How Wistia Escaped VC Control & Built Long-Term Profits | Chris Savage Wistia CEO

I tell my CEOs all the time, when you raise venture capital, there's no turning back. You're on a one-way journey to deliver a big outcome. Well, some rules are made to be broken. Chris Savage, co-founder and CEO of Wistia, raised VC, but he didn't like the choices he was being forced to make. Growth at all costs just didn't sit right. So what did he do? He bought his investors back. Now he controls his company and is building a profitable market leader for the long run. Let's see how Chris did this.

The reason I only coach CEOs of at-scale technology companies that have raised either VC or PE, and I do that because I always tell them, once you take that money, you've begun a one-way journey to deliver an outcome.

Yes. Yeah.

There's no turning back, but you turned back. You did a U-turn along the way and bought your investors out. And I'd love it if you could walk us through that journey because it's pretty unique. And I'll bet you there's a lot of lessons for people.

Yeah.

So basically 2017, we had the opportunity to sell the business. We'd had 3 different companies approach us about buying the company, all companies I respected, and we'd had people approach us in the past just poking around, but we were just like, no, no, no, no, no. But this time my co-founder, Brendan, and I were like, all right, let's like have these conversations. Let's see, 3 at once. Like, seems like there's something here. We have the conversations, get into the place of getting offers, look at the offers, and they're real offers. Like they're big, they're big numbers.. And, you know, as I mentioned before, about 10 years into starting the business at this point. So we've been at it for a while and we start to take these offers really seriously and start thinking like one offer in particular, like what would we do if we actually sold the company? And, you know, we're talking to the folks at that business about like what would happen if we got there. And they're like, well, I mean, the truth is like, you guys are entrepreneurs. Like, are you really going to stick around here? You're going to— because I was trying to come up with this like big thing that we would do that would be new. That was what I was excited about. And they're like, no, are you really going to do that? Like, you're just going to start your own thing in 2 years. Like, really listen to that. Like, that's probably true. And so then Brendan and I start talking. We're like, well, what would we do? What would you do? What would I do? It's like, well, if we start another business, like, we would work together. We feel like we have a unique partnership. We have built our values together as we've built this company of understanding in like every sort of business decision. Like, I almost always know how Brendan's going to go at like what he's going to want to do. He almost always knows what I'm going to do. That's not 100% true, but it's True, very true. We felt like the video space was changing a ton at that moment, and we're like, it was the beginning of being able to make videos with your computer, like where you record and stuff. Like, okay, this is going to have a huge change. This feels like a similar scale change to when we started the company. So then who would we hire? We start making a list of employees. They all work at Wistia. We're like, what type of customers will we focus on? Like, oh, it would be small, medium-sized business. What values would we UpHold, we're like, well, we'd be really— we take a very long-term approach and we'd really try to make sure we give ourselves permission to be really creative because that's what stands out and that's what's different. That's how you get like a better return. We're looking at each other, we're like, wait a second, wait a second, wait a second. If we sell, we're literally talking about rebuilding Wistia. Why, why, why are we saying we should rebuild it? And I look at Brendan, I'm like, are you happy? And he's like, no. He's like, looks at me, he's like, "Chris, are you happy?" I'm like, "No." Like, why aren't we happy? Why do we want to rebuild the company? And we realized that actually we had a few years before kind of changed how we were running the business and we switched to a growth at any cost approach. And that was because we'd gotten so much advice from other entrepreneurs about how we were doing. I'll give you some numbers. We were, it was a moment we did $10 million in revenue one year. And we had $3 million in EBITDA. And we thought that was pretty cool. We're like, look at us. Like we've only ever raised $1.4 million in angel money and we got $3 million in EBITDA one year. Like, isn't this amazing? And everyone I talked to was like, you guys are idiots. Like you could be growing much faster. You shouldn't be profitable. It's way too early to be profitable, blah, blah, blah. Which is general advice, like venture capital advice, right? But everyone I talked to said that. And Brent and I started to question ourselves. And so we decided we aren't growing enough. We should be pushing harder. And so we started running negative and because we'd been profitable for a few years, we'd saved up cash. So we used our own cash. It was like we, it's like we switched into a venture mode. But the problem was when we did that, we had tons of great ideas, I thought. And instead of asking when we had a new idea for something to do, is there something we're doing that we should stop doing? Is there something we're doing that's not working that we should take the person who's on that and put them on this new idea? Instead of asking that question, we just hired and grew and said yes to everything. And so then we ended up in this problem of like, we are running negatively. We had improved our revenue growth rate slightly, but not much. It felt like we actually had a lot of zombie projects of like things were just continuing on, but like lumbering and not actually making progress. We lost focus. And so we looked at each other and we're like, all right, instead of selling, let's fix the business. First thing we're gonna do is we're gonna get back to being profitable. We believe if we're profitable again, it's, it's going to be much easier for us to be long-term focused. Because what ended up happening when we were losing money is that every month that went by we're losing money. You now have like a time to live, you know, you do the time to live math. And if your math is off, you might think you have 18 months and then suddenly, you know, revenue doesn't grow as much as you're expecting and you don't have 18 months, you have 8 months. And like, well, are we really going to stay like this or not? And it, and it without meaning to, everything became short-term focused. And when it's short-term focused, if something doesn't work, it's really stressful. And so sometimes you try something, you do it for 2 months, and you think, "Ah, fuck, it's not working. Like, we need to adjust." And then you stop and you try something else. And a lot of times that thing actually would have worked if you'd stayed on it. So you're like distracting yourself constantly in this kind of like constant thrashing churn mode. And so that's why we were so unhappy. So we decided, all right, we're gonna be profitable, long-term focused, but we think we need to realign with our investors because our investors have been in the company for 10 years and they want us to sell. They want a return. So that led us to this idea of raising debt and debt would force us to be profitable. You know, it would just like, we'd have to be profitable. And we also believed if we were actually profitable that we would get back to being long-term. And that we would actually perform better. And so we, the summer of 2017, figured all this out, said no to the deal, told the company that we decided not to sell the company and that we're going to go to—

previously that you were thinking of that.

We, we went to them and said we had some offers to sell. We decided not to do it. Got it. And they said, what are we going to do? And we said, we don't actually know yet, but we're going to tell you as we figure it out. And then the next month went by, we're like, we think we're going to do a debt deal so we can do a buyback. And they're like, wow. And then the next month we came back and we're like, all right, we have a partner that's going to happen with this and we'll give you the details soon. And then like maybe 2 months later, we did what's called a tender offer. And so all employees and every investor got the opportunity to write in at a specific valuation, like how much of their shares would they actually want to sell? So it's like a big, it's like a liquidity event. The way it works is you can't market it. So Brendan and I. Basically said, this is gonna happen. Then we walked away and we hid. And our like COO and VP of finance at the time basically communicated everything to everybody. And like, you can't talk to Chris and Brendan, they can't give you any advice. But everyone got the same like, you know, 60-page packet of like the deal, our forecast, our recent financial, blah, blah, blah, blah, blah, blah, blah. And then on the other side of it, we had bought back control, converted preferred to common. So like our shareholders who stayed in knew that they would be aligned with Brendan and I. And then we could focus on getting the business profitable so we could serve the debt. And we can focus on being long-term.

Amazing.

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