SaaS Interviews with CEOs, Startups, Founders
Bootstrapped to $30m By Acquiring Smaller Companies for 2x, How Question Pro Did It
08 Feb 2023
Chapter 1: What event is being highlighted at the beginning of the episode?
Guys, SaaS Open is our next big event in New York City. March 16th and 17th, we'll have 1,000 SaaS leaders all sharing how they built their companies. Our keynotes are Henry Shuck, Marie Martins from Tally.sao, Serby from Symbol, Christopher of DocHub, who had a big exit. Again, hundreds of speakers, 1,000 plus attendees.
And we've got folks bringing their entire executive teams because we have stages for founders, founders, heads of product, head of finance and BD, CMOs and CROs, and then people in HR stage. It's going to be special. Prices are increasing every week, so you don't want to wait. Go to sasopen.com right now to see what the ticket price is and lock in your spot today.
Again, that's sasopen.com, March 16th and 17th in New York City. Tickets are almost sold out. You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com.
Questionpro.com finished 2022 at a 30 million run rate, up from 20 million back in 2019. He's bought five companies and done this all organically and bootstrapped since launching in 2005. It's a tool that helps you learn from your employees, learn from your customers, all through smart surveys and engagement tools. Check it out at questionpro.com. Hey folks, my guest today is Vivek Bhaskaran.
He is the CEO and founder of a company called Question Pro. Bootstrapped, he's done a lot of M&A. Last time we spoke, he broke 19 million bucks in revenue, serving over 4,800 customers. He's now in warm and sunny San Francisco while I freeze down here in Austin. Vivek, are you ready to take us to the top? Yes, sir. Let's go for it. Second time. I love it. Second time.
Your first, your recording when you presented on stage at one of our last events where you talked about how you used WhatsApp to text basically another founder and ended up closing a deal with your one page sort of LOI was a massive hit. Are you still today, even in a recession, looking at M&A opportunities or no? I'm doubling down. I mean, in fact, I have three deals in the pipeline right now.
I think, yeah, I mean, from an M&A perspective, the kind of deals we do, like, you know, there are still deals to be made. And we're active. So guys, QuestionPro helps you run surveys to do research, understand your customer's experience, and also get feedback from your employees to manage employee engagement effectively. Vivek, with that context, how are you thinking about M&A?
Do you go buy in adjacent product categories? Do you double down on the current niches you're in? How are you thinking about it? So we double down on the current niches we're in. So like you said, you correctly, accurately pointed out that three different buyers, I look at from the enterprise perspective, there are three buyers. Number one is consumer insights and market research.
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Chapter 2: How did QuestionPro achieve a $30 million revenue run rate?
tech is kind of in the middle realistically right so um and from a you know with valerie and obviously valerie and i hit it off but there are a lot of it's not just valerie she's got a bunch of people they don't you know usually you have at least 20 percent attrition i would argue anytime you do a deal 20 percent of the people um in in the in the selling company will just leave no matter what no matter what you do really because they are like it's a it's a good kind of like you know break point if you will the way i look at it it's a break point right so look you know
If you're working for a company that got sold, you'll be like, let's take a break. Okay, let's see what's going on. And then once you start looking, you're going to find something, quite frankly, you're going to leave. So I think we are kind of, so in my kind of experience, the first time it was kind of a shock. Like, look, you know, we lost a bunch of people.
But the next time, the third time, they're like, look, I'm expecting 20 to 30% attrition. And how many acquisitions have you done since 2005? We've done like five, six or five or seven. Yeah, between five and seven, honestly. The first ones were pretty small. They were only asset deals.
And later on, as we got better at it, now we kind of like, we still do asset deals, but we kind of like are looking for more asset plus, you know, asset as in tech, plus customers, plus, you know, the standard operation. You know, we want customers, we want people from a, you know, from an HR perspective and obviously some tech, you know, from a software perspective.
And the other thing that I want to kind of like, my lesson learned, I would argue is, from a tech integration perspective, the first time I did it, I did not rewrite the platform, it rewrote their code base. And that's, in fact, in long term, a huge mistake, right?
So because now you have multiple code bases, and my team doesn't want to work on that, and there's all these cultural issues start coming into play. So what I've started to do now is like, you know, we model the acquisition such that we are going to rewrite the code base. End of story, right?
So the upfront, we say, look, we're going to buy this awesome piece of tech, but we're going to rewrite it because we have a way and, you know, we have a team and we want to manage it. And that is, well, that seems a little expensive, but that's what you want to do in the long run. Because otherwise you'll have a hodgepodge of, you know, these guys use Ruby, those guys use Java, these guys use,
And now you have like, you know, it's a shit show at that point. So if you're not ready to rewrite the tech, I would say like, then you are in for a lot of pain in terms of, you know, if you're just going to bind to unload the company, then I don't care. But if you're going to stick around with it for three to five years, then, you know, then you can even model
the the cost of the rewrite into the acquisition price realistically right like okay like post post deal it's gonna take us a year year and a half to rewrite your tech and here's how it's gonna cost um and rewriting tech is actually not that complicated once you know what to build the key thing that valerie did was like all right cool we know exactly what the what the product market fit is everything's working people are paying for it oh oh it's written in you know php and
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Chapter 3: What strategies does Vivek Bhaskaran use for M&A during a recession?
then you've got to find somebody who's comfortable dropping a $10 million check cash upfront. Now, the deal price could be $30 million or $20 million or $40 million, but if your upfront price tag is what it is, that's what matters. That's what I zone into, at least the kind of deals that I do that I zone into. How much do you need? to kind of like, you know, where you'd not walk away from it.
So if we can get to that number, then we can negotiate on the rest of the components really, right? And if I can pay upfront and then the rest, do I pay over time or two years or three years or one year? And do I pay stock cash or stock or, you know, warrants or whatever it is. So all those things can be, can be structured.
Uh, uh, but to me, like the most important negotiation, negotiating position is the upfront cash element. Uh, cause that makes or breaks a deal. Simply put, right? Like, and if you really, and it's a subjective argument, frankly, for the most part, subjective argument, like, look, you may want, you know, it is what it is, what you want for now on a personal level, realistically.
So for sweet CX on day one, what was your current cash exposure? IE, your sunk cost of everything failed. One X, one X. Oh, wow. Okay. Now, when she came on my show back in March of 2022, she says she had about 850K of ARR with 30 paying customers. So your total cash exposure on day one was effectively something like 800K. Yeah, a little less than 700 and change, I think.
700 and change was my exposure. And how did you get her? I mean, a lot of people that want to be like you and buy other companies are going to go, how did Vivek get Valerie comfortable paying a 1X cash upfront for this? I mean, there's kickers over time, but why was she okay with that number? How did you get her there? Well, I think two things.
One, I flew in and met with her on day one, straight up. I wanted the deal. And I think this goes down to basic kind of sales, really. Like, you want a deal, you just go and chase it down.
Even though, obviously, we were the acquiring company, it's not beyond me to just go catch a flight to Charlotte, North Carolina, and sit down with her and spend a day with her saying, hey, look, I really want to do this deal. I mean, I'd be able to pay you what you exactly want. Obviously, she wants more than one X cash upfront, realistically, right?
So I mean, I'd be like, but here's who we are, here's how the combined company is, things that we bring to the table that you don't have, you don't have a go-to-market function.
pretty weak let's assume that we have a much stronger go-to-market function um yes we have we don't have a product you have a product so let's kind of marry the two together and we can sell the shit out of it and then these other kind of components that we bring to the table in terms of you know size and kind of like you know stock to compliance and there's a bunch of other randomized stuff realistically right so
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Chapter 4: How does Vivek integrate acquired companies into QuestionPro?
That's my analysis, realistically. Just like there's a difference between a $10 million company and a $30 million company, there's a difference between a $30 and a $70 million business straight up, really. I think the trigger is in the 60-70 range where people can look at that and say, can we get this to $200, $300, $400, really? And that's a linear argument.
Chapter 5: What challenges does Vivek face when merging company cultures?
I mean, it's still a pretty big lift, but it's a linear argument. But from 30 to 300, it's still a lot of things have to happen, which is what I'm working on right now. If I can get to 70, then I think we can get in the double-digit multiple range fairly easily. I would just love to see you go on a buying spree during a recession. You're in such a healthy position.
I just feel like you could go up to like 50, 60 million this year in revenue if you can find the right companies to buy. And by the way, your buddy Nathan's got a little debt fund where if you need to fund those boys. Yes, sir. Plug that shit in, brother. Plug that shit. We can make that happen. That's awesome, though. Congrats, Vivek. This is a really impressive story.
Look, we've only focused on economics and M&A. I want to give you a chance to promote the platform here briefly because I know a lot of our listeners will enjoy it. If people want to test the platform, where can they find you? Actually, you know what? I have a better deal for you. I'm launching a startup program where if you're a startup, it's fucking free, dude. That's it.
I don't even want to... What's the link? questionpro.com slash startups, really, right? And I'll send you a link also. But like, yeah, I mean, just apply for it. And it's $10,000 software we give you for free. It's not no bullshit. It's not like two months, three months, it's the whole year. And it's the full blown software. It's not like a shitty version of our software either.
So it's like, that's amazing. And guys, his eligibility requirements for that is the startup has to be less than 36 months old, you have to raise under to have 10 million under that raised, and you have to be incorporated with a domain name. I got an idea and like, you know, give me some free software. Like, no, come on. You gotta, you gotta, you gotta at least get a goddamn domain name.
Go, go, go pay that. Go pay. Go daddy. At least like eight bucks to get a registered. Yeah. Guys, Vivek, Vivek, you know, I have a list of heroes in the bootstrap SaaS space. The founders, I think we need to be celebrating, putting on magazine covers, putting them on cable, promoting the hell out of them. Vivek is one of them.
He's competing against so many competitors with hundreds of millions of VC funding. He continues to just grind away since 2005. Keep growing. buy other bootstrappers, come speak on our stages. He's an incredible human being. So check it out. Questionpro.com forward slash startups. Check that out. Vivek, let's wrap up here with the famous five. Number one, favorite book.
I've not read a book in a long time, dude, but Ray Dalio's Principles is still fucking, you know, on the money. Number two, is there a CEO you're following or studying? I used to follow Bezos before he became a dick, but that's all right. Number three, what's your favorite online tool for building Question Pro besides one of your own? So I'm a fan. I love Balsamiq.
It's not an online tool, but like, you know, like, yeah, Figma is great, but Balsamiq is even like, it gets kind of the information architecture really quickly, really fast in terms of what I want to get done. And you don't need to have, you know, you don't get caught up with the UI design elements. You get the information elements really quickly, really fast.
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