How AwarenessTech Grew from $5M to $20M Revenue and Sold for $35M Using Debt and Acquisitions (Interview with Former CEO Brad Miller)

Introduction and Welcome

Nathan Latka

00:00Please help me giving a warm welcome to Brad Miller. Brad, come on up, man.

00:09That was good. Right? That was good.

What AwarenessTech Does and How Brad Found the Deal

Nathan Latka

00:14Grab a chair Brad, pull it forward, pick your favorite. Alright. Anywhere up here where people can see us. Here we go. Okay so cool here. Come up here to these side people. There we go. Alright so first, just talk about what AwarenessTech does and how you found the deal and the revenue was doing when you found it.

Brad Miller

00:35>> Sure. So I was previous to that running another business 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.

01:05>> And and so that business turned out to be AwarenessTech. AwarenessTech was also a secure Internet security company, more of a more of a software business. It had both a consumer, a b to c, and a b to b play. But on the consumer side, it was basically helping parents monitor and control their kids online. And on the b to b side, it was employee employers monitoring and managing their employees'productivity.

Nathan Latka

01:31And what was top line and bottom line in 2010 when you found them?

2010 Acquisition: $5M Revenue, $1M Loss, $6M Purchase Price

Brad Miller

01:35>> They were about 5,000,000 in revenue losing one.

Subscription Conversion Adds $2M Revenue Overnight

Nathan Latka

01:38And then what did you do

Brad Miller

01:39>> in the first year? Well, they had a weird 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

02:04>> the customer who would log in and you know, forever, but only get paid once. And so we converted the business from a one time payment to a subscription, and that added $2,000,000 of revenue overnight. So it went from 5,000,000 to 7,000,000 and as all that revenue was profit, the business went from losing 1,000,000 to making a million. I will tell you that, the funny thing was, the two years they worked for me afterwards, they were really

02:28>> building another business on the side And 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

Nathan Latka

02:51You never told me that on the show. You told me the bar name.

Brad Miller

02:53>> You're not you haven't told them yet.

Nathan Latka

02:54Tell them the bar Quest bar.

Brad Miller

02:55>> Don't know if you've heard of it.

Nathan Latka

02:56Of course. That's crazy. You didn't tell me that. Yeah. Yeah. You will you didn't have to pay for 10% in Quest. You just made them feel guilty?

Brad Miller

03:03>> Well, they offered it to me and I turned it down. And then they

Nathan Latka

03:05gave you and they oh, you didn't take it?

Brad Miller

03:07>> I didn't take it.

Nathan Latka

03:08Oh, Brad, you're an idiot.

Brad Miller

03:10>> Thank you.

Nathan Latka

03:11Oh my god. Woah. Why didn't you take it?

Brad Miller

03:13>> Why wouldn't you have said of course?

03:16>> 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 per company.

Nathan Latka

03:26Not everyone's perfect. That's incredible. I didn't know that.

Brad Miller

03:30>> So I'm I'm I'm not shitting money out of my ass now am I?

Nathan Latka

03:35Okay. So you go from okay. And you didn't say the purchase price. So the company's doing five losing one, what'd you pay?

Brad Miller

03:40>> We paid 6,000,000.

Nathan Latka

03:426,000,000. And how'd you fund the 6,000,000?

Funding the Deal: Equity Split and Bank Debt

Brad Miller

03:44>> Well, 5,500,000, myself and a and a financial partner split it 50/50, and we did a little bit of bank debt on top of that. A million bucks of bank debt to fund, you know, the purchase price and some other expenses and all that kind of stuff.

Dividends Taken Out Over the Years

Nathan Latka

04:00And so you start scaling this 2011, 7,000,000 revenue, 1,000,000 profits. Did you take dividends out this year or you waited till next year?

Brad Miller

04:06>> 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 $100,000,000. And so but it did save me $400,000, $500,000 of payroll. So the business went

04:20>> from You wanna put lipstick on that, Peggy, ahead.

Nathan Latka

04:23Sounds like a 100 it sounds like a $100,000,000 loss to me.

Brad Miller

04:27>> So then we were making a million and 0.5, and then we grew a little bit more and it, you know, it grew to, you know, maybe 2,000,000. Then we acquired a a a small company.

Nathan Latka

04:36Wait. 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 I mean, is accurate, right? One three six. Is that about right?

Brad Miller

04:50>> Well, was total of 12. So there was 1,000,000 for a couple of years and then it grew to three and then grew to six. But yes,

Nathan Latka

04:57just because that's not in 2016, that's not revenue. That's what you took out dividends, 6,000,000 dividends. Correct.

Brad Miller

05:03>> Yeah, we we took out double what we put in before we sold it.

First Acquisition: Parental Control App

Nathan Latka

05:06That's incredible. So it made back more than the 5,000,000 again before he sold it. Now, what I want to touch on here a bit is inorganic growth, which you were just about to go into. So talk about the first acquisition here.

Brad Miller

05:17>> So another funny story.

05:20>> I

Nathan Latka

05:21Missed out on Clif Bars too.

Brad Miller

05:24>> No. I I came home one day for dinner, and my wife had made dinner, the kids were upstairs, and they were younger. They had phones. And she was like, okay.

05:33>> Old people don't have phones.

Nathan Latka

05:34What the

Brad Miller

05:35>> No. No. But, you know, the Okay. Great. Yeah. So they they were young kids, you know. And so she was like, alright. 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 shit on her phone and put the phone down, all proud of herself, waited, counted to five, and all of a sudden we heard

05:57>> the kids come down, and I was like, what what'd you do? And she's like, oh, it's it's the greatest it's the greatest parental app ever. You know? It's a 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, and and so then I went and bought the company.

Nathan Latka

06:20And and it was brilliant. Yeah. But but I'm shocked you didn't lose this deal because what you told me was when you started negotiating it, they were doing, like, the LOI, they were doing 50

Brad Miller

06:29>> k a They 50 were thousand a month when we were negotiating. And the the by the time we closed it, the five months later, it was doing a 100,000. And then a year later, it was doing

Nathan Latka

06:44They asked you to pay double them between the LOI and the closing docs?

Brad Miller

06:48>> 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. Legal. 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 $3,000,000 and they were, you know

Nathan Latka

07:04All cash upfront for them?

Brad Miller

07:06>> It was half and half. It was half. We did a 50% upfront and then 50% if once the revenue passed the threshold, which it pretty much already did by the time the deal closed.

Nathan Latka

07:18This was 2016. So now with this first acquisition plus the core business, what was total revenue in 2016?

Brad Miller

07:25>> It was approaching $12,000,000 at that point.

Nathan Latka

07:28And that's the same year you took out $6,000,000 in dividends, right?

Brad Miller

07:31>> No, we didn't take out this final six until 2017.

Nathan Latka

07:382017, 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.

Brad Miller

07:44>> It it was just on a run rate, and it just you didn't know when it was gonna stop. You know?

Nathan Latka

07:48It problem to have. Right?

Brad Miller

07:50>> It just kept going and you know.

Second Acquisition: Buying Competitor Veriato for $3.5M

Nathan Latka

07:52Alright. So you buy it, you get that deal done. You like how that felt and you said Brad wants more. Talk to us about the second acquisition in 2018.

Brad Miller

08:00>> So our biggest competitor, this is also an odd story, was a company called Veriato. 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 45,000,000 to to VCs. And it was a nice, you know, business doing 15,000,000 of revenue, making 6,000,000 of profit. And then once, so when I saw AwarenessTech, which was, a number two to them, I was like, oh,

08:29>> okay. I've seen this movie before. You know, if we can 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, but then, they started to shrink and do badly, for a variety of reasons. And I got a call one day from a VC who said, would you be

08:54>> 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. And so, I called up my investor who knew their investor, and we started a process, and they were starting to crash badly.

09:20>> We started a negotiation where we were gonna pay them $19,000,000 on a then they were doing 12,000,000 of revenue. But by the time we closed the deal, they, they were on a $8,000,000 run rate, and they had run out of money, and they couldn't meet payroll. So we bought it for 3,500,000.

Nathan Latka

09:39That's a round of applause moment. I mean, holy crap. I mean, I imagine for anyone thinking about buying tuck ins 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?

Brad Miller

09:53>> 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 a 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

10:14>> based on the numbers they they shared, they were doing well. You know, they were doing 12,000,000 of revenue, making a couple million, and we felt we could take out $3,000,000 of cost. So we were we had a term sheet to finance, you know, all 19,000,000 of the purchase price. But every time we turned around, instead of doing 2,500,000 or 3,000,000 a quarter, they were at 1,500,000 a quarter. And every month we waited, the revenue just kept

10:41>> falling and falling and falling. And, I mean, it was just one of these things where we just if if if you hang around the hoop long enough, you'll pick up a trash basket.

Nathan Latka

10:50There you go. That's a good one. I'm gonna put on a shirt for you. Next interview, I want you to wear that one. But so I guess the the comp for 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 she would be willing to be a tuck in to

11:08a private equity firm's other scheduling tool and then reverse it.

Brad Miller

11:11>> I think the message is just be in the flow, right? Just talk to a lot of people, be in the flow. And the more flow you're in, the more options you have, you know. Swipe right as often as possible.

Nathan Latka

11:22Fair. 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 Bottomline.

Combined Business: $20M Revenue, $6M Cash Flow

Brad Miller

11:30>> They from losing money to making $2,000,000. And so we were before we bought them, we were, you know, a $12,000,000 business making four at this point. And they added they were eight and two now. And so now we were twenty and six, and then we said, okay. Time to sell the business. And Keep going. And and so we closed that deal in,

11:57>> you know, mid twenty nineteen, and we were we were talking to people to buy it in early twenty twenty and closed the deal late twenty twenty for

12:12>> 35,000,000, you know, which was on top of the 12,000,000.

Nathan Latka

12:15So if we sum this full story out, there's a lot of moving pieces. We take the 5,000,000 of initial investment. Let's make it a dollar, right? So you put a dollar in, you turn that dollar into what over ten years?

Brad Miller

12:25>> Well, '12 and '37. So '47. Five So divided by five. You know, nine times.

Nathan Latka

12:32Yep. Dollars 1 to $9 on a $5,000,000 base. It's pretty good, right? Good story. Okay. So the story gets more interesting. Can we go there?

Brad Miller

12:41>> Yeah, we can.

Nathan Latka

12:42We can. We're going go there. Story gets he has to because it's already on the next slide.

12:48So but before we do that, any questions about just M and A strategy here in general? Just raise your hand if you've got one. How he bought these companies? Anything? Alright. Yeah. Fire away. What's your name? Alex, fire away.

13:04Or

13:07Quasi

Brad Miller

13:10>> well, the first one was growing. So when I bought Awareness, it had grown from one to three to five, so it was growing. But they were more consumer than corporate, and they were struggling growing in corporate. They were trying to sell the business as a b to b business. And when you read the book, it looked like it was a b to b business. But when you looked at the numbers, it was a b to c

13:36>> business. And the number of buyers for a b to c business is much lower than the number for a b to b business. And so it was distressed in that in that it was badly packaged. They were hoping to get a b two b multiple, but, you know, their book was overly ambitious for who they were. And I had just looked at buying their competitor, Veriato, which was, you know, fifty fifty b to b b to

14:03>> c. So I knew there was a b to b opportunity, a b to b 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, was like 10 to one. And so I knew there was a gap in the B2B market that they could fill that they were struggling to do. And as it turned out, were consumer guys.

14:29>> They knew how to sell protein bars and to consumers. 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.

Nathan Latka

14:41So very distressed. Very distressed. Right. Any other questions? Fire away up here. Yeah, Gil. If

Brad Miller

14:49>> you were the investor of that initial company, what advice would you give them so that they avoid that shark move? Would I give what? What advice would you give them so that they end up better?

15:00>> Wait. Which company? Which company?

Nathan Latka

15:01This one that he bought?

Brad Miller

15:02>> Yep. Uh-huh. Yeah.

Nathan Latka

15:02The one that

Brad Miller

15:03>> the VCs put 45 in. Oh, the 45,000,000 in? Uh-huh. 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 15,000,000 and making 6,000,000 in profit. To me, those guys are geniuses. They got rid of those guys and hired professional

15:29>> management.

Nathan Latka

15:32So, Gil, keep control of your board.

Brad Miller

15:35>> So I would tell I would tell those VCs, professional management isn't always the right answer.

Nathan Latka

15:40Alright. Do you guys wanna go into the the next part of the story?

Brad Miller

15:43>> That's a very good question because it's a great segue.

Nathan Latka

15:45It is. Alright. So you sell it at 20 about 20,000,000 revenue in 2020. What happens next?

Post-Sale Decline: Revenue Falls from $20M to $10M

Brad Miller

15:54>> Well,

15:56>> well so the short answer is the the business will do 10,000,000 in revenue this year.

16:03>> They brought in, guess what, professional management. And professional management spends all their time hiring $2,000,000 of overhead to, you know, the best people, the greatest people,

16:23>> 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 decided

16:38>> we used to manage the business on a cash basis. So because we were very pay per click oriented, we needed to see cash sales today so we could measure the success Quantified of our

Nathan Latka

16:48by that, how much were you doing in monthly PPC you were managing?

PPC Strategy and Cash-Based Management

Brad Miller

16:51>> 300 ks a month, know, so over $3,400,000 a year. And so 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 GAAP 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 gap

17:23>> is an historical average over your last twelve months. And so the drop in revenue, they didn't know what's happening because they weren't looking at the cash sales. They were looking at the GAAP revenue. And so we'd show up at these board meetings, and I'm still on the board, and they would show the GAAP 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

17:45>> 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.

Nathan Latka

17:54Oh, can we be not one day, like, two a couple months ago.

Brad Miller

17:57>> 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 in the audience here asked me, you know, is this your company? And they showed me the website. And I was and I 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

18:22>> non ecommerce website and adding brackets to our logo.

Nathan Latka

18:27Just those brackets. So $100,000 brackets.

Brad Miller

18:30>> And so between hiring $2,000,000 of overhead and putting in time into brackets and a and a website that doesn't produce money,

18:41>> 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 1.

Nathan Latka

18:54Why there's a bank payment. You gotta tell them that first.

New Owners Miss Bank Payment, Enter Restructuring

Brad Miller

18:56>> Oh, well, they bought our company using a lot of debt, which was fine when we were making 6,000,000 a year, but not so fine when you're not making 6,000,000 a year.

19:11>> And then, you know, at the end of the month, they turned around and there was no cash in the kitty. And they told the banks they couldn't make the bank payment, the principal or the interest.

Nathan Latka

19:21This bank was these are your friends.

Brad Miller

19:22>> I mean Oh, they were my original bank that re upped when in our deal. Deal. I mean, we were a much smaller loan. We had a loan with them, but not like that. And so, yeah, they just the money was gone and nobody knew where it went and, you know, and it was you know? And and there's and they're in restructuring.

Nathan Latka

19:45And Right now.

Brad Miller

19:47>> Oh, yeah. Right now. And they haven't made an a bank payment or an interest payment since March, and they might not for quite a while.

Nathan Latka

19:54My prediction was gonna this guy's gonna buy it back for a dollar. He's gonna be in New York. He noted. He's gonna there's gonna be another thing on this graph, and it's gonna say, bought it back for a dollar, and now it's growing again.

VC Injects $3M as Business Loses Money

Brad Miller

20:05>> Well, they're they're not desperate enough yet. So the the the the VC has put in another $3,000,000 to fund. So it's not only not making 6, they're actually losing money. Because, of course, when you go from 20 to 10,000,000 in revenue and it's, you know, that's a lot of lost profit and you add $2,000,000 of cost, you know, that math doesn't work well. So it's like losing money quickly. And and so they're putting more money into

20:35>> the business, which is good. I'm you know, I approve of that.

20:39>> But, you know so we'll see what happens.

Closing Remarks and Audience Applause

Nathan Latka

20:41Guys, on that note, give this guy a round of buzz. Brad Miller, AwarenessTech. Dude, unbelievable. Hell of a story.

Brad Miller

20:49>> I'm the I'm the, you know, I'm I'm the guy that lost a 100,000,000 by not Yeah.

Nathan Latka

20:54This story is but we'll stick to this one next time. This is fun. Thanks, Brad. Appreciate that, man.

Brad Miller

20:58>> Thanks,

Nathan Latka

20:58Yep. Thanks. Thanks. Thanks.