Diversity Limited Revenue & Valuation (2021)

started writing his first Angel checks back 19 years ago first when the cloud ability 20K check that turned out nice for me in fact 19 years later after that first check he still got 40 percent of his checks he's written call it in play 40 of debt and 20 who the hell knows what happened to those guys but it growing nicely a lot of diverse Investments and you know he's building it really a life he loves he's has his own manufacturing company on the side doesn't want to run his own thing and like supporting entrepreneurs with right governance right structure especially in the early days as they scale and obviously hopefully generate returns hey folks my guest today is Ben keeps he is a professional board member on globally recognized technology commentator along with being an entrepreneur he's building governance investment and Analysis at diversity.net.nz Ben you ready to take us to the top always all right so my audience is obsessed with SAS walk me through how you think about investing in B2B SAS companies yeah so I mean the great thing about B2B tests is that the metrics are so obvious um you know OTV Tech uh you know Apple all of those sorts of things and so it's kind of pretty easy to to assess uh as this company but fundamentally I come back to the same thing which is all around around t uh so you know a terrible team can screw up a great idea but a great team can can pivot off a terrible idea and make something good and so can you guys tell me the story of the last SAS company you guys invested in yeah so I I invest in a bunch of a bunch of different companies uh probably I guess uh one of the highlights is a company that was on this one I was also the chair of the board of uh companies called swiped on so that there's uh you know entry management software uh building information type stuff uh you know it's a pretty busy field but they've done a great job of of organic marketing did a great job of moving you said swipe John right with haley.com yeah yeah um and and so uh great job of moving up the food chain uh you know adding adding features uh you know delivering Enterprise Solutions uh and wrote that way we got acquired by a UK listed company a few years ago uh and and still doing doing super well so so really cool to uh to invest early uh to join the board uh to chair the board and to run through the the uh the acquisition process and to kind of see how that plays out for the the full life cycle mm-hmm so just it looks like uh they raised about 700 000 and that's in New Zealand the currency obviously you and I see their seed round was to be a New Zealand Venture investment fund was that you no no I invested myself individually oh as an angel investor okay so so what is diversity.net.nz is it a fun structure do you have a pool of capital you're investing I guess I'm a little confused yeah sure so that's me so I do a bunch of different things so I do a bunch of Consulting through there I do a bunch of Industry analysis uh and I and I invest uh directly and and uh and alongside of the funds uh and also I I do a lot of advisory and governance work uh that's kind of my holding vehicle I see okay got it I guess does that have any connection to the government of New Zealand right are they a big LPN a fund that you're running or is there any connection there I know so the government of New Zealand has what's called The Venture investment fund so basically they will co-invest alongside uh credible investors and so a lot of the deals that I've been involved when evolved with uh that fund is invested alongside uh but uh but yeah they're trying to let other people pick winners I guess interesting so yeah it looks like you're also involved I'm looking at your LinkedIn profile now uh things like uh siftery which we add on cloud ability now you got into all these via the the first Angel round yeah pretty much uh so I was the first uh first investor um in cloudability and again that was super interesting invested uh introduced those guys to to to Brad and the team in The Foundry uh you know watch that investment play out over time and then they got that got acquired by fto uh and yeah that was that was an interesting and interesting Journey sifter is another example you know I invested early when it was I can't even remember what it was called before siftry uh and and and watched that proposition because I was an industry analyst and and Sophie was trying to kind of uh disrupt the the analysis space uh and you introduced them to Goddard no no I didn't um uh I mean I knew kind of I knew yeah I knew the people who knew those who were in the zoo uh but they that they met up and they and they were acquired uh which was great you know it was a good outcome for the investors but but great to see that product in a in a bigger home I guess yep yep no that makes tons of sense 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 2807 interviews I've done manually saves you a lot of time well we've done this we've built the 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 evaluation this year now the secret valuation 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 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 valuation data points Founders share with us on the show so traction 1.2 million seed around 3.7 raise they sold 22 percent of their business go in here and filter by the event maybe you only want to see companies that have sold the whole business well here are a bunch that have been acquired the valuation and the multiple maybe you're going out right now and you're raising your seed round well go in here and look at all this recent seed deals that went down what they raised what valuation they raised at and what percent that they sold there's never been a larger data set of SAS valuation than what you can get now inside of founder path and we're thrilled to bring it to you all right we're gonna go back to the YouTube video here in a second but if you want to check this tool out if you want to jump in and sign up you can check it out for free to get your valuation at this link this link founderpath.com forward slash products forward slash evaluations or if you go to founderpath.com and hover over products click on get your valuation 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 we had Cloud ability on the on the show now this was way back before they were acquired this was back when they were doing around 20 million in revenue and they had only a 41 million raised I guess one good question that would be uh I think that would be good to ask you is there's a lot of folks that have boards but they just do a terrible job of using board members right for strategic reasons what founder have you worked with in the past that is just you think is in a brilliant job at treating you like an employee almost getting you to do stuff that really helps them yeah so what the first thing I'd say is it's super important to know the difference between governance and management and it's important for board members to understand where that lies and it's super important for for Governors for directors to to to to to be involved but to be to be hands off I guess uh you know they say well they just say yeah noses and uh hands out um you know the the CEO of swiped off CEO and founder Hadley uh did a great job of of kind of leaning on me when it was appropriate but also you know having that arm's length separation um and so that was that was a fun process it was a really fun process to walk alongside him from from the very early stages to the end you share a real story one that he won't care if you share when you it actually quantify what you need to say he quote leaned on you yeah so in the early days uh before I came on board when it was a very very early product they had outsourced some development uh to uh an individual in in Pakistan I believe uh and that uh these horror stories sometimes happened that kind of kind of went South that relationship went South uh and there was this is a long long time ago and now and there was a bunch of stuff that happened around you know people threatening to steal source code and out people and rip off software and stuff like that and um you know that stuff is is super scary for for anyone and so I think that's not example where as a board member you have the opportunity to to provide the support and and guidance I guess I'm at the end of days the sea probably knows what the right thing to do is and we'll we'll do it anyway but having someone uh who you can confide in because the reality is I see it's it's super hard because you can't be completely honest with your your employees because you know at the end of the day the back stops viewing so your board members should absolutely see them as a sounding board you can be totally honest with and you can have that that super open conversation with interesting and then what about Matt Alice did he use you well at Cloud ability having in the early days for sure I mean I think you know once once you do series a series B with with people like you know in The Foundry uh you know it all changes and it's it's kind of hard for early Andrew investors I mean I've had um not with Cloud ability but with other companies I've had sort of the email from from C saying hey we've we've done series ABC whatever uh from now on we probably won't be updating you ever and I won't reply your emails kind of thing which is which is a little bit jarring that wasn't the case with with math and Jr at Cloud ability uh but the relationship absolutely changes but I mean for me I think the uh the important thing is outside of you know I mean there's a there's a validation that you've done a good job right because they they're leaving home they're growing up your kids are finally fledging uh and it's a good thing but the relationships in terms of the respect and the friendships those remain and so I I catch up with JR uh co-founder of cloud ability I saw him at Ado it's reinvent only a few months ago uh him and his wife he's a great guy I deeply respect him he stayed at my house in New Zealand uh and and that stuff that stuff endures outside of that kind of startup cycle now obviously we're only talking about your wins here you know I bet you probably have a lot of Angel checks that went South as well we'll get to those in a second but for cloud ability there's a lot of you know early stage even Angel Investors solo funds listening going how do I get to a JR out of mat how do I get into the next Cloud ability how did you get into that deal specifically and if you can share what was the check size you wrote yeah I was super lucky I'm going to check size was from memory it was like 20 30k so not much at all I was super lucky because I was working in in the valley living in New Zealand working the valley as an industry analyst I went to all the shows I I put on shows and so I had fantastic deal flow um that's totally not the case for other people so you know one option is to get involved in an Angel Network I'm not so big on that because it's kind of douchebaggy um just just swim in the waters just go and meet some folks go hang out at open nights go to go to pitch days or whatever and get to know people because it's about the relationship is the key thing and so you know you might not have a fantastic deal flow that I've been fortunate enough to have um you know individuals may not have but but just swimming in there to see you start to get a again an affinity and start to pattern match really so how many Angel checks would you say you've written over the past 10 years uh I guess somewhere between 1500 okay and how many of those just went to zero uh probably so there's there's there's probably 40 still in play I would say I've been super lucky so probably um 60 of the ones that have had an outcome have been a positive outcome 40 have been to zero uh positive outcome would mean you at least got your money back uh yeah yeah I mean you've got to have ones like Cloud ability though that are doing you know 5 10 20 extra money back hopefully though right yeah overall overall I'm I'm super lucky I've got so so say 40 interested on play um my portfolio is in the positive even with those still in place I so I've done I've done I've done well um and let's see what happens with these other ones right now is a difficult time in the in the sector so we'll have to see what shakes out what year did you write your first Angel check uh so it was cloudable if it was my first deal and that was um whenever they started so let's like 19 years ago I guess yep okay interesting and so you got 40 still in play now those Founders that are so big they don't give you updates anymore how do you know what to mark them up at how do you go what's my 10K what was my 10K answer what's it worth now yeah so like I'm not a fan for a fund obviously you have to keep on top of that stuff for an angel don't don't invest anything you're not prepared to lose when you do invest really enjoy the ride but you you're kind of paying for the riding if you have an outcome at the other end that's a bonus and so I don't think about that money I don't you know I don't uh yeah of course I track it I have a spreadsheet and all that sort of stuff and I have some crazy stuff around what I think it's actually worth and what I might realize but but that isn't that isn't real until the money it's the bank it's it's not real did you get in Canberra nope no camera and can you name the company that maybe you don't YouTube Founders don't talk to anymore because they're so big but you think it's going to be your biggest win um no I've had some big ones which have been in percentage terms which have been kind of invisible so a company called store reduce that that sold to your storage um you know no one's ever heard of and and whatever but in percentage terms it was it was super good um I I'm you know like so canva you know I'm if only I had that had been in there uh there's another uh company in New Zealand that does kind of um you know democratizing share trading uh and I I you know I talk to those folks super early on I was a mentor I had a program they were on I just didn't didn't kind of work for me and they've done super well but you know you you can't be in everything and it hindsight has 20 20 Vision right you always say oh well I should have been in that one well yeah maybe not who knows at the time that's right that's right very interesting okay so so any itch to get into the operating side is stop investing and maybe launch your own SAS company now so the thing for me is that um I like having a bunch of things on the go so I'm I'm on maybe 10 or a dozen boards I I own my own I do own my own manufacturing business in another sector I do a lot of analysis anything for me is that when I'm only doing one thing you know you know what business is like especially early stage businesses they're up and down sometimes things are going really badly and I kind of that's all a bit depressing and the great thing about having a portfolio of this stuff is that there's always something doing well and so it kind of evens that up for me so no I don't I wouldn't I wouldn't go and start my own thing now I'm kind of it's It's A Young Person's game I don't I want balance I don't want to work 20 hours a day I mean I do work a lot um yeah I was like four o'clock this morning to to record this call so so I'm happy to work a lot but I also want some balance and optionality and the reality is that as a SAS founder no matter what people say you you don't have that balance because you have to you have to focus because it's a short life cycle and in order to scale to the level to see the outcome you need need to be you need to be hustling I'm going to ask you a very specific questions so feel free to punt if it's not relevant to your experience but a lot of times folks that are raising their series a you know that's when a board structure of usually five is proposed right and it's usually structured as three common the seed investor has one seat and maybe the new investor has another or the new investor has another plus a one an independently you know mutually agreed upon position one of the things where I've Just Seen banners get destroyed on this is if is if the verbiage of that board structure says those three seats out of the five uh can be appointed by whoever owns majority of common well the founder assumes they'll always have majority of comment and there are ways that that cannot be the case in the future and we say you should structure it as you your name the CEO right and not necessarily a majority of common would you agree with that advice and feel free to disagree and maybe share an example if you can yeah so it's super difficult and obviously I'd refer everyone to to bradfield's you know Vince Steele's book because there's some some great advice from there uh and also he's done done a book about governance uh it's contextual right so if you have a check and the check says hey we want the these terms around the board seats otherwise we're not going to give you the check you know what are you going to do for sure it's it's within the Founder's interest that they have the power over over a point in the board um and and they don't want to lose control because hey they might get fired or whatever the reality is the right thing for the company is that you know the board is independently at some level isn't independently appointed and the right thing might be to to fire the CE uh and so I I see it both ways I mean I think it comes down to you you can spend a lot of time answering the the legal the legal terms and conditions but the reality is it comes down to the relationship and as long as there's trust and confidence then then you're okay I mean sometimes the reality is and we've seen it so many times for what it's unusual for the founder to be able to take take an organization through to exit or IPO because it's a different skill set and it's very important to have that conversation up front and I don't think I think it's really important for Founders to realize that at some point they might not be the right person and they're far better off to embrace that fact than to go unwillingly and and if their way of kind of dealing with that is to try and retain control of board seats so they don't get fired well it's apparent Victory because the outcome might be bad they're still in the role but the outcome might be bad so I I think you know for sure it's in the the entrepreneur's interests but there's a bigger picture and it's super important for the for the entrepreneur to think about that bigger picture and get some advice and mentorship before they go through the the deal around how that shakes out then on that note where can folks learn more from you online if they want to check you out sure so connect with me on Twitter I'm at Ben keeps I've been there for a long time uh and uh on my my website diversity.net.nz guys there you have it he started writing his first Angel checks back 19 years ago first one the cloud ability 20K check that turned out nice for me in fact 19 years later after that first check he's still got 40 percent of his checks he's written call it in play 40 of debt and 20 who the hell knows what happened to those guys but it growing nicely a lot of diverse Investments and you know he's building up really a life he loves he's has his own manufacturing company on the side doesn't want to run his own thing and like supporting entrepreneurs with right governance right structure especially in the early days as they scale and obviously hopefully generate returns Ben we appreciate you thanks for taking us to the top thanks man one more thing before you go we have a brand new show every Thursday at 1pm 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 our poo 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 p.m Central additionally remember these recorded founder interviews go live we release them here on YouTube every day at 2PM Central to make sure you don't miss any of that make sure you click the Subscribe button below here on YouTube their big red button and then click the little bell notification to make sure you get notifications when we do go live I wouldn't want you to miss breaking news in the SAS World whether it's an acquisition a big fundraise a big sale a big profitability statement or something else I don't want you to miss it additionally if you want to take this conversation deeper and further we have by far the largest private Slack Community for B2B SAS Founders you want to get in there we've probably talked about your tool if you're running a company or your firm if you're investing you can go in there and quickly search and see what people are saying sign up for that at nathanlacka.com forward slash slack in the meantime I'm hanging out with you here on YouTube I'll be in the comments for the next 30 minutes feel free to let me know what you thought about this episode and if you enjoyed it click the thumbs up we get a lot of haters that are mad at how aggressive I am on these shows but I do it so that we can all learn we have to counter those people we got to push them away click the thumbs up below to counter them and know that I appreciate your guys's support all right I'll be in the comments see ya