Startup Acquisition Stories With David Idol, Founder of Computer Mouse For XCloud

Foreign. I'm here with David, the founder of Cubit, or Mouse for xCloud, who recently got acquired. David, how you doing today?

I'm good, Andrew, excited to chat today. Thanks for having me on the show.

Yeah, likewise. Huge congrats on the. The acquisition. But before we dive into that, do you want to give a brief introduction of yourself for those that may not know who you are?

Yeah. So I've always been into software. Kind of funny story, I got my start is one of the first things I did was working on reverse engineering a game called Halo 3 and got banned from the game as a result. And then my first job out of grad school was actually working for Xbox Live. So yeah, it was kind of funny. But after Microsoft had the opportunity to join Snap, while it was relatively small, around 100 employees, and I built a couple of projects there from the ground up, like location based filters, which we call Geofilters, and then working on various creative tools and SDKs for third parties to integrate with Snapchat. And now I'm an engineering manager at Discord, where I run the shop team, where we sell all kinds of digital cosmetics to customize your Discord profile and avatar.

Nice. So tell me about keeping our mouse. What does it do? What? Excuse me? What does it. What does it do? What problem did it solve? Why. Why'd you build it?

Sure, yeah. So a little background. Microsoft, they have this cloud gaming service called xCloud where you can play games remotely on pretty much any device. So not just like an Xbox or a gaming PC, but it requires to use a controller or it just won't work at all. Which is frustrating because if you just, you're traveling, you don't have a controller, or you prefer to use keyboard and mouse, you can't do it. And I was honestly kind of shocked when I realized this. I was trying it out and because the whole thing is really about convenience and portability, not needing any special hardware, that kind of stuff. So the fact that you have to have a controller is definitely a limitation. So really I just started kind of poking around and seeing if I could figure out a way to make essentially a virtual controller to simulate how having a controller without actually using one using your keyboard. So I got the keyboard presses to kind of simulate controller buttons and then I figured out how to translate like mouse movements to look like controller sticks. And then I just decided to turn that into a Chrome extension and make it work for anyone, make it customizable, all that stuff.

This is so awesome. So correct me if I'M wrong. But this is basically you built a software application where you can take your Xbox and use a keyboard instead of the Xbox controller, essentially.

It's not, it's not actually using an Xbox. It's actually you're playing the game on your computer, like in an Internet browser. Like you open a Chrome tab. If you, if you go to xbox.com play, you can just start playing an Xbox game on your computer, which is really cool. I mean the whole cloud gaming thing is pretty interesting. A lot of people haven't even.

Hey, wait, we got to stop. Can we, can I play Xbox games on my PC?

Yeah, you can play them on your, your Mac. You can play them on your iPad with this.

I'm pretty sure for context of that question, I'm a, I'm a big Madden fan. Oh yeah? Yeah. Fun fact. It used to be like a top 100 player, which is an embarrassing award. I was there for like, I'm sure I was there for like a day. It was when I was in between companies and I had way too much time on my hands. All right, so okay, so that's awesome. I have an Xbox and I, I love playing Madden the. Now I'm wondering, you know, how did you go and get customers for something like this?

Right, right. Yeah. I mean I basically just started out by putting it on the Chrome web store and made a post on Reddit. I honestly didn't expect much and initially I wasn't charging anything either, but it just kind of took off within that community. Folks who play cloud gaming on xCloud, I think this is like a real thing that a lot of people wanted. And so at some point as I was adding more features, I started charging a few bucks via one time charge for the extension. So was really how I got my first customers. People started using it originally through that Reddit post and then once I started charging, you know, people were willing to pay. Although there was definitely some backlash initially making that transition from free to paid because I had, there was a lot of people like kids in Brazil and things like that, they were using it that I wasn't even fully aware of. So got a lot of like review bombing and stuff like that when I first started charging. But I think a lot of people saw the value and were happy to pay for the ability to use the keyboard and mouse on it. So within like a few months I had like 250,000 active users and was making about $4,000 a month or so in new activations.

Quarter million monthly active users in the first month.

It was a, that was after like three or four months.

Geez. Was there a moment where you kind of sat back and you're like, oh my. Like this is not what I expected because that's product market fit. Like you're going up into the right.

Yeah. I mean, and then the other thing is the name. I know it's kind of a mouth. I did that intentionally because I wanted to hopefully make it easy for SEO. If you're, if you Google how to use a keyboard and mouse with xCloud, it would be the top result. And I think that at some point it just started, you know, it was definitely all organic search traffic that was really driving the growth.

I love that that's such a simple but powerful growth strategy. And it also works as a moat because you are the default of the software solution that solves the problem that a lot of people are searching for. Even I got excited when. And I'm not the biggest game gamer, but yeah, just, I love stories like that. You just, you, you shared on Reddit, which is a community that has a lot of people that obviously love gaming. So you connect with them right. Right away. I'm sure you gathered a lot of feedback and then yeah, like if you name your business after a specific search term, there's a really good chance you're gonna rank for that term. That's actually something I've always done with my businesses. Like I've had like my first startup was called Business Apps and I spoke to B I Z any SS apps and the idea was on cold calls we would be able to say like, oh, we're calling with business Apps. And so it'd be obvious at what it does. But we actually ranked for a lot of like business apps terms and it'd be like us and then like Google below because they also had business apps spelled correctly. So I love that go to market strategy. It's the simplicity behind it. Tell me about what was like your favorite moment. You know, as you were, you were building this. Was there, you know, a day where you just kind of sat, sat back and you just saw it. You know, I, I really got something on my hands here.

Yeah, I think I had a lot of people reach out to me just saying how thankful they were for having the ability to, to do this, including one person that was disabled and said that this really helped them to be able to enjoy their games and they were really thankful. And that's something I hadn't even, hadn't even occurred to me really.

That's awesome.

So yeah, just I, I had a lot of direct communication with people that were really stoked about it and definitely rewarding for me.

That is so awesome to hear that really is. And then. All right, let's, let's move into the reason we're here. Acquisition. I gotta know, how did it feel when that, you know, it's closing day, the buyer is like, ready to go, wires the money over to. Over to you, it hits your bank account. How did that feel?

It was exciting, really. I mean, it's my first time going through this process, first time you know, selling anything like this. And, you know, I'm a developer. I'm not like a business person. And, and so there was, there was a lot of new things for me across the board, including the whole, the whole selling process. But it was great. I think I was really enjoyed the conversations, frankly. Learned a lot. Just talking to folks and seeing how they were evaluating the business got me to think about it in a different light. And I was happy for, for the buyer. I think they were, they were really excited about it and, and had, you know, kind of developers themselves. And so, yeah, it was, it was really exciting experience.

Yeah, that's always as part is, you know, the end, but, you know, it takes, it takes some work to, to get there, as, you know. Sure, yeah. Tell me about, you know, your reason for selling, you know, you, you decide to sell. What was the reason and what was your initial expectations when you listed on.

Acquire.Com yeah, I think after. I mean, I didn't run the business for that long before I decided to list it. And I think it was partly just because it was doing well, but I was interested in moving on to. I didn't really have any other big ideas or things where I wanted to take it at that point. So it's probably just to focus on other projects. And then the other aspect is there was some risk with the business side. I think both the fact that I started out of the gate with lifetime access and I wasn't doing kind of subscription revenue, I didn't know for sure if it would continue or not, and also the fact that Microsoft themselves could potentially compete. These were all things I was really upfront about in the conversations with potential buyers and had some interesting conversations there. It was, but it was, it was a factor that I was just like, you know, I was happy with the. Where I'd gotten it to and felt like I was ready to move on to the next thing.

Nice. How did you prepare for the acquisition? Because you're going to see good buyers, you're going to have a ton of questions. Was there anything in particular that you prepared in advance that you think help buyers understand the business before speaking to you?

Yeah, I really focused in on understanding the whole funnel and added a lot more analytics. Up to that point, I basically had no analytics. I had just been using what Google and the other kind of web store platforms, Chrome extension platform provides. But I knew there was going to be a lot more questions about the purchase funnel and just engagement and that type of stuff. So that was one of the things I did obviously put together like P and L and thought more deeply about potential opportunities for the business and things where it could be expanded and that kind of stuff. That was probably the main thing.

Nice. Yeah. As I'm looking at your listing, you did a great job in terms of preparation. It's so because if you just, if you don't have, you know, the ability to give buyers, you know, at least a snapshot of the financial health of your business and the performance and the traction that is on your listing, as I'm looking at it, is extraordinary. But as a buyer, your main job is to verify that. So you know, 2 million organic impressions, 2 279,000 weekly active users with no advertising or marketing, that is impressive. And the revenue numbers are great as well. And you did a great job. Just I can see all the additional documents that you provided in your data room. So great job on that. So anyone listening? The point I'm trying to get across is be like David and make sure to have that in advance because the first thing buyers are going to ask is you have these types of documents, you know, P and L overview of the business. Any, the more you can provide, the more interest you're going to get from buyers and the more buyers that are potentially going to submit an offer. My next question would just be, you know, okay, so you, you started speaking with buyers. How did you ensure that the buyer that eventually acquired this business was the right fit, the right one to go with?

Yeah, that's a great question. To be honest, I was a little skeptical prior to the whole thing because I had heard stories of browser extensions in particular getting bought up. I actually had some unsolicited offers come in via email too from, from people that were clearly maybe didn't have the best of intentions. I think just saw you can publicly see some of the download numbers and I think, you know, they a lot of times will just, you know, turn it into, to something completely different ads or, or you know, maybe worse because you can Google's cracked down on a lot of this, but that was obviously didn't want. I knew this was providing value to the community and I knew it could stand on its own in terms of the, you know, the business. So, so I think just looking for a buyer that understood the space was something I was interested in and ideally had the, the ability to maybe take this even further and provide more value for, for the user base. So I think in terms of the, the buyer I ended up going with, as I mentioned, they, they had prior browser extension experience and, you know, understood the space and, and also had the ability to, to add other features and things like that. So to me that was a big factor.

Yeah, I love that when, when you go with a buyer that, you know, shares your vision for the product and has plans to take it farther than, than you do. But I gotta ask, were they a big gamer? Were they. Did they also work at Xbox?

They understood, they, I think had played games and cloud games and that kind of stuff. So yes, I think to an extent they, some people, it was a much harder conversation to even just explain kind of like what this, what this thing is, and they got that pretty quickly. They have some other extensions I think that like do stuff with old Flash games and things like that, so.

Nice.

Yeah, yeah.

If you, if you go with the wrong buyer, you sign an LOI with someone who doesn't have, you know, doesn't truly understand the customer or hasn't done the homework to truly understand the customer. So it sounds like you went with a great buyer that really understood Chrome extensions. Yes, which just makes the whole process easier. They know how to do diligence the business, they know what questions to ask, they know likely how to transfer the assets. So it's just such a smoother acquisition process when you go with someone that has some. They don't have to be an expert, but at least some experience with what you're selling.

100%. Yeah, I saw that firsthand. Like, I also had a Microsoft Edge version of the extension and there were all these weird things about how you transfer ownership of that and that's something that the buyer was really, really helpful at understanding and facilitating and. Yeah, so they even had questions about some things within the code and stuff like that. So it definitely was great to have that knowledge, that shared knowledge and understanding.

Can you walk me through how did you transfer the Chrome extension and all the assets?

Mostly I sent them all of the code and then I redirected. I had a web kind of a landing web page as well as some Various social things like a subreddit and a discord community and I just kind of gave them access to all of that. The extension itself, Chrome fortunately has a feature where you can transfer ownership and it's kind of like built in to the platform. So we did that obviously moved over all the stripe and that kind of stuff. But the biggest headache was just Edge because they don't officially have something for that. So I had to kind of create this, this weird like group account thing and it was much more of a mess. I think they're eventually going to add support for that. But.

Yeah, nice. Yeah, I think like I always say, you know, if you're looking at this is your first acquisition, potentially Shopify apps are great because the transfer is just so much easier. Everything's kind of built in. The analytic, the ability to transfer payments are built in Chrome plugins as well because it's much, it's just so easy to transfer, you know, typically not, not all the time, but the majority of times you're going to see that it's, it's a lighter asset and so it's easier to transfer that than a full blown, you know, built from the ground up SaaS product that maybe has a hundred more moving parts. I guess my last question on the acquisition, if you had to maybe rewind the tape or another startup founder came to you and said, hey David, I'm thinking about selling my own startup. You know, what's your like top three pieces of advice so I can successfully get acquired?

Yeah, I think being mindful about pricing is one piece of advice that I would give. I think I just kind of jumped straight in with an arbitrary price and didn't give it maybe as much thought as I should have. And in particular throughout the acquisition process, talking to a lot of buyers, I think there's definitely a preference understandably for recurring revenue versus one time. And of course that's, that's, that's a trade off for the potential customer as well. So you know, there's a lot of thought that probably goes into those decisions. But I think if, if the goal is to get acquired and make it really clear to a potential buyer that this thing is going to continue to, to do well, that's something that I would give some serious thought to. I think being, being prepared as you mentioned, is really smart. Understanding what all aspects of the business. I think it's something that when you're, when you're building something you feel like you, you have a clear understanding of everything, but when you start to dig in, there's There are sometimes little gaps of things that are kind of where naturally people are going to have questions. And it's, it's great to already have yourself some investigation, some understanding of what's going on so that you can explain that to other people rather than just kind of being like, well, I don't know, let me go look into that after.

Yeah, those are all, all great. And I'll, I'll, I'll give you my thoughts on.

Yeah, please.

Each of them. Valuation. Absol. Absolutely.

Just.

That's probably the number one reason why startups don't sell on acquire.com is you, you price too high. And the strategy that I always recommend and my whole team recommends and what we've seen work the best is it's counterintuitive. But price it below what you think it's going to sell for. Because what that does is it draws in a lot of buyers. So you have a lot of attention from buyers and interests and then you have a lot of calls of buyers. And then that allows you to potentially have multiple offers. That should be your goal. Goal. Right. Your goal shouldn't be to have a high listing price and just sell that to one buyer. It should be to list it at a price that shows that you're motivated and you're looking to sell this business and buyers flock to it. And then what you do from there is since you have multiple offers, you can say, hey, you know, John or Sally, there are offers here. If you can get it to right here, you know, maybe it's where you originally were going to list it at. That's how you get that price is you want to get a lot of buyers excited. Because, because typically in most cases, you know, it allows you to keep control. And there's a saying, if you have one buyer, you have no buyers. And it gives you a chance to, you know, negotiate on price or terms or whatever is, you know, most important to you. And then preparation is, is absolutely key as well. Like if you go onto car.com and if you speak to anyone on my team, we'll tell you and we have all these documents ready to go. But, but as a buyer, you know, giving them information to read and giving them the ability. Because your job when you list your business for sale is to close that information gap. The buyers have a ton of questions. And before they get on a call with you, if you're able to provide, you know, a due diligence checklist, a potential transition guide, you know, a P and L that shows the financial health of Your business, when you get on a call with buyers, they're going to be, you know, they've already reviewed these documents and they have, have, you know, a good understanding of your business. And I'm not saying give away your secret sauce or whatever, but it'll just make the calls much more efficient. But also, more importantly, as a buyer, they're more excited to get on the call because if you don't provide those documents, their first question is going to be, hey, do you have a PNL? Like, hey, I have like these 10 standard questions I asked every business. So you did a great job on, on all those.

Yeah, that's so.

So, you know, I guess, you know, you're an entrepreneur. I, you know, I love asking this question as well, is, you know, what are you, what are you building next, David?

So I've built a new app for iOS that's called PhotoArchive. And the idea is that over time we're all taking more photos and videos on our phones, which takes up a lot of space. So we end up paying more for icloud storage as a result. And nobody really wants to sift through all their photos and back them up or delete them. So, yeah, my goal with PhotoArchive is just to offer the best of both worlds where you can set a storage limit for recent photos and videos that you want to keep on icloud. You still have those on your phone, easy access, and then everything else will get automatically backed up to either your computer or some other cloud for long term storage and deleted so that you can free up more space and you're not paying more, more and more every year for icloud fees. So.

Yeah, interesting. Yeah, my icloud fee, it's a little high.

Yeah. And it's only going to get worse, I think, as we, as we get older and continue to take more pictures and continue to buy new iph.

I completely agree. And that's. Is it live on the iOS store now?

It's in test flight right now, so hopefully maybe by the time this goes live, it'll be out. But I have a webpage set up@photoarchive app.com right now to kind of get signed up for the test flight.

Nice. We'll, we'll definitely put that in the show notes. But David, thanks so much for, for coming on the podcast and congrats again on the acquisition and I hope to, to have you back on here to maybe talk about the next business that you're selling.

Yeah, thanks again, Andrew. Appreciate it. All right.

Cheers, my friend.

Thanks.