Awareness Technologies Revenue, Valuation & Funding (2023)

[00:00] So Brad is one of these guys that he never he never he doesn't speak at all. So you have to really work him to speak, but his story is really it's a fascinating story and I wanna get an update because you spoke, those of you raise your hand if you were here in Austin. So you got okay. So do you guys remember Brad? His speak on his speech on debt? You know, you missed out on the [00:24] nut bar company. Which one was this? [00:26] >> West. [00:26] The small bar quest. I guess it's like a billion dollar brand now. [00:30] >> Well, sold for a billion. Yeah. [00:32] Sold for a billion. But I'm gonna give you his quick backstory, and then we're gonna jump into like the update of this story. So I would say Brad is a creative capitalist that's very opportunistic, and he buys SaaS companies, and many people think you can't buy a SaaS company that's willing to pay three, four, five, six x. Okay. He gets these deals done to like point six x, and he buys a $5,000,000 ARR company and he only [00:56] puts up 2,500,000 of his own equity, maybe more, but then uses debt to do the rest, so he's not a lot of exposure. Then he makes back five, ten, fifteen x's return from dividends for five years and grows the company to 15,000,000 in ARR and then sells it, stays on a little bit and that's sort of where the story I think you had left, they invited you back in September, fill in any gaps in the story [01:19] and then pick us up. Where is the company at today? [01:22] >> Well, the company two years later is half its size. It was at the time when I sold it doing 20,000,000 in revenue and 6 in profit and I believe it's like twelve [01:35] and two, something along those lines. And so for the folks that missed you in September, what what quickly happened? And then I wanna talk about buying in the future. [01:47] >> Well, there was a litany of things that happened, but one of the things that happened is and like many of the companies here are super efficient and many people wear many hats and the company kinda went from an entrepreneurial company to, we need, you know, more people to do the same amount of work, so the so the payroll skyrocketed. Who was the buyer? It was a, a New York based private equity fund called TZP. [02:11] Raise your hand if you're here with TZP. Alright. So what what they fuck up? [02:18] >> Well, you know, when when they hired the consultants to do their due diligence, one of the things that came back on me was I felt I was a little too fast and loose and not structured enough. And, and I'm but you know, there was a ten year history of raising, increasing revenue and profits, so you can, you know, to listen to consultants tell you Brad Miller isn't structured enough, that may be true, but when you have [02:46] >> a ten year history of raising revenue and profits Unstructured structure. [02:51] Yeah. Just to be clear, they were challenging the fact that you were spending 300 to $500,000 per month on ads. [02:57] >> They weren't just challenging that. They were just really challenging the fact that there wasn't an organized structure. It was like Brad and his helpers and where was the game plan written down, where was this documented. But after ten years of working with the same people, you know, you don't necessarily have to document things. So they they were a little, you know, they wanted to hire more professional management and, know, the company proceeded to crash, [03:29] >> know, in part because they, the cost side, raised the cost significantly. And on the and on the sales side, you know, our sales were heavily driven by pay per click, and they decided that that was not important, and so they outsourced it to an agency. This is something that I used to spend a fair amount of time working on with somebody because that's how we made our money. Yeah. You know, it was like being a being [03:54] >> a day trader and outsourcing the day trading. And and so their returns on the advertising went from what they were to half of what they used to be. [04:06] So what was your return on it? What year did you buy it again? 2010. And so for every dollar you put in, how much did you make five, ten years later? Three years later? [04:16] >> Well, so here's how we looked at it. We looked a little different. It's a reasonable question but we looked at it as we wanted we had an immediate sale and if we could make it if we spend a dollar, can make a dollar, then we knew that all renewals were profit after that. So we didn't have to invest any money if we could spend a dollar, make a dollar right away we were we were even and [04:37] >> then any renewals or upsells thereafter were just gravy and that's how we operated. And so [04:44] But you took just for context because this is important, I mean he was taking $1,500,000 in dividends and your best year I think, right? 2018? [04:52] >> Best year was '6 actually. [04:54] Oh, 2006? [04:56] >> No. 6,000,000. [04:58] Oh, 6,000,000. Yeah. Oh. Yeah. [05:05] >> It started at a million and it was started at increased. [05:08] I'm rarely speechless. So this is great. Okay. [05:11] >> So Well, when when you're making 6,000,000, right, you can go to the bank and say give me one x my profit and then, you know [05:18] As debt. Yeah. I mean, I think you're genius at this. So my goal in the next fourteen, fifteen minutes is to pull some of this of out of you so that current operating staffs owners that wanna go buy someone in their space for point five x using debt can sort of have a playbook. The first thing is finding the deal, right? You're not going to find your deal reading TechCrunch articles about people that just raised it [05:37] to evaluation because then you got to go negotiate with a VC that wants a 30 x multiple. So what is your advice for finding someone willing to sell for under one x? [05:47] >> That's that's not easy, advice, my friend. No. It's, you know, be network a lot. Oh, no. No. [05:53] Tell them how you did it because then they can think how to use that. [05:55] >> Well, I had a previous, Internet security company where we bought a lot of companies, and I sold that business to Goldman. And, I wanted to keep buying more businesses. They didn't want to, so I left and took the money that I got from selling it to Goldman and go went and bought the next company that I would have bought for them, you know, as part of this as part of my previous company, but they didn't wanna [06:19] >> go in that direction. So I thought it was a good deal and so I went I went in it myself. You know, the the company was like in in in a lot of cases sometimes these are just orphan companies where the founders have done some things very well and some things very badly. And in this particular case, they created a good product. They had a very bizarre and it was an internet security product that was a [06:45] >> cloud based product, a SaaS based product, but they had a perpetual sales model, meaning you sold the product for a dollar and then that's it and there were no renewals. And, but you continue to provide hosting. It wasn't like you're buying a piece of software and downloading it onto a device. You still had to log in like a like any other SaaS product. So why they had this bizarre business model So there's [07:13] a takeaway for you guys. Right? So look in your space as somebody's selling something one time. [07:18] Like this is a great way to like go build a lead list of things to go buy. Like look at your space and go find some of that's effectively what you did, and we're gonna make it recurring. So that's like step one. Step two, you're really close to I think it was a VC from a PE firm that you knew wanted to get rid of it. Sure. Was that is that true? [07:34] >> Well, it was an investment bank that was selling it. So Okay. And they approached me because I had had a history of buying like similar companies and I'm wasn't, you know, and they've known me as someone who's willing to buy complicated situations, and this was one of those complicated situations, in part because of the problem of not making it a SaaS. It was a SaaS product without a SaaS business model. So the first thing we did [08:00] >> is we turned it into a you know, we made it a renewal, a subscription model and the and the revenue increased 40% overnight. [08:06] And you bought it for [08:08] like was it one what was it doing revenue wise when you bought it? [08:11] >> It's doing 5 or 6,000,000 and we bought it for about 5 or 6,000,000 and [08:15] How much how much cash did you put up though? [08:18] >> We put up 5.5 of of equity and 1,000,000 of debt. Okay. And, the business was losing money day one, but because of the renewals within a year, it went from losing a million to making a million literally overnight just by that one element. And then we just continued, we bought more businesses at good prices and kept adding to the revenue line and we got a lot more lever. We only needed one CEO, one CFO and so [08:50] >> you add revenue to that [08:54] >> machine and more of it falls to the bottom line. [08:57] So tactic one there would be again look for folks selling a one time thing in your space. Tactic two would be pull a power move and VC's are emailing you asking to invest. You can write back and say, we're very well capitalized. If you have any underperforming companies you'd like to get rid of, I'd be happy to take it off your hands. That would be a great reply email there in an appropriate way. A lot of [09:14] these folks sometimes wanna take the write down, especially after the firm has a big exit because of the tax coverage. So they don't mind the write down occasionally. And those of if are any VCs in the room that can speak more about about know we have some VCs. We have our investors in the room which which we love, but people just investors love write downs. Right? They love a tax shelter. Right? A legal tax shelf. Right? [09:36] Legal. Yeah. Legal tax shelter. Just but these are good things. And then step three step three, Brad, like there's all kinds of I've seen folks in this room buy companies for really cheap where they'll go on a marketplace like the Google Chrome store. They'll see that a Chrome extension has 500,000 downloads, but there's a thing that says when the developers push the last update. If it's more than a year ago, it's probably sitting there doing nothing. [10:00] You buy that for cheap, it's a 500,000 email list. So my question to you is, now you guys have those three ideas, this company which you love and you know very well is now on the decline. Mhmm. We're in a bad economy. I'm waiting for the news to come out that you buy it for a dollar. [10:15] >> Probably I actually bought another business. [10:17] Oh, tell Okay. Tell us about this. [10:19] >> It's a prop tech business. Bootstrap Founder, [10:24] >> you know, it's an app that you that the property manager provides to the renters of a high class building to do all the business operations. So if you wanna pay your rent, you wanna book a work order, you wanna go to a yoga class, you know, you do [10:37] >> it all through the app. [10:38] When did you close the transaction? [10:40] >> I closed it in mid twenty one. Just just about a year and a half or almost two years ago. [10:47] And what was the revenue of this company when you bought it? [10:50] >> It was doing about 3,000,000. I bought it at a 6,000,000 pre, you know, pre money value. [10:56] Oh, you're [10:56] >> you're up on your [10:57] the two x is a big deal for you. [10:59] >> It was. It was. That one worked. So he was, you know, breaking even, very bootstrapped, was all in Chicago, had a 100 buildings in Chicago, and all the other competitors had raised 20 to $80,000,000, and they were all based in Chicago too. But he had the number one market share, and I'm like, how how is that possible that in their backyard, you're kicking their ass? [11:23] How do you do it? [11:24] >> I'll tell you in a second, but, you know, but the deal was let's go take the show on the road. And so the money I I I invested actually went to him personally because he was starting to make profit and he was like, do I reinvest the money? Do I go buy myself a new, you know, car? And I was like, okay. Here's this money. It goes in your pocket. We're just gonna reinvest everything into the [11:45] >> business. [11:46] The 2,000,000 ARR, 4,000,000 cash. He took off 4,000,000 off the table. 3. Oh, 3,000,000 cash. So [11:51] >> I bought 51% for 3,000,000. [11:53] Ah, okay. [11:54] >> And and now the business is doing 7,000,000. [11:58] A year later. Yeah. It just came from selling. Why couldn't he think to sell outside of Chicago? [12:04] >> It's not that he couldn't sell it, it's just that he's he he was just looking at the cash and, like, the business was starting to make $30,000 to $40,000 a month, and he was like, you know, you know, and can I do I he wanted to, you know, spend it and Very good? [12:19] You know, and so Which one would do with money. [12:22] >> Yeah. You know, and so I think it was a conflicting thing for him, and and, and so I took away the conflict. Jamie, what [12:29] are you curious about? You got a you got a question for for Brad? [12:36] What did you do on awareness tech to the people that were on perpetual licenses? Did you force them into a new recurring fee or did you grandfather them? [12:44] >> We did not grandfather them. [12:47] Ruthless. [12:48] We did. How did you do that copy wise though? Was there any blowback? Did they go post negative reviews on g two? How did you manage that? [12:55] >> Well, you know, so software kind of gets, extinct. Right? I mean, like it it you have to keep up with it, and so if you wanted to keep up with it, then we were like, if you want to you wanted to get the latest version that worked with, you know, worked with all the latest other software so that it was is functioning. [13:17] >> And but, you know, we we gave them notice, and it was it was tricky for sure, but honestly, like, we didn't get that much pushback and most of that business was dealing with consumers, [13:32] >> not not, you know, it wasn't b to b. On the b to b side, which was a small piece of the business they had, they were doing it on a subscription basis, but for consumers, they were doing it as a one off basis. [13:44] Interesting. [13:45] >> And, it was a bizarre model and there was nothing super clear in the in the terms of service that [13:53] >> said that you could have it forever. It it wasn't it wasn't super straightforward. [13:58] Top three terms if these guys are looking at raising debt, I'm talking traditional, so not I'm not asking for a founder about So the way you raise debt, what are the top three terms they they should all be negotiating? [14:08] >> Well, depends what kind of debt it is. Right? I mean, so, you know, it's funny someone mentioned Silicon Valley for obvious reasons. They they were one of our banks, but they never lent us money. We we float all our credit cards through them, and, they would come to us all the time and ask if we wanted to borrow money from them. We'd say, sure. And, you know, we were the only company they had that was making [14:29] >> money, And they'd say, but who's your name VC and when was your last raise? I'm like, well, here's the thing. We don't need that because we make money, so we don't have to fund our losses with a VC. [14:40] Hello. And and they would [14:43] >> say, well, we're we need to have a VC. Go, so you want me to lose money and raise money to cover the losses and then you'll lend me money? And they're like, yes. Like, that's the most backward thing I've ever heard, but that was their business model. So we could never get a deal done with Silicon Valley though. They were a bank of ours and saw them cash flow flowing in every day, you know, and just [15:07] >> couldn't get their arms around it. So that was that was one thing that didn't work. But you know we had both bank traditional bank debt and mezzanine debt. [15:17] But like name the term. So should they negotiate for low warrants? Financial covenant is a gotcha? [15:23] >> So the basic bank debt was very was very plain vanilla. There were no warrants. It was purely a multiple of EBITDA typically two to three times So [15:36] do they all have to be making EBITDA in order to go raise bank debt? [15:39] >> Yeah. So that's the difference with your debt is you don't need that, right? You're kind of a form of equity in a sense we were making profits so our rates were probably lower than what you charge but we were making profits versus your customers. [15:54] We're not cheap but we don't take equity. But okay, so what are the what are some of the what's the biggest financial covenant gotcha that they should all negotiate out of? [16:03] >> Well, that stuff. I mean, like we were taking dividends and so we were always really good on the debt to EBITDA. We were always good on, interest EBITDA coverage. Where we always struggled was the fixed charge because it included the dividends. And so we would take out a dividend for the year, but we had to live with that coverage. Yeah. You know, and so we were always trying to balance it. What's the maximum we can take [16:26] >> and not have any hiccups for the year and not, you know, not blow through that. [16:31] Just write that down. Fixed charge coverage ratio is what he's referring to. If you wanna go down that rabbit hole. Fixed charge coverage ratio. What are some other ratios that were challenging to manage with debt? [16:39] >> Well, you know, the debt to EBITDA was the main one that they probably care about. Right? I mean, so that's the main one. But that's kind of standard in the traditional bank universe. And with the, you know, with the mezzanine debt, you know, which we also used, you know, one of one of of our one of my partners was in the mezzanine debt business and so [17:02] How expensive was the mezz slice? [17:04] >> That was typically, 10 to 12% coupon with a PIK. So with a with a kicker which could either be in the form of a PIK, accreting PIK, or could be in the form of warrants. [17:18] But So when you were evaluating and there's the there's the cut there's the cover rate of 12%, but then there's the warrants, the PIK. How did you guys actually model in your pro form a the true cost of the mezz slice all in? [17:28] >> Well, for the most part, they preferred to do it as a PIK, they were guaranteed their 18% Okay. All in number. [17:35] Okay. [17:36] >> But, you know, we did in in the early days when we had less leverage, that's what we had to deal with. And then in the later days when we had more leverage, we got into do it on an EBITDA, you know, well, on a on a you know, you get an equity warrant, if you will. Mhmm. [17:55] >> And, you know, they they they weren't super complicated. Honestly, it was pretty straightforward, not as straightforward as your debt. Yours is super easy. And our our biggest thing that I I hated the most was the legal fees. You had to pay for not only your lawyer, but their lawyer, and their lawyer had no incentive to keep the fees down. And when you're not raising a lot of money, we're talking about million, 2,000,000, 3,000,000, you'd get these [18:16] >> crazy legal bills. You know, that's probably what drove me the most insane. [18:21] Yeah. I wanna have you wrap up talking about how the buyer, if the debt you had on your books impacted your ability to sell at the end, but then I'll throw it over to the audience for one last question. So tell us that. It did not. It did not. [18:33] >> Okay. It did not at all. They just viewed it as an enterprise value and whether they wrote the check to me or the bank didn't matter to them at all. And in fact, the bank ended up re upping, and whereas, so I, you know, it was a local bank in Connecticut called Webster Bank, which still was a large bank, and when I went when I went and asked them for 10,000,000, they laughed at me, but when [18:57] >> the new buy they they but they could get comfortable with 5 or 6. But when the new buyer came in and said, we want 10,000,000, they had no problem. And I'm like, how is this possible? Same business, [19:08] you know, but Big sponsor with some big funds. Yeah. Yeah. Alright. Raise your hand. Who's got a question? Any question? Okay. Susan or Bridget, sorry. [19:25] Why didn't the private After [19:29] the fact? Let me repeat it because everyone can't hear. Why did the private okay finish finish. [19:40] >> Yep. Oh, a gap earnings. Right. Right. Right. They changed it back. Yes. Yeah. [19:52] So why summary is why didn't the private equity firm listen to Brad? [19:56] >> Have you have you have you no. I think she's I think she's saying after they realized they were wrong, why didn't they come crawling back. Right? Do do you know many private equity people? [20:06] >> I can guarantee you that was the last thing. They would rather burn in hell hanging by their, you know, by their ankles than they would come back and say, screwed up. [20:18] >> Mass you know, masters of the universe, you know, like just just, yeah. [20:23] We got time for one more. Calvin, you wanna throw on at you wanna throw on at Brad? Any questions? Sinclair is not gonna go raise a bunch of debt and buy a bunch of companies? We We might. Alright. We'll go we'll go in the back. Go ahead. What do you got? [20:42] >> Initially, when we bought it. Yeah. [20:50] >> Well, because, you know, I wanted to write less of an equity check. I was trying to figure out, like like anything else when you buy a house, how much can I borrow and then I'll fill in the gap? Right? And so this company was losing money, so the bank wasn't interested in giving us a big debt check. So they were comfortable giving us a million even though it was losing money, and so we had to fill [21:13] >> in the rest which was another 5. [21:15] We're out of time. Last question quick. Rajesh, hit me. You [21:23] should be the next Mark Leonard. Why not create the next constellation? [21:26] >> I don't like working that hard. [21:28] On that note, give it up for Brad Miller. [21:33] Was great. Thank you. I'll follow you off.

please help me giving a warm welcome to Brad Miller Brad come on up man that was good right that was good all right grab a chair Brad Pull It Forward pick your favorite all right anywhere up here where people can see us here we go Okay so cool here come up here to these side payments there we go all right so um first just uh talk about what awareness Tech does and and how you found the deal and the revenue was doing when you found it sure um so I was previous to that running another business uh called perimeter which was an internet security business we had just sold half the business to Goldman Sachs and as usual when these things happen you know I was there for two years and then looking to go do something else I was looking at buying another company for perimeter which but as I was leaving I decided to buy it for myself um and uh and so that business turned out to be awareness Tech um awareness Tech was also a secure Internet Security Company more of uh more of a software business it had both a consumer a b2c and a B2B play but on the consumer side it was basically helping parents Monitor and control their kids online and on the B2B side it was Employee employers monitoring and managing their employees productivity and what was Top Line and bottom line in 2010 when you found them uh they were about 5 million in Revenue losing one and then what did you do in the first year well they had a weird um now these guys are really really smart but and I'll tell you an interesting story in a second which I don't think I've ever told you they're really smart guys but they did a really dumb thing they had a business set up as a software as a service business but they sold the product as if it was a one-time sale and so they had an ongoing relationship with the customer who would log in and you know forever but only get paid once and so we can inverted the business from a one-time payment to a subscription and that added two million dollars of Revenue overnight so it went from five million to seven million and as all that Revenue was profit the business went from losing a million to making a million I will tell you that the funny thing was uh the two years they worked for me afterwards they were really building another business on the side and um and I didn't like paying them a lot of money to build another business so to shut me up they offered me 10 in their new Venture which was a protein bar company don't ask me why they were bodybuilders and I was like I the the world does not need another protein bar company they later sold it for a billion dollars if you if you never told me on the show you told me the bar name you know you haven't told them yet tell them the bar name Quest Bar I don't know if you've ever heard of it of course but that's crazy you didn't tell me that yeah you will you didn't have to pay for 10 quests you just made them feel guilty well they offered it to me and I turned it down whoa why didn't you take it why wouldn't you said of course because I could didn't feel right paying them to not work at my company in return for 10 of a piece of crap protein bar company not everyone's perfect that's incredible yeah I didn't know that so I'm I'm not money out of my ass okay so you go from okay and you didn't say the purchase price so the company oh it's five losing one what'd you pay we paid uh six million six million and how'd you find the Six Million uh well five and a half million uh myself in a financial partner split at 50 50. and we did a little bit of Bank debt uh on top of that um a million bucks a Bank debt to fund you know the purchase price and some other expenses and all that kind of stuff and so you start scaling this 2011 7 million Revenue 1 million profits did you take dividends out this year or you waited till next year no the next year but then so then we finally got them off the payroll so that I wouldn't take the 10 that would have made me a hundred million dollars um and so but it did save me four hundred and five hundred thousand dollars a payroll so the business went from benefit lipstick on that big you go ahead sounds like a 100 million dollar loss to me uh so then we were making a million and a half and then we grew a little bit more and it you know it grew to you know maybe two million uh then we acquired a a small company wait hold on hold on hold on I want to get everyone on the timeline here so this is what people don't take dividends I don't know why I mean you've heard some of it some folks say Bridget kicked us off talking about dividends but like you should take dividends right so um I mean this is accurate right it's one three six is that about right uh well it was total of 12 so there was 1 million for a couple years and then it grew to three then grew to six but yes that's not in 2016 that's not Revenue that's what you took out dividends six million dividends correct yeah we we took out double what we put in before we sold it yeah it's incredible so it made back more than the 5 million again before he sold it now um what I want to touch on here a bit um is inorganic growth which you were just about to go into so talk about the first acquisition here um so another funny story um I uh I missed out on Cliff Bars too no I I came home one day for dinner and my wife had made dinner and the kids were upstairs and they were younger they had phones and she was like okay old people don't have phones no no but you know that uh yeah so I mean they were young kids you know and so she was like all right I gotta get the kids you know she called the kids down for dinner they didn't come and she goes wait a second and she like pulled up her phone and started tapping on her phone and put the phone down all proud of herself waited counted to five and all of a sudden we heard the kids come down and I was like what would you do and she's like oh it's the it's the greatest it's the greatest parental app ever you know it's I can shut off their iPhones you know remotely and I was like do you know what business I'm in and so she had found this other parental app online um and um and so then I went and bought the company and and it was broken but I'm shocked I didn't lose this deal because what you told me was when you started negotiating they were doing like the LOI they were doing 50 they were doing they were doing 50 000 a month when we were negotiating um and uh the the by the time we closed it the five months later it was doing a hundred thousand and then a year later it was doing I asked you to pay double then between the LOI and the closing docks they did but I didn't budge I hung up the phone and didn't answer the phone for three days and then they came back begging me to close the original deal because they had already spent the money you know it was it was just a one guy it was a guy and his wife and they had already you know they had bootstrapped it and it was three million bucks and they were you know all cash up front for them it was half and half it was half uh we did a 50 up front and then 50 if once the revenue passed a threshold which it pretty much already did by the time the deal closed so this was 2016. so now with this first acquisition plus the core business what was total revenue in 2016. uh it was kind of approaching 12 million at that point and that's the same year you took out six million in dividends right no we we were taking we didn't take out this final six until 2017. okay so that's for does that first deal make sense any any questions on the first deal from anyone you can just yell them out it was just on a run rate and it just you didn't know when it was going to stop you know but it's a problem it just kept going and you know all right so you buy it you get that deal done um you like how that felt and you said uh Brad wants more talk to us about the second acquisition in 2018. so our biggest competitor uh this is also an odd story uh was a company called variato and at my previous business that I sold to Goldman I was trying to buy them too I got outbid heavily because they got sold for 45 million to two VCS and it was a nice you know business doing 15 million of Revenue making six million a profit um and then once so when I saw awareness Tech which was like a number two to them I was like oh okay I've seen this movie before you know if we could only grow this business a little bit we can make a lot of money and it was a two-horse race between them and us and so they were always our daddy if you will for a long time and uh but then um they started to shrink and do badly uh for a variety of reasons and I got a call one day from a VC who said would you be open to being for sale and I said I don't know maybe and they said well you would make a great tuck in acquisition for another company we're looking at buying and I knew there were there could only be one other company they could be talking about and I was like they must be for sale um and so I called up my investor who knew their investor and we started a process and they were starting to crash badly we started a negotiation where we were going to pay them 19 million dollars on it than they were doing 12 million of Revenue but by the time we closed a deal they they were on a eight million dollar run rate and they had run out of money and they couldn't meet payroll so we bought it for three and a half million uh that's a round of applause moment I mean holy crap um I mean I imagine for anyone thinking about uh buying tokens for their own business they're going how do I find a deal like that so I mean give how I mean is it luck can you program that I guess it was partial luck I mean we got a call from a VC thinking that we'd be a good tuck-in for that one so we knew they would be for sale and we figured well why not take a look at it because we were now pretty profitable business you know and we thought we could afford you know we could you know Finance it and and in fact when we first looked at it and based on the numbers they sh they shared they were doing well you know they were doing 12 million Revenue making a couple million and we felt we could take out three million dollars a cost so we were we had a term sheet to finance you know all 19 million of the purchase price but every time we turned around instead of doing two and a half million or three million a quarter they were one and a half million a quarter and every month we waited the revenue just kept falling and falling and falling and it was just one of these things where we just if if you hang around the hoop long enough you'll pick up a trash basket all right there you go that's a good one I'm gonna put on a shirt for you next interview I want to wear that one um but uh so uh I guess the the comp from maybe like Bridget right you can book me right is if she's looking at maybe buying other companies the best way for her to get deal flow like the deal flow you got is to maybe Bluff that should be willing to be a tuck-in to a private Equity firm's other scheduling tool and then reverse it I think the message is just being the flow right just talk to a lot of people be in the flow and you the more flow you're in the more options you have you know swipe right as often as possible and fair you know fair you're that guy options okay here we go all right now you buy the company and then you cut 30 people right talk to us about how that impacted bottom line uh they went from losing money to making two million dollars and so we were before we bought them we were you know a 12 million dollar business making four at this point and they added um they were eight and two now and so now we were 20 and six and then we said okay time to sell the business and keep going and um and so we closed that deal and um you know mid 2019 and uh we were um we were talking to people to buy it in early 2020 and closed the deal late 2020 for uh 35 million you know which was on top of the 12 million so if we sum this full story out there's a lot of moving pieces we take the 5 million of initial investment you can see let's make it a dollar right so you put a dollar in you turn that dollar into what over 10 years uh well 12 and 37 so 47 so five um you know uh nine times nine one dollar to nine dollars on a five million base it's pretty good right good story okay so the story gets more interesting um can we go there yeah we can we can go there uh story gets he has to because it's already on the next slide so but before we do that any questions about just m a strategy here in general um just raise your hand if you've got one how we bought these companies anything all right yeah fire away what's your name Alex fire away quasi distressed or healthy um well uh the first one was growing so when I bought awareness it had grown from one to three to five so it was growing um but they were more consumer than corporate and they were struggling growing in corporate they were trying to sell the business as a B2B business and when you read the book it looked like it was a B2B business but when you looked at the numbers it was a b2c business and the number of buyers for a b2c business is much lower than the number for a B2B business and so it was distressed and that's in that it was badly packaged they were hoping to get a B2B multiple but you know their book was overly ambitious for who they were um and I had just looked at buying their competitor variato which was you know 50 50 B2B b2c so I knew there was a B2B opportunity a B2B market and so you know relative to them they were maybe on the consumer side there was like two-thirds one-third of the market and on the B2B side it was like ten to one and so I knew there was a gap in the B2B Market that they could fill um that they were struggling to do and as it turned out they were consumer guys they knew how to sell protein bars and to Consumers uh and so they were they had come up with a good technology they just couldn't figure out how to grow it out of it out of their original consumer Market it's a very distressed yeah Gill investor for the investor of that initial company what advice would you give them so they they avoid that shark move what would I give what what advice would you give them so that I don't know which company which company this one that he bought yeah the one that the VCS put 45 in oh the 45 million in oh well so you're gonna hear a second part of this of my story which will emulate that this story which is the VCS bought the business from the original Founders and decided the original Founders weren't smart enough these are the guys that grew it from 0 to 15 million and making six million in profit to meet those guys are geniuses they got rid of those guys and hired professional management so you'll keep control of your board so I would tell I would tell those VCS Professional Management isn't always the right answer all right you guys want to go into the next part of the story that's a very good question because it's a great segue it is all right so you sell it at 20 about 20 million Revenue in 2020. what happens next uh well um uh well so the short answer is the the business will do 10 million in Revenue this year um they brought in guess what professional management and Professional Management spends all their time hiring two million dollars of overhead to you know the best people the greatest people um and um uh they and they don't actually manage the business day to day and so they're adding cost in the business on one end and the business is starting to decline on the other they they decided um we used to manage the business on a cash basis so because we were very paper click oriented we needed to see sales cash sales today so we could measure the success how much were you doing in monthly PPC you were managing 300K a month you know and um so over you know three four million a year and um and so it was it was the biggest source of our revenue and so we had to really carefully see we spend a dollar we get back blank dollars we had to really watch that they changed the business to a gap basis right away where you don't see the day-to-day revenue and GAP basically underestimates your Revenue if you're growing but overestimates your Revenue if you're shrinking because gaap is an historical average over your last 12 months and so the drop in Revenue they didn't know was happening because they weren't looking at the cash sales they were looking at the Gap revenue and so we show up at these board meetings and I'm still on the board and they would show The Gap revenue and I'd be like I can't make heads or tails of this I mean can someone show me the cash revenue and they're like oh we're professional now we don't do things on a cash basis we do them on a gap basis and then one day I show up at a board meeting oh can we be not one day like two a couple months ago yeah three months ago I show up at a board meeting in March they're high-fiving and chest bumping over what a how great the management is somebody in the audience here asked me um you know uh is this your company and they showed me the website and I was like and I didn't recognize it but it took me a minute to realize that it was because they spent hundreds of thousands of dollars trying to polish up a non-ecommerce website and adding brackets to our logo just those packets it's a hundred thousand dollar brackets and uh so between hiring two million dollars or overhead and putting in time into brackets and a website that doesn't produce money um that's where the time went but not watching the day-to-day running of the business and so March we're at a board meeting everyone's high-fiving and chest bumping and then the bank payment is due March why there's a bank payment you got to tell them that first oh well they bought our company using a lot of debt um which was fine when we were making six million dollars a year but not so fine when you're not making 6 million a year uh and um uh and then you know at the end of the month they turned around and there was no gash in the kitty and they told the banks they couldn't make the bank payment the principal or the interest um this bank was these are your friends I mean oh they were my original bank that re-upped when in our deal um I mean we were a much smaller loan we had a loan with them but not like that and uh and so yeah they just the the money was gone and nobody knew where it went and uh you know and it was uh you know and uh and there's and they're in restructuring um and um right now oh yeah right now and they haven't made a bank payment or interest payment since March and they might not for quite a while um my prediction was gonna this guy's gonna buy it back for a dollar he's gonna be in New York he not there's gonna be another thing on this graph and it's going to say I bought it back for a dollar and now it's growing again well they're not desperate enough yet so the the the um the the VC has put in another three million bucks to fund so it's not only not making six they're actually losing money because of course when you go from 20 to 10 million in Revenue and it's you know that's a lot of lost profit and you add two million dollars of cost you know that math doesn't work well so it's like losing money quickly and uh and so they're putting more money into the business which is good I'm you know I approve of that um but you know so we'll see what happens nice on that note give this guy a round of applause Brad Miller awareness Tech unbelievable tell them a story I'm the I'm then you know I'm the guy that lost 100 million by not yeah there's stories but we'll stick to this one next time this is fun thanks Brad appreciate that manager yep thanks thanks

hello everyone my guest today is brad miller he's a serial entrepreneur who successfully bought built and sold several companies with extreme capital efficiency most recently grew awareness technology's revenue 400 organically and through acquisition with a 30 37 ebitda margin with investors making a 9x roi previous that he built silver sky from startup to 60 million revenue with 10 million ebitda after recapping the goldman sachs at 150 million bucks it was later sold to bae for 250 million dollars this guy knows what he's doing brad you ready to take this off sure shoot tease people first we already interviewed you several times as you are building awareness technologies but quickly talk about the capital infrastructure behind awareness tech so did it start off as a search fund how did you get the deal done um so uh after i did the deal with goldman at my previous company silver sky i was we had been buying companies and at some point they didn't want to keep buying companies because they felt like we were going to become viewed as a consolidator rather than an organic grower and so there were companies that i wanted to continue buying and they didn't want to so i asked for permission to buy the ones that i was looking at uh that they passed on and so i left i left silver sky and then bought awareness technologies with another financial partner and that's kind of how it happened that's great so when you structure that initial deal with that first financial partner were they they have oh equity in the company or was it pure debt no they were we were 50 50 equity partners we each put up 2.75 million we you know we put up five and a half million uh together uh all that money went to founders uh there was no it wasn't money in the company the uh the founders i may i may have told you this went on to take that money and start a billion dollar company called quest nutrition i don't know if you're a fan of quest bars yeah and uh um but the business when i bought it was doing you know sort of 5 million losing a million and even though it was structured as a sas cloud delivery model they were only charging a one-time fee though providing service and cloud forever and so the first thing we did was change that to a subscription uh uh and so the business went from five million losing a million to seven million making a million because the extra two million dollars of immediate revenue was pure profit um and uh and then we just built we just kept going from there what year was that that was 2010. and so take us through the journey you get a little bit incremental revenue the first 12 months uh what happened in 2020 2019 2020 uh well uh we bought a few businesses along the way uh we kind of were leveraging profits uh both to pay dividends as well as to um as well as to use ebitda for bank debt purposes to acquire a few companies and so we bought um we were both in the in the consumer business and the b2b business we bought a consumer business and a b2b business each for one for three million one for three and a half million uh anyway uh the business grew from seven million well i guess five to seven and then uh and then uh and then to 20 last year we did 20 million making six uh and so that was big it was a big year um there was a lot of growth in our b2b business uh due to the covid um effect you know we uh we focus on providing employers with uh pc activity monitoring activity of their employees so our what time do they log in what are they doing when they log in you know how do i get comfortable that all the things that i used to see with my eyes when people came to the office and i no longer see how do i how do i recreate that line of sight information i used to have and um and so we had a you know the b2b business had a very big year last year and um and so it was a good time to sell and so we did i want to talk more about timing but just to sum that up 5.5 million to start of your own cash another 3 million and another 3 and a half million so about 11 million in the business total but enterprise value in terms actual revenue was called 20 25 million i mean this is extreme capital efficiency what enables you to spot like these sorts of things where there's not a bunch of other competition i imagine that people look at this and go we could do we should do the same thing and then you can't buy it because there's so much competition how did you find these gems well you know uh one of the the competitor that we bought sometimes just being at the right place right time but the the last competitor that we bought that pushed us over the edge to 20 million i looked at buying a year before i bought awareness and that when i looked at buying it i couldn't afford it it was doing 15 million of revenue making six the two vcs bought it for 45 million and they and the business went from doing 15 million making six to doing seven million losing three uh when we bought it so it's why we bought it for such a good deal and but when i saw them i was like this is back in 2008 2009 i was like wow i don't know many internet security businesses that are growing 20 doing 15 million making 40 percent ebitda margins um and when i saw awareness it was you know they were the avis to the you know to that company's hurts if you will and i was like geez i'll you know and so uh it was a two race it was a two horse market at that time between the two of them uh where uh where the number one company was three times the size but you could see how you could you know take up some of that market share and um and you know i felt if we could just even grow it to 10 million we'd go from um you know making a million uh once we you know once we added the you know the you know the recurring revenue to um you know to making four or five million and if you could buy a business for five and a half million and make five million you know those are good those are good numbers um little did we know along the way that company would have such problems uh and um and so but if you have an in with the vcs that bought it for 45 million where you they were happy to take the loss and let you take it even though you win well we um my co-investor co-invested with one of those vcs in another deal so we had a we had an initial entree into that conversation um they were for sale for two years they didn't contact us uh you know they viewed us as the small guy nipping at their heels and not able to afford them um and their business was doing better before they you know what at the beginning of their sales process but it started to really struggle in the last year um and uh they kept thinking it was going to turn around turn around turn around and it didn't and and so we did a deal literally in three weeks because they weren't going to meet payroll they were burning cash fast and not willing to do anything about it and they kept hoping for some big deal to close and it didn't then they needed to get something done and the vcs had had guaranteed a two million dollar emergency line of credit that was due and you know at the same time and they didn't want to make good on it so we were able to basically buy it by taking over that two million dollar line of credit and then pay the investment banker fees and lawyer fees that they couldn't afford to pay because there was no cash changing hands yeah and so so fast forward to you know pre-pre-deal um did you guys still each on 50 and then how much debt was on the books um so yeah so uh no i i had a 10 option thing that i had exercised um we had also taken out 12 and a half million of dividends along the way oh wow um and so we were both already in the money if you will on our original investment uh the two acquisitions weren't financed with equity they were financed with debt so we didn't put more money into the business we were only taking money out and so yeah at the end of the day you know we had um maybe uh six or seven million well we also had four or five million of cash on the balance sheet when we did the deal so net debt we probably had a couple million yep yeah we were very very we were very cash flow generative as i said we made six million that last year and so yeah we probably had uh uh we probably started the year with nine million of debt we probably paid off you know a million and or so and but we had five million of cash on the on the books from that year yeah pure profit zone so what was the sale sale price uh well you can sort of backwards and i'm not sure i'm allowed exactly to say but like i said the combination of the dividends and the price was just shy of 50 of just shy 15 million so is this what you'll do next you'll go sort of to run the same playbook i mean you basically your cash exposure was about 2.7 million it sounds like total when you guys bought the initial thing and then the rest was creativity good deal-making and a lot of patience is that what you'll do next i hope so that's it every deal has its own you know has it's it's not always the same playbook for each deal right it depends on the market dynamics the growth trajectory the competitive you know you don't always control those things um and so uh but i generally like acquiring you know there's always things you can fix in a business um sometimes it's as basic as actually actually making a subscription business you know which wasn't too hard to do but wasn't being done for some reason you know not not not every fix is that obvious and that easy um but but you know we look for things that are doing well in spite of some you know some mistakes you know founders are sometimes really smart at some things but not so good at other things and so we try to find things that they've done really well but still see issues that they've you know you know where they left me you know meet on the bone unwittingly because they're just not experts and everything yeah which one could you use in the first three million dollar acquisition i want to get a sense of what banks are friendly in terms of letting entrepreneurs like you use debt to do acquisitions uh so that was webster bank this was before the days of sas capital and lighter capital and people like you now um you know that didn't really exist at the time uh but yeah webster uh bank which is a local connecticut bank um i they were my bank in my previous company too and and so they you know they were funding is that a less deal is that a less i mean most entrepreneurs are forced by their vcs to go bank with like goldman or svb but you really can't have a personal relationship there like you have with this local bank right isn't that an advantage svb wouldn't touch us because we didn't have like a traditional vc in the deal they would rather fund a company that's losing money with a brand name vc then you know they don't do cash flow lending you know it's like well but we actually have profits you know they're like well we don't care about those we you know you don't have uh profits profit what are profits so you know we we were getting basic kind of you know three times three and a half times leverage kind of uh standard you know that deepita stuff and we had the ebitda to do it and you know listen if that business was doing a million in in profits you could go raise 3x that in debt to fund the deal 3 yeah what million the capital to like under 10 interest oh uh yeah it was typically you know um libor plus you know nothing i mean it was like typical around five percent you know now um but you have to pay back the principal right you know and you have to make pretty hefty principal repayments um brad how do i get how do i get on your next deal how can i put up some cash and then let you do your thing with it well i i'd love to work with you i i was looking at that very same thing i would love to work with you yeah i'm not as rich as you but i'd put up i put up 200 300 400 grand and let you do your thing and learn yeah i mean i i i'd give you a huge carry because you're a really smart knowledgeable guy about this business so i i wouldn't need your capital i'd be happy to you know i'd be happy to work with you just for your for your knowledge know-how etc well i love profits i love founders with profits you love operating companies with profits there seems like a win-win here brad miller we'll see what happens thanks for taking us to the top and i'm serious if you want to talk hit me up on slack i am happy to i am happy to figure something out with you one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube 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hello everybody my guest today is brad miller he runs awareness technologies and which provides endpoint security solutions for both home and businesses with over 50 employees in offices in westport connecticut and bristol uk ati both develops and acquires market leading solutions trusted by millions of parents and thousands of businesses brad you ready to take us to the top sure all right so just to be clear it sounds like you're selling it to very different groups here it seems like parents are buying this and businesses how does it work correct you got it so we have uh underlying the same technology are multiple uses and so the the technology that we have allows us to record and control what an end user is doing on an endpoint and then it sends that data to a secure website that can be viewed so whether it's an employee an employer wanting to monitor employee user activity for security reasons because they have confidential data and uh we have uh plenty of people working remotely and it's really hard to know who's taking what data with them where um this is a tool that employers can use to protect their confidential where are the data it's like in the office or it's on their computer or their phones or what correct it's on it would be on their computers typically and so i as an employee have access to all sorts of um confidential data like client lists as an example and if i take that information that's on my laptop and i'm and i'm home and the employer has no visibility into what i'm doing with that information then in theory when i go to find my next job chances are i will pull off a client list and all the information about what they have how much they pay when they're up for renewal uh and that would be devastating to a company uh if their employees when they left to go to a competitor were you know we're able to have easy access to now is your business model a pure play sas model people pay monthly for this uh on the consumer side they can that they can pay monthly quarterly or annually and then on the corporate side uh they typically pay annually but there is a monthly option as well but they're both they're both it's it's a sas play they're both recurring revenue losses yes you got it interesting okay and then and then so how many give me i mean give me a general sense here let's just focus on b2b for now what's an average business going to pay you per month to use this technology sure so it's it's user-based uh so on a on a on an employer side depending and it's volume pricing related but let's just say on average it's between 70 and 100 a year um per per employee and and that's what i'm trying to get so is how big are these teams that are signing up with you are they typically two three person startups or 10 000 person banks yes all right okay what what's just because we have a limited amount of time what's this what would you say sweet spot is are we talking maybe you know a grand a month for 10 employees or sure so that's probably a very good uh a very good uh average okay i did that actually i did that math on because you said one employee is a hundred bucks for the year not a month correct 100 yes 100 a year okay so someone's paying you a thousand bucks a month that would that would be a team a year i'm sorry okay okay okay okay so a thousand a year or uh again obviously we can divide by 12 to get that monthly that's good okay good so um walk me through kind of the the timeline here where did you launch the company what year uh well the company was started in 2006 seven uh i bought it in 2010 and i've been running it since then okay walk me through that you know there's a lot of people that would argue it's actually smarter to buy companies than it is to start them from scratch you're doing it what'd you see in the tool that made you want to buy it in 2010 uh well the technology i thought was really good so on the i was more at the time interested in the corporate space than the consumer space my prior background was i had run and built a company that was focused on providing security to community banks and the exclusive focus of uh of that was focused on external security stopping the unknown bad guy from breaking into a bank's network and there was very little done at the time on internal security and while most of the problems that exist are created by external people most of the problems that cause a lot of damage are done by internal people if that makes any sense and so yeah i felt it was the next uh frontier and how do you know they were for sale i mean explain me how you reached out uh well i was running my previous business and they were for sale they had hired an investment bank and they had reached out to me in my in my capacity as ceo of another business that was known to buy other security companies and uh it was just around the time i was making a transition i had previously sold my previous business and had a two-year transition agreement so i was just it was at the perfect time when i was leaving anyway and uh and so i decided to buy it for my you know for myself and how did they i mean was it a sas company at that point um interestingly enough it was a sas technology but not a sas business model and so so they offered so the at the the technology was provided in a hosted way where the clients logged into a secure website to see data um but they sold it as a one-time license interesting that's really interesting so you obviously saw opportunity there um what'd you so what did you value the company at back in 2010 that would have been eight years ago um uh well at the time we we probably uh you know valued at about 10 million it was it was doing a about four or five million in revenue okay and and did you just do a very simple kind of ar math or did you look at churn as well i guess there wasn't really churn because they only paid one time exactly yeah exactly there was no concept of churn uh and um and so you know the business the technology was quite good but the business model was uh under optimized uh as i think you've recognized and so we saw an opportunity to change that model which we did and uh very you know very quickly and now renewals makes up you know you know 50 of the revenue um and uh and so the business has grown you know a bit and has become um you know and has become quite uh profitable as well that's great okay so so you take over kind of in 2010 you buy it for say 10 million bucks using cash from your prior exit they reached out to you when you were still at the older company and happened to just have really good timing is that all accurate yep okay okay so 2010 today how many customers have you now scaled to um well we've also bought another business i mean i'm sensing a pattern here there is a pattern um but in the in the core business uh we've um you know we're where we probably have at any one time because you know we have new customers coming on you know an old customer is dropping off um but at any one time you know we probably have a couple hundred thousand consumers you know paying us either you know monthly quarterly or annually okay who have active active licenses are those so that's obviously different than the business model i assume that's different are those 100 000 paying still 100 bucks a seat per year um so that was i was talking about the consumer that's that was the consumer side of the business which obviously has more customers uh than the corporate side the corporate side of the business probably has more like uh 5000 customers okay got it what's the i only want i want to spend the rest of time hyper focusing on one of these angles because they're very different playbooks which one is more important in terms of revenue for the business like does b2b make up more than 50 or does consumer make up more consumer makes up more though the focus is on their own focus is on corporate so we've kind of um you know we've spent the first few years maximizing the consumer side of the business there was a uh there was a a radical change since 2000 i bought it in march 2010 april i uh apple came out with the ipad consumer desales started to decline rapidly and we had to quickly backwards create technologies to work with uh mac uh blackberry at the time and blackberry died and then android and and ios so we spent those first few years trying to um uh you know trying to adjust to the changing operating landscape so what's the split today between is it what is the business the b2b revenue is that 30 40 50 of the business what percentage uh probably 75 25 consumer oh wow okay okay okay so it's obviously but the b2b is growing faster than the 75 percent that's consumer correct and it has more opportunity yeah of course of course yeah so what what's happened in the recent year or two is that the uh the technology that you know has typically been focused on you know what you said were 10 20 30 users is you know we're starting to see more and more larger companies looking to address the insider threat it was typically the it was typically only of interest to the small companies where maybe you had an owner like me you know who was hyper paranoid about you know oh my god what if my what if my employee leaves and takes the client list you know i would be in a very bad place bigger companies were less worried about that for some reason but i think they're starting to realize and so we're seeing a shift so david can i can i multiply the 5 000 b2b customers you have times a thousand bucks a year i mean that is basically a 5 million run rate business today correct and what's that growing at you over here so a year ago what was the run rate it's probably growing at 20 a year okay good so you know 5 million ar today would be what is that a 416 000 a month thing if you're growing 20 30 so a year ago you were doing what 3 30 340 a month something like that uh sure i don't have those numbers offhand but just uh but you're you're probably in the ballpark okay but just to be clear twenty to thirty percent year over year growth on the b2b side correct that's great where's most that growth coming from upselling new seats to the same customers or onboarding brand new customers all together um mostly new customers and and importantly bigger customers so it's not necessarily that the number of customers is growing um rapidly it's more that we are now focused on adding bigger customers and bigger cut you know when you're when you're used to selling 10 to 50 seats and all of a sudden you sell 2 000 seats um you know and so you may not have added a lot of new customers but you've added a lot of seats yep how many people are on the team today uh about 50. 50. and is are folks all spread out or remote or what's the deal they are fairly spread out um you know the uh you know the the core people are based here in connecticut but we do have people all over the us and all over the world for that matter that's great okay so uh you said earlier you're profitable have you raised additional capital after you purchase it to fund growth or no it's all your own capital so far it's all our own capital uh we have raised additional because we're because we are profitable we're able to raise bank debt which is maybe slightly unusual for a tech business who do you work with hercules or timia or what no we use well our local bank here in connecticut uh webster savings bank at webster bank and um uh and um how did you convince them to do that i mean these whole sas capital lighter capital hercules to me and svb they all exist because traditional banks typically want loan to people like you because there's no hard assets to loan against how did you convince your local bank to do this well so there's two reasons um that's half the reason why they don't lend to people like us the other half the reason they don't lend to people like us is because we're not profitable as a rule as an industry and so we were profitable we're very profitable we're you know we're dropping 30 plus percent to the bottom line and so to them you know they see a lot of consistent recurring profits with a high percentage of revenue and so you know those those you know lighter capital ex you know sas capital they're not focused on profitability they're just focused on taking a pc or revenue and you know and um you know and so how big was that line if you want me asking from the local bank uh it was uh four million at its peak okay interesting and how did they get to that number was it was it was it a multiple of your mrr or something no we we could have gotten more actually we were just when we bought the company in the uk uh we bought it for a little over 3 million and we already had a million of debt at the time so it was just what we needed in order to acquire uh so your initial question was that i raised additional capital and we did for the purposes of buying a company but not traditional capital you know that no i like it bank debt is a great way to go it's non-dilutive as long as there's you don't have to personally guarantee it no covenants or warrants right uh i didn't have to personally guarantee it uh there was a small very small warrant and of course there are covenants because i don't know there are a lot of banks though now that i mean lighter sas capital to me and hercules uh scale works where you can do these kinds of deals you know the four million kind of range where there's no warrants no covenants uh no personal guarantee um so that's interesting your local bank today that's great to hear um tell me more about economics on these customers so what's churn look like today on the b2b side um well we have two types of customers on the b2b side we have uh customers that are looking at uh solving a long-term problem and doing preventative maintenance if you will you know uh stopping the problem from happening in the first place and there you know the the churn is you know our retention is you know like eighty percent annually and then we have yeah and then we have customers who are looking to do a one-time investigation and so there the turn is quite high you know our retention is probably more like more like 40 or 50 percent uh on those on those customers because they've done what they had to do and you know they're they're looking yeah that's not sas that's like that's i think that's a whole different model but 20 logo turn annually on your kind of your sas play with people that have intent to do it every single month um how aggressive are you being with cac so what do you what are you spending fully waited to get a new thousand dollar your customer that's a good question um and so you know our typical rule of thumb is you know we we spend a dollar to get a dollar okay so 12 month payback yeah that would have been clear that's a dollar of ar or mrr uh a dollar well most of our corporate business is arr so it turns out to be the same thing there is a little bit of mrr sprinkled in but you know but yes a dollar on on mr on on arr sorry yeah yeah spend a dollar and then it takes you a year to get that dollar back but it's a dollar and a dollar out you got it that's it that's great very cool okay good um any plans to make any acquisitions in the next call 12 months uh hopefully what kind of companies are you looking at uh well we'd be looking more at companies on the corporate side um you know we're we're happy with our consumer business and it's become quite a cash cow and so where we're looking to grow now as i said is on the is on the corporate side and so yeah and when you say cash cow by the way you said the corporate stuff is 25 percent of your revenue and that's doing 5 million ar today so we multiply by four i mean all together you're doing 20 million taking 30 ebitda to the bottom line um yeah on a run rate basis yes yeah yeah i mean it says like basically six million bucks in free cash flow annually something like that yeah that's great you're very quick with numbers hey when i do interviews like this i'm talking to short people like you i better be real i have to be real quick otherwise i miss it all right very good let's wrap up here david with the famous five number one what's your favorite business book uh first i think you mean brad by the way no oh dude wait have i been calling you the wrong thing the whole time not the wrong not the whole time just occasionally oh god okay you should correct me every single time sorry i had uh yeah that's weird you're right it is brad i had david pulled up for some reason brad i apologize yeah what's your favorite business what's your favorite business book uh i have two one uh is uh moneyball actually i know it's not traditionally viewed as a business book but it really is if you uh if you think about the principles behind it yep and the other one is is a blue ocean explosion strategy number two is there a ceo you're following or studying uh the two i like uh one just from a just a thought leadership i love listening to uh simon sinek i don't know if he's you know i'll call a ceo but the other one for uh interest is um is uh uh um elon musk recent tesla buyer and um and uh just i find uh you know i i enjoy his view on the world good number three what's your favorite online tool for building the company oh for building the company wow i didn't i didn't get that uh little qualifier um my favorite online tool for bustle since we are so um uh so pay-per-click heavily focused i would say google analytics is i spend an awful lot of time how much money do you spend every month on ppc millions okay interesting years that's oh sorry uh hundreds of thousands a month yeah millions a year yeah yeah number four how many hours of sleep to get every night i am a very um i'm a choppy sleeper so it might add up to four to six hours in in two to three hour increments and brad what's your situation married single kiddos uh married kids yeah how many kiddos two two kids and how old are you i am 55. guys it's pretty good i can get a privacy guy to review all this information brad what's your social security number last question what do you wish your 20 year old self knew my 20 year old self knew um uh a little bit of uh um [Music] you know that um you know what's what's the judgment is better or uh discretion is a better part of valor you know you don't always have to win every argument when you don't you don't have to win every battle guys you don't have to win every battle game coming from uh brad again launched his first company sorry not actually launched the company actually saw an opportunity to buy a company back in 2010 for about 10 million bucks in the security space he knew that the model of tech would work great in a sas space they weren't using a sas pricing model yet so he bought it he's now grown it to about 5 000 companies on the b2b side using it paying 80 90 bucks a month so doing about 420 grand a month in revenue that's up from call at 350 grand a month just a year ago so that business is doing 5 million bucks in terms of run rate that's 25 of the total business the other 75 is consumer security so called a 20 million dollar business overall they're also making obviously acquisitions as they scale using some bank debt to do that hugely profitable 30 percent ebitda team of 50 spread all across the country 20 logo churn annually as they look to scale spending about a dollar to get a new dollar of ar so healthy economics brad thanks for taking us to the top all right thank you sir