May SaaS Deal Review with James Graves, Rainier Nanquil, and Paul Kelley

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Thank you all for coming. Really appreciate it. This is the May 2024 SaaS deal review. We've done a few of these in the past. We like to do them bi monthly so a couple weeks time from now you'll see another one about a month from today you'll see I want to pass that. So love that you all arrive and take the time out of your day to come and hang out with us. And we love doing these too. My name's James, I'm the general counsel here. I've been@acquire.com for a couple years, two and a half years now, which in startup time kind of feels like a decade if I'm being honest. I, I my background is sort of smathering of private practice work that includes commercial defense litigation, M and A capital markets startups and securities financing. So a lot of that. I've also worked in house@Amazon.com and then also F5 Networks, which is a Seattle local company. But they started in the Internet boom, the late 90s and they make just really badass modems and hard drives. So here's just a really quick agenda here. Obviously introductions, we're about 2/3 of the way through there, one third, I mean here to see some deals. We're going to bring up live deals that we recommend that we enjoy looking at, that we advise in a lot of situations. We're going to give you the good, the bad, potentially the ugly, hopefully not too much of that. And then at the end we're going to describe how we can help you if you'd like to engage a little bit further and a little more about the platform. So just talking about quire.com, the artist formerly known as Mike Require Inc. We've been around for four years. I remember Andrew Gadznik, your CEO, who I'm sitting in for today. He sent me the first email and like, man, I think it was like June 2020 or something when I was working in private practice and I was representing him and a few other ventures talking about he wanted to make a startup marketplace that literally just introduces a buyer and seller and that's it. Since then we've obviously came a long way, but that was the initial concept that we continue to iterate on and improve upon every day. Well, I found tons of questions off them. I personally know that they can add extreme amount of insight to pretty much any deal you put in front of them. So again, while you're here today with some deals, I just want to kind of recap the deals we're looking at. We consider these are our biggest and best SaaS. Again, the movement of the company right now is we're moving up market to larger, more complex SaaS deals. We consider ourselves experts in SaaS and we have deep expertise in SAS no matter where it's located. That could be here, Canada, Europe, Southeast Asia, wherever we. We deal almost exclusively in SaaS and we have a lot of value to add there. I like to think the ones that we're going to show today, they're pre vetted and they're recommended and sometimes actually advised by our advisors. What that means is that we have an advisory arm to the business where we actually have an assigned advisor to the listing and to the startup target where we help them out with coaching, negotiation preparation, expectation setting, legal and then down to closing in escrow and then after which there's about five deals we'll get through. Hopefully we have time for all five. But regardless we'll make some time. Five, ten minutes at the very end. So without further ado here, let's go ahead and take a look at a deal. Okay, so start at the bottom. Okay, deal number one, it's a SaaS startup. Like I mentioned, we're really focused on SaaS here. Obviously want to showcase the best ones we have. So we'll start with this. So I'll just go ahead and read it off. A lead generation platform for businesses to generate build email lists. 100% organic traffic. Okay, so let's scroll through the list scene here. I wanted to show a few things just before I pass it over to these guys. This one's cool because it has this Google Analytics connected which is another feature we have. We have an API directly to Google Analytics so you can see traffic, users incline down, client bounce rate, average session duration, all nicely laid out like that for you in both a sort of cell format and a graph format. But the first thing that comes to mind when I take a look at this guy is right here. So you can't have these numbers be the exact same, the multiples because revenue is just always going to be higher than profit or excuse me, they can't be equal. However, this is pretty good. I mean if it's that close in the multiples, that means that their margin is very high which if you take a look down here and again this is just a, this is going to be on almost every list. And you look at the four basic financial metrics, this is pretty good. That makes for, you know, for every 7, every 7 2k to 23k in top line, they make 6, 11 bottom line. So just a slightly under 100k less, which is really, really solid. So anyway, those are what I, that's what I noticed when I first look at this. Rainier, I think that you are actually biasing on this. Like I just mentioned, our advisory team comes in on certain deals and Rainier is, I believe is on this one. So maybe if you want to hear Rainier and we can kind of go back and forth between you and Paul.

Sure thing. Yeah. I'm quarterbacking this deal. I like it. I'm going to talk highly of it, of course. But just looking at it from a buyer's perspective, first thing I gravitate to is the multiple. So 4.1x of profit, 3.5x of revenue. That quickly shows me as a buyer that this seller is motivated and serious about selling in a timely manner. And if I look at the other things that you scrolled past, James, it's the multiple, the high margin, it's 85% profit margin. So right there it's already hitting a lot of the fundamentals that I look for as a buyer. It's already a good thing that it's SaaS. It's growing and it's profitable. It's another great thing that it's an 85% profit margin. So it's strong there. The growth rate that we saw on the very bottom is 30%. This is the year over year, growing very quickly. Another thing I noticed, financing, it's bootstrapped. So it's a small team, very hands off business, highly automated business. This is great for someone that's looking for a lifestyle type of business. Very passive. And if you scroll up to the top, all of the traffic is organic from Google. There's no marketing, there's no professional SEO being done. It's all organic growth from the marketing aspect. And what this business does is it extracts data from various social media platforms and quickly builds email lists. So overall this hits a lot of fundamentals that I look for. Strong multiple profitable, year over year growth SaaS. The one thing that I would, if I were to play devil's advocate and point out a couple things, the history it's was founded June 2022. So a lot of buyers on our platform, they like to see at least three years of history because if something's growing at a fast rate, eventually there's going to be a time where it evens out or might go down. So you need to figure out as a buyer how to quantify and limit your downside risk. Taking on a business that's growing so rapidly. That being said, I'll pass the mic over to my colleague, Paul. What do you think?

Hey, thanks, Ranier. This looks really nice. I think that the, the items that I would want to really understand things.

Just before I pass it over to these guys. This one's cool because it has this Google Analytics connected, which is another feature we have. We have an API directly to Google Analytics. So you can see traffic users incline down, client bounce rate, average session duration, all nicely laid out like that for you in both a sort of cell format and a graph format. But the first thing that comes to mind when I take a look at this guy is right here. So you can't have these numbers be the exact same, the multiples, because revenue is just always going to be higher than profit or, excuse me, it can be equal. However, this is pretty good. I mean, if it's that close in the multiples, that means that their margin is very high. Which if you take a look down here, and again, this is just a. This is going to be on almost every list. And you look at the four basic financial metrics, this is pretty good. That makes for, you know, for every 7, every 7, 2 kids to 23k in top line, they make 6, 11, bottom line. So just a slightly under 100k less, which is really, really solid. So anyway, those are what I. That's what I noticed when I first look at this. Rainier, I think that you are actually advising on this. Like I just mentioned, our advisory team comes in on certain deals and Rainier is, I believe is on this one. So maybe if you want to hear Rainier and we can kind of go back and forth between you and Paul.

Sure thing. Yeah. I'm quarterbacking this deal. I like it. I'm going to talk highly of it, of course. But just looking at it from a buyer's perspective, first thing I gravitate to is the multiple. So 4.1x of profit, 3.5x of revenue. That quickly shows me as a buyer that this seller is motivated and serious about selling in a timely manner. And if I look at the other things that you scrolled past, James, it's the multiple, the high margin, it's 85% profit margin. So right there, it's already hitting a lot of the fundamentals that I look for as a buyer. It's already a good thing that it's SaaS, it's growing and it's profitable. It's another great thing that it's an 85% profit. Margin so it's strong there. The growth rate that we saw on the very bottom is 30%. This is the year over year, growing very quickly. Another thing I noticed, financing, it's bootstrapped. So it's a small team, very hands off business, highly automated business. This is great for someone that's looking for a lifestyle type of business. Very passive and if you scroll up to the top, all of the traffic is organic from Google. There's no marketing, there's no professional SEO being done. It's all organic growth from the marketing aspect. And what this business does is it extracts data from various social media platforms and quickly builds email lists. So overall this hits a lot of fundamentals that I look for. Strong, multiple profitable year over year growth. SaaS. The one thing that I would, if I were to play devil's advocate and point out a couple things, the history, it's was founded June 2022. So a lot of buyers on our platform, they like to see at least three years of history because if something's growing at a fast rate, eventually there's going to be a time where it evens out or might go down. So you need to figure out as a buyer how to quantify and limit your downside risk taking on a business that's growing so rapidly. That being said, I'll pass the mic over to my colleague Paul. What do you think?

Hey, thanks Ranier. This looks really nice. I think that the, the items that I would want to really understand, you know, having it full, you know, this high automation is fantastic. That's why we get into SaaS to have the robo to do the work for us. But really how much is the owner contributing on a weekly basis to the business and really what are they doing, you know, day, day in and day out? And why that's important is if you sell 100% of the business, the, the owner, you know, has a short transition and leaves and the, you know, obviously you'll be left scrambling if the owner is, you know, majorly involved and, and you weren't aware to, to the extent of that involvement. Other than that, I mean it's the team size again that kind of akin to the same thinking, you know, what is the overall team size? Yeah, this looks good. I mean I would want to uncover that first. There's another question that was in the chat around unpacking the financials and you know how we operate here is when we do full recasted financial statement, we have all the month over month trailing 12. So request the information and all of that is accessible through the platform and. Great question. Cool.

And I'm trying to look keep tabs on all these questions that come in, but it's kind of hard when I have my screen shared. So if I miss any, it just.

Happened to pop up right there in front of me. So I wasn't doing anything extra special.

Oh, nice, nice. What do you guys think about, like, the customer concentration here? I mean, I feel this is pretty good for a business that is more of a lifestyle business. And I don't know if either of you guys have any thoughts, let me know. I might. My take is that it's pretty solid. There's not gonna be too much dependence on any one person.

Right, Right. It's pretty diverse. It's still going to be good. A good question to ask the seller if there's any big clients that make up a good chunk of the revenue. You want to know that off the bat.

Yeah. And then, you know, rule of thumb is if any one customer represents more than 10% of the revenue, that's a flag you should be chasing down. And understanding it's not always a detriment. I mean, it could be 10 years running day in and day out. That's awesome. That's an annuity. But understanding the relationship with those customers is important. And again, back to the owner. If it's an owner relationship with that customer and the owner leads, that's also something you should uncover.

Yeah. I just got that question from Howard. The annual growth rate is based on financials, but the Google Analytics is based on metrics, like users online. So this is a financial metric as opposed to analytical one. And then I was going to ask, I mean, like, what do you guys think about the fact that it's all organic but it's still doing great? Like, does this opportunity for a sales and marketing play? In my mind, I feel like we could just add a little marketing and you just further accelerate both top line and bottom line.

Yeah. For me, it's tons of upside. So with having organic traffic, that's awesome. Someone that's a buyer that has sales and marketing experience, you should be salivating at this opportunity. Every time there's someone that has a business that they're just having word of mouth or they just put something up and it's organically growing over the last couple years, there's tons of potential here for a lot of these sophisticated buyers that have proper sales and marketing experience and more importantly, dollars to spend and grow on the business.

Nice. Well, any last comments? I think we're, we're sitting pretty, pretty well right here on this one.

No, I think it's. I think it's a nice, a nice business definitely. I would be happy to review this more and go into the hood.

Rainier, do you have a shameless plug.

To add or we it's a motive motivated seller. Reach out to him. He's a great guy. He's always willing to jump on a call and answer questions. All of your due diligence documents are uploaded there as well. So I highly recommend reaching out to this. This is going to sell quick.

All right. That's our shameless plug in the day.

And one I'm sorry one closing I did see. You know the reason for selling was other so that is something I'd want to understand is what is other Cool.

And then Rodman, I just saw your question there. It's only brackets. There's only such a few options you could use for customer range. So it's going to be something you want to confirm and due diligence. I realize that 100 to 1000 is pretty pretty wide so definitely a due diligence item.

Good feedback.

Let's go to the second here. So this is a SaaS startup based in Delaware. Honestly, more like the incorporated Delaware. There's very few startups that are actually located in Delaware. That's about the place where 95% of most tech companies incorporate these days. Looks like it's data as a service platform caters to B2B customers. I'm just going to cruise through it and see if I have any thoughts on the top of my head. I was going to look at this. This is something that we often include. This is pre approved for financing. That means it already has a term sheet for bupos that the buyer can leverage when they're purchasing it. And it will the note or the debt will get paid off for future cash flows of the assets that the buyer ends up purchasing. So Buboes acts really quickly from submission to underwriting. It's usually less than a week and it's a pretty.