SaaS Exits in the New AI Era [Webinar Recap]

All right, so this month's webinar is titled SaaS Exits in the New AI Area. There's obviously been a ton of changes in tech in the past couple years, and we've been seeing a lot of positive activity on the acquire.com platform. So we're going to talk a little bit about that, um, and some other things to hopefully guide you as a founder towards the right path, whether you're thinking about continuing to build or potentially sell your business. Hopefully we'll, we'll give you some good tips and advice to figure out which path is best. Quick intros. My name is Andrew Gazdecki. Before Acquire.com, I built and sold two different companies. One was a company called Business Apps that Dave here on this webinar was a part of. And then after that, I built a crypto exchange platform and had that acquired by a company called B&K to the Future. And really just going through that process kind of opened my eyes to just how hard it is to sell a business, from finding the buyer to figuring out what is due diligence, to just figuring out if you're getting a good deal or not. And I thought it'd be great to build a marketplace that put all the buyers in one spot, really empowered founders to have the best exits they possibly can, And that's how Acquire.com was born. And as a company, we've done over a billion in acquisitions. I've seen probably every single deal type you can imagine, every founder mistake, every great outcome that you could possibly imagine. So it's a pleasure serving founders. And with that, I'll pass over to you, Dave.

How you doing, guys? I'm David Morton, VP of Engineering here at Acquire. And I've got over 25 years experience building startups I've come in as the first employee, I've scaled to hundreds of employees, gone through exits as part of, as the technical lead. And as Andrew says, it's my second company with him. I'm thrilled to be with him at another venture and really excited to help founders get the exit they deserve here at Acquire.com. And so happy to be on this webinar and happy to talk through some of the technical nuances of the AI era we're in.

All right, so for a, a quick agenda overview, at the top we're going to be going over the AI disruption map, helping you figure out which side are you on. Are you having AI empower your business, or is your business potentially being disrupted by AI, and what to do, defensible modes in the AI area, and then 3 paths forward, whether that's selling, scaling, or pivoting. How to think through each of those. And then we'll move back into acquisitions, more focused on should you sell fast or potentially hold on to the company where you might find yourself in a position where the business isn't sellable. We'll talk about what you're seeing or what we're seeing in terms of what sells fast and what isn't. And then we'll go over some real founder stories of founders that have sold with us, why it was successful, and some background on their business. And then we'll do Q&A at the end. So if you have any questions, feel free to put them in the chat. We'll be watching that and towards the end of the webinar, we'll, we'll be sure to answer those. And if you're not familiar with acquire.com, we are the number one startup acquisition marketplace. Been in business about 5 years. We've done over a billion in closed transactions. Currently today on the platform, we have over half a million vetted buyers and investors. We are the number one SaaS marketplace globally, and on average, we see deals close in about 60 days. And really what, what sets us apart is just the amount of buyers and attention we drive to businesses that are actively looking to sell. And then we also have a hands-on advisory service that helps founders through every step of the way. So we really do everything we can to ensure that you're getting a great outcome when you're working with us. And then I'll pass it over to you, Dave, kick us off.

All right. Striking gold or getting struck. Let's move on. All right, I think everybody on this call knows this, but the robots aren't coming, they're already here, right? AI is a part of our business life, it's a part of our personal life, and it's really changed the business landscape in just a few short years. And I think one of the areas that it really impacts is just where you feel competition from your business, right? In addition to the usual places you could face competition, which is maybe new entrepreneurs entering the market, now you have AI companies themselves like Google, Anthropic, and OpenAI who are actually actively going after different SaaS verticals. You know, a few weeks ago we had Claude Code release— or Anthropic release Claude Design, which took a bite out of Figma and Adobe. Google also already had a product in that space with Stitch. And so in addition to just entrepreneurs, you have AI companies who are growing their TAM, growing their capabilities. A couple of weeks ago, or a few months ago, there was a reporter for CNBC who actually wrote an article to see how far she could get building a clone of monday.com. And she didn't actually expect to build one. She just wanted to see how far she could get armed with AI. And she successfully built an MVP and it was big news. And so right now as a founder, you just don't face risk from the traditional, in the traditional sense, you face it from AI companies going after your vertical. You face it from non-technical people, first-time founders, you know, kids, 22-year-olds with GitHub account. And so the question isn't really if AI will hit your category, it's already happening. People are probably already sizing up your market thinking, what can I do and how can I use AI to get into it? And what we've done here is we've put together a disruption matrix, you know, like basically talking about which businesses are at high risk of disruption due to AI. And so over, over on the extreme risk side, you have AI writing, copywriting tools, chatbots, transcripts, grammar, all language-based. And this is because AI at its core is a language model, and it does this stuff extremely well already and has been for a while. Um, Moving on to the high-risk category, you have things like spreadsheet automation, simple analytics dashboards, basic CRM, situations where the AI has moved beyond just language and now can make tool calls and actually call out with APIs and deliver a full app, which is pretty impressive. I also want to highlight, if you have a business in extreme risk or high risk, it doesn't mean your business is unsellable. Come talk to us at Acquire.com. We'll help you position your business right. We know how to position it for our buying pool so that buyers see the value and the hard work you've put in. So we're just highlighting these categories here, but that does— by no means does that not mean that your business is unsellable. And then over on the low-risk side, we have deep vertical SaaS, right? Think about legal or medical where you have specific domain knowledge in a vertical. That's at low risk. Data with network effects. In the startup era, data has always been gold and it will continue to be gold. And if you have network effects where that data is getting better as your users are using it, that's even better. Compliance platforms, those types of softwares tend to be pretty sticky. You know, they're built on trust, and when businesses pick a compliance platform, usually they stick with it. Usually it's a core part of their business, so you're gonna tend to have low churn and the customers are gonna tend to be sticky. And finally, we have multi-integration hubs. To me, this is like HubSpot, right? Maybe you bring it in to be your CRM, but as it matures, it sort of gets tentacles in your business, right? It plugs into your sales system, it plugs into your customer service, your reporting, maybe integrates deeply with your product, and all of a sudden it becomes a core part of your business. So again, tend to have low churn, tend to be sticky, and tend to be very attractive for buyers.

And I think, you know, one thing I would think about if I'm a founder, uh, seeing this slide is, you know, you really want to understand where you sit. I know as founders we're very optimistic and, you know, we might be on the extreme risk side, but we'll say, oh no, I think we're on the, the lower risk side. But at the bare minimum, at least have a, a strategy to move from extreme risk to high risk or high risk to lower risk. And this by no means is entirely comprehensive and is completely factual to where you are, but you should take an honest look at your business and say, where do I think the market's going to be in 2 to 3 years? Are there going to be more competitors? How am I doing against existing competitors? And what can I do to make my business more defensible? Because at the end of the day, that's what's going to really increase your valuation and build a better business that will last a longer time. I'm not sure if you'd add anything to that, Dave.

Yeah, I completely agree. Let's move on to the next slide. Yeah, AI, you know, it can be your moat, but really at this point it's everyone's commodity, right? Like AI is approachable, it's easy to use, it's cheap. And so you really need, like Andrew was saying, you really need to be thinking about how to take your business to the next level, making sure that you have some of those items like data integration, make your business defensible and leverage AI to help you do it. You know, in the past we'd seen apps that were just, you know, wrappers around the OpenAI APIs or the Anthropic APIs, but those days are gone, right? You can't just build an app, put it on the marketplace and wrap an API. You really need a moat, right? You need data ownership, distribution, deep integration, and you really need, if you are in some of those higher risk categories, like Andrew says, you need to find your way to move down and, and de-risk the business a bit.

100%.

All right, so what are the 3 moats in the AI era? Like, what can you do? What's valuable right now? Um, proprietary data, right? Data has always been gold in the startup era and continues to be gold, right? Not only do buyers want data, but AI companies themselves want data, right? It allows them to train their models on new capabilities. And so if you have unique data, if you have a lot of data, that's valuable. If you're not gathering data, start gathering more data. Storing data is cheap now, and so the more data you can collect, the better. It can be a huge value add to your business with honestly a little bit of work. Um, let's move on. I would say if data has been bold in the startup world, distribution is platinum, man. I mean, if you have users, there are ways to make money off those users. Like even something like a newsletter, right? It's just distribution, but that's valuable. And so you can't have— you can't click a button on AI, it can't get you, you know, 100,000 DAU with a click of the button. Building distribution, building customers, that takes hard work, that takes marketing, and that takes truly knowing the people that are interested in your product. And so there's value there. Everybody wants network and distribution, and if you have it, it can be a wonderful moat. And finally, deep vertical integration, right? This is kind of some of the things we touched on before. You know, if you have compliance hooks, if you have domain-specific knowledge or workflows, stuff that generic AI doesn't do well now but could in the future, like you have a good moat right now and it's a great spot to be in.

Completely agree. I think the distribution and network is a, is a massive one today, because like you said, you can't just go and chat GPT and say, hey, can I get, you know, 100,000 users, which would be amazing. But some things to think about if you have a large network of distribution, is there another product that you can build to sell to that user that maybe they're using with another company and they could switch to you? You know, when you speak with buyers, they could potentially have, you know, an amazing product that they sell to an existing customer and they could use your distribution. So there's also some things to think about in that realm as well. But great points, Dave, completely agree. Moving over to who's writing checks in 2026. So we're going to move more towards the acquisition side of things and talk about who we're seeing acquire startups on acquire.com. So right at the top, we're gonna see strategic acquirers. These are essentially other businesses that are gonna be interested in your data, or just like I was mentioning, your distribution and your team. Generally, strategic buyers are gonna pay the most for a business, but they're always the hardest acquisitions to close. And the reason being is there's so few strategic acquirers. And these are generally the acquisitions that you hear about. These are gonna be the headlines. Google buys Wiz or, XYZ company. This is the top of what you want to achieve in an acquisition, but it's not always gonna be there. My first business, Business Apps, we sold to a private equity fund. As we move to the right side of this slide, the buyer pools get much, much bigger. So there's far more PE funds and search funds than there's gonna be strategic acquirers. And so these are other targets that you can potentially sell for on acquire.com as we have a network of strategic buyers, private equity funds, individual operators, and also AI-native startups. The difference between strategic buyers and private equity buyers is typically we'll call them strategic buyers and then financial buyers. So a financial buyer is gonna be predominantly interested in your cash flow and your profitability and your EBITDA. And the way that they're looking at the acquisition from an ROI standpoint is going to be completely different. They're going to be thinking, how can I pay back this total acquisition price in 5 years from the cash flow of the business? Can I do that or increase the speed by reducing costs or making the business more profitable? What does that look like? And a strategic acquirer is going to be looking at it from the lens of we could take this existing product, sell it to an existing customer base, or this team can help us enter this market. "and that is worth XYZ based on our valuation." So you want to be familiar with both types of buyers, both strategic and financial. You're more than likely to sell to a financial buyer. I would say that 95% of acquisitions are going to be from private equity funds and individual operators. To touch on individual operator, these are essentially people that want to be the CEO of a startup. Themselves and they don't have a great startup idea. Uh, maybe they're an executive at Stripe and they have some capital and they'd like to invest that into a business that they can run. They're not necessarily looking for a grand slam acquisition, meaning they're not looking for a business that could 100x and they can take public. They're entirely fine with a business that generates a couple hundred thousand in cash flow and is pretty stable and isn't going to be, chaotic mess. And then at the end, we have a large amount of smaller startups that are always interested in acquihires or feature tuck-ins. But the main two buckets that we see are definitely private equity funds and individual operators. And then in terms of what these buyers are paying, a lot of the buyers that we see doing acquisitions today are focusing on profit multiples over revenue multiples. And these are ranges that we like to give founders to give a sense of what the market is paying. So you can see on the left-hand side, $100K and below, all the way up to $1 million plus, the multiples will range and generally get larger as the profit gets larger. I think one of the biggest misconceptions too I see in acquisitions that we work with founders every day at Acquire is, will my business sell for 10 times revenue? That's what I heard startups sell for. How can I get a 10x revenue multiple? Generally, I've never seen a 10x revenue acquisition. I think they're extremely rare and they're generally only cases that involved a large amount of equity in a larger company. But generally, this is startup when you go to market, because when you price outside of it and you have a valuation asset that's going to be outside of what buyers view as the norm, you're not going to get any attention. You're not going to get any interest. And you're not going to get your business acquired. So quick valuation guide again by SaaS business, e-commerce, marketplace, and agency. You can see most of the focus is going to be on the range of profits. Again, this is because in order for buyers to see a return on the investment of acquiring your business, there needs to be some profit in the business. And an example I'll give you that we see all the time at Acquire is the So let's say there's a SaaS business doing $2 million in revenue, but $100,000 in profit. And if you compare that to a SaaS business that's doing half the amount of revenue, let's say it's $1 million in revenue, but $500,000 in profit. So half the revenue, but 5 times the amount of profit from the first example. The business with lower revenue, but more profit will get way more interest from buyers, generally multiple offer situations. And will also command a higher multiple because buyers are able to calculate a very clear return on investment from that acquisition. And when the business has a lot of revenue, but not a lot of profit, there's still work that needs to be done on the business side of things from the cost structure point of view to make the business profitable, and that's going to command a lower multiple. So how are these deals actually structured? So we know there are strategic buyers, financial buyers, They're looking to acquire businesses on a profit multiple. What do those deals actually look like and how are they structured? So these are some common deal structures that we see at Acquire. The best is going to be full cash at close. That's always what we're aiming for at Acquire. That's going to be 100% cash paid at closing. There's no earnouts, there's no seller financing, no future obligations. This outcome generally requires a multiple buyer scenario where you have a lot of leverage. Where you have multiple offers from different buyers and you're able to go to one buyer and say, hey, I know you said you'd acquire the business for $2 million, but 80% of that was going to be cash at close. Can we make that 100%? And that's how you're able to move that percentage up to get a full cash at close acquisition. We see this pretty often at Acquire. And again, it is a function of having multiple buyers interested, running a good process, going out to market with a fair valuation, being prepared. And these are all things that the Acquire M&A team works with founders on is how do we best prepare the business? How do we prepare you as the founder? How do we price the business appropriately so we can really maximize that initial interest and get as many buyers to the table as possible so we can field as many offers as possible? When you miss any of those pieces to an acquisition, it all kind of falls apart. I mean, you go out to market, you have a really high asking price. You just want to test the market to see if someone will give you a really high offer. And maybe we advise you to go at a different valuation. What happens is the deal stalls and buyers don't get interested. And then you kind of signal to the market that no one is interested in this acquisition. And what happens is you have to go back, regroup. It's not a deal killer, but it's always the best to go out to market with your best foot forward. Priced correctly, you have all the necessary materials available, clean P&L, put-together SIB, a listing that looks great, marketed to the large groups of buyers that we have at Acquire, and then you speak with them all at the same time to garner as much interest as possible. Do that correctly, that's how you're going to see full cash at close. Now, depending on the type of buyer, you could also see an earnout. Which isn't necessarily bad. An earnout is, it's not a bad thing if it's structured in a way that's fair, meaning the targets are reasonable. There's a high likelihood that you'll reach those targets. This is generally how we'll bridge the gap if the founder wants a valuation that's going to be higher than what a willing buyer's willing to pay. So for example, buyer feels the business is worth $1.5 million, founder feels it's worth $2 million, we'll bridge that gap by having a performance-based earnout to essentially prove that the business will be worth more in the future post-acquisition. We also see things like an equity rollover. This is where the business is acquired by a certain buyer, and you as a founder will retain ownership in the buyer's existing business or the new entity that they create to give you some upside if the business ends up 10x-ing from the acquisition point, this could be a great way to have what we call a second bite of the apple. And then we also see a lot of seller financing. So this is where a portion of the agreed valuation is going to be paid on a monthly or quarterly or yearly basis, typically from the cash flow of the business. As an example, you could have a $2 million acquisition, $500,000 of that is seller financed, and that's going to be essentially a loan paid to you by the buyer every single month or a quarter or a year from the cash flow of the business. So it's another way to bridge the gap where you want a higher valuation, buyer wants to reduce the risk and lower the initial cash at close. These can be good options. But again, our goal at Acquire is always to get full cash at close. And we do that by getting as many buyers to the table with as many offers from our buyer network as possible so we can use those to negotiate better terms and a higher valuation.

I think one of the key things too on this slide is that there are a lot of levers you can pull and a lot of ways you can position a deal. And so as Andrew said, if you're willing to de-risk the business by a little bit by staying on, you can get a higher exit. You know, maybe you want to get out and you want 100% cash on close, but That's what acquire.com is here for too. As Andrew said, deals come in a lot of different flavors and structures, and we have our advisors here that can help walk you through the deal, maybe show you where you have leverage, maybe work with you on those levers that you can pull to get the outcome that you desire.

100%. You brought up a great point, Dave. You know, the name of the game in acquisitions is reducing the risk for everybody involved. So as a founder, how can you do that? For the buyers. You could stay on the business. You could agree to certain structures like an earnout to prove that the business will continue to perform post-acquisition. Because the biggest fear of a buyer is they acquire the business, everything falls apart, you as a founder leaves, and everything they put up for the acquisition is, is going to decline. So everything you can do to ensure a buyer that that's not going to happen, typically the more interest you're going to see and the higher valuations you're going to see. And again, these are, these are things we definitely work with you at Acquire because we're aligned in what we want to see in these outcomes, and that's great exits. So 100%. And just touching on what every buyer wants in 2026. So this would be our acquisition checklist. We want to see predictable MRR and annual recurring revenue. This would be the best revenue stream you can have in a startup. And the lower your churn, the better you're going to see in terms of interest from buyers. Another big one that a lot of founders overlook is going to be founder-independent operations. In startups, it's really— what's the word? You know, every founder wants to do everything. It's almost what we're trained to do is you need to be on top of support, top of marketing, top of sales. But when you go to sell your business, it's the complete opposite. The more useless you are as a founder, the less you do in the business, the better. And that's because it de-risks acquisition where a buyer can look at this say, you know, the, the founder isn't necessary to run the operations of the business. And that lowers the risk if the founder wants to leave post-acquisition, which is very common. You want to sell the business and move on, go start something new. Totally get it. Uh, but before you put yourself in a position where that's going to happen, you want to de-risk the business, uh, delegate key parts of the operations of your business, document everything you possibly can so someone could step in and learn how to run the business. Just as well as you do. And it's just great business practice. And you might get some of your sanity back if you delegate and document everything. So if you haven't thought about that, take a step back and think, you know, what parts of my business am I still running that don't necessarily need me to survive? Clean financials is another one. Dave probably has heard me say this a billion times. It sounds so simple, but having a clean P&L with expenses and revenue broken out by month that's easy to read, is absolutely critical for an acquisition. It's almost required by most buyers. Anything you can do to really share just the financial health of your business, and it's not super hard to understand, is going to increase your valuation. I had a small angel investor in my last company, and he gave me some advice to hire a VP of Finance for my last startup, just for the clean P&L and books that we would have. And his argument was it would essentially buy 10% of goodwill with potential buyers. And he was absolutely correct, especially if you're gonna be selling to a financial buyer. Having clean financials is gonna be absolutely critical. This is also something that we can work with founders on. But again, look through your financials today and see how organized are you, what needs work, what can you do in a week? Can you hire a CPA to just give you a quick refresh if maybe hiring a VP of finance is going to be too overkill? Can you use AI today to put together all your numbers? But at a minimum, have them together and know where your financials stand in terms of ability to read.

And I would say too, if you're maybe thinking about selling soon, get a jump on this. Maybe you're not a finance person. I'm not. I sort of dread this. But if you can start it early and chip away at it, Man, does it make a big difference. And, and we get it as a founder, right? Like, you see an opportunity, you move into a market quick. Maybe you haven't been careful about, um, how you've been billing things or organizing things, but, you know, take a little time and, you know, maybe you can chip away at the problem a little at a time because, boy, this makes a massive difference— clean financials. And I think it's, it's something we can all do. And like Andrew said, you can hire, um, professional help if you need it, or you can work with AI to maybe just help get organized. But just being able to present your financials in an organized, uh, transparent, and trustworthy way is huge.

100%. And if you're not sure where you stand, uh, definitely meet with us and we can give you our opinion on, you know, how everything looks, what needs work, uh, where we'd focus the next week, stuff like that. Um, but completely agree. Uh, the next one would be having an AI, uh, narrative. Every buyer is going to ask, how are you using AI in your business? How defensible are you against it? So you need to really have answers to those questions and ones that are believable as well. If you're making up, you know, hey, AI isn't going to come to my market because we have, you know, the best feature XYZ. If it's believable, sure. But if it's not, buyers are smart and they're not going to believe you. So if you don't have a rock-solid answer to this question and how are you using AI in your business, You should think that through and really work on that. Maybe it's something you can build, maybe it's a market you can enter, or maybe you're good to go and you have a very defensible business. But whatever the answer to that question is, start thinking through it because buyers will ask you 100%. And last is going to be growth. Are you growing? Is it flat? Is it declining? All of these are fine for acquisitions, but you need to know how it can impact your acquisition. For example, if you're declining or if you're flat, you really need to focus on profitability. It is extremely hard to sell a slow-growth, non-profitable business. We do see it from time to time, but if it's slow growth, flat growth, and you're extremely profitable, those acquisitions see offers all day long from a number of different buyers on Acquire. If you're growing really fast and there's a good justification for not being profitable, We see those acquisitions as well. So you need to know where you stand. If it's slow growth, not profitable, that's an area you need to work on as a founder and be honest with yourself, meaning should you reduce expenses or do you have ideas to reignite growth? Because without doing one of those, it's likely that your business won't be sellable. And if you have questions on those, we're happy to meet with you, give our honest opinion on what we're seeing in the market. But a lot of things to think through as you think through an acquisition.

All right, sell, scale, pivot, choose wisely. All right, as a founder, you make decisions every day, hundreds of them, and I'm sure you're thinking, okay, what do I want to do next with my business? And we put together a couple of forks in the road, a couple of choices that you can make as a founder as to what you can do, right? Option A is to exit now. Maybe your business is is doing good, but you're not quite sure what the future holds. Maybe churn is ticking up a little bit. Maybe you're worried AI is entering your category. Come talk to us. We can help you position your business in front of buyers to get the exit you deserve. And you don't want to wait until your business is declining. Like Andrew said, you don't want to wait until growth runs out. I think it's important to always be selling from a position of strength, right? Like if people can see opportunity in your business, they see the growth. If they, can see how they can get their investment back and then continue to grow it further. That's what excites buyers, right? Nobody, few buyers want a declining business with declining revenue. And so if your business is hot, it can be a great time to sell. Also, maybe you're the 0 to 1 guy and you're not the 1 to 100 guy, right? Maybe you've got it to a point and you're thinking, I'm ready to move on to the next thing. Maybe some of these new AI capabilities have come out and you're thinking like, I want to start a new venture or a new business, you can help fund your new venture with the sale of your existing business. And so we're here at acquire.com to help you. We'll help you evaluate the market, evaluate your business, and really put it in a position to highlight the strengths and highlight all the hard work you've done to our buyer pool so that you get the exit that you want.

And one thing just to add to that, I really like that you said was You know, there's, there's so much going on in tech right now where there's so many new tools, so much more opportunity. You know, as founders, we're always thinking about different ideas. We're always thinking of, you know, this business is interesting or someone should disrupt that business. I'm sure if you're listening to this and you've been thinking about selling, you have a few of those ideas already. So maybe exiting is the move where you can really execute on a brand new AI-first company in a market that you've been looking at for a while. So if that is kind of where your head's been at, um, Path A might be for you.

Absolutely. All right, Path B: scale up, um, doubling down with AI as fuel, right? Use AI to cut operating expenses, expand margins, automate. I mean, these are table stakes at this point. Like, you should be doing this, these things. Your competitors are doing these things. This is like the standard playbook now. And so You already should be using AI to do automation, improving margins, things like that. And what I really think, if you want to scale up with AI, I think you have to think about something new your business can do that couldn't do before the, before the AI era, right? I think that's key. That's where you're really going to scale up and unlock something new and novel. Like I said, cutting operating expenses, that's great. You should do that. Table stakes, everyone else is doing that. But try to think bigger than that. Try to think about something unique about your business or a way to integrate AI into your vertical that truly unlocks something new for your customer base.

100%. I think, you know, you touched on this too with Path A, but, you know, scale at B requires a different skill set. For a lot of founders that I meet, zero to one is where we shine, where it's thinking of the idea, building the brand, getting the initial customers. If you're banging your head against the wall to scale your business, that may not be the skillset that you have as a founder, and you may be best suited to build companies from scratch. There's nothing wrong with that because we work with founders literally all the time that have built these great companies but have zero interest in scaling, and that could be another reason reason to exit as well.

Absolutely. All right, pass C. Andrew talked about this a little bit before, but pivot fast, right? Maybe your growth has stalled, um, maybe you're not just squeezing as much juice out of the business as you want. Like, think of a way that you can reposition the business to your existing customers with maybe a slight tweak to the product or a different offering. Um, I remember early on in my career, I was sharing an office with Jason Citron, the founder of Discord. And at the time they were building a Dota clone for the iPad. And so it was like a video game for the iPad and they got to MVP and wasn't very good and wasn't exactly what they thought they wanted. And they, and during the course they realized there was this gap in chat over video games and they pivoted to that. And the reason I like that is it's not like they pivoted from building games to like sales software, right? Like a complete 180, like they stayed in the vertical that they're passionate about. They stayed in a vertical that they had expertise, that they had the team for. So when you hear pivot, don't just think about a completely different direction, or, or if you could, but leverage the skills you have, leverage the knowledge you've learned being in the vertical you're in to pivot to something new that could market to your existing customers or really drive excitement in your industry.

100%. If I have any advice on path C is I would put a time limit on it, meaning, you know, give yourself 6 months to build something interesting, uh, get customers, see if you can get people paying for it, and make a decision then. Like, you know, put a, put a timeframe around it. Uh, and then if path C doesn't work, reconsider path A or, uh, another path. But that's how I would think through is, um, instead of endlessly pivoting, but every founder is different.

Great advice. Waiting to sell as a strategy could be a bad one. I mean, I always go back to, you wanna sell from a position of strength, right? Don't wait till your business is declining. If you've got something good, you know, come talk to us at Acquire. We'll help you position and get that thing in front of buyers who recognize the hard work and the unique characteristics about your business. Every month you delay, buyers are getting smarter, AI is getting cheaper. And, you know, from the previous, or the previous examples I gave, new people are getting into being entrepreneurs as now with armed with AI, they too can build businesses. And so your leverage can shrink. And so, you know, timing's like an exit, like the stock market. Nobody knows when the right time is, but, you know, I would definitely say don't wait until it's too late. Wait till you still have leverage. Wait till you're selling from a position of strength. And, and we can help you here at acquire.com. Navigate the market and put you in the best spot.

All right, what's selling and what's stalling? So we're going to go over really what we're seeing be successful with Acquire and maybe what's having some issues. So selling fast versus dying on the vine. When we see deals that close in 60 days, we generally see startups with really good churn operations. The founder has removed themselves or they've documented or have a plan to bring in someone else if that is what they're looking to do. 12+ month customer average LTV. So customers are using the product and they're staying, they're buying the product on a repeated basis. It's a very predictable business. Clean books. They've spent the time, they prepared before they go to market, and they usually have a single niche with deep penetration. It's usually a customer base in a market where they have deep, deep, deep knowledge and customers are reliant on their product or service on a daily basis. And with AI, it's generally a cost savings narrative rather than a massive disruption narrative. And then what stalls a due diligence? The founder is the product. This is always a tough one, tough sell. Messy mix, personal and business expenses, churn more than 8% monthly. Just basic stuff that makes a good business. If the founder's involved in everything, just the, the data of the business is a mess. Churn is really high. Customers are canceling. Um, customer concentration is more than 30%. That means they have one large customer that takes up more than 30% of the revenue. Uh, no documentation of, of anything, meaning everything kind of just lives in the founder's head. These are really hard businesses to sell. Um, but luckily a lot of these items are easily addressable, but things to think through, um, before going to market. So you may be thinking now, okay, how does an acquisition actually go down? What is the process? So this slide is going over our step-by-step process at acquire.com because we like to make acquisitions as easy as possible. And the more we can put each stage into a process, the more successful everybody is, both sellers and buyers. So it starts off with creating a listing. This is where you create a listing on acquire.com. Generally, it just takes a few hours. Our internal team then reviews the listing. Every listing on acquire.com is approved by our marketplace operations team. We only approve about 15% of the listings that go on to Acquire. So it's a heavily curated marketplace, and this is what builds a lot of trust with buyers. Then after that, you're going to be matched to our buyer network where we have hundreds of thousands of different buyers are going to review your listing. And then if they're interested, they're going to move to step 3 and sign an NDA. This is when they're going to gain access to what we call your private details. So everything on the listing is completely anonymous, It'll have general, a general overview of your business, what it does, your business model, stuff like that. But you can't really tell what the business is and there's no P&L, there's no documents or anything like that. You have to sign an NDA to get access to those items. And then once they sign the NDA, you as a founder actually approve the buyer to then review the materials. So if a big competitor pops in or someone you just don't want to have access to your private details, You still have control over every buyer that sees your listing. And then from there, you have conversations with different buyers, you answer different questions. And the goal after the NDA phase is to get to the letter of intent phase. This is a formal offer to acquire your business that will have high-level details such as the valuation, high-level terms, when they expect to close, how long is due diligence going to be. And once you have an LOI in hand, and you sign one, you move into due diligence. This is where buyers are going to dig through literally every aspect of your data room and have lots of different requests to assess the acquisition is everything that will meet their standards and how it was advertised. Due diligence can be typically a 30 to 60-day period, sometimes 90 depending on the buyer or longer if there's bank financing involved. And then at the end of all that, you're successfully acquired, you closed, wire transfers hit your bank account, and you've successfully sold your company. And I should also add, between due diligence and closing, there's also asset transfers as well. So that's when you're moving over all of the business's assets and the buyer officially owns the business. And we help with every single step along this acquisition journey. So at no point are you alone and you aren't sure what to do next. We like to lay everything out as clearly as possible for all founders that we work with to really make this as seamless as a process as we possibly can.

I want to highlight too one of the things you said, Andrew, which is your business stays anonymous, um, all while it's on the marketplace until you approve buyers to get access to your personal information, right? And so, you know, when you're on the marketplace, things like your, your revenue, maybe a description about your business, things like that are available so buyers can go through the marketplace. But your website's not there, your name, the business name, none of that stuff is available. So you could list on the marketplace and stay anonymous and then review the buyers who are requesting access before you give them the information about who you are, specifically your website and, and all the rest of the information on there. Yep.

Entirely true. Okay, so moving on to a real exit in the AI area. So basically some case studies of founders that have sold with AI-related businesses that I thought would be cool stories to share. So this was a platform called SuperDev. It was made by a founder, his name was Atay, and essentially was a lovable Replit-type business. It was very similar and it was growing extremely fast. Uh, and he realized that he was better at building businesses and trying to scale up businesses. So this was a 0 to 1 founder rather than the 1 to 100 founder. Uh, closed in 2 weeks. He had, I believe, 8 different offers on, on Acquire, 5 LOIs, um, tons of activity. This founder met with one of our M&A advisors. We prepared the business, um, put together financials, put together a mini data room. Put together a buyer overview for buyers to see top questions that we'll address ahead of time. Just ran a great process and he successfully exited 2 weeks. The full story is on the acquire.com blog. And we actually, we've been seeing stories like this quite a bit on Acquire. You know, one thing that I'd like to touch on too for this webinar as a whole is it is a great time to sell your business. As a company grew about 50% last year. This year is also on pace to be an even better year. So even with all the headlines of AI is taking over, disrupting startups, and SaaS is dead and stuff like that, we've never seen a marketplace with more activity. Never seen as many interested buyers or as many offers being made. So it's definitely a good time to sell if that's something you're interested in. Another one here, this was a business called AI Contentfy. Essentially, it was an AI content tool for B2B SaaS blogs. This founder, he built a great business. He crossed a million in recurring revenue, and he realized that he simply wanted to move on and do something new, and we helped him exit all cash at close, zero earnout. This was another great acquisition story. And if you want to check out the full story, it's on our acquire.com blog. We did a podcast episode with both the Tay and also Temu. And this one, the boring niche that buyers fought over. I really like this business because it was a very niche business for a market that I personally would never go after, and that's what makes startups like this just so amazing and such good acquisitions. It was for small government contractors drowning in proposals and compliance paperwork. Super boring industry, but the business was doing really, really well. He saw that as an opportunity. He worked with us at acquire.com. We were able to help him find a buyer and he successfully sold the business. And we see a lot of startups that sell really well where they have just industries that I would personally never think of. And maybe if you're on this call and you're thinking of, what market should I go after? Sometimes the more boring and more niche, the better and the more successful it can make you.

Yeah, I love that story too, Andrew. I love just sort of zigging when everyone else is zagging, right? Like, so while everyone rushes over to the obvious, uh, field, you sort of hang out in the back. You find a way to go after a market that's totally overlooked. Um, and I think there's a lot of interesting markets like that out there, right? Where, um, you know, a lot of us tend to be excited about tech and we all kind of wander in the same direction, but over here Right. Um, this business that you're highlighting, like, I doubt anyone ever thought of that, but this person was in a unique spot with some unique domain knowledge and they put it to work and, and had a great exit.

100%. And I think just having the unique domain knowledge can make all the difference. Uh, being, you know, close to the problem or close to that customer, I think can give you a, an unfair advantage, especially when everybody has these tools that can build products just so quickly. So the closer you can get to the problem and the customer and really deeply understanding their problems deeper than your competitors, I think the better off you're going to be. So 5 things to remember as we, as we wrap things up here. AI is already in your category. The question is whether you are leveraging it. So really think through your AI strategy. How are you leveraging AI to grow your business or reduce expenses or to automate certain things that maybe take a lot of time? All those things will increase your valuation. Timing an exit is like timing the market. Most founders regret waiting too long. This is 1000% true. Really, right now reminds me a lot of 2021 when, you know, stock market's at all-time highs, you know, everything's doing pretty well. At Acquire, from our perspective, we're seeing record activity, record interest from buyers. It's a great time to think about selling because these market situations, they do go up and down. So we have great times in the market and they go down. A lot of the activity that we see on Acquire can sometimes be reflective of just the general stock market. So it's a good time to sell. Again, you can't time your exit at the very top, but if you've been thinking about it, it's not like we're in a global recession where all the buyers are going to dry up, and that could be around the corner. I have no idea. Number 3 here, your real moat is data distribution and defensibility. Dave touched on a lot of this. Really think through what is your moat? Do you have a data opportunity? Is there additional customer information you can capture? Is there areas of your distribution that can be leveraged for a new product or towards a different company or a different customer? How are you defensible? That's a question every single buyer is going to be asking, so really think through that. Know your deal structure, cash at close, earnout, seller finance, equity rollover. Each has a different risk and reward profile. Cash at close is king, but earnouts, seller financing, equity rollovers are all great too. The name of the game is really going to market prepared, having clean financials, and you're gonna be in a good spot. And then lastly, acquire.com. We have over half a million buyers ready to move. Your job is to show up prepared and you will likely see a great outcome. I hope this was helpful. This was a lot of information, a lot to think about. Happy to answer a few questions and we'll jump off here. Let me pull up a couple of the questions that we've had really quick. All right, Dave, you want to take this first one? I think it's going to be directed to you. What technical debt is a deal killer?

You know, here at Acquire, we always say time kills deals, but I would also say that risk kills deals. And so I think that during due diligence, if the buyer comes in to your tech platform and just things aren't easy and documented well, and if systems are fragile, right? And so as Andrew said, you have to put yourself in the shoes of the buyer where they're taking over this business and they want to step in and run the business. And they've got so many things to consider on day one. And they want, you know, one of the things that they want is gonna be that the technical side is sorted out, right? And I think there's a lot you can do ahead of time, just like we talked about having your financials ready, you know, get your technical side ready before you start the acquisition process, right? There's, you know, go through those error logs and clean up those errors that you just ignore 'cause you know they're not really errors, right? So that when the buyer comes in, they get— their logs are clean. You know, if you have automations that run, you know, maybe one of those automations runs great, like every, you know, for months on end, but then every once in a while it crashes and you have to know to like restart it. Like, you should fix that, you know, de-risk the technical side as much as you can. Because I really see, you know, when the buyer is going through due diligence, they're evaluating the risk of that business. Especially if it's a non-technical founder. I mean, looking at the daunting task of taking on someone's technical stack could spook them. And so really make sure that you prep the business for selling on the technical side by going through, cleaning everything up, and making sure that thing just hums without user intervention, or as much as you can.

100%. There's, there's not a lot of downside to doing it, I think. At a minimum, it'd make just overall business better. And then if you go to market, it could make all the difference. All right, here's another one directed at you, Dave. How do you manage AI costs as you scale?

That's a good question. I guess I would say two things come to mind. The first is make sure you're using the right model for the job, right? I think as technical people, as founders, we tend to want to use the latest and greatest. Latest model comes out, we're all excited about it, we want to see its capabilities. I think the knee-jerk reaction is to use it, but it tends to be the most expensive. I had something I was working on just a few days ago, and I'm using Opus because it's the latest model, and I found that using Sonnet got the job done just as well for like a fraction of the price and was faster. And so I think resist the urge to always use the latest model. You may not need it, especially when these models are getting so good that a few generation of models back can a lot of times solve the problem you're trying to solve for a fraction of the cost. So that's one way. The second way I would say is think about what you're putting into the prompt in the context when you're making API calls to these AI companies. I think there's a tendency of like, okay, more is better, let's throw everything in there. But the more you throw in, the more tokens that's going to cost. Take one step, think about what you're sending to the API and is it useful? Is it needed? Maybe try a couple of times not including that information because If you build a feature and you're just throwing everything into AI, if that feature scales, you could end up with pretty significant AI costs. I would take a step back, think about, is this information needed, and do a little bit of optimization on the prompt side. Those are probably the two things that come to mind. Use the right model, it may not be the latest one, and always think about the prompts you're sending to AI. And make sure you're not just overloading them without getting any significant benefit back from them.

Love it. All right, I'll take this next one. Are there any constraints or considerations when the seller is based in Europe or the US and the buyer is in a different jurisdiction? You know, it, it can, meaning let's say the founder is in Europe, the buyer is in the US. Generally, a lot of the acquisitions that we see are going to be asset sales. Meaning the actual entity of your business is not going to be required because most buyers are not interested in acquiring an entity where there may be liabilities or legal implications or tax implications. So generally, a buyer in the US is going to acquire the assets and then move it into their own new US entity. But sometimes there can be additional risk because if you live in France and the buyers in the US, they don't have a France-based attorney, And so that might raise a little bit of just the risk profile on the acquisition. It's not impossible. We've done cross-border acquisitions more times than I can count. It's just something to think through, meaning is there additional ways that you can de-risk the overall acquisition? Can you offer to stay on the business for a longer period of time? Can you call it out early in the acquisition process? There's a bit of nuance here, but generally I would say there's a small constraint, but it's easily addressed. And if this is you and you're in this situation, just come talk to us at Acquire. We can walk you through how we think through it. But we do cross-border acquisitions all the time. Actually, one of the largest acquisitions we've ever done was a company, the buyer was based in Japan and the seller was based in the US. And then we did another 8-figure acquisition where the seller was in Spain and the buyers were in the US. So it can be done. Just adds a little bit of extra complexity. Okay, moving on to this next question. If let's say we just had a website and a product, is it possible to sell and acquire given that it's heavily dependent on AI? I'm a first-time founder. This is a good question, and you know, we see a lot of submissions where it's a product, there's no revenue, there's no customers, there's no users. These are extremely difficult difficult acquisitions to facilitate. We do allow for some, but we're really, really selective on the businesses that will actually approve onto the marketplace. And the reason that they're so hard to find buyers for is there's really nothing defensible there. A buyer can come in, develop something similar. And if we do see these acquisitions, it's generally a very small one. It's going to be $5,000, $10,000, nothing too material. So my best advice here is if there's any way you can find a handful of customers or a handful of users, your exhibit will, will be so much more meaningful if you're able to get some traction in the business. Okay, last question, then we'll go ahead and call it. How are contracts handled? Say we have a pending contract with the government not actualized yet up to $1.2 million while revenue is just $45,000. K in recurring revenue, how is that handled? And also say we just want to sell a product in the company and not the entire business, just an isolated part, a standalone product. It, it can be done. So for the contract part, generally depending on the buyer— I'm going to say this is probably all buyers— um, they're going to want to have the customer sign a new agreement with their acquiring company essentially saying we're going to buy this company, uh, when the deal closes, um, we'll continue our agreement, basically reassigning the contract to the acquiring company's company. That's a lot of words. Acquiring company's company. But essentially what the buyer is doing here is they're saying, hey, you know, a large portion of your revenue is dependent on this contract. And if we close and the contract voids, you know, I can't acquire the business, but I'll move forward with acquisition if we can transfer the agreement. One way to do it is you can do a stock purchase, meaning you purchase the whole entity, and by purchasing the whole entity, contracts will survive a transfer. Not all the time, so there's also some nuance here, but there's ways that it's addressed. Probably something to, to speak with us on a one-on-one basis so we can give you some specific guidance here, but it, it's definitely doable. And then your second question, you want to sell just a product within your company. I'm going to assume it's, you know, a portion of your company that does a few hundred thousand revenue, or let's say it's a million revenue. You can absolutely carve that off. I've seen that a ton of times. It's just going to have some nuance to it as well. It's going to need to be marketed in a specific way. Are there any parts of the business outside of just the tech, um, that are going to pass over. Are there existing customers or anyone to maintain it or any documentation? Um, a bit of nuance, but absolutely possible. Um, that was a great question. Uh, all right everybody, thank you so much for, for joining today's webinar. Uh, always enjoy having all of you. And just to, to leave you all this, um, before we end, if you're considering exiting, we'd love to talk with you. We see a ton in the market. We'd be happy to give you our our thoughts, tell you what we're seeing in the market from valuations or insights into how to think of things or just how to prepare a year from now or 2 years from now or next month, whatever your timeline is. If you're looking to sell, go to acquire.com/free-slash-valuation. You can get a free valuation from us. It's confidential. You don't need to make a listing or anything like that, but this is real market data that we've collected over the thousands of acquisitions that we do. So Um, definitely check that out. And again, thank you all so much for joining and hope to see you all next time. Thanks everybody.

Thank you, appreciate it.

Thanks everybody.

Cheers.