How Growth Stack Inc CEO Kevin Petersen grew Growth Stack Inc to $870.1K revenue and 20K customers in 2024.

hello everyone my guest today is kevin peterson he was number 13 at a staffing industry startup that grew from 7 million to 65 million during his tenure and went public in 1996. the business still operates say in 26 countries with 4 billion in market cap today uh he spent 20 years consulting before launching growth stack inc a sas portfolio on a path to ipo in the next 30 months kevin you ready to take us to the top absolutely thank you nathan you bet so just to be clear is growth stacking.com a sas company or you're buying sas companies under that label we're buying sas companies under that label so uh growth stack is the whole co and we're we're tucking in uh b2b sas all right talking about your playbook everybody wants to do this but how do you find a deal how do you price it how do you convince the founder to sell let's start off maybe with your first deal what's the name of the first company you bought oh wow okay so trip down memory lane here so um seven years ago i started buying online businesses it was not specifically sas in the beginning i was building micro portfolios for well diversified investors that were you know really unaware that there was even a secondary market for online businesses so oddly the very first online business that i bought was a tattoo blog yeah you have any tattoos i don't have any tattoos i didn't sound like a product or a founder product match there not so much but i learned a lot from it so my background is marketing and uh and so to me that's you know online business is you know a lot of times what's missing are you know marketing fundamentals and traditional sales funds so um so you know to test the waters uh i paid 900 for a sas blog i mean sorry a tattoo blog and uh and as we mentioned i don't have any tattoos but i felt like you know i i need to understand content marketing if i'm going to go down this path and again like my background is marketing but it was kind of a different beast it was kind of new to me and i wanted to see what would happen so i bought this tattoo blog for 900. i hired a developer to improve it i paid about 300 in in development costs and uh within 90 days where did you find a developer for 300 bucks uh it was somebody overseas um and really all it needed and this is this is gonna there are there are probably a lot of things i'm gonna say today they're gonna date me a little bit but at the time you know seven it was only seven years ago but at the time um there were many online businesses that were not mobile friendly you know that sounds absurd today but just seven years ago that was pretty common so i paid somebody 300 bucks to make it mobile friendly i started writing the content myself um and you know based on my marketing background i understood that relevance is everything so i started developing tattoo content around every holiday on the calendar so there was a tattoo blog around halloween you know like the best tattoos for halloween and one for christmas and one for uh you know everything there was uh you know possible word for me do you still have the best yes i don't but that business that i spent you know i invested twelve hundred dollars in this business and then within 90 days it was producing 750 a month in profit and so then i just uh i lost i lost my my mind really i started buying businesses like crazy what happened um actually so unfortunately that business eventually was penalized by google i got the uh the infamous google letter saying or emails saying um you know we're not going to pay you anymore okay sas acquisition your first sas company yes so the first sas acquisition i bought was a company called pick rail um it's uh yeah p-i-p-s and peter i-c-r-e-e-l and uh you know it started out the time that i bought it it was um it was creating uh those you know quote unquote annoying pop-ups um we evolved here to be here to buy this oh sorry that was uh uh 2015. it was late 2015. how much did you pay for it uh that was around a million dollars it was our first seven figure acquisition yeah the big deal how much revenue was it doing uh at the time it was about three it was over three hundred thousand in arr in a r yeah i want to say it was about 360 370. you paid a three x multiple yeah we did where'd you get the money from not easy to come by is that just mine investors yeah so that was the funny thing so yeah to take you down the the history here so you know i started building these micro portfolios for investors and um and people you know what people saw from my early experiences buying online businesses was that i was excited about it and so there were a lot of people i know who were like well you know like i don't i don't understand what you do i don't know if i'll ever understand it but um uh here's you know 50 000 or something right will you place capital for me so that i can participate in this and your energy behind it and get some dividends off of it and so uh so i started building portfolios to do just that when did you do that kevin when did you raise your first outside capital uh it was uh so it's in that kind of 2014-2015 time period and how much was the first tranche that you raised um so uh there was i ended up building four portfolios that ranged in size from you know initially they were micro investments so it ranged in size from like you know half a million to a million and a half so you had individual investors writing you checks to invest in your fund for half a million to a million you kept them in their own portfolios and then you use that capital to go buy companies under each of those four blocks that's exactly right okay and so if i if i was the one that wrote you check as an investor for a million bucks back in 2014 what were you selling me what dividend like what returns would i be getting on my million uh so depending on the portfolio is between so let's say 13 on the low end to 22 ish on high end paid out like quarterly quarterly yeah got it so if i give you a million bucks you're basically saying what i would get 36 000 from you every three months uh yeah at the time i didn't have anyone participating at that level but effectively yeah that's where we're paying out there okay okay so that's how you scale so let's this is interesting you get pick real done by the way how would you convince the how did you find pick brio where should people look for deal flow today so that one i actually got through a broker which broke um uh fe international okay and what happened what happened who by the way they charged 15 fee on the sale did you have to pay that or did the founder have to pay that uh we i if i recall correctly we split the fee and and if i recall correctly their fees were lower at the time interesting okay so what keep going forward to pick real what happened next yeah so what happened was so we had some really we realized some very quick gains on pickerel we had 46 percent uh year on year growth first year um and again like you know what i'm seeing in the sas space is that uh founders tend to be tech savvy but not business savvy and that's not a slight against any founders it's just the way founders in the space are right so uh sas founders are very good at identifying a need in the marketplace um building that out taking a product to market going through proof of concept and building a small but loyal customer base and then uh and for the most part i know that you've you've had people on on your show that are enormously successful in this space and we challenge this but um but most of the sas founders that i meet with that are selling their businesses um are are really widget-focused and they have no interest in building out like a sales team um and and they'll build some marketing funnels but it's really not their thing right so kevin you're using this play but keep telling the story via pick reel so how much revenue did you go quick reel to uh i think the uh peak revenue was uh close to 600 arr okay and and what'd you do with it what year was that and did you sell it we did not sell it and in hindsight we should have you still full transfer no we just recently exited that position okay and why what did revenue decline to before you sold uh it was back down to approximately where we bought it it was right in that 300 to 350 000 and when did you sell it just like literally this month within the last 90 days oh wow okay how did you say did you use a broker no at this point um so you know again seven years is not a very long time but in the sas world it's uh it's enough time to build a very close you know to become part of a very close-knit community um what i see is that you know sas people in the sas space kind of know each other um people find me pretty easily uh i actually started a sas mastermind this year so i'm pretty well networked and so i get deal i get deal flow from every source imaginable and um and for me to exit a position uh it's not it's actually not hard for me to find a buyer on my own so what'd you end up knowing for uh it was uh we haven't actually disclosed this and i don't...