Startup Acquisition Stories Podcast With Pascal Levy-Garboua, CEO of Noosa Labs

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I am with Pascal, the founder and CEO of Nusa Labs. Pascal, how you doing today?

Good. Good to see you, Andrew.

Yeah, likewise. I'm excited to have you on the podcast and really just dive into what you've been building over the past few years. It's been awesome seeing you. You build new labs. But for those that may not know you, do you want to give your yourself a brief introduction?

Sure. I have a career of 20 years in tech, mostly in startups. I've done multiple startups both in France and in the US I started in France with a chatbot company 20 years ago and we brought this company to the US. We had some success and some struggles, I would say. And then we eventually sold this company to Nuance Communications, which is a big voice recognition company. I then joined an image recognition company that was also acquired by Yahoo, for those who remember Yahoo. And then I started a second startup which was an on demand delivery company that wasn't successful. But at the same time I started investing in startups in San Francisco and among others I invested in a company called, I mean I invested in Notion very early, but I also invested in a company called Checker, which was a background check software company. And I joined them as one of their first executive ninth employee and helped them grow from, you know, nine people to 300 people, like hundreds of millions of revenue. So it's really an amazing ride. I thought I would, I wanted to become a vc and so for one year before leaving San Francisco, I was only investing through the angelist platform and then realized that I needed to do that. It was not for me and that the best scenario for me was to be a acquisition entrepreneur. So I tried different. I read a lot of books, I. I tried different strategies but eventually settled on acquiring smaller startup that I could acquire on acquire.com among others, but mostly on acquire.com and, and grow them. And that's what I've been building in the last two years, two and a half years at Noosa.

Nice. I, I love that story because I remember you were one of the the first early users of microacquire. Now acquire.com but I have to ask, how many startups have you acquired off acquire.com and how many startups have you acquired in total?

So the funny thing is that I discovered Microacquire at the time or acquire.com because I think you followed me. I don't know how or why because at the time I was not officially saying that I was going to acquire companies, but you followed me on Twitter. I Said, oh, interesting. And so I followed you back and I started registering and looking at what was out there. I acquired. So we've acquired five startups overall, but four out of five were acquired on acquire.com.

Oh wow. You might be up on the leaderboard if I thought it was two. That's awesome.

First four we bought on acquire.com.

Oh awesome. So going back to, you know, how you got into acquiring startups, was it really just you didn't want to build a startup, you didn't want to be investing in startups. Would you agree with, you know, acquiring startups is kind of like a middle ground where if you start a new business, you kind of have to chew glass for two years. You gotta find product market fit might not work and that's really hard. And then as an investor you're just investing. It's I would like to assume a little bit easier. I don't have experience there, but as much as you do. But when you acquire startups you're able to skip the first two years. You're able to acquire product market fit. Is there any. Would you say it's easier acquiring startups and building them or investing or more enjoyable?

I think it's a completely different framework almost when you're doing a startups. When you're doing a startup, whether especially a startup where you want to raise money because it's a big opportunity, you're in it for a long run. It's on the, on the one hand, the way has been paved by playbooks that have been written by founders and investors before you and yet getting to product market fit is always hard unless you're incredibly lucky and very. It's not a skill problem. It's a. There's also a luck aspect and I'm not the best personally at 0 to 1. I mean I've seen that. I'm not. There are people that are amazing product people. I'm not an amazing product person like Ivan Zao from notion. I mean I can tell you like he's 1000x better than me in products and I will never touch anything close to where he is. I mean obviously it's an outlier but my point is that very strong product people are have an outsized advantage at going from zero to one and I'm not that. And on the other hand, investing is very exciting because there's a curiosity of discovering new cool ideas but you have so few lever on the company. But for somebody like me who's, who likes actually having shorter term milestones, it's Very nerve wracking. And when I was only doing that, and I did that for a year, I had FOMO all the time. I made the worst decisions. I missed more unicorns a year where I was only doing investing than all the years where I was doing investing on the side and either working at a startup or building my own. And so I realized that to, to get my brain right, I needed something where I could grow. I could apply my skill sets, but also apply my curiosity. And in my case, because not only do I acquire startups in general, but I acquire multiple ones. You know, if, if one week I don't want to work on a given one or a given or I can work on the others. And that's exciting. What's what I like about it personally? Because I can have a variety without missing out on the ability to make positioning decisions, product decisions, business decisions, which is kind of the exciting part of building a startup.

I like that. I feel like if you're almost like a startup junkie, like if you have a portfolio of startups like you one day you can work on positioning, next day you can work on sales, next day you can work on marketing or product whatever, maybe or support on. I guess it could also be your least favorite part too because there's just so many different things to think about. I mean running one startup is hard enough and you have five does that.

Yeah. But I have a team. So I build the company and the structure so that I don't have to manage the day to day of these companies so I can decide what I work on. Because in a way the companies are running themselves through my team makes sense. My structure is a little bit different. What I'm very. What I admire is all the guys. I mean there are a few of them that are very active on Twitter that have like 10. Like, like John Rush has 24 sass. Like there's this other guy, the French guy that lives in Bali, I forgot his name now, that has like 10 or 10 SaaS that are doing hundreds of thousands of MRR. Like it's, it feels very hard to do all that at the same time.

Like.

But yeah, I mean my, the way I do it is that I really have a team that helps me manage it and my job is to find new targets and to, to see what we can do that will. And to, to create plans for like long term plans for what we, whatever we acquire. But nice team can execute.

What would you say like a perfect acquisition target is for you? So size cat. If you could just describe like the perfect business that you would absolutely want to buy. What would that look like?

So we look at businesses that are between 200 and 800k of ARR. We look at businesses that are typically bootstrapped, no team beyond the founders or maybe a few contractors here and there and with a lot of inbound free trial customers like that alone is an amazing start. Like if you have that. That's very interesting to me because is the right size, the right profitability? We look at businesses that are at least 60% profit margin like beyond the salary of a founder. And a lot of inbound means that there is a lot of levers we can pull hopefully to improve a business and grow a business. And so then we have some playbooks that we know very well, like improving the user experience of a product sometimes or the design or improving or making sure that the product is enterprise ready so that all the inbound enterprise customers can come. The last criteria that I didn't mention is that the business needs to be still growing. What is hard is when the business is not growing anymore or declining despite having a lot of inbound or of being very profitable because you don't know why, what is broken and how and you don't know how much time you have until the thing is, you're immediately broken. So I'm, I'm more nervous about that personally.

What's. Out of the five startups you've acquired, what would. What's your favorite one? If you had to pick or just in terms of a story or whatever you're comfortable sharing, what's the best acquisition you made? Maybe, maybe it was a turnaround, maybe you bought it at a certain size, it's grown the most. Maybe it's just.

Yeah, I mean the, I would say that out of the five, I wouldn't say between being successful with five. First of all, we've had, we've had one where we had to sell it actually two. We had, we. We sold some. We sold it. We sold first two. So out of the ones that we keep operating, I would say my lab. The, the fourth one is probably our biggest success so far. It's a company called Centric. It's a, It's a very simple feature. I mean it's simple in theory, but it's hard to do well at scale. It's. It allows people email marketers to add countdown timers to their emails, also to their website, but it's mostly used for emails. And we bought it, it was one of the larger acquisition we made both in terms of it's actually our largest acquisition in terms of enterprise value. It was a good size. We've been able to grow it, grow MRR2X at least already in less than two years. And what I like about it is that one we've been able to to grow it really well. Two, we had a very good partnership with a seller but even though he's not involved anymore, he has helped us in numerous occasions and, and we have a good relationship, like a trusting relationship where he's as bought in our success than I would have hoped. And so I think that's to date the best acquisition. The last one we did, which was a company out of Chile, is a promising one, but it's too early because the bulk of the changes we're making to it will go live in a few months and so after that we'll know whether we are in the good right track or not. But I would say so. So my, my favorite one so far at least is that countdown timer for email centric that we we found on on quarter.com and we bought in May 2022.

I like how your, your biggest success is your biggest acquisition. I think it was the opposite. That would not be good. So that's good to hear. In terms of everything that you've learned so far, you know, acquiring your first two startups, it sounds like those were some learning lessons. And then as you got to the bigger ones, you've really seen success. If you had to give advice to anybody looking to acquire startups or maybe they're interested in acquiring startups. What's like three things that maybe you wish you knew before you started all this.

The first startup we acquired was a startup that was a tool on top of WhatsApp. And we bought was a pretty small acquisition. Small MRR. We grew it a lot and then we got a season disease letter by WhatsApp and we had to shut it down. And it sucked. And it sucked because obviously it would have been our if had it not happened. I think it would have been our biggest success today revenue wise. Like I think we were ready to 10x this business at least. So I think that the first lesson is to be very careful with companies that are relying on large platforms. And when I say large platform, I'm talking about the meta apps, I'm Talking about Twitter, LinkedIn, things like that. Like when you're basically sleeping on the, when you were feasting on their back at some point they can wake up and disrupt what you're building and it can be pretty violent. And so that's one thing that I'm very nervous about. I almost bought a business on top of OnlyFans but I also found on far.com and it was just after, at the moment we had that our receiving this letter from WhatsApp and I decided against it and I frankly have no regret. It was like you, you, I, I've learned a lesson and, and I'm, I'm going to be very, very cautious when, when dealing, when being too close to these large platforms and doing things that are I would say a little bit borderline or on the gray area with them. So I would say that for us where we're not flipping companies when we're selling, it means that, it means that there's a problem. In a way we need to buy something that will be there for the long run. Some other people are different. Many people buy on, acquire and then sell something after six months. That's a different mindset. These are the flippers. I'm a long term holders and so for me something like betting on something that won't change is a better path. I think that the second thing I would pay close attention to is the fact that the more meticulous a founder like a seller is, the better the business. And so today I spend way more time understanding the psyche of a seller because in a way for bootstrap founders, the business reflects the founder very, very closely. And so if they're messy, the business will be messy, if they're shady, the business will be shady, etc. Etc. So I really try to understand the psyche of a founder and, and what are their standards. And if they have high standards, it's a good sign. Also because you're going to deal even though the founders typically leave, you have to deal with them after because sometimes you have questions and sometimes you have problems and you'd rather interact and work with people that you like and value and so obviously value. That's, that's a good life advice. I would say more broadly, yeah, there's.

A, there's a good saying you can't do a good deal with a bad person. I think that is kind of relevant here.

Yeah, yeah. And, and, and I don't think we, we, we ever did a deal with a, with bad people. But I would say that the better acquisitions have been with people that were more aligned with us and our values. And so that's, and then the last one would be that because we acquire many of our businesses with debts, it's important to know when to think about when do we think the business will peak and I mean obviously you want to, to peak it in 10 years. Right. But it's not the case for every startup. Some startups just peak and then they go down. And, and so for us it's a question of can we make sure that it peaks in at least four or five years versus us just having a business that will peak probably next year and then it will go downhill from there because debt for these businesses is very expensive and you, you need growth to pay for the, the price of a debt in a way. And so you want to make sure that what you're buying is not going to have one last puff and then go downhill from there, despite everything that you can try.

So nice. I like those.

It means that, it means that when we're thinking about it, we need to have multiple obvious growth levers that we can pull so that maybe we'll pull one at a time, but over time it will make sure that we have four years of growth.

Yeah, that makes sense. Yeah. There's definitely a lot of SaaS companies where there's obvious levers and there's clearly ones where maybe there's none at all and that's probably the ones that you don't want to acquire. Moving over towards the, the founder side, I think this is a good segue. You look at a lot of businesses, you look at a lot of different SaaS startups. What are some common mistakes you think founders make when they go to sell their business? Could be valuation. Could be, yeah, yeah.

And I, and I, I think valuation is the biggest mistake in a sense. I think that, I think that the, a good acquisition is an acquisition where the seller gets a fair price for their work, but where the buyer can make money without needing to be heroic about it. I saw recently a business where the founder wanted to sell. He had clearly mismanaged the business. Like not really taking to. He was not really taking care of a business, but he was asking for a very high multiple because he thought, oh, if, if, if you work on it, revenue will grow. But he hasn't really built any strong foundation like, like long term foundation. And I was like, yeah, but if I do all that work, I'm taking the risk, I'm doing the work. And in a way I need all that to work in order for me to be able to make any money. And I think that for me that's a problem because it means that my margin of safety is zero and that's bad. You need to have to allow for some margin of safety. I mean if you have the best business in the world, sure. Like if you have and I, you know a business with super low retention, like super high MRR and you have lots of private equity firms that are bidding for it or you have a strategic that is knocking at your door, sure that business, sell it for as high as you can and go to a beach afterwards. But I would say for a regular bootstrap SaaS that has competition and whatever I think that the founders need to think about I need to make money. But the only way this is going to work is that I need to make money and he needs to be able to make money. He or she being the acquirer. And founders never think about that. And yet it's important because it limits who you're going to talk to. And then I see these companies that are doing that and they're hoping that somebody will come and they have offers and then during due diligence the deals fall through and it and they go back and the deal falls through and like they do, they go at it like two, three, four times and they take six months to a year to sell their company where they could have solid in the first place in like two months or one month. And I, and I've seen many of them on acquire.com or otherwise with the same scenario.

Yeah, I would agree. That's actually the number one reason a startup won't get acquired on acquire.com is pricing too high. Because most buyers, like you said, we usually just skip past them or the ones that are interested will typically waste their time. Like it's just if you're so out of range in terms of typical market multiples, it's, it's hard unless like you said you have a perfect business or you're an outlier in some way. So I definitely agree with you there. Any other tips for founders?

I would say get your ducks in a row in the sense that if you want to sell, try to make sure you have clean piano. You have like that if you're using profit, even if you're not using ProfitWell, maybe use a free ProfitWell account so that you can send it to your, to the potential acquirer without giving access to stripe. Just do the basic homework that shows that you understand your business. I mean so many times I talk to founders that have been at their business for some sometimes years and I ask them basic questions like what's your conversion rate of free to paid or whatever and they have no idea. Or what does your churn look like? Or like sure, maybe we can. Yeah you need to, when you're selling and you decided to sell, you need to know a little bit these numbers. Like you can't just pretend that you know. So I think that's, that would be the one thing I would say.

Yeah, I, I see that all the time. Pascal. In terms of specifically the P L, I think that's probably the first question if you don't have one that buyers are going to ask.

Yeah.

So for any founders listening to this and you're looking to sell your business, definitely, definitely have a clean P L. Definitely know your numbers. It, it's such easy homework and it can make the difference between selling your business and not. So I definitely agree with that. Tell me this, where do you see new collabs going? Like in five years from now, maybe one year from now, are you going to acquire 10 more startups, 50 more startups? Where do you, where do you kind of see this, this firm going?

So I want to acquire more for sure. I think that first of all I'm having fun doing what I'm doing and so unless something catastrophic happens or like I make really bad acquisitions and I'm terrible at it, I want to do that for next 10 years. So I'm really building something for the long run and it's the first time in my career. But I, but I feel that what I'm doing is something that I want to do in like 10 years. The second thing I would say is that so in five years probably we required, I don't know, 10 more businesses, maybe more, I don't know, at least 10 core businesses, maybe some small add ons here and there if we make some add on acquisitions, product acquisitions. But yeah, I will probably raise money between now and then to help me like so that I'm not the only one funding the acquisition. Then we rely a little bit on less on debt. But if in five years we make 10 more acquisitions, we, we have had multiple successes in that we have built lasting franchises. But my team is happy and, and, and growing not in terms of number of people, but in terms of their responsibility within the company. That would be exciting if, if we're, if people know us like when I say people, I mean bootstrap founders know of us and, and they know that we are a reliable, good partner for an acquisition. That would be awesome. I would be excited about that.

I like that. I think, I think you'll acquire more than 10 in the next five years. But yeah, we'll just have to see. All right, last question. In terms of, you see A lot in the market and industry. Has there been any major shifts or changes or trends that you have found interesting or exciting in terms of acquisitions and SaaS? It's been crazy. There's been AI. There's been, yeah.

So I would say that the interesting thing with AI is that there has been a lot of companies that have launched in the last year, year and a half, but have had like crazy growth, like meteoric growth in the last year and a half, like growing from zero to sometimes a million ARR or more in like a year. I've seen quite a few of those, I think. I mean I, I would say that one thing that I see, I believe is that there will be more and more people that will have, that will be operating in multiple SaaS, either Sats that they've built or SaaS they've bought or both. But like I, I, there is this concept of labels where you have like bootstrap founders or like in like indie bands and then you have labels like you have small like indie bands and the majors that are acquiring these bootstrap founders product and they have a go to market machines to grow these businesses. I think that this is the trend that I believe in for a future. And so I think that the market will align along those lines, like more and more, more and more people will try to become labels initially like in the next few years and then some position will solidify in like three or four years.

Interesting. I could definitely see that. I mean we see a lot of Repeat sellers on acquire.com so I think, I think you might be right about that one. All right, Pascal, if people want to reach out to you, learn more about NUSA Labs or potentially just see if you want to buy their business. Where can they find you?

Yeah, I mean they can find me. On nusalabs.com n o o s a l a b s.com we have a contact form. I reply to 100% of them and also over email PascalUSA Labs and on LinkedIn they can follow me on LinkedIn where I post from the most under my name, Pascal Levy Garbua or Pascal Nusa Labs and search and you'll find me. And yeah, these are the best avenues to, to reach out and to engage.

All right, I'll be sure to put those in the the show notes for scoutsman. A privilege having you on the podcast and looking forward to seeing how far you take this.

Sure. Thank you and thank you for creating acquirer. Com. Not be there without it.

All right, cheers, Cheers.