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• By far the most personal talk I’ve ever given
• 5 parts
  • Things to take away from this
    • It’s a long process
    • “Why did you decide to sell Drip?”
    • As in-depth as I can into what the process looked like. My perspective & motivations
• Part 1: The Early Years 2005-2009
  • Transitioning from salary work
  • A lot of consulting
  • Made really good money for how old I was
  • Acquired and launched products.
    • Wedding Toolbox.
    • Apprentice Landing Jobs.
    • JustBeachTowels - sold a couple of grand. Then sold it – didn’t want to do physical products
    • DIYDuckBoat.com - bought it for a couple hundred bucks. Did SEO. Made some money.
    • CMS Themer. Productized service, before we called them that
  • $5k highest month from any of those
  • Made less doing this than when I was consulting, but way happier.
  • “Why would you take a pay cut to go and do something else?”
    • Three reasons I HAD to do products. To own my destiny
      • Freedom
      • Purpose
      • Relationships
      • Heard these three things on a podcast. Wife Sherry explained it’s a known psychological thing
      • If you remove any, you’ll be unhappy
    • Freedom
      • Ability to choose what you work on
      • Don’t want a boss or clients dictating
      • In control of time, income, mobility
        • Can I take a month off. Can I work 3 hours a day. Travel the world if you want
        • Hard in a job. Hard in consulting, too
      • Not having my life consumed by my business
    • Purpose
      • Personal to each person
        • For me - learning & teaching
        • Need to figure out your own
    • Relationships
      • Us technically oriented people often forget this
      • Easy to accidentally neglect relationships; friends; family;
      • Choosing who you interact with in your business
      • Having time AND headspace for friends and family
  • Products allowed me to quit consulting
    • Making less money, but the days were magical
    • I don’t have a boss any more :)
  • BUT… (this talk has a lot of these…)
  • Was selling one-off products. Had freedom & relationships, but I was stressed as hell
    • Do I have to go back to salary?
  • So added one more to the list:
    • Stability
      • Something sustainable
      • How do I achieve this?
      • Products was Stability 1.0, but it needed iteration
  • Took some 8-12 hour weeks after son was born
    • Will never regret the time I got to spend with him
  • Realising it could be taken away at any time was frightening
  • Instead of these one-off sales, I wanted recurring revenue
    • This wasn’t obvious at the time. We didn’t even call SaaS SaaS yet
    • Best thing since sliced bread
  • Stability 2.0
    • “I need to buy or build a SaaS app”
    • HitTail (2011)
      • 10x-ed revenue in 15 months
      • Before… $20k run rate
      • What am I doing buying this? “I’ve never had this much money in my life, and now I’ve sent it to someone?”
      • After… $300k run rate
      • Making more money than I’d ever seen
      • Travelled a little more
      • Next step of the dream
      • “I’ve made it. This is it”
    • BUT…
    • Every 6 months, Google would… (accidentally) break all your shit.
      • I was freaking out. My whole livelihood is based on this app. If it goes under, I go back to consulting? I’m too far into this to take that step back
      • Scary. Didn’t have the stability I wanted.
    • Can I bet my future on this app? Because if not, I need to find Stability 3.0
  • Stability 3.0
    • Something that could last a decade or even longer
    • Not reliant on a single external data source
      • Not relying on Google / etc
    • HitTail also had a high price point and wasn’t a “core” business application
• Part 2: 2013-2014
  • Drip
    • Talked a lot in the past about finding product-market fit
    • 2013 Launched
    • 2014 product-market fit
    • ~7 months to find the fit
    • Added automation in July 2014. Up to $10k MRR
    • $45k MRR by August 2015
    • But that’s revenue. Drip net profit: all negative until March 2015
  • 2014: hardest part of entrepreneurial career by far
    • Had more money than ever in the bank
      • Pushing it all into Drip
    • Hired a head of revenue
    • Within 60 days, big tax bill
    • Unexpected expenses
    • Had ~45 days of payroll cash in the bank
    • Took 6 or 7 months to recover
    • “This is my last one”
      • I can’t do this again
      • I’ll figure this one out, but then I’m done
        • (Don’t know what done is, but not doing this again)
    • My wife: “That’s bullshit”
      • But I don’t think I’m going to do another one
• Been some heavy stuff so far, so… [INTERMISSION: Lesson 1: Don’t leave your kids unlocked with kids around]
• Part 3: Profit 2015
  • Automation picked up
  • Picked up a lot of competitors’ customers
  • SaaS app, highly competitive space, high growth, need to hire bodies as soon as you have the revenue
  • When you’re growing fast, as soon as you have $5-10k, you hire another body
  • AWS getting more and more expensive
  • But profitable
  • Fast growing companies are rarely profitable
    • Have to ask yourself – how long am I willing to forego profit for growth?
    • Will be 43 this year. Done a lot of these. 15 years into entrepreneurial career. I’m all in. If this explodes. If a competitor kills us. What, back to consulting?
      • I’d be coming to MicroConf like “can someone hire me?”
  • Rand Fishkin, CEO Moz, when they were doing >$1MM/mo: “~$25k in a checking account, no car and a rented apartment in walking distance to my office”
    • “Beware of the illusion of success, most people you look up to are more invested in looking successful than being successful.” -Wil Reynolds
    • Rand (so transparent and genuine): “I just want that one win… Just one.”
    • Full thread: https://twitter.com/randfish/status/802939001124503552
  • Didn’t have freedom
  • Didn’t have really healthy relationships. Was thinking about my business all the time
  • Didn’t have stability
  • What about funding?
    • It would cut down on the monetary stress within the business
    • But would delay profitability for years
      • Don’t know if I can keep doing this for 3/5/7 years
• Part 4: Acquisitions 2015-2016
  • 2 or 3 emails coming in per month offering funding
  • 5 potential acquirers in 2 years
  • Inbound interest
  • One interesting one… Clay Collins (Co-Founder/CEO of LeadPages)
    • “Would you ever consider selling Drip? I really like it.
      Warm regards,
      Clay”
  • Stability 4.0
    • “Sunset money”
      • Some people call it F U Money
      • Enough money you could run off into the sunset and never work again
    • First job out of college – $17/hour
    • We were tenth biggest marketing automation tool. 4 guys in an office
      • Built something pretty special with a really cool team
    • Wasn’t as simple as “if they offer me a million bucks, I’ll run off into the sunset”
  • Objections to selling, particularly in bootstrapping
    • “My startup is my baby”
      • That’s a negotiating tactic! Startups aren’t the same as having kids
    • “Selling is selling out”
      • Never been said by someone with something worth selling
    • “What else would I do?”
      • I hope you have an answer. If you don’t have anything other than your startup………
      • I have hobbies. Podcasting. Write a book. Run conferences. Etc etc
      • This one is just an excuse
  • Reasons to sell now
    • (The Zuckerberg thing basically never happens)
    • A lot of people ride their company over the top. Past the peak. → Plateau
    • Let’s say we hadn’t sold Drip. And now I was done with it, and wanted to sell. We’d be going to the market, not them coming to us. That’s a weaker position

• Startups are bought, not sold.

• Most people I spoke with who hadn’t sold regretting not selling

• Best time to sell is when you don’t need to sell

• Jason Cohen: “See, it’s good to be ‘king’, but what do you do when you’re at Trudy’s ‘North Star’ Tex-Mex restaurant tucking into a chile relleno and the guy across the table looks you in the eye and offers you enough money that you never have to work again?”
• “I’m flattered that you would consider acquiring Drip… Drip is growing quickly and we’re profitable, so selling now would need to make a lot of sense…”
• Deal-breakers
  • Not doing this again, so HAD TO BE sunset money
  • Can’t screw our team. Don’t want anyone to lose their job
  • Can’t screw our customers. Didn’t want to be shut down like a lot of acquisitions
  • Keep doing podcasts, MicroConf, etc

• One acquirer (Clay) was on board with all of these – even suggesting some of them before I did

• • Once someone makes contact, every contact after that is a negotiation
    • Acquisition activity
      • June 2015 - first contact
      • Jul-Sept, nothing
      • Oct – NDA and brought in FEInternational (Thomas Smale)
      • Back and forth
      • Feb 2016 – price & counter
      • Launched Drip workflow builder
      • Feel guilty “keeping a secret” from your team
      • Mar 2016 – Don’t know. A lot of zeros! Couldn’t agree on price
      • April 2016 Reconnect
      • May Agree on Price, Sign letter of intent
      • Proposed close June 2016
      • Started telling team ~2 weeks before close
        • Absolutely the right decision
        • Can’t be distracting your team. It’s so distracting
• Part 5: Reflections 2016-2017
  • July 1, 2016, acquired
    • At a cello recital with son. Have to step out, signing deal on phone!
    • Derrick sent me screenshot of bank account
    • Public announcement a week later
• It’s going to take a long time. Longer than you think. Longer than you want it to.

• Run your business as if you are not being acquired.

• • Protect your team until the last possible days. It’s distracting. “Firewall” them from it. - “I’m going to tell you something that’s going to sound like bad news at the start, but trust me, it’s really good for us”
    • Did it tick the boxes?
      • Freedom: yes
      • Purpose: yes
      • Relationships: absolutely
      • Stability 4.0: yup
    • In Minneapolis. Snow so cold it won’t stick together. Too cold for phone to work.
    • A great move for the family
    • Have been able to hand off:
      • HR
      • Legal
      • Payroll
      • Benefits
      • Operations
      • Hiring support personal
      • And more…
    • So far it feels like a “win” to me
      • Resources of a funded company, without the negatives of that
      • Handed off most of the work I didn’t enjoy
      • Able to achieve the long-sought after “Stability”
      • Not a single day of regret
    • You have a year to agonize over something, I think you usually make the right decision
    • Some potential drawbacks to selling
      • Leaving money on the table. Probably would’ve made more if we’d sold now
      • Working for someone else
      • Losing control of your product
      • Hard to let it go if your identity is tied to it
    • If you had the opportunity for a deal structure that works and sunset money, is it worth saying “no” for a chance at 2x that amount?
• Q&A
  • “Have you bought anything ridiculous yet?”
    • Until about 3 months ago… no…
      I drive a beat up car. I’ve been investing in stocks etc. Realised collectibles are a good way to… diversify. I now have the money to buy some really expensive comic books! Spent a lot on comics. Spiderman #1. etc etc
      Couldn’t give a crap about a Lambo. But these comic books…
  • “How stable was the revenue? If you had decided to milk it – cut costs, fire anyone you could get away with, no values – how quickly would the revenue have evaporated? Could you have got anywhere close to that level of profit?”
    • Good question. I did the analysis. We said exactly that. “Hypothetical, what if we’d laid people off etc etc?”
      → Would’ve been 10 years to get the same amount of net profit
  • “How has the leadership changed within Drip since acquisition?”
    • LeadPages already has two software products. We came in as a third business unit / department.
      Went from 1 to 7 full time support people. I don’t want to run a huge organization.
      We’ve not merged engineering of Drip with engineering of LeadPages. We do things differently. They’re 40 engineers, we’re 8.
      Feels like the best of both worlds so far.
      Had a hard time at first handing over the marketing. But so happy now.
      Funny the things you think you wanna do til they’re not there.
  • “The role FEInternational played in the process?”
    • Sanity checks. Certain terms: “Is this normal? Are they taking advantage of us?”
      Advice: “Try to get as much as you can in writing before the Letter of Intent. You don’t want to just agree on price before the LOI, you want to agree on as many terms as you can.”
      Then when you get to due diligence, everything’s already decided
  • “The lack of freedom, the relationships suffering. I feel like I’m in that place. I don’t feel like acquisition would help. Any other options, or advice?”
    • I don’t know that I have an easy answer for that. I think if I had something unacquirable or unsellable… I think the relationship one is the one that doesn’t have to depend on acquisition, it could be a state of mind. May mean conversation with a therapist… psychiatrist… someone to beat me around the head and say dude spend more time with your kids
      The freedom one is tougher. Because if you really do have to work 12 hours a day… I haven’t thought a lot about that. It’s tough.
  • “What gave you the confidence to invest the money from HitTail into Drip?”
    • Good question. Couple of things:
      Drip was not my first rodeo. I felt like I’d built the skills to make it successful
      I knew I had a network, and an audience. The pieces to make it work.
      Working with Derrick. I just knew we built good software together. It’s not always the best product that wins, but I knew we could make a great product
      Felt like we were onto something. Bright people were interested. They had good advice. Getting those positive signals…
      And finally felt confident enough in my entrepreneurial ability
  • “How did you think about your personal freedom – in an acquisition there’s usually some time where you’re tied to the company. Was that not a dealbreaker?”
    • I read up. I only found two startup acquisitions where they didn’t have to work for the company. It just doesn’t happen
      There were a bunch of reasons I didn’t like working for others. And this acquisition didn’t have those.
      They were cool people, I wanted to work with them.
      Creative environment that we could potentially thrive in. Went with our gut.
      There’s negotiation there, but that wasn’t a dealbreaker.
      I don’t regret it 9 months in. I’ve learnt a ton.
      LeadPages is one of the best in the world at top of funnel marketing. Amazing SaaS product. I’ve been inside that for 9 months. That’s an amazing learning experience
  • “How did the team react?”
    • Small team. All very loyal to each other. They backed us up.
      One person had been at 2 startups that were acquired and had problems and so was more skeptical, but it worked out fine
      It’s just a shock when you first hear it.
  • “You were approached multiple times. Did you leave some breadcrumbs? When you’re a small private company, why were they coming to you?”
    • One advantage we have is the “powered by Drip” on the widget
      But even without that. We were #10 ranked automation software, people look at that
      Positive press - listed as best automation tool for small businesses
      “When you hit $1-1.5MM ARR, you hit “mini-brand” status. You’re big enough in your space that people at least know who you are.”
  • “If you couldn’t have found anyone who would meet all your dealbreakers, would that have been a problem? Were you desperate to get out?”
    • No. I don’t think it would’ve imploded. We were profitable. I think we’d still be going fine. But, the stars aligned as they say.

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