Navigating the Startup Acquisition Landscape with Andrew Gazdecki

[00:00:00] On today's episode of The Exit Plan, I talk to Andrew Gazdecki, who is the CEO and founder of Acquire.com. He talks about his entrepreneurial journey, we discuss his previous ventures and some of the challenges around acquisitions of startups and the innovative solutions that his platform offers to streamline that process. We talk a little bit about the emotional aspects of selling a business and he's got some really great tips for founders preparing for an acquisition. I hope you enjoy today's conversation.

[00:00:30] Andrew Gazdecki, I'm the CEO and founder of Acquire.com. Very nice. So can you just tell me a little bit about your career and what you've done up to this point? Yeah, I've been an entrepreneur kind of my whole life. I was a kid selling baseball cards when everyone was buying them. I used to also sell like yo-yos and Pokemon cards and stuff like that. And then in college, I used to do this thing where I'd start a different company every year for fun. I just knew I wanted to be an entrepreneur really young.

[00:00:58] I actually started a company my senior year in college that kind of took off. I bootstrapped a mobile app development platform drag and drop builder for small businesses. It was called Business Apps. It's spelled B-I-Z-N-E-S-S. I couldn't afford the correct domain. So I got that one. Friends called it Biz Apps for short. Grew that to about $10 million annual recurring revenue. And that was acquired by a private equity firm when I was 29. That was like my life changing.

[00:01:28] Holy shit. Exit. I remember the day that happened. It was pretty wild. It was like spraying champagne and stuff. So that was cool. And then after that, I started a crypto trading platform called Altcoin. That company I sold to another cryptocurrency company called B&K to the Future. They're like the WeFunder or Republic of cryptocurrency projects. So it was cool. Also got to.

[00:01:53] So I went from like a SaaS company to interesting world of crypto and they're dramatically different. Very different audiences. And then after that, I was CRO at a company called Spiff. They automated sales commissions. So think if you have a big sales team, people are like using a calculator, figuring out how much you got to pay them. And they automated all that. And that sold to Salesforce for about $500 million. I was there for about a year.

[00:02:21] When I got there, they weren't really selling anything. And I helped them. Their marketing strategy, their sales strategy. And then I started my current company, MicroQuire at the time. And then left to start that one. We've since re-branded to acquire. And here I am. That was a lot. What a journey. I mean, it's very impressive to hear all of that. And also, I guess you've been on the entrepreneurial side of it.

[00:02:48] You've got a lot of experience of what it takes to grow, scale and exit businesses. What was the kind of motivation to start this most recent? Was it MicroQuire to begin with? But now it's acquire.com. Yeah, it was MicroQuire. And then we dropped the Micro as we started helping larger startups get acquired. The Micro was limiting, I felt like. But yeah, going through my first acquisition, I just saw how confusing it was.

[00:03:15] There was a lot of times where I just wanted to press the eject button and sell my company to whoever I could find. And then I ended up selling to a financial buyer, a private equity firm. And I remember thinking, okay, this private equity firm is probably a lot of similar firms like this. They just buy SaaS companies or software companies. So I thought, well, it'd be really interesting if I could meet all of these firms all at once. And that was the original concept behind making a marketplace for startups to get acquired. That's okay. That's interesting the way you think there.

[00:03:45] So did you go about doing that? How did you kind of go? Did you sort of network yourself within the private equity community? Sort of. Well, first, with any marketplace, you need both the supply and the demand. So I needed buyers and sellers. So I originally just started cold emailing a lot of different startups, asking if they were interested in eventually meeting buyers or getting acquired. A lot of them would tell me like, no, I don't want to go away.

[00:04:10] Like, you know, some pretty, you know, what's the word? Let's just say they were telling me not to email them again. And then I switched it to say, hey, do you want to buy startups? And that's when response rates skyrocketed. Because even if they wanted to sell, it was a softer message instead of like someone knocking on your house and being like, hey, do you want to sell your house? They're like, no, get off my porch. So cold email was how we took off originally. And then I'd do the same for buyers. I would email VCs, accelerators, private equity firms.

[00:04:40] And then over time, just the flywheel started picking up and we'd see thousands and thousands of buyers and sellers registering. And then today we see on average 10,000 to 15,000 buyers register a month and around 2,000 different startups register every single month. So originally it was very manual and then it takes off. What was it when you started this business that what was the opportunity that you saw?

[00:05:04] I just saw the startup acquisition process to be very confusing and almost hidden behind advisors and investment banks. What is due diligence? What do buyers expect to see in your company? What is the legal process? What is a letter of intent? How do you value your startup? It was all very manual and very old school, I felt like. And I didn't see a lot of innovation happening in that space.

[00:05:28] And so since I've started the company, we've streamlined building a letter of intent for buyers as a purchase agreement. We've done a lot around due diligence for both sides where you go under due diligence. What do you do? What can you expect? What are buyers going to be looking at? What is normal? What is not normal? Should they have full access to your source code and your bank account? What is normal? Probably not. You know, just stuff like that.

[00:05:54] I remember when I sold business house, my first company, I had, gosh, maybe 10, 12 friends just text me, call me like, hey, how did you sell your company? How did you meet the buyer? Like just meeting the buyer alone is a huge just mystery for a lot of founders. And once you go through an acquisition, I think everything becomes a lot more clear. But I thought there was a really big opportunity to just even educate founders around that.

[00:06:21] Because when you think about marketing or sales or startup investing, there's, you know, 50 books on every single topic. But when you get to the acquisition, which is arguably the most important part of the founder's journey, there's like one or two books. So I thought I could help there. So with your background in tech and having had a SaaS business before, are you kind of applying a lot of those learnings to acquire.com? Like what's the sort of the platform that you've built and what are its capabilities?

[00:06:52] Yeah, definitely. Yeah. I mean, I try to build it as much as I can for other founders and what appeals to them. I like to think I have some unique insight because I was a founder previously before this. I guess I still am. But yeah, the platform, you can sign up, you can register your own startup, create your own listing. This in traditional investment banking is called a SIM, a confidential information memorandum. It's like a fancy pitch deck if you're trying to sell your company.

[00:07:18] So we have these anonymized listings you can connect into your billing system. So Stripe, Paddle, QuickBooks, whatever you're using to capture customer revenue. You can connect that to show potential buyers in real time and it's all anonymized. So that alone helps with buyer connections where buyers want to know what is the financial health of the business. And then just meeting a buyer too. We're able to use a number of different data points that we have on buyers' preferences.

[00:07:46] So if you're selling a SaaS company that is making a million in revenue that's in the Martech space or something like that, we can segment all the data we have on buyers and instantly notify those buyers specifically interested in that type of company as soon as it goes live on our marketplace. And then just getting and receiving offers. I keep going. Yeah. Thinking about what's the mix of different types of businesses? Because you obviously, you know, you're in San Francisco, you come from tech background.

[00:08:16] It sounds like it's quite technology focused, but what's the kind of mix of businesses and buyers that you have on? Yep. It's all technology. I'd say 80% SaaS businesses. It depends on the month because inventory, you know, kind of moves. So on average, 80% SaaS, 70%, 80%. We have 30% for the other categories like e-commerce, marketplaces, mobile apps. Those are the big content agencies.

[00:08:42] And when you first started the business and you called it micro acquire, what would you consider a micro business? Yeah, good question. Like anywhere from K to 50K, we see a lot of pre-revenue software companies where maybe they haven't found any customers at all. So it's just an idea and a working piece of software.

[00:09:01] But as we progress, we started to move up market where our ideal ICP is think of a SaaS company bootstrapped, hasn't raised any venture capital. Team is still pretty small. They're generating one, two, three, four, five million in recurring revenue. That's a perfect fit for what we do. I mean, what were the numbers you were saying of businesses that are signing up on a monthly basis to your platform? Around 2000. But I should know that will... That's crazy.

[00:09:32] That's, I mean, is that mainly in the Silicon Valley area or is it global? It's huge acquisitions, right? I should know that 2000 will go down to a number around 200 new businesses per month. So that's just top of funnel sellers signing up. We'll talk to them. We'll disqualify a lot of businesses too. So we don't let every business onto our marketplace. And you can be, we call it rejected for a number of different reasons.

[00:09:59] But most of the time it's business size, quality, industry is a mismatch. For example, if you own a hair salon or something like that, we don't allow those businesses because it's just technology companies. So it dwindles down to 200 per month. But even so, that's still, you know, it's two and a half thousand a year, isn't it? It's still a lot of businesses signing up.

[00:10:22] So a lot of the listeners to this podcast are more in the kind of service expertise business, you know, creative agency owners. And I just kind of wonder about the kind of parallels, you know, what's similar and what's different between a kind of creative service industry based agency and a technology company.

[00:10:45] You know, it might be useful just to start with like what you look for in a good company that you think has a good prospect to sell at. Yeah, definitely. Well, we also help digital agencies, marketing agencies, software agencies, content businesses. So we do help a lot of those businesses sell. The main difference is how the revenue is generated. You know, a service business is generally not recurring. Sometimes it is. But there's a large pool for agencies.

[00:11:14] I love helping agencies get acquired. Those are great businesses. Okay. And what how much kind of work is it for you and your like how much of it is kind of manual work where you're helping these agencies getting sold versus how much of it is them signing up the platform and having access to the materials to be able to do it themselves, as it were. Yeah, great question. So when I originally started the business, the concept was end to end tools. We're going to automate everything for acquisitions and advisories. And we do a lot of that.

[00:11:42] But over time, I've learned that people just want to have someone in their corner when they're selling their business. It's a very emotional process and journey. So we have a full team of advisors now that will complement the tools that we built and the tools we built essentially just streamline and make things more efficient. You can reach out to more buyers faster. But then we have a team that walks every seller through the whole process.

[00:12:06] So think negotiations, going through due diligence, initially valuing the company before you go live on the marketplace. We assist with all that. I think the combination of both is necessary and that's how you maximize your acquisition. Okay. Yeah, I mean, it's interesting that you touched on the sort of emotional aspects of selling a business because I think it really is for a lot of people. For, you know, it's often their baby.

[00:12:30] It's often this kind of huge life change, which often kind of coincides with other stuff going on in their life as well. I think just kind of recognizing that and having the right support for founders when they're selling is really important. Totally. Totally. And if you don't have good help in your corner, the acquisition can roll through. You can sell it yourself short. Now, most of the time, just small things that happen in acquisitions, they can be completely avoided.

[00:12:59] So preventing those things, I think, is huge. Yeah. I mean, have you got any examples of little things like that, things that can go wrong, things that have gone wrong? Yeah. Oh, gosh, so many. Just before this podcast, I was on a call with these two founders that are looking to walk away from this acquisition because it's essentially getting too tense where you can only disagree on certain things so many times and just deal fatigue starts to kick in. So that's a big one.

[00:13:28] And then the obvious ones where, you know, things are misrepresented by sellers or viewed as inaccurate by the buyer. So that could just be, hey, we thought you were growing by this much or we thought your churn was this much. And it's not once you go on to due diligence. But generally, sometimes it just can't get along. Like tone of email can be something because it's a very high stakes moment where you're right. It is their baby. You're hoping for something that goes, you know, quickly and enclosed and there's not a lot of headaches.

[00:13:56] And over time, I see a lot of just, you know, one data request leads to another and sellers get fatigued. And then, you know, those emotions rise up and then someone walks away from the deal. Yeah, I mean, I've seen that, made a few acquisitions myself and there's always twists and turns and, you know, moments where you think you're getting there and then suddenly you think, oh, my God, the whole thing's off. Yeah, no, it totally happens.

[00:14:22] And every like every email and like meeting and stuff like that, it's an opportunity for, you know, the buyer gets spooked where, you know, something was viewed a certain way. And sometimes it's not even the case. So it's a very tricky process. Yeah. So where do you kind of see the business going? What do you kind of enjoy about it? Are you building this business to sell or what are your kind of motivations for continuing to grow this?

[00:14:49] Yeah, I always joke, you know, if we ever wanted to sell a business, we could just list it on Acquire and have a buyer buy the business on our own platform. But no, I think this is a business I'll run for the next decade. I love entrepreneurship. I love startups. I love helping out their entrepreneurs. I love just seeing the different startups every single day. It gives me a unique view into the technology world with all. So I'm in like startup heaven with all the cool things I get to see.

[00:15:17] Have you gone for any funding yourself? Yeah, we've raised about $10 million in venture capital. And are you kind of potentially looking to go out and make some other... I know a few of these marketplaces in different regions in the world. And I was sort of wondering whether that's... Are you kind of looking to do your own deals? Potentially. You know, we're currently profitable. I think we'll see where we go this year with M&A picking up.

[00:15:47] We're forecasting a good year, but we'll just have to see. I think what's interesting about opportunities like that is they're not very attractive when you view them from our lens, I think, because we're already active in essentially every different continent around the world. I think if we wanted to do international expansion in a more focused manner, we could just localize what we do. But we are looking at Latin America a little bit more seriously and also expansion in Europe. But I mean, you never know.

[00:16:18] Yeah. Yeah. What I'm so raising $10 million. I mean, that's that's fantastic. Talk to me a bit about how you got that funding in. Definitely. So originally I started the business just it was just me. I was doing essentially everything, product development, onboarding startups. We market the startups through a number of different ways on social media. We have a large mailing list of buyers. I was doing customer support, kind of just operating the whole business. And we haven't raised financing since 2021.

[00:16:48] During that time, valuations were really high. Investors were looking to deploy capital really quickly. And we were bootstrapped. And I was building the company very publicly where I was sharing a lot of stats on what we were doing on social media, kind of creating a movement around what we were doing that attracted the attention of a lot of different investors. So when I did go to raise capital, I'd already met a lot of different investors and

[00:17:15] made the process, I think, a lot easier than what you see today. Okay. That's interesting. Were these kind of connections that you had from your previous exits? Yeah. My first investor, he was actually an investor or not an investor in my investors company. He was an introduction from my first company's investor, if that made sense. Got it. Right, right. I see. Yeah. So my lead investor in the first company, he introduced me to the VC that is the first

[00:17:45] investor in acquire. Okay. Yeah. We had known each other for a couple of years, a few years, actually. And I guess you've got successful track records as an entrepreneur, so that kind of makes it easier when you're... Candidly, it does quite a bit. Yeah. And I think that's a little overblown, if I'm being honest. I think a lot of VCs, you'll read about it all the time. Second time founders get better. And it's very true. Do I think it should be that way? No.

[00:18:14] I think every time you build a company, it's just as equally as hard. Yes. Yeah, I would agree with that, actually. And I think I read something, I can't remember where it was, but it was saying that actually the stats aren't particularly good around second time founders. I would believe that too. I think you can get lazy. You can... If you've had some prior success, some things can feel below you where maybe you don't want to roll your sleeves up as much. So I believe that for sure. Yeah. And what about your team? Are they kind of mainly in the Bay Area or are you kind of distributed?

[00:18:45] Do you kind of offshore any of your processes? Yeah. I mean, surprisingly, I'm one of the few in the Bay Area. The majority of the team is in San Diego, so Southern California. And then we have members in Jamaica and the Philippines and Ukraine. So we're like half in person in San Diego and then the rest is distributed. Okay.

[00:19:07] And in terms of sort of looking forward to 2025, you kind of mentioned that you think kind of M&A is going to pick up. Can you talk to me a bit about what sort of what you see coming down the road? Yeah. Yeah. I mean, with just the market improving, I think we're optimistic about where acquisitions will go in the next couple of years compared to 2024, 2023 and 2022, when I felt like the

[00:19:34] whole market was in a little bit of a downturn, especially SaaS companies. And then we just look at our own internal data. So we have a lot of just overall users every single month. And so we see things like thousands of NDAs signed, hundreds of letter of attempts being created or accepted. So we have a lot of these initial indicators telling us where we think the market's going to go. And things are looking good. That's really, that's interesting.

[00:20:01] The data aspect of what, cause you've got quite good insight into, into the market really from, from all of that activity. Is there anything you kind of do? Do you publish that data? Do you kind of? We do it once a year, we compile a report and we're going to have our next report coming out probably within the next month or so at the most. Okay. So for thinking about the kind of digital and marketing agencies that you've worked with, have you got any kind of tips, advice for founders of those businesses?

[00:20:31] If they were kind of thinking about selling, what should they be doing now? Even if now by the right time, but what can they be doing to prepare to make their business the best it can be? I think the number one thing is just getting the house in order. Even if you're not looking to sell, I think it's a good exercise documenting every process, outlining what customers are occurring. If there's any, you know, services that can be delivered by essentially anyone that's really good to document because if you can hire more people to deliver those same services, then

[00:21:00] a new buyer can step in and take over those processes. But essentially like a whole user manual, how does marketing work? How does sales work? How does support work? How many hours a week are you spending in each department? What would just, what would the life look like for a new buyer to step into? That alone, that company operating manual can be so useful. If any buyer comes when you're not expecting it, they're just, you know, sending you an email saying, Hey, have you ever thought about selling?

[00:21:26] You have something that you can share if you get comfortable to that point. But that's the first thing, just preparation. Because the cool thing about preparation is when you start doing that, you'll start to see areas where your company isn't that good or could be better. And then so you'll naturally just improve the company. Yeah. Yeah, absolutely. So for you with your role, like what's, where do you kind of focus your time? What, what do you, what, what, what do you kind of, yeah, how do you sort of spend your week?

[00:21:56] Yeah, it depends. Lately, the past few months, I've been focusing a lot on marketing. I like marketing. I like, yeah, that's kind of the whole story there. I like marketing. I also spend a lot of time with sales. That would be our M&A advisory part of the business. So that's onboarding new startups, walking them through what to expect when they go to market, how to meet with buyers, how to prepare their startup. And then starting this year, I've been diving a bit more into product. So that's been refreshing.

[00:22:25] I'm not a technical founder, so I don't spend the most time in product, but I'm shifting my focus. So I kind of move around a bit. I'm definitely a generalist. Yeah. I'm not really great at anything. Are you kind of integrating any sort of AI tools into, into the? Oh yeah. Yeah. A hundred percent. I think at this point, if you're a software company and you aren't looking at AI or missing out on potential opportunities. And the biggest one for us is just making things faster and streamlining things more.

[00:22:56] Yeah. Yeah. I was, I was, um, a while ago now talking to another, another, a similar sort of marketplace platform to, to your one, but they were, when it came, came to kind of doing the share, share purchase agreement or asset purchase agreement, there were a sort of AI copilot essentially that could kind of, you know, where, when you made changes could sort of make suggestions about what the other side might say about that and could kind of give you a lot of context around that document, which I thought was quite interesting. Yeah.

[00:23:23] There's tons of stuff like that, like drafting letter of intents, drafting purchase agreements, even just drafting the listing or the SIM. What do you say? How do you position it? There's endless opportunities there. Yeah. Yeah. Yeah. Yeah. It's funny what, I mean, I do, cause these, these, these purchase agreements are often really quite similar. They are. I thought that with, with a deal I did a little while ago. I was like, that's, that's a big opportunity.

[00:23:51] That's something that we've tried to do is standardize these documents within the market. We've done so within our marketplace. And the key benefit of that is when it comes time to making an informal offer through a letter of intent or a formal offer to buy the company with a purchase agreement, if it's standardized, there's less to review and it's more straightforward and there's more trust on both sides. Yeah. Yeah. Nice. Great. Well, I think that, um, is probably a good place to, to say thanks very much.

[00:24:21] I don't know. Thanks for having me. Cool. Thank you very much for listening to the exit plan podcast. If you enjoyed it, please leave us a review to help other people find us. If you would like your question answered in M&A Q&A or are wondering what's next for you and your business and want to chat about an exit plan, drop me an email on barnaby at foxcogroup.com or get in touch with me on LinkedIn.