SaaS Acquisitions w/ Tara Reed CEO at Apps Without Code

Foreign.

That's like the easiest last name. Okay. All right, I'm with Tara Reed. I'm super excited for this one. Tara recently acquired a company on Microquire and is now acquiring multiple companies. So, Tara, thanks so much for joining me.

Yeah, thank you so much for having me.

I actually just did my second.

I haven't told you about this yet. I just closed my second microacquire acquisition last week. The email end of last week. So I'm now two now.

Okay. I might have double the questions. So, I mean, I want to make this about you and whatever you want to discuss. So maybe we'll focus on the first deal. I know a lot of people were excited to hear about that. I was too. What was it? What did it do? Or. No, no, no. Let's start with this. Sorry. Let's hear your background. You know, I want to hear about growth spree. Let's start there.

Great.

Okay, good. So my background is in tech. Before becoming an entrepreneur, I used to run marketing initiatives at Google, then Foursquare, then Microsoft. So I worked on the business side on the marketing department at those companies. And I now run a company. So I've been a full time entrepreneur for six years now. And so I run a company called AppsWithoutCode. So we're an online school. We teach people how to build their own apps, web apps, mobile apps, without knowing how to write any code. And then there is profit from that business. And we think about how we invest in other tools and other businesses that are also going to help our audience of entrepreneurs. Because for us, we've got this audience of 150,000 entrepreneurs who are just on our email list who are looking for, like, entrepreneurship advice, what tools they should use to get started, all of that. And so we decided that we're going to be creating another entity and really through that separate entity, investing in and buying primarily marketing related software businesses, but putting our own spin on the distribution of them. So that's where. So I've got two companies, sort of holding companies that I run, apps without code, and also a company called Grosspree where we're acquiring small businesses.

Nice. So we come from a similar background. I started at no Code mobile app builder and I. And I kind of wish I didn't sell it so we could, you know, do what you're doing. But, you know, now I'm helping others like yourself.

I saw that in your background. I love it. Yes. You were early. When was that?

That was 2010. Yeah, it was when the iPhone first came out, basically it was so early that we almost developed a BlackBerry version of our product. That's over. That's awesome. Congrats on all that, I guess. Next question would be, are you willing to share the company that you acquired on Microacquire?

Yeah, absolutely. So there's been two. The first one is called Copycat and it's a copywriting AI software. And the other one, the most recent one is called Way, and so it's a software that helps you build a website.

So a website building tool.

The first company was the founder is based in Switzerland and the second company was actually owned by another company that had multiple softwares out of Brazil.

Nice. Walk me through your acquisition process. Like, how do you start your initial reach out? How did the negotiations go? Kind of let's, let's unveil the curtain on that a little bit.

Yeah. Okay, so I will preface this by saying that I spent the first four to six months just trying to figure out what the heck I was doing.

So there was a period of time.

Where I just wasn't making lots of movements and getting deals done because I was trying to develop my preferences for what kinds of companies. I was interested in what deal size. There was sort of a range of deal size that I could do and I wasn't really sure what was best.

And also I had to get out.

Of my own way in terms of the due diligence process. I think that there is a limited amount of due diligence that you can do depending on the deal size. And so I think I probably overcomplicated that part of the process when I first got started. But let me walk you through what I'm doing now and what's working. My favorite site to find tools and software and company on is microacquire.

I appreciate that.

Yeah, it's like the best. I'm not just saying that that is true. I would say that to anyone. I like the combination of quality and also responsiveness from founders. And like, you've done a really good job. I don't even know how you've done it, but did a really good job curating. So.

I have a question there. Yeah, you know, there's probably a lot of founders listening to this and maybe thinking about selling their business. What's a way? What's like a red flag to you? Like when you like, responsiveness from founders is obviously a great thing. Is there anything that kind of stands out as like, don't do this or definitely have, you know, these sort of metrics in place?

Yeah, I think that for me, the biggest red flags come a little bit later in the process. So it's not necessarily, I think just.

Naturally as entrepreneurs you kind of do this sort of like we're for sale, but like not really for sale. We're like this maybe my work, but not really. You know, I know I used to do sort of like that weird dance, but just. Yeah, being like upfront, transparent, getting on the same page and just doing it like very direct, I think is, is a great approach. So nice work there. In terms of. Tell me how you structured the deals.

Yeah, okay, good question. So the first deal that I did was a deal where I purchased 80% and there is a cash up front, 80% purchase, they held on to 20% equity. The second deal that I structured was different. I bought 100% of the business, of course, in that deal and we had like a three payment tranche payout. The other part that's really important about how we structure the deals just for like tax planning purposes is we'll do a lot of the asset purchase will be like, we'll take the amount that we agree upon and a particular percentage of that will be actually for the asset purchase itself. And the other percentage of that will be for like independent contractor work, which creates a little bit more ease of tax for just like everybody. So that's another structure. It's the same amount that we agreed upon. We just split it into two different vehicles. And that's another element of the deal.

Nice.

And those are really good ways to de risk the deal for really both parties because number one, the seller is able to get a deal done because they're being flexible on terms. And then with you, you know that the seller isn't gonna essentially walk away after the acquisition and not be available for anything on transition and all that fun stuff.

Yeah, I think for the deals that.

I'm doing, I'm looking for someone to.

Come on and largely stay on either as cp.

There are some occasional deals that we find where that person would be like cmo, but usually it's CTO who would stay on board. And so our particular strategy is to acquire software businesses, but to really wrap them in something different. And so for that reason we're looking for someone who's going to at least one person on the team, even if it's a contractor who was working and doing most of the development, to stay on board. So for that reason we don't do everything upfront usually, but we do like most upfront dual split a few different sort of.

Milestones around that transition period, which is usually a short transition period.

Of like a few months.

Awesome. What does that transition period look like?

Yeah, great question. So we have a. So we're acquiring multiple businesses. So we have a Growth Spree Slack channel. The initial part of that transition looks like I put them particularly since there's going to be an independent contractor agreement. We have them join, we use deal lets deal.com for payments. They join that. So there's automatic payments and that handles internationally really well. So it puts their terms of service in their country's terms. And then also what happens is usually we set a weekly meeting and we have that weekly meeting. We talk about things in between in Slack, but during that weekly meeting we sort of agree on here's what I'm going to do, here's what you're going to do, here's what the team's going to do moving forward. For me, I'm buying relatively smaller brands that need a good amount of like direction, particularly on the distribution level. So I have a team on the grocery side. I have a team that focuses a lead that focuses on agency. So creating an agency out of the software. I have a lead that focuses on marketing. So my grocery team is primarily meeting with whoever it was we acquired. And so all of the grocery companies are sharing marketing agency operations, a couple different resources if that makes sense. But then they have a point of.

Contact who's usually the cto.

Right. I love how you're leveraging in house resources for your existing company with this holding. Is that the setup that you have? So basically whoever's in charge of marketing kind of takes lead on building out the growth plan for every newly acquired company some.

So there's definitely sharing of resources and the premise of really what we're looking to do at grocery is to allow some sharing of of resources. So for example, the person who runs Marketing for Growth Spree, she's exclusively at Grossfree. However she used to run marketing with me at Apps Without Code. So I've already worked with her for a while and hired her on to work on this other project. So I am working with people that I've worked with before to sort of place them in places from an agency perspective. We have an agency at Apps Without Code and so my agency lead at Apps Without Code is also working with me on Grosspreet. Because what we sort of what's foundational at the view of how we're approaching things at Growth Spree is and this is interesting because I've done a lot of helping people building my own software and selling it and helping other people build software and selling it. And one of the challenges with software is that people think that software should be free or cheap. Like most people believe that.

Yeah, I can definitely agree with that from personal experience.

But if you gave people like a service, the service did the exact same thing as the software, but just a service version and told them that humans are going to do it, they would pay like way more for that same exact thing. Or if you, or if you taught them something and gave them education in particularly in the U.S. but I think worldwide, we think that education is worth money. So we're like, oh yeah, like I will spend money to learn what the software is doing. But the software itself, people have like a really low perceived value for. For it. So the strategy at Grossfree is to lean into that and to. Because there's a couple of pros and cons of each of those business models. It's not like software is terrible. Software is great. There's pros and cons in each of those three business models. With a course and with education, people have a high perceived value. However, like most people, you've got to like pull them through getting them to do the work, right? Like actually doing the work. An agency is nice because people really get what they actually want, which is like to not have to do much. It gets done for them. However, agencies are usually really hard to scale. Like there's a lot of custom things that you're doing for different people. So they're often hard to scale. And then with software, software usually automates the process of the fulfillment for them. Right? But people have a really low perceived value of software. So the idea that we're playing with at Grosspree is to combine the best of each of those three business models. So when we acquire a software business, we're not going to sell it just as a software business. We sell it and position it as a education experience and. Or an agency, sometimes it's both, sometimes.

It'S just one or the other.

So an example of this is with Copycat. We're repositioning it now. We're working on this right now where we could sell it as a software. And there are competitors out there, competitive tools that are, you type in your piece of text that you want to write and it will. Or you describe your business, for example, and it writes emails for you for your marketing, or it writes ads for you for your marketing. Those things exist. But when I talk to folks who run agencies, their perceived value of how much they should spend On a software.

That does that is pretty low.

But if you tell them, actually we're just going to give you a service and we're going to write your copy for you. It's like sky, go sky high. And so it's just a totally different perception. So we are going to have some human copywriters that are doing the work, but we're also sort of centering it in the tool. So the tool is the fulfillment but not actually the thing that the client interacts with. Does that make sense?

No, it totally makes sense. Like at Business Apps we had a really easy to use app builder but we would build most of the apps for customers because for us it took, you know, 10 minutes. We know the software inside and out but that, you know, lowered the barriers to entry. Like one, I don't have to learn the software. Two, I know when it's all configured it's going to be done correctly.

Right.

So that's a really good model. I really like that.

Yeah. So take the software business rapid, either in education or agency, sometimes both, depending on the model. So an example of this we just acquired Way, which is a website builder. And, and it's funny because you might think that that space is like so saturated already. I'm actually really interested in saturated spaces where people just want it done for them. I'm actually really interested in that.

So we have like a list of.

Our 150,000 person list of people who are building their own websites. Like sorry, building their own apps. They're also thinking about building websites and we often say like, hey, that's not something we do. But like here's a tool that you can go do it yourself in. And some people do it, but other people are like, I don't, most people don't know how to structure a really.

Good website or how to, or want to build it themselves. Right. The average person, if we think about you and I who are like entrepreneurs and we're going to get in there and we're building and we're like techie, we'll do it. The average person is not going to do it. And so we're wrapping that both in like education about how to build a really great website and structure but also will then do it for you.

I really like that. I think we have a lot of alignment on startups in terms of. I talked to a lot of entrepreneurs that are always looking to build what I've called the vending machine. Like they'll just come to your website, they'll just sign up, they'll Pay a subscription, you never have to talk to them, they never have any questions. But in reality like you know, getting on the phone with customers, like understanding like their needs and pain points, being able to be consultive and helpful go such a long ways and that can be like the differentiator from you and you know, a thousand other competitors, especially in a crowded market.

Yeah, I think that's spot on.

I'm not really that interested in the.

Like low price point but we've got lots of customers model. I actually prefer premium price points as a business model and sort of learned that in my first two businesses. One where I did a low price point, one where I did a premium price point. And there was a radically different outcome and just how the businesses ran and worked and how you can bootstrap. Right.

If I was going to raise a.

Bunch of capital, low price point, tons of users, it's perfect. I'm personally not that interested in raising venture a ton of external capital and so it looks a little bit different.

Yeah, I mean if you could build calendly like more power to you but for most entrepreneurs it doesn't work out like that. Like you have to talk to people, you have to like we even do that at Microacquire. Like you know, we're very hands on. You know, we talk to, you know, the founders, we talk to the buyers. But you know, that's. I guess what I'm trying to say is like you know Paul Graham's quote of like doing the stuff that doesn't scale and you can charge for that too. So that's awesome. I guess my next question is so due diligence, can you walk me through that? Because for some people it's you know, really lengthy. I've gone through some pretty lengthy due diligence processes myself. Other people do it quick. Like what? Walk me through maybe like the main parts of you signed an loi. Maybe you're getting close to a purchase agreement, a circle closing date. What does due diligence look like for you?

Yeah, it's relatively brief.

I will usually jump in and because.

I'm pretty hands on with software and feel comfortable with it, I'll go explore the front end of the tool myself or my team? Well, I have one other person who's on my team now who's helping me with this. So there's sort of two of us doing this and then I have tried in the past. I actually worked with a due diligence company actually who like went and looked at code base and did all of that. Work. And I felt like they just wasn't.

All that helpful at the deal sites that I was doing to get that level of. Like there were things that were like, yeah, this could be more secure, we could do this a little bit differently. And so, but. And that all those things were sort of to be expected of someone who was a small developer who didn't have like a humongous team. Right. Nothing shocked me and I actually decided not to do that Formal, formal due diligence of a process moving forward in that same way. So I will have a zoom where I ask sort of the developer, the founder, sort of walk me through what they've got on the back end. I'll ask questions, sort of got a checklist of things and that's like the bulk of the due diligence that I'm doing. I'm not doing a whole crazy ton.

Nice. And then for first time buyers, what would you recommend in terms of. Are there any of favorite resources? Obviously following you on Twitter is probably a good thing to do, but anything that helped you in terms of getting your first acquisition done.

I have a business manager who helps me with my companies across the board and he was actually the push to getting my first deal done. And, and mainly his push was like, you just have to do it, like even if it sucks as a deal, you just have to do the first one and rip off the band aid pressing on that. But he was so right.

I recommend that like to people all the time. Like, what should I start with? I always recommend something small just to go through the motions of like letter of intent, you have a purchase agreement in between that you have due diligence, then you have transferring of the assets and then just do it all formal, even if it seems a little overkill, just to kind of like give yourself a little bit of confidence to, you know, when you do find a bigger business, you can move into it.

Yes, yes. So I think that's largely what's happening. Like we started with a small deal and they're sort of scaling up, but I really just had to pull off the band aid. I don't know that I have like a best practice thing that you have to read. There were a few articles that I read, but actually not that much. Like I just seemed to go, yeah.

It'S kind of like starting a business too. I mean you could read all the books you want and watch all the videos, but yeah, when you actually start it, that's when you start to really, really learn the most.

Question I'm asking myself like the majority of the due diligence for me is the core question that I'm asking myself. Particularly since I'm a marketer. I'm building this leveraging my, not only my marketing ability but also the audience that I have. So it's like, okay, I have entrepreneurs that I already have interested in tools and things that I'm recommending. So if I first am clear on what my superpower is that I'm leveraging and we all have some sort of thing that we bring to the table that we're going to leverage, it could be that you are really innovative and can come up with lots of cool new ideas for the product. That's not going to be my superpower. I'm probably not going to come up with a bunch of product ideas as what they can do differently. I'm going to come up with a marketing and distribution idea or how we're going to wrap this in something that can get a different price point and I'm literally just going to stick with that. I'm fine with being a one trick pony on that. And so my question when I'm looking at a deal is like, what is my confidence of the ability to market this? Yeah, that's the biggest thing I want to know.

Yeah. Seeing the potential upside like as you acquire it.

Yes.

That's awesome. So I'm sure you have some ambitious plans for it this year. Are you willing to share maybe what you have in store? Other companies you're hoping to acquire? Anything at all?

Yeah. Okay. So in general I'm looking for marketing related businesses. We're not exclusively looking at software. So there are some like education businesses and some agencies but sort of that trio of education software agency primarily leaning on softwares. I am really looking for a LinkedIn lead generation tool which I know is like an interesting space because there's so many of them. We haven't done a deal yet that I really like so I'm totally looking for that. Other than that I'm really open to opportunities that come my way. I am a big practicer and this is funny because I don't know a ton of women who are in micro private equity.

Andrew, if you know some, let me.

Know who I should talk to. I don't know a ton but I do know that in my own business practice I like to balance the like masculine and feminine energy. So what I mean by that is like I'm not always like here's the goal that we're trying to hit. Sometimes I'm like in flow of what opportunities come my way. So if I see something that I think is a really good fit and it fits sort of this formula that we have already built and are building, like, I'm going to talk to someone and also, like, if it feels good, if it feels like I can have a good working relationship with the founder, like, I'm going to spend, I'm going to lean that way as opposed to making really a ton of rigid criteria or like, here are the exact things that we have to buy moving forward.

Nice. I like that. Yeah. Just being patient. I think someone told me a quote where the best deal to do is typically it was like one in front of you, and then the second one is like, no deal at all. Where if it's just not a fit, don't go, you know, searching too hard, wait for something that fits within. Like. Like it just needs to feel right for. On multiple fronts. And then that's when you kind of move.

There have been multiple times where it just, like, it didn't feel right. And I pulled out because it didn't feel right. The collaboration of how we were working together, how the meeting went, just didn't feel right. And that's. That's okay.

Yeah. Well, Tara, this has been awesome. I so appreciate you coming on this podcast. Where can people find you and learn more about you?

Yeah. Okay.

So you can find me on both Twitter and Instagram. Eraad. On Instagram, I'm usually writing sort of these micro blog posts and captions about what I've been up to in business, and I'm going to be doing a lot more of those actually. Really related to what I'm doing with growth free. So Instagram or Twitter. Tararead.

All right, there we have it. Tara, thanks again so much for coming on. I appreciate it.

Thanks so much for having me.

And it will. Or you describe your business, for example, and it writes emails for you for your market, or it writes ads for you for your marketing. Those things exist. But when I talk to folks who run agencies, their perceived value of how much they should spend on a software.

That does that is pretty low.

But if you tell them, actually, we're just going to give you a service and we're going to write your copy for you, it's like sky go sky high. And so it's just a totally different perception. So we are going to have some human copywriters that are doing the work, but we're also sort of centering it in the tool. So the tool is the fulfillment, but not actually the thing that the Client interacts with. Does that make sense?

No, it totally makes sense. Like at Business Apps we had a really easy to use app builder, but we would build most of the apps for customers because for us it took, you know, 10 minutes. We know the software inside and out, but that, you know, lowered the barriers to entry. Like one, I don't have to learn the software, two, I know when it's all configured it's going to be done correctly. So that's a really good model. I really like that.

Yeah, so take the software business, wrap it in either an education or agency, sometimes both, depending on the model. So an example of this we just acquired way, which is a website builder. And it's funny because you might think that that space is like so saturated already. I'm actually really interested in saturated spaces where people just want it done for them.

So we have like a list of.

Our 150,000 person list of people who are building their own websites. Like, sorry, building their own apps. They're also thinking about building websites and we often say like, hey, that's not something we do. But like, here's a tool that you can go do it yourself in. And some people do it, but other people are like, most people don't know how to structure a really good website.

Or how to, or want to build it themselves. Right. The average person, if we think about you and I who are like entrepreneurs and we're gonna get in there and we're building and we're like techie, we'll do it. The average person is not going to do it. And so we're wrapping that both in like education about how to build a really great website and structure. But also we'll then do it for you.

I really like that. I think we have a lot of alignment on startups in terms of I talk to a lot of entrepreneurs that are always looking to build what I've called the vending machine. Like they'll just come to your website, they'll just sign up, they'll pay a subscription, you never have to talk to them, they never have any questions. But in reality, like, you know, getting on the phone with customers, like understanding like their needs and pain points, being able to be consultive and helpful go such a long ways and that can be like the differentiator from you and you know, a thousand other competitors, especially in a crowded market.

Yeah, I think that's spot on.

I'm not really that interested in the.

Like low price point, but we've got lots of customers model. I actually prefer premium price point. Points as a business model and sort of learned that in my first two businesses. One where I did a low price point, one where I did a premium price point and there was a radically different outcome and just how the businesses ran and worked and how you can bootstrap. Right.

If I was going to raise a.

Bunch of capital, low price point, tons of users, it's perfect. I'm personally not that interested in raising venture a ton of external capital and so it looks a little bit different.

Yeah, I mean if you can build calendly like more power to you but like for most entrepreneurs it's. It doesn't work out like that. Like you have to talk to people, you have to like we even do that at micro choir. Like you know, we're very hands on. You know, we talk to, you know, the founders, we talk to the buyers. But you know, that's. I guess what I'm trying to say is like you know Paul Graham's quote of like doing the stuff that doesn't scale and you can charge for that too. So that's awesome.

That's right.

I guess my next question is so due diligence. Can you walk me through that? Because for some people it's really lengthy. I've gone through some pretty.