Archive for category: Case Studies

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When Kaelon Egan first built Accelaschool, he knew he wanted to build the company to be acquired by a bigger player in the space. This wasn’t just because he had doubts that he could scale the business himself, but because he saw this as a logical endgame in building a business. Not all first-time entrepreneurs have such vision.

Kaelon worked in a school district for ten years in the IT department and saw where data collection was going and how it could be improved. He saw this need not just from inside the district, but as a parent in which he was inundated with paper forms and permission slips that all could be dealt with digitally, instead of potentially being lost inside a backpack.

Sales Model

Kaelon used his knowledge working in the school district and as a parent to great effect in the sales process. He knew the pain that different schools felt, and he knew how Accelaschool could solve those problems. Once he was able to make the case to those people feeling the pain on the ground, those people could sell the solution internally to the higher-ups.

Outside of customer-facing sales, Kaelon was also thinking about a future acquisition and when it became clear that their software needed a different type of architecture, they chose one that would more closely adhere to a big player in the space, making them a more attractive target in the long term.

Size is Speed

Accelaschool had 15 employees when it was acquired and Kaelon saw a strength there. He admits that many software founders stay awake at night worrying that a giant in their space will just code out a competitor over a weekend. But his team was nimble and had only continued to build up knowledge that meant that the best a giant could do would be to create a me-too product that lagged behind in its path.

Time to Sell

As we often talk about on the blog, there are many reasons people choose to sell. Kaelon was remarkably self-aware in recognizing that he was not the person to take the company to the next level, and besides that, he was ready to move on to something else. While he had originally approached Powerschool as a potential partner in which both companies could help each other grow, it became pretty obvious that an acquisition rather than a partnership made more sense.

Key Lessons

As we noted already, Kaelon was a mature first-time builder and seller. Here are three points that helped him win big:

• He bootstrapped. By not being beholden to outside investors or other similar influences he was able to control the direction of the company and the time and place of his choosing when it came to sell. Not all businesses can be bootstrapped, but sometimes founders are too eager to take money without realizing hidden costs.
• He had a great Advisory Board. He notes that they were particularly helpful when it came to the sale, as he had no idea really whether the valuation made sense or what deal points he should fight for. But Advisory Boards are how you even get to a sale in the first place. They offer disinterested real-world advice that can make a real difference.
• He built to sell. Kaelon began with the end in mind and knew he wanted to be acquired and built his company accordingly.

Are you building something you’d like to be acquired by a big player in your industry? We’ve helped many business owners do just that. Give us a call today.

Any entrepreneur who takes the leap into healthcare or health technology, especially with no prior experience in the industry, usually does so in response to a tragedy. That was the case for Aaron Leibtag and Steven Aviv when they created Pentavere Research Group, a digital healthcare company.

When Steve’s mother passed away unexpectedly due to a data error, the pair built AI-powered software that can identify patients who may not be receiving the care that they need due to the information being buried in a patient’s electronic health record.

Despite only having 15 employees at the time, the company received an acquisition offer for a whopping $15 million.

The Idea

Aaron has a background in finance and spent some time on the private equity side, evaluating consumer-facing companies to drive better results. As such, he has an appreciation for what happens when you combine great data with great people and great processes.

His co-founder, Steven Aviv also spent some time in finance but on the technical side, building large financial systems that ingest data. One day, his mother went into what should have been a routine procedure. Based on her comorbidities (coinciding diseases), she needed to be put on a certain medication. This information was missed by her care team because it was buried in a clinical note and she passed away as a result.

Both Aaron and Steve were at the point in their corporate careers where Steve in particular was helping companies make millions of dollars every day by analyzing data. When such a catastrophic event — that could have been prevented through analyzing data — happened to Steve’s mother, they started to do some research. They found that the majority of patients fall through the cracks in some way, shape, or form within healthcare.

While not every patient experiences such a catastrophic event, many don’t receive the proper treatments, medications, and interventions. So, Aaron and Steve decided to fill in that gap and build something to help.

They built an AI engine that can ingest and read clinical notes within an electronic health record that a doctor dictates to identify patients who are falling through the cracks in healthcare systems. In layman’s terms, they’re able to take all of that clinical text and turn it into a structured Excel spreadsheet-like data set that can be used to improve healthcare.

Once they had the product, they validated the technology by getting the outcomes published in high-impact peer-reviewed journals that matter in healthcare. Now, they were ready to bring it to the market.

The Business Model

Aaron and Steve didn’t know what the business model for their product would be. They simply knew that the industry was large, and the problem was great.

Unlike other digital health companies — when they were growing it was the heyday of venture capital raising — they went to one of Toronto’s largest hospitals to really understand the problem.

They say that they got lucky and were approached by people on the medical side of pharmaceutical companies who themselves are trying to find real-world evidence to understand how their medications were working. The companies were willing to fund the project so they would have access to the findings.

Six months later Aaron and Steve presented their results at the most prestigious lung cancer conference in the world in Barcelona. Soon, more pharmaceutical companies started to call asking them to do similar studies.

The money from those studies helped to fund their R&D and validate their AI engine, but say that at that point there still wasn’t a product or a business model. That said, it was a step in the right direction and both Aaron and Steve knew they had come up with something valuable — and needed in the industry.

The Acquisition

Aaron and Steve began to consider an acquisition when they had over 19 high-impact peer-reviewed publications validating their engine — a claim that not even companies like Google have.

It hit home for them when they got a call that they were nominated for a Prix Galien, the equivalent of the Nobel Prize in the life science industry. They were also told that there was only a very short list of other AI companies with the same criteria as theirs. So, Aaron and Steve decided that this was the time to commercialize and scale.

To do so, they didn’t just need capital, they also needed access to data. The right partners with the right mindset were the missing pieces to the puzzle. It wasn’t so much about an exit, it was trying to find a like-minded partner.

When they tried the venture capitalist route, all it brought them was capital but no data. What’s more, they didn’t really like the idea of giving up control of the company, no matter how much money someone was willing to put down. They wanted — and needed — to partner with someone with the same goals, mission, and values (to improve healthcare) and they just didn’t find that with VCs.

That’s when they began talking to Healwell AI, a healthcare technology company also based in Canada. They were willing to open up their data ecosystem and give them the funding they needed. Healwell is also a publicly traded company and has a strategic alliance with WELL Health, the largest private provider of healthcare in Canada.

It was an easy yes.

Key Lessons

• Uninspired? Identify market gaps. Aaron and Steve recognized a significant gap in healthcare where patients were not receiving proper treatment. This realization led them to develop a solution that could identify and address these gaps. If you want to build a business but aren’t sure where to start, pick an industry and figure out what it’s missing.
• Create, tweak, validate. Before bringing their product to market, Aaron and Steve validated their technology by getting outcomes published in high-impact peer-reviewed journals. Yes, they were required to due to the nature of their product and the industry, but there’s something to be learned here. Come up with your own system of validation to determine whether your idea is viable, and then be willing to tweak it if needed.
• Seek strategic partnerships. Aaron and Steve first went to VCs but quickly discovered they wouldn’t likely find their ideal partner there. Rather than giving up, they sought out companies that had the same mission, values, and goals as they did. Their patience and due diligence paid off.

Although it operates under the Healwell umbrella, 48% of the company still belongs to Aaron, Steve, and the other original shareholders. The final Letter of Intent was signed on September 22, they announced the definitive documents signed to the public markets on November 15, and closed the transaction on December 1, all for a cool $15 million.

Aaron and Steve are still very much involved in the day-to-day operations post-acquisition, and Healwell’s stock went up 30%. It’s safe to say everyone made it out a winner.

If you’re ready to take your business to the next level and aren’t sure whether an exit or an acquisition is your best bet, we can help. Give us a call today to talk about your options.

Selling a business is often portrayed as the culmination of an entrepreneur’s dreams — a big achievement that signifies success. However, the reality is that the experience is often full of complexities and challenges.

Michia Rohrssen, founder of Prodigy (now owned by Upstart), knows firsthand what an emotional rollercoaster selling a business can be. He initially viewed it as a straightforward process — little did he know the intricate web of negotiations, investor dynamics, and personal reflections that awaited him.

The Initial Offer

Michia founded Prodigy with friend Marty Hu to create a platform that would allow consumers to purchase a car all from the comfort of their own homes. The software was used by some of the largest auto groups in the world, and at the height of its success consistently processed billions of dollars in car sales.

Michia wasn’t planning on selling when he was approached with an initial offer of $110 million from Upstart. He faced a pivotal moment: as excited as he was, he realized the importance of maintaining a balance. Sharing this news with his team and ensuring a smooth transition required strategic planning. The delicate nature of handling investor dynamics was a lesson that played a crucial role in what happened next.

Handling Investor Dynamics

During the negotiation phase with Upstart, Michia and his team were also in the delicate process of closing a substantial funding round led by prominent investors, including a notable venture capital firm.

The stakes were high, and momentum was crucial. So when an investor who had previously injected $25,000 into Prodigy decided to demand a return on his investment, Michia was in trouble. They were on the brink of finalizing a $5 million round, a significant milestone for the startup and this investor’s sudden change of heart, seeking the return of a relatively small amount in the grand scheme, posed a threat to the entire process.

At this point, it wasn’t only about the money. Rather, it was about the potential disruptions to the larger funding round which could raise concerns about the stability of the company.

Michia decided to gather the other investors and emphasize the critical nature of the ongoing negotiations with Upstart. They needed unanimous support to address the lone investor’s claim and secure the future of the deal.

Ultimately, his team’s resilience and the swift (and positive) response from his other investors played a pivotal role and prevented a potential derailment.

The Earnout Dilema

While joining Upstart and achieving his lifelong dreams was exciting, Michia knew the earnout specifics were equally important. Mentors had warned him about the importance of advocating for a shorter earnout — beyond monetary concerns, they urged him to think about his future interests and whether or not they align with the acquiring company’s plans.

The earnout dilemma demands a delicate negotiation, balancing immediate gains with long-term commitments. The emotional high of sealing the deal can make it easy to overlook details, but this part of the discussion requires careful thought.

Looking back, a more assertive discussion about the earnout terms could have added a substantial $4 million to the deal. It’s a lesson Michia learned the hard way, and now shares as a cautionary tale for other entrepreneurs who are navigating acquisitions.

Ultimately, Michia accepted Upstart’s initial offer of $110 million. After the sale, he and his wife moved abroad and now travel frequently, enjoying the break from the hustle and bustle of Silicon Valley.

Key Lessons

• Keep your poker face: Michia’s ability to stay cool, calm, and collected during the sale process was crucial. The uncertainty inherent in negotiations can be emotionally taxing, and entrepreneurs need to remain resilient and prepare for the possibility of deals falling through while staying focused on the business’s core strengths.
• Investor relationships sometimes come with challenges: Founders should build healthy relationships with investors, making sure both sides have the same long-term goals. If conflicts arise, quick and smart moves might be necessary to resolve issues and keep the company stable, especially during important negotiations.
• Earnout terms require careful consideration: Remember to carefully consider the terms of earnouts, balancing short-term gains with long-term goals. Michia’s story serves as a valuable lesson for future entrepreneurs hoping to sell their businesses.

From handling investor dynamics to navigating the earnout dilemma and embracing post-sale emotions, Michia’s story is a testament to the multifaceted nature of creating, building, and selling a business. Beyond the financial gains, the decision to sell involves a delicate dance of negotiations, self-reflection, and ultimately, choosing a path aligned with your values.

If you need help along this journey, we’re here for you. Give us a call today.

You’ve most likely heard the expression, “You learn more from your failures than your successes.” Entrepreneur Josh Anhalt is living proof of that statement. He recently sold his business GreenPath Energy, but not before three failed attempts.

His company played a crucial role in the oil and gas sector, but industry changes prompted Josh to consider selling. With political uncertainties on the rise and technological advances reshaping market dynamics, he knew he had to figure out what to do next.

Recognizing the need to adapt, Josh decided that it was time to let go of the business. He didn’t get it right the first time (or the two times after that), and there are several lessons to learn from his failures.

Understanding the Oil and Gas Industry

To understand Josh’s decision to sell, it’s crucial to understand the challenges within the oil and gas industry. Politics and technology play a massive role in deciding what GreenPath could and could not do.

In 2016, market forces and political headwinds created a demand for a shift in strategy. Josh realized that scaling the business required consolidation. He needed to focus on high gross margins and assemble a team of highly technical professionals if he wanted to make it work.

Despite facing difficulties, Josh maintained a profitable business. He generated $8.2 million in revenue with a remarkable return on investment before ultimately deciding it was time to sell.

The Three Failed Attempts

Josh’s eventual success was followed only by three previous failures.

• Attempt 1: The first deal saw Josh signing a letter of intent (LOI) without legal review which led to a flawed agreement. The deal collapsed due to issues with definitions and disparities in the interpretation of “cash-free, debt-free.”
• Attempt 2: In the second attempt, engaging with another company revealed challenges in the earnout structure. The proposal jeopardized employees’ positions, and the acquirer’s reluctance to enter the US market further strained negotiations. It was a reminder of how much his people meant to him. Josh prioritized the well-being of his employees and rejected the deal.
• Attempt 3: Private equity’s involvement in the third attempt brought promises of an equity roll, but caution on their part derailed the deal. Reps and warranties in the share purchase agreement proved to be contentious, which highlighted the conservative approach often taken by private equity firms.

Fourth Time’s a Charm

Josh decided on a different approach this time.

Thorough due diligence preparation — including the creation of a “data room” that held all of the necessary documents — proved crucial. The deal structure involved 90% cash upfront, 10% stock, and no earnout, which demonstrated the acquirer’s confidence in the business’s future potential. In talks, Josh replaced backward-looking scrutiny with forward-looking evaluation. He emphasizes the value of future opportunities and revenue and it worked. GreenPath was officially sold.

Key Lessons

Although the sale of GreenPath wasn’t as straightforward as Josh may have liked, it was worth it in the end. He sold his company for seven times its EBITDA figure. He also learned a lot along the way:

• It pays to say no (sometimes): Josh built his company with one thing in mind — to make money. As such, he found it very painful when he had to reject the large sum of money in his first attempt to sell. However, the cons well outweighed the pros in that deal, so it was worth it in the end.
• Thorough preparation is key: Josh emphasizes the importance of meticulous preparation in the business sale process. Creating a data room with all essential documents, financials, and agreements readily available streamlines the due diligence process and builds trust with potential acquirers.
• People matter: The emotional impact of selling a business is significant, especially when it comes to the relationships built with employees and colleagues. Understanding the personal and emotional aspects of the process is crucial, and considering the impact on people is an integral part of successful deal-making.

From the importance of defining terms early and adapting to industry changes to the emotional impact on personal connections, Josh’s story is a testament to resilience, strategic thinking, and the significance of preparation in the intricate world of business transactions.

Need help preparing for your own sale but aren’t sure where to start? We can help you with that — and it won’t take us four times to get it right. Give us a call today.

When it comes to building a successful service-based business, few entrepreneurs can match the journey of Brandon Lazar. Over the course of 15 years, he transformed a simple window cleaning operation into a thriving business that served his community. But what happens when it’s time to move on and sell that business? Well, for starters, Brandon wasn’t interested in an earnout, which meant that he had to be particular about his buyer.

The Path to Selling a Bootstrapped Business

Brandon’s story begins with the humble origins of A+ Gutter & Window Cleaning. He turned a one-man show into a thriving operation through hard work, dedication, and a relentless focus on providing top-notch service to his customers. 

An intriguing aspect of Brandon’s business is his approach to financing it. He bootstrapped his way to the top, relying only on his cash flow to fund his growth. Unlike many business owners who constantly monitor valuation multiples, Brandon decided to concentrate on steady growth and exceptional service. 

His path to success raises the question: Should valuation multiples be at the forefront of an entrepreneur’s mind during the growth phase? 

Brandon says that honestly, he wasn’t thinking about valuation because he was fully invested in growing and scaling his company on a day-to-day level. With that mindset, he grew his business to seven figures before deciding to sell. It’s something to note for all of you valuation-obsessed owners out there.

Initial Approach and Negotiations = No Deal?

It’s all about who you know, or at least it was in Brandon’s case. After a tough hiring cycle, he was approached by a potential buyer within his network. This initial conversation led to negotiations about the sale of his business. 

Brandon was upfront about his expectations, being sure to emphasize the financial terms that would make the deal worthwhile to him. The lesson here is clear: transparent communication is key during the negotiation process. 

Or, one would think. While Brandon was very clear on his end, the buyer? Not so much. He eventually requested audited financial statements, which added complexity and ultimately dragged out the process. Another lesson to note here is the importance of setting clear deadlines and managing your own expectations throughout the process.

Despite progress made throughout the negotiation and due diligence stages of the sale, the deal ultimately fell apart during a Zoom call. It goes to show how unpredictable business transactions can be. 

A New Buyer Emerges

As one door closed, another one opened for Brandon. Someone else in his network expressed interest in buying A+ Gutter & Window Cleaning. He decided to go all in on this second chance, and dove into the new negotiations. 

Now that there was a new potential buyer on the horizon, Brandon revisited the valuation of his business. He successfully negotiated a sale without an earnout clause. The deal’s structure itself, including vendor take-back financing, was carefully created to align with Brandon’s specific goals. 

Key Lessons

Brandon’s story offers three key lessons:

• Focus on growth, not valuation multiples. Brandon’s success story highlights the importance of prioritizing growth and exceptional service over constant valuation concerns during the business’s growth phase. Instead of fixating on valuation multiples, entrepreneurs should invest their energy in scaling their companies and delivering outstanding services to their customers. 
• Transparent communication in negotiations. Being upfront about your expectations and financial terms is essential to ensure a smooth negotiation process. Clear communication helps prevent misunderstandings and aligns both parties’ interests.
• Be flexible when structuring a deal. Explore various deal structures to align with your specific goals to ensure a favorable outcome. Brandon’s ability to adapt and shape the deal to his liking, including negotiating the absence of an earnout clause, showcases the importance of flexibility.

We help business owners create their own ideal exit, whether you’re interested in an earnout or not. Give us a call today.