SaaS Acquisitions w/ Christopher Tung - Founder of Reporty

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I am live with Chris Tung. He recently sold a application on microguire for five figures. So excited to hear your story and thanks for joining me on this podcast.

Yeah, thanks for having me, Andrew. Really appreciate the product that you've built connecting, you know, SaaS founders with potential buyers. You know, I, I think we don't all need to be IPOs. We don't all need to be acquired by like, Salesforce or whatever. So having an outlet and an exit strategy that is quite lucrative for those of us that are micro SaaS builders or, you know, solo founders has been great. So happy to be here.

Damn. I should probably hire you to, like, pitch microquire because I completely agree. I'm glad it all worked out and I'm really excited to just hear the story. So I guess to start things out, do you want to tell me a little bit about reporting what it did? Just details on that. Then we'll move into the acquisition and all that fun stuff.

Yeah. So I'll start with what was the pain point? Right. Because I think we always want to build products for those who feel specific pain because that leads to a lucrative exit, all that kind of stuff. But the pain point was I was working at an e commerce startup that used Shopify at the time, Shopify was growing, but it wasn't the like, I think this current share price is like $1,500 a share. I think at the time it was like $200 a share. Right. It's big, but not like what it is right now. And there was no way for you to get UTM tracking specifically and like coupon code redemption data in, in your Slack channel from Shopify. There were a lot of apps out there that would do light Shopify to Slack integration, but not what I needed. And so I decided at the same time I was learning to program on my own using Ruby on Rails, and I found out that Shopify is very. Makes it very easy to build a Ruby on Rails application for the Shopify app store. So I was like, great, let me go build my own solution. And so the solution was, let's allow someone to connect their Slack to a Shopify store, select the kinds of notifications they get, select the kinds of signals and data fields that they want in a notification, and then take it from there. And so that's what I built.

Damn, that's a good app, man. I mean, you built it all yourself, correct?

Yep. So, yeah, as I mentioned, yeah, Solo founded, Solo built.

Yeah, nicely done. That's, that's, that's, that's not as easy as it sounds, and that sounds extremely badass. So I assume I know the new owner is super happy. So, moving into your experience on microcquire. Tell me about it. So you listed on microblier. Walk me through, you know, how you met the buyer, you know, how you negotiated terms, and then maybe we'll move into, like, due diligence and actually how you guys ended up, you know, closing the deal.

Yeah. So listed on microquire. And then at the time, I didn't know that your team does the magic backend to make it more attractive, which I hugely appreciate. Just make the listing a little bit better.

You're welcome.

And from there, just buyers started coming in, which was actually really great because I'd used other listing marketplaces before and it didn't happen like that. Whereas microacquire was so much better. And so I actually proactively created a public profit and loss statement and a public faq, because the kinds of questions you get from a microacquire buyer are very common. What's the app? How many customers? How many paying customers? What's your retention? What's your turn, whatever. So I put that into a Google Doc and a Google spreadsheet, and I was just very open about it. And the lucky position I was in is that the product is very passive income for me. And so I was pretty rigid in the valuation that I put out. And if a buyer said, I don't think it's worth that much, I was like, great. Good luck on all your other microacquired acquisitions. I'm not really eager to sell. Ultimately, I found a buyer who understood what I was building, understood the potential of the product, and understood that I was at a life stage where I was ready to find a new home for it, but someone who actually cared about the product and the customers and so connected through microacquire. We use the in app messaging flow, which is great. The notifications you get are good and, you know, sharing assets and things back and forth was good. And then we agreed that, hey, this is going to happen. And so.

Yeah, nice. What was the life change?

Oh, I just had a baby boy.

I know. We were talking about that for the podcast. I'm a dad too, so congrats to you on that.

Yeah.

Okay, so you found a buyer. I assume you guys are on good terms in terms of same page. What did due diligence look like? What was the next step after you come to terms? What did you guys do next?

Yeah, I think a big part of it is trust. How do you build trust? So, so that the numbers that I'm showing are accurate, right? And how do I understand that, like he will post funds and all that kind of stuff? So on my part, I was very eager to chat with him through a Google video call. So we did that. I got to learn more about him, his point of view. The fact that he also, like, is a human being and is not, you know, is not a representative of a giant conglomerate or didn't seem sketchy was really helpful. And then while we were doing that video chat, I was very public and so I present my screen. I showed him the Shopify portal. You could see all the numbers, you could see all the customers. You can see how much revenue the product was generating to date. And so I think that helped him, trust me. And then we ended up building a terms of sale document that was like a contract that outlined what he would be buying, how would we transfer the assets, what would customer support look like for me once he acquired the assets, all that kind of stuff. I think what was really important that I would recommend to anyone who goes through a process like this is we did a Google video call where we both mutually recorded the call and then transferred everything on the call. And so as the call was happening, which took over the course of about an hour, because my app was really like Heroku GitHub code base and like the Shopify assets and stuff, we just kept crossing them off. And like every time like an asset was transferred, I was like, hey, did you receive it? Can you log in? Does it look good? And he said, yep, we crossed that off the list and then we worked our way through a list of about, I think six or seven things. And then once that was done, we used. Well, earlier he had deposited funds into escrow.com, and once he said, yep, looks good, he released the funds on his side, which then I got a notification saying, like, the buyer has released funds from escrow. Escrow will now handle depositing the funds in the next like two to three business days. This is not a gripe about microacquire, more a gripe about escrow. And Andrew, you and I have chatted about this. I very much think your next place should be a way to make the fund transfer better.

I got you, dude, don't worry.

But yeah, there's a lack of transparency on that side. And I think what has been wonderful is microcquire has so much transparency on the actual relationship building experience that it was ultimately, it was great going through Microcard though? Yeah.

Awesome. Glad it worked out like that. And in terms of, did you do any like post sales support? Like, okay, you got, you got everything transferred, you got the funds. What did post support look like? Sorry to interrupt. Go ahead.

Oh, no problem. In the contract, we had outlined 30 days and so that was what I committed to also, he knew that I had a full time job and he had a full time job. So we both mutually agreed it would be 30 days within reason. And so generally we always got back to each other within 24 hours. We're both very active on Twitter and so we would chat on Twitter or DM each other through Twitter or LinkedIn. And he actually, it's been more than 30 days, but he messaged me like two days ago just asking a question. And I've reach out to him. I think if I were to put myself in the buyer's shoes, if I put myself in his shoes, I think what he got out of me is someone who knows the product inside and out, who knows the code base because he built the code himself. And so when the buyer has a question from the seller, he knows he can get the answer from a source. I think if I was doing due diligence and buying a product of my own through Microacquire, I would look for something similar because it has been helpful to, to interact with people who intimately know the product and therefore can help with that kind of post sales support versus being like, oh, let me go talk to my dev team, blah, blah, blah, blah. It takes forever and then you don't get an answer right away.

Yeah, I like that. And I love how you guys have like, I know who the buyer is. I won't, I won't mention him. But you guys seem to have like a great relationship. You guys trust each other and I'm sure if he emailed you like with a question a month from now, you'd still answer it a hundred percent. But just like that component of, you know, you know, trust and building that relationship because, you know, when you acquire a SaaS application, it's not like, here's the keys. All right, you're good. You know, there might be a part that you just didn't cover in due diligence. And a month goes by and you're going to want to, you know, have the original owner available even for just light support. So that's, that's awesome that you did that. So this was a really quick and smooth transactions. I don't really have any other questions. Do you have like, any like, advice or like guidance. So for founders maybe thinking about listing their startup on Microacquire, maybe like one or two tips perhaps.

Yeah. And to your point, it was very smooth. Well, working with the final buyer was very smooth. I would say. The initial due diligence outreaches from, you know, I think it was probably 40 or 50 people reached out through Microquire, which was great. That was a little bit of a slog simply because you get the same questions over and over and over. And so the first tip I would give is if you're comfortable, make as much of those kinds of questions available in an faq because you may not post this directly on your product and you probably shouldn't, like, because your product is really focused on the customer. But when you are going through microacquired, you have a new set of customers and it's potential buyers. And so building an FAQ document, kind of like a pseudo help center for these buyers, will allow you to focus more on the buyers that really are serious. And then the ones who you say like, hey, I have some questions, you send them the document, they never get back to you. Great, you can weed them out. So I'd say that was a really good thing. But it also involves you being in a position of like full confidence in your product. Right. If you're like fire selling the business, you might not be so eager to make that available. But if you are in a good position, where I was, be confident in your business, put that information out there, and if people engage with it, great. And if they don't, then they're probably not the right buyer. So that would be one. And then the second one, I think is as much communication as possible. I feel like trust is directly correlated with the amount of communication you have with a human being. And so the more communication interaction you have with them, the more trust you can build. And so if you can use Microacquire's texting tool, right, like DMs and things like that, that's good. But at some point during due diligence, probably want to hop on a phone call. You know, we sold the business during like the hot, like the height of COVID So like, if I can't do it in person, but if you can meet in person or, you know, video call is perfectly fine. But it's good to just chat with them and understand who they are. If you can, you know, check out their LinkedIn, find their Twitter, you know, just make sure that they are representing themselves properly. That's, that's valuable. And yeah, I Think that's probably what I would say. I guess the other thing that comes to mind is, as a seller, valuations is, I think, something that people struggle with. So maybe I'll talk a little bit about that, if that's all right, is if you are building a SaaS and your numbers are growing, that magical number is 20% month over month. Right. If you're showing that kind of growth, then being able to anchor your valuation to either like annual reoccurring revenue x some multiple is a good place to start. You can use gross revenue if the business doesn't have significant margin hits. If it does have significant margin hits, you might want to reevaluate your valuation, things like that. But I ultimately picked a 5x valuation, which was quite lucrative and helpful for me, and then I stood by it. And you justify it by having FAQ docs and a P and L that's available. And so people can say like, great, it's not smoke and mirrors, it's in fact the numbers that he's saying. And so then you find people that agree with your valuation.

I agree with that on so many levels. Just being able to justify your valuation is so critical. Buyers just having like, I'm going to take my revenue and just multiply it by like 30 isn't going to work. I wish maybe microacquire grows to a point where it does. But just being able to talk to a buyer and say, this is how I got to my valuation. And whether you're doing that off of, like you said, ARR or just even daw typically even do best from what I've seen, when business isn't growing too much, it's flat or it's just extremely profitable. And then ARR, if it's growing. So if you're growing 20% month over month, you can definitely command those 5x multiples. So congrats to you on that, man. That's badass. And I'm super happy to hear that. So to wrap things up, this has been an awesome story. A lot of entrepreneurs are going to benefit from this. I always like to end these with a couple of personal questions. You know, what's your favorite book? Where do you go to educate yourself on startups? It could be a podcast too.

I think. Recently I've really enjoyed How I Built this. I think with Guy Ross, right. As a podcast.

I gotta check that out.

How I Built this. I think it's available on Apple Podcasts or wherever you listen to your podcast. But it has been a really interesting way of learning about what companies that you kind of see out there that are either unicorn valuations or things like that and understand, like, what was that story? Like, what was that struggle in the beginning? I think, who knows, Andrew, you'll probably be on how I built this in two to three years. Forever having the conversation of, like, how did you acquire your first customers? Right. Those are the stories that people talk about, though, which I really appreciate. So that's been good. So I'm a big graphic novel person. Comic books are my life. My first real job was actually as an editorial intern at Marvel for the X Men line.

That is badass. What's your favorite superhero? Marvel Gambit.

Gambit from the X Men is probably my favorite.

Yeah, but really, I'm a Venom guy. I used to. I used to be really into Spider man as a kid, and I always like Venom.

You should check out their newest thing is the King in Black. It's Venom. It's like a core big Marvel event. That Venom is like the antihero of the whole thing, but it establishes this idea that there's like a God of symbiotes. Right. The God of all the Venoms. And it's quite interesting, so you might want to check it out.

I gotta correct that. I'd probably say Iron Man. I mean, Iron man, at least from a movie perspective. Those are my favorite movies, but yeah, but yeah.

So then favorite graphic novels. I'll go that way. Watchmen, I think, is an important piece of literature that everyone should read. It examines the question, like, in a world of superheroes, like, who watches the superheroes? Right. Has applications for, like, a lot of, I think, how we analyze the world and what we view as, like, super people. Whether it's people, companies, founders, whatever. I think that one is great. And then I'll go a different way. I'll go with, like, Blankets, which by Craig Thompson. It's, I think, one of the few graphic novels that has, like, some very notable award, but nonetheless, it's a simple slice of life story about two people falling in love. And I'm a big romantic as well. So I felt like that was. It's beautifully drawn and illustrated and was just a really important book for my development.

Nice. Chris, you're awesome. I really, really appreciate you joining this podcast and just hearing your story. Congrats on the successful acquisition. And if people want to get ahold of you, where's the best place? Twitter. LinkedIn.

Yeah, so if you follow me on Twitter, it's. Chptung is my handle. And then it'd be a shame if I didn't plug. The thing that I'm actually building right now is called Coffee Chats. It is a way to create a personally branded website with built in calendaring functionality. And you can book a coffee chat with me@chris.try coffeechats.com I like that.

I'll include a link in the show notes on this for you.

Yeah, exactly. Yeah. And if anyone is interested in being part of the Coffee Chats community and making yourself available to talk about building products, founding products, selling things on Microacquire, it's completely free to make a website.

Right on. Chris, thanks again for coming on this podcast. Congrats on becoming a dad. Congrats on the acquisition and congrats on the new product.

Yeah, thank you so much.

All right. Cheers, bud.

Thanks.