SaaS Interviews with CEOs, Startups, Founders
Details behind Dixa $43m Acquisition, $15m combined ARR, $400m Valuation
02 Jun 2022
Chapter 1: What is the significance of Dixa's $105 million Series C funding?
It was $105 million seriously led by General Atlantic, but also with all the existing investors chipping in on their pro-rata and more. So a significant round for us. And also with General Atlantic being a partner that is used to, of course, heavy, hyper-organic growth, but also sometimes with an M&A agenda.
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Chapter 2: How does Dixa plan to utilize the funds for acquisitions?
Entrepreneurs always wonder, what is it like selling your company? And then what's it like post-acquisition? Well, we have a unique experience today with Mads from Dixa and Eric from SolveMate. Dixa recently raised a new round of capital and a big tranche of that capital was dedicated towards M&A.
He chose to, Mads chose to, and Dixa team chose to go acquire Eric at SolveMate, which we also have here live. So guys, we're going to have fun today. Thanks for taking us out. Thanks for joining. Thank you so much, Nathan. Great to be here again. So Mads, let's work backwards and Eric will then loop and solve it as we work backwards. Mads, you needed to obviously fund this acquisition.
And I think last time we spoke in terms of focus, you were really focused on call center support desk and tickets. Give us an updated view of Dix's product safe for folks that are not familiar with the website.
Yeah, definitely. So Dixter is a next generation customer service platform, just as you said, Nathan. And of course, we have been changing the way customer service works and brands, typically consumer brands, but also B2B the last two years. And we are disrupting the way you do it on a typical ticketing basis. We are doing it in a conversational way in what we call customer friendship.
So all the conversations across all channels, we are equally strong at all channels, phone, email, live chat, messaging, Facebook Messenger, WhatsApp, and the list continues. And then we use the customer data and the channels to basically build strong bonds across all these different experiences. So that's kind of the core of Dixia.
And what we're going to talk about today is how we expanded what we call internally at Dixit, the effortless trinity. So I'm looking forward to talk a little bit more about that.
The effortless trinity. Eric, this seems like he's holding up to a very high standard. Effortless trinity seems like a big call to action. We'll loop that in here in a second. Mads, pre-series, what was it? What was it? A series C, right? Pre-series C. And pre the acquisition of both SolveMate and I can't remember the other one. What was the other company you acquired?
Olivia, an AI knowledge base from Melbourne, Australia. Yeah. Back in February last year.
So pre both of those deals, what did you grow in the customer base to just number of businesses on the platform?
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Chapter 3: What is the 'effortless trinity' concept mentioned by Mads?
So to fund these deals, you raised a Series C. How much was that for?
It was $105 million, seriously, led by General Atlantic, but also with all the existing investors chipping in on their pro-rata and more. So a significant round for us. And also with General Atlantic being a partner that is used to, of course, heavy, hyper-organic growth, but also sometimes with an M&A agenda.
Yeah. So split the $105 million down for me. How much was earmarked for M&A?
So no specific amount was actually earmarked for M&A because General Atlantic and existing investors actually are able to allocate extra funds to projects like the one we've been through, the double acquisition here and the acquisition of Saltmate specifically. So it... The good thing is there's no real boundaries around what we can use.
But, of course, every company tries to preserve the cash for the organic growth, for opportunities coming ahead. But we have had opportunities where we've actually been able to preserve a lot of that cash and make other facilities for these acquisitions.
So I guess the only other place that 105 million could have gone if it didn't go to the balance sheet was, you know, you've been around since 2016. So you have early employees, obviously, that are going, Mads, when do we get some liquidity here? We believe in the vision, but we want to go buy a house. Can we get some liquidity? Did any of this go to secondary?
Yes, a small amount went to secondaries for, as you just said, founders, some founders, early employees, some very first business angels, taking a little bit out for house or apartment or for savings.
And that's a little, under 10% of the round, fair to say? Yes, that's fair to say. Okay, now let's loop in product strategy, M&A strategy. So when did you first realize, you know what, M&A is a strategy we want to use to grow? And then how did you go about finding companies like Eric and so on? And I imagine you looked at a lot of them, Eric's obviously closed, but what was the process like?
Yeah, so first of all, the first part of this strategy actually started one and a half years ago, a little bit more discussing it with our existing board and investors and in the management teams. So we knew that we had some really, really strong partners in the ecosystem. So our approach is actually, it's a kind of a luxury approach because we know the companies very well.
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Chapter 4: How did Dixa's customer base grow before the acquisitions?
Historically, we've collected a lot of data. We want to help agents, customers, end customers in real time. We haven't been able to do that ourselves, but then we got Olivia on board. We started the journey in our own Effortless Trinity to make customer service effortless for customers and consumers, agents, and admins.
Of course, one of the very, very big and important next steps in that is the automation chatbot intelligence piece of that trinity. So it's actually not an optimistic approach. It's been there for a long time. Of course, we had to have the funds and the backing to make such a big move for a company of, at that point, 200 employees or so.
And 200 employees, Mads, then, and about how much revenue? I mean, you were north of, what, 10, 11, 12, 13 in ARR, something like that?
No, we're north of 15. So, yeah. North of 1.5 at that point? At the point with funding or when we acquired the first company?
When you closed the Series C, you had about $15 million in ARR?
No, that was around the $10 million, as you mentioned there. Correct, yes.
But today, you've grown post-acquisitions to $15 million.
Yes, and more. Growing rapidly. The next level is between 15 and 20, then you can get some numbers there, right? So we're growing rapidly, yes, but we're also using the right amount of time for integrations, especially on the people side and the product side.
And that will maybe for a quarter or two take a little bit momentum out of your hyper growth, but it's a very, very big investment for us as a product-led company.
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Chapter 5: What strategies did Dixa employ to find and evaluate acquisition targets?
And this wasn't like a low ARPU high volume.
No, we have a very high ARPU. So we were typically charging more for our automation than the CRM or ticketing or the CCAS vendor. You know, ticketing is of the past. So we're talking about conversations. We were typically charging more than the system where the agent is working in every single day.
The conversation is creating such a high value for the end customer and for the company and for the agent.
Are we talking like $10,000 a year sorts of contracts or 100,000 a year? Around 30,000. Interesting. So Mads, how did you evaluate that? So, you know, someone like, let me just find an example. Someone that like Dialpad, right?
Might go acquire another company like Uber Conference because Uber Conference has a million users that pay a dollar each and Uber Conference can be cross-sold into Dialpad's user base. That does not look like that was a strategy here. It sounds like Eric already had proven he built a piece of tech people are willing to pay 30K a year for.
Was the motion more how do you upsell SolveMate to Dix's user base and drive ARPU expansion?
Very, very good question, Nathan. Actually, it is a double thing we're doing here. We're doing things in parallel. We want to keep the momentum of the great growth that SolveMate has built with a great number of customers that we are not the platform for yet today. And also respect there are many platforms out there that are doing a great job for different types of businesses.
And we really want to leverage that to stay in the game to be the best automation chatbot vendor. But of course, in parallel, we are integrating the technology the know-how, the product deeply into the platform.
But if you use all your time and just merging things together from a go-to-market product perspective, you will lose a lot of the great momentum that's created both in Dixter and Saltmate. So we are doing both. Maybe we're not going to do that forever, but today from a product perspective, and of course you have to have priorities on product,
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Chapter 6: What was the negotiation process like for the acquisition deal?
Unfortunately, we cannot. That's confidential information.
If I get you both to agree to it, we can share.
I think it was decided to not share the breakdown. And now we have the same board of investors.
Yeah. Yeah. Well, I guess let me, I can still ask some sort of a question through here without having, you know, the exact amount, right? So obviously with deals like this, you know, Eric, if you believe in the growth of Dixa, you want Dixa stock, but you've also been building SolveMate for many years. You'd love to also cash out as well.
So how did you guys negotiate the total deal price and what, you know, there's a big difference between the deal value and the deal terms, cash upfront, earn out, you know, consulting fees and kickbacks. Eric gets on the side for sticking around, building the handcuffs, all that stuff. How did you guys negotiate that? They both want to answer at the same time. We should get Eric first.
Yeah, probably. I think Dixar is very experienced in doing M&A, not only because the chief revenue officer has been doing this for a living before, but they were very smart in, of course, having a cash portion, having a stop option. There is vesting. And I think the most important thing, you shouldn't talk about cash and shares.
You should think about creating a joint vision and motivating the company. So if there is a fit between the companies, you want to stay and you want to build something awesome.
Again, you, Eric, obviously have employees too that maybe had equity early on. I imagine if you were doing raises, investors required an ESOP pool, 5%, 10%, whatever. You also have to manage their psyche around cash today versus future earn out and selling them on Dixit stock, right?
So is this something, I mean, are you able to share maybe a ratio was 40% cash up front and 60% of whatever the deal value was in Dixit stock? Are you able to share that breakdown? Leaving that to Max, if you want.
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Chapter 7: How is Dixa integrating SolveMate and Muros into its platform?
My official new role is called VP Strategy in M&A.
Exactly. I mean, what's your pipeline look like? I mean, without saying how many terms, I mean, can you give me some, I mean, are you actively talking to 30 companies right now, five companies, a hundred? How do you manage M&A pipeline?
So first of all, we have some areas that we want to look into in 23. So right now, we are talking, we are always talking because either they are partners or they are new companies coming into the ecosystem, either as integration partners to us or alliance partners. or because they have a process running, of course.
We are open for receiving proposals and we consider them, but we also have to say that in 22, we have enough to do on our organic engine and the very, very important integration of Solmate and Mirrors. So 23, or when we're getting later in the year, I think we can have another talk where maybe we can talk open up for some of the areas that we are looking into in the future.
We would love that. Guys, anything else you want to touch on before we wrap up with the Famous Five? All good. Love it. All right, Matt, it's Famous Five. First one, favorite book?
Favorite book is Play Bigger. Which is a famous book around category building. It's a book I've read some years back, recommended by Notion Capital, our dear investor, and then also our VP product, Rob, actually came with it some weeks ago and I had to go for it again. So very close to what we're trying to do here at Dixit.
Number two, Mads, is there a CEO you're following or studying?
Yeah, Satya Nadella, Microsoft legend already. I would say it's impressive what he's done with... Yeah, we're turning around, I would say, in a license-based company some years ago now, implementing a growth mindset and a cognitive diversity. I'm a huge fan. And Microsoft, I know people love or hate Microsoft, but what they did after Bulma there is very impressive, I would say.
Eric, let's throw this one over to you. Favorite online tool for building SolveMate and now Dixit besides your own tools?
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Chapter 8: What are the future growth plans for Dixa post-acquisition?
Eric was working with already 10 to call it 100 enterprise customers paying an average $30,000. ACV is now part of the Dixa family as they scale up between 15 and 20 million bucks of revenue this year and work on integrating these two new acquired companies, the team, the IP, the customers, all of it as they build what they call this Trinity. Mads, Eric, thanks for taking us to the top.
Thank you. Thank you so much, Maven.