Purchasing and Reselling the Same Startup for 5 Figures with Qayyum Rajan, Founder of ESG Analytics

Foreign.

I'm here with Quam, also known as Q, the founder of ESG analytics that recently got acquired for six figures. Q. How you doing today?

I'm pretty good. It's nice finally get a chance to chat with you, Andrew.

Yeah, love the nickname because I got a last name, Gazdecki and everybody calls me Gaz. So I'll just call you Q for the, the whole. So were you selling the product before you actually built it? Were you just showing like designs and mockups and basically the concept, it's almost.

Served as like a dou purpose because we're reaching out to people that we thought were our ideal clients, testing them to be our ideal client and then showing them and getting their feedback on what they think the product is and what things we might be missing. So we're sort of like co building but then we can go back to those same people and be like, hey, so we built it. What do you guys think? Right?

Yes. Good for you. Q. I see. I love the reason I stopped you is I love this approach because this is, this is how you do it. So for those listening, you don't have to build a full product to go to market. And there's really two questions that you want to have answered before you build the product is who's your ideal customer? And does anybody want it? You know, too many, too many founders just build stuff that without talking to anybody first. So what you can do is, and I actually did this with pretty much every startup I've ever built where I'd show the design like, hey, this is the concept and kind of get some buy in from customers and get their feedback, bake it in and then you start building the product. I'm sure your first version wasn't.

Oh yeah, I mean I have a, I have a really funny story for you on that. So the other thing I would always recommend to anyone, like whatever version of your product you put up first, get like Hotjar or UX Cam or whatever, whatever, like monitors user behavior. Because the first version we launched did the thing that we said it was going to do, right? Take a company, do the sentiment analysis, get a score, determine. Did it look great? No. Right? Like look like trash. Actually in hindsight at the time I was like, it's perfect, it's done. But the one thing I notice is like we. And. But what happened was like six months after they, the company went through a few issues themselves and so the people that brought us on sort of left the company and they gave us the company back for like A dollar. And then we sort of scaled up the business again and then we resold it on acquire.com to another company who, you know, we're sort of still working. And in between I've created a carbon carbon marketplace that got acquired as well. So it's a fortunate set of instances when the market was really good as well. And so yeah, that's kind of funding all the new things that we're doing now.

That's awesome, man. Buying it back for a dollar. I love it. Yeah, you know, tell me that's. So for the, for this podcast, let's focus on ESG analytics because I want to know for just what's like the quick pitch of ESG analytics, what does it do? What problem does it solve?

Yeah, so it's really meant for investment managers. And so what we're looking to do is use more real time data to benchmark corporate sustainability and ESG performance, which environmental, social and governance. And the issue it's solving is that today when people are looking to invest in these kind of invest in companies and want to, you know, see how they rate and that kind of stuff, there's all these rating companies, but they use like the reports from the companies which are like six months to a year old. And so everything you get is like quite bland. And so we started doing like some NLP like natural language processing and sentiment analysis to extract all of this data on a day to day basis, map it to all the companies and then deliver it as a, an easy to use like SaaS solution and API, which wasn't the case for any other company trying to do that at the time. So we were able to get like a better, better portion of the market and make something that look, you know, really, really neat and cool in a business that was kind of purposeful, interesting.

I like that, I like how it's in a market that I'm, I'm not particularly too familiar with. I love businesses like that where you spot something that, yeah, it's not like a startup selling to other startups, which I totally, that's all.com does. But, but tell me about how did you get, what made you, you know, start this business? What was the light bulb moment?

The light bulb moment? It was like a very specific moment. I was looking at like this Bloomberg report and it was like, here are the bottom rated companies from an ESG perspective in the world. So this is basically saying, hey, these are the worst companies, you know, on the planet. And it was by Sustainalytics, which was, you know, sort of the De facto rating agency. And on that list of 10 was like Walmart, Amazon. In my head, I'm like, okay, maybe they're bad companies, quote unquote. I'm like, is this like the, the bottom 10 in the world? I'm like, there's no way. And we started digging into these rating companies and we found out that again, they use teams of like 400 analysts to, you know, dig into company reporting documents. And this is not a regulated space. So it's like, you know, they have these 600 page PDF reports, DSR reports once a year and their coverage was so low is like 4,000 companies, 5,000 companies. I'm like, how are people making investment decisions? So that's kind of when we were like, okay, let's why I said, I say we. But where I was like, hey, let's start coding and put a slide deck together. Showed us my girlfriend at the time, wife now. And yeah, we started going, going to market and that was in 2020. And the idea as well was to go out with something that because from my finance days we used to sell to financial advisors and portfolio managers and everyone in the space was selling to like the big enterprise size. I'm like, why shouldn't, why should this data be $100,000 a year? It should be 80 bucks a month, right? 100 bucks a month for anyone trying to look for ESG data. And so that's what we went to market with.

I love that. To be seeing a lot of that just across the whole startup ecosystem with AI tools making the cost of delivering software, people like you building products where it's really, you have a very, you're operating the business at a very high margin so you can deliver the product at a low price and you don't have to go enterprise like if you're a venture back.

Exactly. Yeah. So additive, right? Like you add a thousand new customers and all you do is change up your virtual machine from 16 gigs of RAM to 50 and call it a day. Right.

I love it.

When was we added a subscription subscription layer and free trial like immediately. And the first homepage was like this. Like you're subscribed, right? Like after you enter your credit cards information. And so somebody subscribed and I'm looking at like, I'm looking at like hotjar. And all this person did is like this big. Like you are subscribed was like the first window and they couldn't like unsubscribe because we hadn't, you know, it was more important to build subscribe functionality than to unsubscribe. And it's just like this thing. And so you just kind of kept clicking on there because they were met with this payment interface and they didn't even look into the app. And then so that was like the first thing. We're like, okay, people are not even exploring because they're wondering like where their credit card is. And so we fixed that and then we got the app again and then we started watching people from there and it was like we found that people were going in and like clicking around and they were done with the app in like 60 seconds. So it's like, okay, like how do you make this more engaging and keep people coming back and email alerts and all this kind of stuff. So it was a really interesting file and error journey. I'd say there like a lot of lessons learned. Awesome.

I love hotjar and it's fascinating to see what people have done. People, weirdest stuff, they'll click on your images, they'll click on like tags.

It's insight that you just don't get like anywhere else even if you talk to people. Like, like without it I really feel like you're flying completely blind. Like marketing website and otherwise.

Yeah, it's a great tool to understand how people are using your product without them feeling like, hey, I want your feedback. It's kind of like the natural usage of the product.

Totally.

You get an idea of what CTAs are standing out and then where people are getting stuck.

Yeah, when you ask me about like you know, the first customers. But one thing we noticed as well, like early in the business and I wasn't very familiar with like SEO as a concept, like at the early stages I sort of was diving more into it. But as we were building, you know, we were getting the marketing website up and I was wondering why this website was not ranking on Google. And it turned out it was not server side rendering at the time. And so anyways we managed to fix all that. So lesson is definitely keep your marketing website separate from everything else. But we started to understand the SEO game and started to pump out some really good high quality articles targeted in our space. And actually to this date SEO is the source and has been the source and was the source of 95 plus percent of our leads coming in. And so we started to rank, you know, top for like where did the term ESG come from or Nike ESG and stuff like that. And so that was like, that was the most valuable lesson actually from this entire journey was like the SEO game.

I Love that. And I love that because especially with, you know, really specific products, you can dominate the keywords because the competition on them is very low. And so if your company has, you know, ESG in the name, you know, that can really benefit you. I'm kind of, I'm kind of an SEO nerd too.

I spent my morning programmatically deploying like 300 SEO optimizer.

Yeah, but I mean SEO, it's a, it's the gift that keeps on giving. So essentially, you know, you do this like upfront work and cost, but now your customer acquisition cost is essentially zero. Customers and new leads coming to you. So that's awesome. The next question though, I love asking this question, but was there like a time or day or moment when you like kind of sat back and you're like, hey, I, I really got something here. I got, I found product market fit. This is, I don't know where this is going to go, but it's working.

Yeah. And that's true. I mean, you know, in our initial slide deck, I wanted to build to sell, but that was theoretical at the time. And as the application started rolling and we saw like this traffic come in and we started to get the assignments from SEO, I'm like, oh, like we really do have something here. And it was primarily self funded but with some money from family and friends too. So there's also this very real burn happening right at the time. And so just that balance was really interesting to navigate. But you know, we'd started reaching out maybe like a year and a half like into the journey for prospective sort of buyers and just, you know, just targeting stuff. Because the thing is, I kind of make this distinction between things that are sexy and make sense from an investment perspective and things that maybe are truly commercial. And I'll classify that early days of EC analytics as something that people wanted to get into. It was sexy and it was good from an investment perspective because of the zone. But it's still, even to this day, slightly early from a true commercialization perspective all the way across. So it's additive to the firms that wanted to acquire it. Like really strategic. But from a customer. It's not like we had like, you know, a million users or a million customers when it was actually bought. Both Time.

That's a great realization in terms of just, or self reflection in terms of just, you know, where the, the business is. Does it guess what the number one factor of really outsized startup successes go? It's timing.

Yeah. Oh, absolutely.

Like, I'll give you a few Examples like, before YouTube, there was like, 10 different video sites. But the problem was video files were too big. Then Adobe Flash came out.

Right.

YouTube capitalized on that. Uber wasn't available until the mobile phone came out.

Yeah.

What's another good example? Airbnb. You know, they tried for, you know, years, but it wasn't. The economic crisis happened that people were a little bit more comfortable having people stay in their house for some extra income.

If you don't have the right timing, like, you might as well be wrong on your entire idea. Like, not necessarily, but, like, it's true. Like, from a. From a true value perspective, it's like we were lucky that first time that we got required to do it at like a, you know, 22x. Like, ration was good. Like, you know, mid six figures. Like, you know, it was great. And. But, you know, today, like, it's a little bit different. Right? Like, with fun and stuff. Like, so even just that time in that you go to market and the timing that you exit, it's that.

That's always you. You bring up a great point, too. I mean, the time at which you exit your business, too. So I always say you want to sell it at the peak, not at the pit.

Yeah.

So you want to sell when things are going down absolute. That's really hard for a lot of founders because I have a lot of conversations that are like, hey, rat, you know, 2, 3 million now. But we're totally going to be at 10 million in a year, and that's not guaranteed. And if acquisition offers in hand, I. Another saying I always have is treat every acquisition offer as if it's the only one you will ever get, because it may be. And so just food for thought there. But let's move on to your acquisition. I want to hear. I want to hear about how this all went down, because, yeah, correct me if I'm wrong. So you listed on acquired.com, some other private equity firm bought it, but then you ended up buying it back, and then you listed it on acquirer.com again and then found a buyer and totally that way, right?

Yeah, exactly.

Okay, so tell me about the second time that you listed where you had this successful acquisition with us. How did that go? What was your expectations? How many buyers reached out?

It was really. Yeah, it was a really interesting process. So, first of all, thank God I have my. My. My sales co founder now. Mata helped me manage this entire process. So we're sort of like a pair of team. But. Okay, so we. We got it back, and we Actually reached out to somebody on the Acquire marketplace as well to be like, hey, like, you know, should we look at a broker for this? And the guy, I forget his name, but he was like, I'll help you grow this, like 1 million. And I'm like, okay, so there's a choice here. Either we can scale it up or we can, you know, listed. But we chose to like, sort of do some groundwork, get it all nice, spend like, you know, 10 grand on a redesign, all that kind of stuff, and then, and then list it. And so we started to get some offers. And one of them actually was somebody who had offered the first time as well, who we'd kept in contact with. And so we started a conversation with him and he was a super nice guy and sort of really wanted to, you know, he was super interested in this. And he had come off an exit himself. And so we started going to the, the thing with him and then that sort of like went here and there. And then we got like four other like, very tangible offers. One was from the guy who we ended up selling to, and then one was somebody who had sort of like a venture firm. So they wanted to come in and do sort of like a, like a, like a carve out in a way, like where we'd sort of work with them, we'd retain a percentage, and we sort of all go together. And they had some really good B2B like marketing expertise and that's how their firm operated, which is actually really attractive at the time. Another one was like a Swedish firm who want do. I think it's like 60, 40, but then list us to one of their public vehicles on like the Swedish OMX Exchange, which is also like an attractive thing and an interesting journey. And so they're like all these like very different sort of things. And so we actually went quite through with all of them because every time you get an offer you're like, okay, this is the way we're going, right? And then you never expect to be in a position. Well, not me anyways. You never expect to be in a position where you're like, you can actually bounce people off each other, like, even though it's not what you intended. And so another buyer came in, was looking to take it over. We would sort of help consult with them. And they made a cash offer. And so now we actually had two cash offers. And we really couldn't decide at the time. And so we asked, we. We were pretty transparent and we said like, hey, just for transparency, this is what they offered. And Then this was the day that it came down to the wire. Like, I'm, I'm in, I'm in this office, my wife's downstairs and I'm like, we got an offer for X amount. And then I'm like, this guy just offered like 20 grand more. Okay, I'll match it. And I'm like 40 grand more. And like I kept like coming up and down the stairs and I'm like, okay, and then they'll then like close it off. And then we went with them and it turned out to be the best decision because they really understood our business and it's so additive to what they do. But it was like this sort of like pinball back and forth and it was a very cool sort of thing. We got the asset purchase stuff done. We were, as you can imagine, extremely organized because we gave the company away, integrated it fully and then reintegrated, took it back and reintegrated ourselves. Like from a domain email documentation code. Like we are extremely organized and set up. And yeah, we transfer that over, we got the cash in the bank. Always the best feeling. And to be honest, we're still consulting with them, which is something that people don't always talk about with acquisitions is the follow up post acquisition. There's all the stuff you do, but typically you do get a consulting arrangement with these companies, which happen in both cases.

Yeah, it's very typical to have some sort of, if you're, if you're, if you're selling a business, at minimum, I would expect, yeah, 90 day transition plan or consulting agreement. And you can get paid for that too.

Yeah.

And the best part, there's two things that you said that I really, really like and I want to touch on is number one, I like how you kept in touch with other buyers that you had spoken to. So if you sell on acquire.com and you sign a letter of intent, but you have other offers, it's so important, or maybe not important, but it's just such a good move of character to go back to every buyer that gave you an offer and just say, hey, thanks. Moving forward with this other buyer, if anything goes wrong, I'd be happy to reach out to you to let you know. Because never know, you might sign the loi and things just don't go correctly. And then if you have other buyers ready to go, it can also, you know, keep momentum on the deal towards closing. Because I always say if you have one buyer, you have no buyers and it gets very passing. And this is how you increase valuation or get better terms is you have multiple buyers because you have leverage. You're able to say, just like you said, hey, someone offered me this, and.

Yeah, and it's proof of value, right? It's proof of social value, like, all the way through. But, yeah, as I say this, then, like, you know, the stuff that you guys have created, like, has unlocked a whole area of liquidity, and it's been a life changer for me, you know, like, I'm on such a cool path now and have all the flexibility to build stuff, you know, and as a result of having access to that kind of pool of liquidity which, you know, 10 years ago, like, doesn't work this way. Like, it wouldn't have worked out this way. So feel quite fortunate.

You built the company and you sold it, man. Yeah, I got a question. Question. So it's, you know, it's closing day, the wire comes in, money hits a bank. What'd you do?

What? How so in again, lucky enough. In. In both acquisitions, I made the same deal with my wife. I'm like, look, 80 reinvested. 20. Let's have some fun. So we went to Paris for a couple weeks and then went to Hawaii and then came back and went back to business with 80% that now funneled into new ventures and all the stuff that we need to do. Made sure my team was taken care of. And ye. At this point, too, you know, after the first acquisition, I was the sole. Sole owner of everything. So, yeah, was able to, you know, make sure everything's. Everyone's compensated nicely and excited and bonused out, and now we go again.

I love that I have a rule that I always tell founders, depending on, like, the size of the acquisition or.

Yeah, but.

But yes, don't spend it all. That's the rule number one.

Exactly.

But also, if you're unsure of, you know, where you want to invest it or whatever, maybe just let it sit in your bank account for 6.6months and just change nothing about your lifestyle. Don't. Yeah, don't start, you know.

Yeah.

Angel investing and stuff like that.

Totally.

Just let it all kind of sink in. And then after six months, you know, you'll have a plan of maybe you want to start another business. Maybe you want to, you know, put in the stock market.

Maybe equally important is to celebrate, you know, like you said, don't go buy, like, a bunch of diamonds. Or maybe you do, but, you know, so celebrate, like, and enjoy that milestone that you've created for yourself, because it's a big. It's a huge Deal. It's a big deal and it's easy sometimes as things happen to be like, okay, like now that was great. Like now what? But it's like, oh, just take a second. Right.

And I agree with that too. When I, when I sold my first SaaS business, I bootstrapped it and sold it when we reached around like 10 million in recruiting revenue. So it was a meaningful exit. And I just bought a $35,000 Mercedes AMD. It was like my, my dream car, but I bought it used.

Yeah.

You know, didn't buy like a purchase car, but just a little sort of.

Yeah. You know, the promise you made to yourself as a younger. Younger Andrew, you know, it was.

So I actually. True story. I ran that, my previous startup for eight years and my call, I launched a business in college and my college roommate was like, why are you always looking at like AMG Mercedes? And I was like, I don't know, like, it's what I, it's what I want. And then when I finally had the opportunity to get one, that's what I did. So love that, man. So there's a lot of, you know, startup founders, business owners listening to this and thinking, you know, man, I'd love to sell my business. If you had three pieces of advice to deliver to them, what do you think they'd be?

Yeah, I mean, I think the first one and something we hear from, yeah, a bunch of people that have sold stuff is like, build to sell. You know, like, if you think that you might want to sell, then operate your business in that way. Right. And that kind of means, like, put in creating the package of things which keeps your business running smoothly, right? The documentation, the code, the approach to things. Like, don't just duct tape things together. Like, do it as if, you know, you were going to take over that because it only helps you with your acquisition case and helps your business stay organized, right? So if you're bundling things together and putting it right, it's good. And I've been on, I've acquired some companies now and I've been the acquired company. And I can tell you that, you know, I hope that in my acquisitions, it was a dream for me to work. I was a dream to work with because I was like, okay, like here's everything. And you know, you're the domain expert of your stuff, right? So I think that's, that's the main one. And the second is like, know the market, right? Like, understand where valuations are at. Understand what you should be asking. Because oftentimes the Person, especially these days, the person acquiring your business might not necessarily be, you know, this, like, SaaS founder or something who's like, you have a chance. You do have a chance to benchmark and dictate yourself. Right. In your terms. Right. So, you know, markets are hot. You know where things are at. Like, make that pitch. Right. And. And translate that. Right. And I think if you do that effectively, then you obviously can take as much value out of that. So I think those are like my top two. But definitely the organization one is the. Is the most important. Don't have a third one off the top of my head, but I guess celebrate.

Yeah, I mean, there's. There's one right there.

Sorry. The third one is it is never over until the money is in the bank. Like, and just to give you a good example, the first acquisition, like, three days before closing, they're like, oh, we need to do like a lien check on the business. I'm like, great. Got. I don't want Google Cloud and $500 credit card. Right. And anyways, they do it. They do a check. It turns out that the bank that we had our credit card from, in order to just give a credit card, they take a lien on the entire business, just as a blanket. As a blanket lien. Like, that's their standard procedure. So now I had to. We actually had to push the acquisition almost a month and a half forward two months because I had to call the bank and get to the deep dark recesses of the corporate Toronto tower that dealt with lien removals on credit cards for small businesses. And I keep the business open while closing down a credit card to remove the lien, which went to, like, some other government organization. And I was stressed out for like a month. I'm like, pad art VC on speed dial being like, can I get this $500. This lien removed on this $500 part that almost. That almost stopped the entire acquisition. Like, literally, like, it was actually.

That is wild.

It's never over.

Yeah, I see that a lot with. With acquisitions that we work with, but, you know, it.

Yeah.

Last point. It's not over until the money hits the bank.

So that's number one. Yeah.

So to build on that, I'll start with your first one because I agree with all of them. Preparation. Preparation is so critical for, like, I cannot stress this enough. Like, have your financials together, have a list of common due diligence questions. Create a transition guide. Make it easy for the buyer to wrap their head around their. Your business. Because most buyers are looking at typically I always say a hundred deals per day and startup founders don't realize that like. And to look at your business and to go through your docs or to actually have a conversation with you is a big time commitment comparative to the other 99 startups are going to look at that day.

Totally.

And then on your second point in terms of valuation, this is a big one. This is probably the number one reason why I see a lot of startups not selling is they read about some company that sold for 10 times revenue.

And that the biggest thing, man, that happens.

But that's an outlier. That's not the averages and that's. And then also understanding who is going to buy your business. I would say you have a 45% chance of getting acquired by private equity, 5% strategic and then 50%. It's probably going to be an individual buyer. Yeah, Google's not dying to buy, you know, you know a subscale SaaS business, you know they, they typically strategics, you know they aren't actively buying companies as much as private equity and individ individual buyers. So treat all buyers like the buyers, like they are the buyer until they are not. You can follow up all the way until you're blue in the face, until you get a note just like you're in sales.

And then exactly like you gotta run it that way. Like it, it's a marketing excess at the end of the day. And just even following up with the 40 people that reached out with an LOI it's like it takes like I'm sure so many deals die just because people were like I can't deal with all these emails, you know what I mean? But you got it like you have.

To sell your business. You have to get on calls with buyers. You have to be transparent, honest. You have to be prepared. You have to have realistic asking price. Otherwise buyers just aren't even going to give you a look at any of your details or anything.

You got to play the, you got to play the game too. You know, you got to keep people intrigued. Don't give everything as well like right up, you know, out the door. Like you got to play that game right? Make it a little bit exclusive, make it like, like any sales thing, right. It's like I don't, I don't know the best way to say that. But there's a game to everything, right?

Yeah. One, one tip there that we utilize is after the first call, if it goes well, have a separate data room set up with a bit more information and then you give access to that data room. And when you're on the call, ask if they want to have a secondary call. Same time next week. I call it book a meeting from a meeting. So do not let the buyer off the call. If you feel the call went well and you know they're showing some sign of interest, be like, hey, do you want to just kind of catch up next week?

Totally.

I'll give you access to, you know, a data room with a little bit more information. And this is assuming you're under NDA, but when you get on the calendar the next week, it keeps them accountable to go through the information. And then at the worst case scenario, they say, hey, we're not interested. But at least you keep momentum. And then when you sign an loi, Absolutely. Have a follow up call every single week until the deal closes. I don't care if you talk about the weather or your favorite sports team that lost whatever, or some really big issue, but constant communication, because that's where a lot of deals die too, is just the momentum starts to slow and you know, like something, a surprise comes up, you want to address those things as quickly as possible. So another, another tip there.

Yeah. And also. Yeah, that's fine. I was gonna say, I mean just that learn was just like, yeah. Like, you know, things like asset purchase agreements, if they make sense for you, are so much easier to do. Right. So you make things easy for both parties. Yeah.

Legal counsel always there to help or acquire dot com. We, we got a asset purchase agreement builder. Letter of intent builder. Sorry, sorry. Shameless. Plug on my own pocket.

No, no, no, no, that's what I was referring. That's what I was referring to. So.

So, Q, you've gone through, you know, several successful exits. Now I gotta assume you got something new you're working on. What's. What's next for you.

Yeah. So the outcome of the acquisitions today has sort of been the formation of like my own holding company called New Ventures nuu, which is sort of a nickname my brother used to call me and sort of within there were buying some SaaS, businesses we're building.

Nice. Where are you going to buy now?

We are buying some from acquire.com we've purchased a few others just through cold outreach. Purchase one for my friend the other day. But we're basically buying traffic, so we're building niche sites and we're buying products to fit with these niche sites. I would tell all the niche sites, but the first thing with these sites is don't tell people what your niche site is. So yeah, so I've made four acquisitions this year, which has been exciting and it's nice to get acquired for 10-15x and acquire for 2x if you can and catch that there. And so yeah, so we're building stuff, we're building traffic and now I get to play the long term three to five year game as opposed to the six month watching the burn in my bank account go. And so yeah, we're doing stuff in the freelancer space, the remote workspace, SaaS and then carbon and finance. And so we have a team now where we can kind of push everything together and we kind of operate like a venture studio, which is kind of exciting.

Love it. Well, Q, I'm rooting for you, man. If you want to learn more about you or just reach out to you. Where can they find you online?

You can find me on Twitter at Krajan. Yep. I'm always around there. So just DM me and I'm super responsible.

We'll put that in the show notes. Hopefully you don't get too many people reaching out. But congrats again on that acquisition, man. And hopefully I see you back here selling seven, eight figure acquisition.

That is the goal. So hopefully.

All right, man, great chat.

All right, take care.