SaaS Interviews with CEOs, Startups, Founders
Flippa Gave Me $1.1m Valuation Based off $600m in Deal History Over 10 Years
01 Oct 2020
Chapter 1: What is the significance of Flippa's $600 million transactional history?
We're at about 600 million in transactional TTV, so total transaction value. But you know, the critical thing is actually what buyers are looking for. So we see just over 10 million monthly keyword searches on Flippa. You are listening to Conversations with Nathan Latka. Now, if you're hearing this, it means you're not currently on our subscriber feed.
Chapter 2: What are buyers looking for on Flippa?
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Chapter 3: How does Flippa generate interest with 10 million monthly searches?
Like Eric Wan, 18 months before he took Zoom public. We got to grow faster. Minimum is 100% over the past several years. Or bootstrap founders like Vivek of QuestionPro. When I started the company, it was not cool to raise. Or Looker CEO Frank Bean before Google acquired his company for $2.6 billion. We want to see a real pervasive data culture, and then the rest flows behind that.
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My guest today is Blake Hutchison. If the name rings a bell, it's because he jumped in full feet 2018 into running a flip up coming from a different company. He's scaled companies before, but now focused on helping all kinds of brands and businesses sell quickly and effectively via flip up a marketplace for again, buying and selling your company. Blake, you ready to take to the top?
Yeah, absolutely. Nathan, thanks for having me. So let's dig into your personal story here for a second. You could do anything in the world in 2018. You're working at, I think you're working at really this thing that helps people book luxury experiences, correct? Luxury rentals? Yeah, that's right. Luxuryescapes.com, which is, I guess, a flash sales engine for beautiful holidays around the world.
And yeah, super fun company to run. So what happened? I mean, did the folks at football approach you and say, Blake, you're the guy we want you in here. Here's where I excited. Come join, please. I mean, how did that work? Yeah, so I really like working for founders. I really like running businesses on behalf of founders and had some success at Luxury Escapes. Great founding team there.
But as you say, I was tapped on the shoulder, so to speak. So the board and the founders at Flippa had said, we've got a great opportunity for you. We're a global marketplace. We've got customers all over the world. We're helping to democratize the exit. And that's where I've ended up. And it's a lot of fun. It's different to luxury holidays, that's for sure.
So what about center sort of exits, but a different kind of exit instead of luxury goods, it's digital assets and sites, businesses. But what did you see in the space at the time? I mean, again, you're sitting on a great cushy thing. I assume it's going well. You have to have real conviction around that vision to jump out and start leading Flippa full time.
What did you see in the M&A marketplace back in 2018? I think there's really one thing for me and then one thing that relates to the macro environment. The thing for me was that I'm based here in Australia. Flip is a technology company. It's a global technology company. It's bootstrapped. It's profitable. It's organically grown. And that's a rare thing to find.
in the Australian market of business, which is truly global. So that was the thing which appealed to me. As it relates to the macro environment, there is clearly huge amounts of growth in the small business digital sector. And the small business digital sector has been one that you and I are very familiar with, but the mainstream community has taken some time to jump on the back off.
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Chapter 4: What motivated Blake Hutchison to join Flippa in 2018?
Like how, you know, it's, it's a whole combination of the buyer going, well, what would I actually need that expense? Would I have to go replace that developer with somebody else? How do they get comfortable with how that SDA is calculated? Yeah, I think it's critically, it's about, can the buyer imagine that that expense that has been removed is a one-time expense that is non-carry forward?
And that's a really important distinction. And therefore, the discussion has to happen with the current owner. I see that you have removed these expenses. Could you tell me a little bit more about those expenses?
And then the buyer needs to make a judgment call as to whether those expenses should have been included in the cost base or whether it is fair and reasonable to remove those because they are non-carry forward. But you're absolutely right. The buyer does need to be comfortable with that and that can sometimes take some time and some digging. Interesting.
Okay, let's sort of get it, you know, any marketplace business model, you got to have both sides built out, help us understand how effective Flippa has been at that in 2018. Well, if you add up all of the sale prices of all the websites you sold, how much total GMV went to the platform in 2018? So we ā well, each month is a little bit different. Each year is a little bit different.
We do around ā well, I'm not going to reveal what we do GMV-wise, but we see around 4,500 listings a month on the platform across ā the collection of digital assets. And those digital assets are SaaS businesses, as you've alluded to so well, Nathan, and I know your community is very passionate about. But they can also include e-commerce, content assets, marketplace assets, and apps.
So if you're not comfortable talking about GMB, is there a different number you can point to that highlights Flippa's ability to move inventory so that these 4,500 listings don't just sit there? Yeah, absolutely. So we convert at 35%. So 35% of all assets list on Flippa, sell on Flippa. And the important thing about that is that remember how many assets we list each month.
So this has nothing to do, we're not a broker. That's a really important distinction. Flippa is a marketplace. It's a peer-to-peer environment. where high quality digital real estate owners, so SaaS founders, for instance, can find a pathway to the largest network of buyers globally. So we have over 3 million users. In fact, it was two weeks ago that Flippa signed up its 3 millionth user.
So that should give you some sense of the scale that we operate. And when you say user, you mean a seller looking to sell or a buyer looking to buy? Actually, the combination of both buyers and sellers combined is a combined community of 3 million people. Okay, got it. So how do you measure sort of an active buyer on the platform?
Because as you and I have discussed, I mean, the best way to move an asset is to get a bidding war going, which is measured by when you list it on Flippa, how many people do you push it out to and how many buyers actually place a bid to create that bidding war? Yeah, it's a great question. So I'll answer it at a very high level first. So we have 1.5 million active buyer accounts.
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Chapter 5: What is the current landscape of the M&A marketplace?
Now, here's my thing about brokerages, especially for selling your company. You guys should not have to pay a 10% brokerage fee when you put your blood, sweat, and tears into building your company for years out of a sale. All smart founders know, though, that the best way to maximize price is to have multiple options.
So how do you get multiple options, multiple bids on your company without paying a broker 10% or more? Well, I recommend Flippa because they have the largest list of buyers for these sorts of digital assets, which almost always guarantees a bidding war. I tell my founder friends all the time to try Flippa's valuation calculator to see what their company is worth.
And I encourage you guys to do it today. Go to NathanLacke.com forward slash Flippa right now to test out the valuation calculator for free. That's NathanLacke.com forward slash F-L-I-P-P-A. In terms of benchmarking data, I don't know that anyone in terms of an online marketplace has more historical data than you have.
I mean, have you guys published what, through your life, total amount of transactions to the platform? Has it passed a billion yet? No, sort of about 600 million, 600 million in transactional TTV, so total transaction value. So not a billion yet. And that's a big number. You've got a lot of sales data there. But the critical thing is actually what buyers are looking for.
So we see just over 10 million monthly keyword searches on Flippa. Say that again. You see 10 million? 10 million keyword searches on Flippa. What's that mean? So much like any other search engine, Flippa has its own search environment. So someone could type in SaaS and hit search. They could type in Amazon and hit search. Now, if they type in SaaS, they're clearly looking for SaaS assets.
If they type in Amazon, they could be looking for merch by Amazon, FBA fulfilled by Amazon. They could be looking for Kindle publishing. So that's a keyword search. Now, we therefore know what business models people look for. And not only that, what categories and niches people look for.
And of course, through this weird COVID-19 pandemic period, we've seen the number of searches for particular categories rise and fall on the basis of buyer confidence. And that's been super interesting to watch. And so what we can say is we have categorically got demand for the following types of assets.
Therefore, if you're a seller that meets one of those keyword searches at the top of the pops, top of the tree, you've got a very, very high chance of finding a buyer. Blake, everyone listening is going, okay, well, what's the demand for SaaS? It's a SaaS podcast. Come on, Blake, give it to us. How many SaaS searches are you seeing monthly? Yeah, so SaaS is in our top 15 searches.
So what that means is you've got just under 100,000 searches a month, just under 100,000 searches a month for SaaS. Oh, wow.
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Chapter 6: How does seller discretionary earnings (SDE) impact business valuation?
I'm going to go to Richard Branson's autobiography from back in the day. Number two, is there a founder you're following or studying right now? So I follow Brian Chesky at Airbnb very closely because as a marketplace founder, we can learn a lot from what he's achieved. Number three, what's your favorite online tool for building Flippa?
At the moment, we're trying a little product called FlowXO, which is a SaaS business. Interesting. Number four, how many hours of sleep do you get every night? Not enough. Like under five, six? No, I'd say five, six, yeah. Fair enough. And situation, married, single kids? Married, no kids. No kids yet. Okay. And how old are you, Blake? I am 40. 40. Last question.
What do you wish your 20-year-old self knew? Everything will be okay. Guys, Flippa.com, over $600 million in sales of companies over the past, call it six, seven, eight years. Blake now leading the company, over 50 to 60,000 buyers waiting with more than $750,000 to spend each for you to go list your SaaS company and buy it. It's a great way to get a bidding war going.
Check out their valuation tool to get an accurate idea of what your SaaS company might be worth. They take 5% if you end up selling for more than $100,000 as a success fee. Blake, thank you so much for taking us to the top. Thank you, Nathan. I appreciate that.