay to release the wire transfers and to release the funds to the shareholders. 

So, I had long planned, even some of this I had do plan around, I had a five-day family vacation that had been planned forever. And let's just say before this, I had been working crazy hours, like 80 hour weeks, super stressed, traveling a ton. I had like eight weeks straight on the road and I had let Alpine Software Group, know hey, when it comes to this date on November first, I'm on a plane with my family and this has to wrap before then, 'cause I'm gonna be on a time-out. Like I've been absent for so many reasons, and so based on the way things fall I'm like, "Okay I can do the call that morning before we get on the plane or whatever. I was hoping in a perfect world, my wife and I and our four kids will be through security. I'll go to the Delta sky Club, I'll take the call, all will be great, I'll come back and hug the family and we'll get on our flight and head off to sunny San Diego.

48:06 AW: Well, We were behind, of course right, four kids, everyone packed, getting out the door. So, literally when the time comes for this call at 10:00 or 10:30, I can't remember which one it was, but I'm in line at TSA, and we are three away from getting our IDs scanned and boarding pass scan to go through X-ray and the scanner so I just tell my wife, you go with the kids. I have to make the call right now. I step back a few people in line and I like... I take the call for this to close the deal in the line of TSA. So I will never ever forget that was the... Again I was like super stressed about it and then it ended up being all of a two-minute call and just hung up and went and rejoined the family in the x-ray line, and we were off.

48:56 DS: That's it.

48:56 AW: Yeah.

48:57 DS: Yeah, you know, you're not even supposed to be on your phone when you're at the TSA I think. Yeah, I'm surprised you didn't get tased. You're like in the middle of the call and someone comes in and tases you.

49:05 AW: I'm like, yes, no and the deal is off, right? 

49:09 DS: Deal is off, yeah. You didn't finish the call.

49:13 AW: Interesting enough, right. A lot of founders, shareholders, would talk about right, it's that, it's real when the wire transfer hits your account. Well, funny story, for me there. Mine was going to my investment bank, so it had to hop a couple of banks and basically my wire got stuck at one of the banks and so my money didn't hit for another like four to five days, I had to make calls on it, I had to help them track it down through routing numbers. It was very non-climactic and all right, where it's like some of the other guys are within an hour or two were like, I got it, yeah, and whatever else.

49:50 DS: Popping champagne and you're trying to find your money.

49:53 AW: And I didn't even tell them any of that. This is probably the first time I'm sharing this out loud where it's just like after a day or two, I was like, what's going on, and then my investment bank helped track that down and everything else, but it was very anti-climactic where as finally where I could open the app and see the money was there and it was just like, I think we were sitting out on the patio already having a drink at the hotel in San Diego right on the beach and I just go, "Hey my money did show up." and we're just like cheers, so. [chuckle]

50:21 DS: Yeah, yeah, awesome, that's funny. I feel like, you're stressing about when is my money gonna show up, but.

50:29 AW: Yeah, so anyway all's well that ends well.

50:32 DS: It all worked out, all worked out.

50:34 AW: It did.

50:35 DS: So yeah, now what's next, what do we gonna talk about next podcast? 

50:37 AW: Yeah, part three, I wanna dive into some of the transition things right and share. There's some interesting aspects emotionally going from, you run this race, you run the race to the finish line and then you're kinda like what's my new motivation? It's like you always had this carrot of your equity and selling the business and getting this exit, and outcome. And for me in staying with the company I definitely think there are some things where it took me the last couple of months at the end of the year to kind of refocus, get my personal life back in order. I've been working so crazy and you're almost manic to a certain sense and it's like finding time to get yourself back to normal...

51:23 AW: I'm helping the team map out things. There's some things that Alpine Software Group did that were really helpful in bringing our team together and I wanna talk about some of those, and then just helping the business not get too distracted. Because that caused a lot of distraction and a lot of...

51:41 DS: Slowdown.

51:41 AW: Uneasiness. Yeah, and it's like how do you get things calibrated back to the cadence where you were before or even better? And so I definitely wanna share what that's looked like for us 90 days after closing. And there's definitely...

51:57 DS: Great.

51:58 AW: Yeah, some interesting things to talk about there.

52:00 DS: Man, such a great, interesting process, the whole thing. I really love all three of these episodes and I'm really looking forward to the next one. I have a lot of questions. And that whole feeling like when you sell your company, how does it change? There's so many things to think about, so many new details to incorporate into your company culture and your processes. So yeah, I'm really looking forward to that.

52:19 AW: I wish truthfully, and this has been great to talk about this and it forces me to think about some of it and put it on paper in our notes to talk about these angles, but I really wish we could have done a reality show out of it.

52:33 DS: Yeah, that'd be amazing.

52:34 AW: Yeah, I would have loved to see a more accurate view of even how I was during this. It's because I truly don't even know. My wife, Marcy, has definitely provided me some insight and man, she was amazing. She got that I needed so much room to operate and I was so stressed and she did everything she could to keep me grounded and centered. And this isn't the world. It's not everything and everything else, but then also give me the room to go work crazy and not be there at kids' events and things like that because I'm working on all of these things nonstop. So it would definitely, it would be interesting to be able to look at it from the outside and see how you were and be like, "Do I recognize myself in that moment? What I see, what I see now, does that match up with what I thought I felt at that moment?" That would be really interesting.

53:28 DS: Yeah, you just need the cameras following you through the whole process and then you could go back and review it, a little self-reflection.

53:34 AW: Yeah, I don't think I'd be as dramatic as The Real Housewives of whatever city you choose to watch but I probably had a moment or two [chuckle] where it's like, "Alright, Aaron's off the rails a little bit" and then either Marcy or talking to one of our partners would definitely help bring me back to where things were, so.

53:51 DS: Yeah, the real entrepreneurs of Minneapolis.

[laughter]

53:57 AW: Awesome, missed opportunity. If I ever get to do this again, I am calling the networks and being like, "Alright, let's do this." Yeah, here's a totally different reality show you need to make happen, so.

54:08 DS: Sounds like it would be great. That would be an amazing show actually, but there'd be all these things you can and can't say. But you can all cut, edit it all out. Put it on the cutting room floor.

54:17 AW: Yeah, no, absolutely.

54:19 DS: I'm surprised that show doesn't exist. Shark Tank people should do that.

54:23 AW: Let's get to a different part of things. Alright, well with that we should probably wrap, man. We are pushing in the hour but hopefully everyone listening found this to be extremely beneficial. Thank you for letting me share a pretty amazing chapter out of my business story. That's for sure.

54:41 DS: Thanks so much for sharing it. I feel like, man, these episodes are so valuable. I think that for me personally hearing all of these information, it's so useful. It's great to be able to wrap my head around all of these different things and think about all the different things you have to think about when you're selling your company. So I love these episodes and that I hope that the audience is liking them too.

55:03 AW: I can easily say I wish I would have had even more resources while going into it, during it, all of those things. So that's definitely my goal is to help others as they go into this, just have some framework. And obviously every acquisition can be so different. I'm just sharing what it looked like for us but I think some of the things are staples and are true and maybe they're just some of the things on what to look out for, what to pay attention to, how to make good choices, can be beneficial.

55:33 DS: Yep, yeah, really good, alright, Aaron.

55:35 AW: Well, with that episode 17 is a wrap. We will have part three of the Gather Up Acquisition coming up a few weeks down the line. Do you wanna remind people? I do wanna say thanks, man. I had a couple people reach out to me on LinkedIn and Twitter, and send me messages and just say, "Hey, thanks for sharing your story, really enjoying part one of it. Looking forward to part two," so thanks to those of you that took that time. If any of you feel compelled, we would love if you took the time to give us a review on iTunes. Help make our podcast as visible as possible or any sharing of it socially via LinkedIn, Facebook, Twitter, wherever you're hanging out, passing it along inside of some of the groups you might be, Slack groups, or Mastermind groups, or SAS groups you're a part of if you think there's anyone that might benefit from this. Definitely appreciate you circulating it and bringing more listeners to what Darren and I share on a monthly basis.

56:32 DS: Yes, please.

56:33 AW: Alright, with that, take care, everybody and we'll talk to you soon.

56:37 DS: Alright, thanks, Aaron. See you.

56:37 AW: See you, Darren.

56:38 DS: See you next time. Bye.

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