Thread by @PierreDeWulf

- How we were a few days away from being settled from life -

Last summer, we almost sold ScrapingBee for a high 7 figures amount.

SPOILER alert: it didn't happen.

The experience was both nerve-wracking and very valuable.

Here's what happened:

With ScrapingBee, we've always been very open about our numbers.

This led to a lot of emails from:
- VC wanting to invests
- PE and competitors looking to acquire us

To those people, we almost always shared the same answer:
"Not looking to sell, except for a lot of $"

But here come those people, not deterred by this type of answer.

They just raised a fund and need to deploy an important amount of capital. They seem to know SaaS and tech. This could be a good fit.

And so it begins:

- The Negotiation -

During that first call, things go well.

We both seem to agree on the terms and vision.

In order to make an LOI (a non-binding offer that is used as a base for the negotiations), they ask us a lot of info and metrics.

Let's go

We send them all the information and wait.

Three weeks go by, they come back to us asking again and again for all kinds of information:
- recuring tasks
- revenue breakdown
- support load
etc ...

We obliged, and 2 months + 30 ✉️ after the first call, we get the first LOI.

What we received was not overwhelming, but definitely encouraging.

It was around half of what we expected.

We made our concerns clear.

Another month goes by where we have a lot of calls and talk about a lot of things:
- growth
- earn-out (money getting unlocked until we reach revenue target)
- how long we should stay in the company

At the end of June, things move faster, we agreed to stay longer on the company, to have earn-out, and to onboard a whole new team.

On their side, they basically doubled the offer.

We know that nothing is done yet, but we think that things are looking good.

We sign the LOI.

- The Due Diligence -

Now all the fun begins. We agreed on the term of the deal, now two things need to happen:
- buyer check that everything we told them was true by checking various documents
- LOI gets transformed into a binding agreement by lawyers

We're told that this will take around 1 month.

For the due diligence, we had to put hundreds, (690 to be precise), of documents into a data room (Google Drive) and then update a big Google sheet to track the state of said documents.

This was a very long and stressful process.

For example, I had to generate a list of ALL the code dependencies we use in Python / JS, why we used them and what licenses they were under.

Like any software company, we had thousands of dependencies ...

We also had to give loads and loads of metrics and financial statements

2 weeks go by, and we start to really believe that it will happen.

We start to tell our family about it. We start to talk to (expensive) lawyers about it. We start to wonder what we will do in this new life.

At this point, we have spent ~ 200hours and $3k on the whole thing.

There were around 7 versions of the LOI drafted.

75% of all documents during the due diligence had been uploaded.

50 emails were exchanged between buyers, sellers, investors, and all.

Then we receive this email:

I remember having read tons of acquisition stories that just ended like this email followed by this:

"So I’m sorry to tell you this, but we discussed with the team and have decided to pull off from the deal, let me know if I can be helpful"

But since it was not the first time they sent us a message like that, there was hope.

Kevin takes the call as he was their primary point of touch.

1 hour later my phone rings, it's Kevin.

"The deal is off"

☹️

- Wake up call -

To give you a bit more context, at this moment, we were supposed to each receive several $m in a few weeks.

So this was a bit of a shock, also I really had a bad feeling about this call.

I had one clue that things were not as good as they looked.

Files were no longer moving to the "accepted" area in the due diligence Google sheet. But other than that, everything seemed great.

The buyers were nice enough to give us the precise reason for their drawback:
- churn
- business too dependant on us

For the first reason, I had trouble understanding it, because even if our customer churn can be seen as above average, our net churn is negative.

A golden goal in the SaaS industry.

About the second point, I was also surprised because we already talked about it a lot.

And this is why we agreed to stay as long as 18 months to train a new team.

But anyway, the deal was off, time to move on.

The hardest part here was definitely to tell the few people who knew about the deal that everything was canceled.

I thought I looked a bit like a fool, and that was not a nice experience.

I was also a bit bitter after this. So much time and money were wasted for nothing as they could have made the decision to back-off way earlier in the process since they got all those information already.

But after a few days, we both moved on, and actually decided to take action.

It was true that the business relied too much on us, and we knew it was a problem, this is why we decided to make the business less dependent on us.

And so far we succeed.

https://twitter.com/PierreDeWulf/status/1501540299788726274

It also made @SahinKevin and I talk a lot on how we viewed the business and what were our goals from now on.

Finally, it made us learn a lot about what happens when you sell a business or at least negotiate it. My three big learnings about this last point are:

1. Be careful who you talked to: not all buyers are experienced, not everyone knows what they're doing

2. You have a valuable business, they don't, never forget this during the negotiation.

3. Have a clear goal of what you want to get in terms of $, time, commitment

4. Everything can be talked about: if you can't get your way in terms of $, you can talk about the vesting, earn-out, time spent in the company, salary, everything!

5. Try to get advice: especially if it's the first time, don't do it on your own (@tinyseedfund helped a lot).

And that's it. Today I have no bitterness towards anyone. The PE firm acted respectfully and all in all, we were quite lucky.

Deal do fail often and I know others who lost months of work and $XXX,XXX during such things.

Plus, I truly think it made us change the business for the best.

As we've grown more than 100% since that small (mis)adventure.

So definitely a net positive!

Now I don't when and to whom we'll try to sell in the future, but this time we'll be more prepared 😉

Cheers!

You can read the unrolled version of this thread here: typefully.com/PierreDeWulf/m…