How Brightpearl CEO Derek O'Carroll grew Brightpearl to $30M revenue and 1.4K customers in 2021.

hey folks my guest today is a familiar face he's been on him many times derek o'connell is the ceo of austin based retail back off a software provider called brightpearl derek's remarkable six-year turnout of brightpearl is now complete he turned it from a loss-making business valued at just 8 million into a 360 million acquisition by software giant sage which many of you guys know he did it in his words by taking staff to the valley of death and upping the charges of some low paying clients from six grand a month to 140 000 a month we love net dollar retention derek ready to take to the top absolutely nathan looking forward to it all right so give context again real quick what year did you join brightpearl i joined 2016 in april okay and you were you guys were doing 8 million in rev run right at that point we were eight million quickly on our way to six if that gives you get more context yep that does yeah he was it was a shrinking business put it that way it was the shrinking business yeah great product pointed in the wrong direction but a shrinking business yep now then you i believe again you've been on a few times but my data shows in 2019 you guys broke 12 million in revenue so you have the ship turned around less than 24 months later back to a growth story correct yeah we ended 2019 at 12.8 then the next year 2020 went to 18 million so that was about 39 38 growth and then in 21 just gone we got to 30 million which was 63 growth year over year that's been the trajectory it's fair to point out though as you said we've been bought by sage but that deal closed uh you know it was signed in december closed in january but just before that i closed an acquisition of my own i bought a company called inventory planner that closed in august inventory planner it was an inventory planning uh module very very successful on shopify to over 2000 customers um but you know great product point in the wrong direction so i wanted to roll that into the momentum we had and go to market so we got to 30 we got to 30 million in 2021 but obviously that was combined right so organically breitbart got to 25 and a half and then the four and a half came from the acquisition that we made so the group got to 30 million at the end which uh which was which was key now we were obviously a very successful partner of a venture planner at that time at that time or by the way what multiple did you pay for brightpearl back in what i guess it was november pay for bike approval or sorry sorry for inventory planner you could do a lot of these calls so yeah um so that business is growing at 70 percent uh when we sent in the loi the letter of intent uh we have we obviously had them growing at 70 percent they were on revenue at 2.4 they ended the year at four 4.5 so you know they beat their plans the multiple that we paid because they were pre-scale uh was uh around about 3.1 times 3.1 revenue because they were sub scale and they were a technology only team great guys great team but really couldn't answer the question how do i get to 10 million how do i get it to 50 million and that's where we came in so it was a better together story uh and a good deal for us all now at that time we didn't know that we were going to be acquired very quickly thereafter that's that's a different story but uh we were very much focused on growth and getting the business to 100 million that's why it was a good deal for us and we'll jump into the stage deal here in a second so you paid about three to four x multiple for this business what that means we paid like 10 million something like that uh you can do the math yeah just over that with um but it was a typical deal structure you know uh cash and then a business of that size we needed to make sure that certain security and technical remediation uh would be able to be in place so that it could scale if people left the business so they were in there so it was a deal where it was cash and then remediation you complete that you get the rest of the cash but yeah three times revenue is what we paid just over so yeah i mean look some people split cash flows earn out all kinds of different ways what was like 30 50 cash up front the rest was remedial um no it was 70 30 um because the remediation list was very was very small uh it was it was a known you know it's just pretty tight well written code base so uh yeah 70 30. and in a deal like that you know we want we want them to be successful as well you know strengthen the partnership and we already had that sort of built with the relationship that we had today oh what's going on there youtube good to see you guys now imagine this you love watching these interviews with sas founders but imagine if we took all of the valuation data out from over 2 2807 interviews i've done manually saves you a lot of time well we've done this we've built it into the beautiful interface inside of founder path check this out i'll show you how you can access this in a second but you log in you connect your stripe account you see your valuation real time you can see what it changed over the past 88 days and even set goals for valuation this year now the secret evaluation is there's many different ways to value a sas business so the reason you're going to see three or four different valuations inside of your frowner path dashboard this is all free by the way is because depending on who's doing the buying of your sas company you're going to get a different valuation a vc is going to pay a different valuation private equity firm is different if you're going to do a minority sale that's different and if you sell the whole business that's a different valuation you can see all those when i hover over here right so the teal is what a vc would pay yellow is what private equity and red is if you sold the whole thing outright now what's cool about this is this is not built off random data again you guys hear these interviews on youtube all these datas are built from real-time 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hover over products click on get your evaluation here and go ahead and sign up to give it a whirl again all that valuation data live right inside the platform i hope to see you there all right let's jump back into the interview now and now prior to that just because this will be important for the stage deal you guys even before you came in the company had raised i think a total of 40 million you then raised 15 pretty quickly right 15 million when you joined yeah i raised uh i think i raised 15 million in the early in the first two years and then we used that to sort of right-size the ship uh and then but at the point of me joining we did do a down round like in terms of a re-value of of brightpearl we had to and the primary driver of that was to ensure that we could top up the option pool for the employees and make sure that they all came along for the ride and every share was equal yeah that was four million that was four million to eight million free money right pretty much yeah that was the first round here looking at the notes yeah that was the first that was an internal round um and everyone had to that's always a difficult thing to do with with with venture capitalists essentially a down round but we did that they're very supportive then we return the business to growth green scores on the board with the sas metrics that you're very familiar with then we did 15 million we brought in some secondary funds uh crowd called uh scipio great bunch of guys out of germany and verdane uh which was another secondary fund and then on top of that we brought in the strategic investor which is called sage and all together we raised 30 million um about 14 months ago with those guys and then we used that money to further accelerate the business to buy and venture planner and then through uh through a couple of uh uh factors outside of our control we got to a point where sage made an offer for the business in late last year which we accepted let me break that down really quick the 15 million you did in 2018 once the scoreboard was green again your turn around was just starting to take off right you could tell a good story correct million round was that what valuation do you remember i don't remember...