How Issuu Grew Past $30M in Revenue and Sold for 9 Figures (Former CEO Joe Hyrkin at SaaS Open 2024)

Introduction and Conference Context

Nathan Latka

00:00I am, very excited about this next guest because every time I have it on the have it on the podcast, I cannot get you guys know I push. That I just could not get the data I wanted. And then all of a sudden, say, let me put you on stage at SaaS Open. And he says, well, we actually just had a big transaction. I'll come to SaaS Open. We'll talk about it. That's all I'm gonna say.

00:18Please tell me welcome to the stage, Joe from Issuu. Joe, come on up.

00:26Good to see you, my friend. Good to see Thank you for the water. So I'm gonna keep chatting while I ask you questions and I'm gonna grab my coffee while you make yourself comfortable.

Joe Hyrkin

00:34>> First of all, go ahead. You should change the name of this conference to the resilience open because all we're hearing about is like one experience of resilience after the next sort of the core of these businesses. Anyway.

Nathan Latka

00:50I also want to tell you guys, and Joe, I hope you don't I hope you don't mind me doing this, but we'll get to this later because conference is not always just about business, but he actually feels great. He just sounds terrible. We'll talk about that in a little bit. We'll let that be an open loop.

Joe Hyrkin

01:03>> I have vocal cord non nerd.

Nathan Latka

01:04Go. This is called an open loop and forbatta

Joe Hyrkin

01:06>> I'm wings. It sit.

Nathan Latka

01:09They'll pay attention. We'll get to in about I'd like to just four minutes. Know. The point, you know. This happened about a month ago. What did you do with Bending Spoons?

Bending Spoons Acquisition Announced

Joe Hyrkin

01:17>> Yeah. So first of all, I should just say I'm no longer the CEO of Issuu. I was the CEO of Issuu for eleven years eleven and a half years. And we got acquired by Bending Spoons at the end of July. So any anyone familiar with Bending Spoons.

01:35>> So there are a company everyone in this room should know more about. They're Italian based and they are acquiring primarily product led growth SaaS companies, but also doing more as well. They bought Evernote Meetup. They just bought WeTransfer. They bought us as well.

Who Is Bending Spoons

Nathan Latka

01:57Hopin.

Joe Hyrkin

01:57>> Hopin. Yeah. And what they're doing is they're buying companies that have some pretty good scale kind of revenue in the twenty five to two hundred million dollar range profitable or close to it. And then they go run them. They buy to own. It's not a PE firm. And we found them through some of their earlier acquisitions. And they were sort of always on my list of folks that we should be reaching out to at the

02:27>> time when we were ready to look at getting acquired.

Nathan Latka

02:30We're gonna get your backstory here but I want everyone to understand what the end looks like. So this is sort of what the end looks like. And can we put a dollar value on the deal or maybe a range on the on the AR multiple.

Revenue and Sale Price Range

Joe Hyrkin

02:42>> I sure we can. I can't give you specifics because you're never allowed to give specifics like this. But I've never given you anything. So I'm going give you a good range of that to be pretty great. So you know we we did. I think as a company we're doing just north of 30,000,000 in revenue profitable not not very profitable but sort of barely profitable. And we sold the company for 9 figures.

Nathan Latka

03:10So fair to say like a 4 to 6 x revenue multiple something in that range.

Joe Hyrkin

03:14>> Yeah. Not six. I mean unless you're AI right now, you're not getting north of five. Okay. And there's that that there's all these companies, you know, given the stage of our Issuu was when we sold it in July, if we had sold it two years prior in '22, we would have gotten two to three x what we got.

Nathan Latka

03:37Why didn't you?

Joe Hyrkin

03:38>> Because we weren't at the size we're at now. I mean, of the things that when you're selling a company, it's important to understand our lane. Right. And where the market is. So we could have held on and continue to grow and build Issuu for another two years and hope that the market comes back. But I think it's also important to understand where we are in the business, where we are in the opportunity cycle. And we felt

Customer Base and Inbound Interest

Joe Hyrkin

04:06>> like profitable growing north of 30,000,000 in revenue. Good business. Huge number of really happy customers with a million free customers a year, marketers, content creators, 65,000 of them paying Issuu. And we had gotten some inbound interest. And once we got that inbound interest we started talking to folks on the market.

Banker Fees and Deal Structure

Nathan Latka

04:35So here's we're going to focus on over the next fourteen minutes and thirty seconds you know going from zero to a 9 figure exit. Right. We're going to talk about how Joe used debt, how he scaled ARR across three key sort of story points, and then exiting. Right? You paid your bankers how much to do the deal?

Joe Hyrkin

04:50>> $2,000,000.

Nathan Latka

04:51Over 2,000,000.

Joe Hyrkin

04:51>> Little two over 2,000,000.

Nathan Latka

04:52Over $2,000,000. Was it all cash or cashless earn out in a mix?

Joe Hyrkin

04:56>> Well, it was all cash, no earn outs.

Nathan Latka

05:00We actually Barry, let let it hang. So we'll talk about that. And then yeah. That's good. Right? And then we'll talk a little bit more about the layer the lawyers and the process you did on the exit. So all that in next fourteen minutes, but let's talk about the product for a second. This is your homepage. This is what you do.

Issuu Product Overview

Joe Hyrkin

05:14>> Yeah. So Issuu is this massive digital publishing platform primarily catering to marketers to take their marketing content, collateral, sales materials, brochures,

05:29>> publications, all the whole range of different documents, mostly created in using Figma, Adobe or Canva. It's uploaded to Issuu, Issuu hosted,

05:43>> transforms it into a range of assets. So you create one piece of content and it can get transformed into a video and link enhanced paginated version, an article using AI, social post, whole range of different assets that can then be shared anywhere embedded anywhere and then provide a whole range of data and analytics around that content. We landed on this home page about two years ago. We had our version of the purple homepage. Yeah. Also

Nathan Latka

06:12going all the back I just put the revenue graph up. The first revenues back in our launches 2006. Is that our

Revenue History and Slow Early Growth

Joe Hyrkin

06:16>> company launched two thousand and seven seven very slow revenue growth for the first five or six years. Focus initially was massive scale. So I joined the company in 2013, took over for a from a previous CEO.

06:32>> And up until that point, the focus has been go find anybody that's got a longer form, high quality PDF, brochures, catalogs, market materials, magazines, publications, all that stuff, get it into Issuu. Because from there, make it look great, Issuu launched like as the iPad was launching, right, so it was a different time. Make it look great, get lots of data, and then start to figure out what aspects that are valuable to businesses and start to charge.

Joining as CEO in 2013 and B2B Pivot

Joe Hyrkin

07:03>> And we really honed in on being a B2B company in that twenty thirteen twenty fourteen timeframe.

Nathan Latka

07:12So you guys can see again the story here. Just doubling down on this idea. It's not always like you know 0 to $1,000,000,000 of revenue in two days. You know, this is like Well, it is for most companies.

Joe Hyrkin

07:21>> Yeah.

Nathan Latka

07:22It is for everybody else except you. Right? But we we all it's I mean, look at this. I mean, that is that's ten years of hustle before your first 5,000,000 of revenue. Right? And now we see it.

07:30We're seeing the big exit on LinkedIn. It's a great story, but it takes a decade, two decades almost of hustle, right, to get to this point. So you're scaling out at this point. You come in as CEO in 2013. Should we dive deeper there? Was there a contention with founders and investors and they brought you in, or what happened?

Joe Hyrkin

07:46>> Company is founded in Denmark.

Nathan Latka

07:48In where?

Joe Hyrkin

07:49>> Denmark.

Nathan Latka

07:49Denmark.

Joe Hyrkin

07:50>> And the lead investor is referred to one of the largest Scandinavian VCs.

Nathan Latka

07:54Would they have the other 2007 round for $10,300,000? Yeah. K. The bottom one? Yes.

Joe Hyrkin

08:03>> Yeah. I don't think it was whatever.

Nathan Latka

08:05Yes. This is wrong. It's crunch basis fault, not mine. But

Joe Hyrkin

08:08>> crunch base doesn't have everything, but it's close. I think it was a little less actually. Okay. I think some of that 2007 was actually

Nathan Latka

08:15The point being the lead of that series a is.

Joe Hyrkin

08:16>> Yeah. Hardcore capital. They also put them the bulk of the rest in in 2014 when I raised and KDDI, the big Japanese telco came in as part of that. They had a there was a founding group of five people. They were doing a nice job of scaling use, but but there are sort of two main growth opportunities. One was partnerships with content tech platforms in Silicon Valley primarily Facebook Pinterest Adobe ultimately later Canva, et cetera. And then

08:55>> the other was really an emphasis on revenue growth. And so they decided to go find a Silicon Valley seasoned person to come in and run the business. So I joined. It actually got rid of the CEO six months before I joined which was really great. Most times when there's a CEO switch, the board will bring in the new CEO and then say, hey, lucky you. You've got this previous CEO and you can have them do whatever

09:24>> you want. And even in the best circumstances, and often it's, you know, it's challenging. It's confusing because the people who are still in the company aren't sure whether loyalties are supposed to lie or who's really in charge or whatnot. So what

Nathan Latka

09:39are the brass tacks here though. So they they got rid of CEO because he wasn't performing or she wasn't selling or what was the

Joe Hyrkin

09:43>> Wasn't what didn't have any connections outside of Denmark.

Nathan Latka

09:46Okay. So And

Joe Hyrkin

09:46>> wasn't really growing the business.

Nathan Latka

09:47Couldn't grow internationally. They find you were you already involved in the company or they brought No.

Joe Hyrkin

09:51>> They brought me in from scratch.

Nathan Latka

09:52From scratch. You are a talented guy. You could do anything you want. How do they recruit you? What was your compact like? Did you get equity?

Joe Hyrkin

09:58>> Yeah. So we flipped the company. First of we flipped the company from being a Danish company to US company. That was a somewhat complicated process. I got

10:12>> I got a nice comp package. I'm not going to give you the specifics but I got a high a much higher percent of the company than normally when you bring in a CEO.

Nathan Latka

10:22Would a normal CEO be like four or 5%.

Joe Hyrkin

10:24>> Yeah.

Nathan Latka

10:25So you're higher than that.

Joe Hyrkin

10:26>> Significantly higher than that. Okay.

10:29>> Nathan always asks these questions really fast, hoping that you'll answer them.

10:34>> But we've done this a lot. So, you know, I'll give but I'm giving you more today than

Nathan Latka

10:38You're great. I'm not complaining. This is wonderful. But you say you come in, you're well incentivized. You you get Let the thing

Joe Hyrkin

10:44>> me just finish on the point why I came in. So I've spent my career in this intersection around creativity, content, and technology growth. I was at a company called Virage back in the late 90s, early 2000s that did video search. I ran the business side of things at Flickr. So I've sort of my wheelhouse is content. And I I love the background of the basis and foundation of what Issuu is doing. So I was excited about

11:11>> the product. I thought wow I think there's a lot we can do here. Good comp package and exciting.

2021 Debt Deal and Cap Table Strategy

Nathan Latka

11:19So you're in you're in now full time. You're growing the business. You did this series B. I want you to just quickly on what was the thinking in 2021 when you did this debt deal. And can you share the term?

Joe Hyrkin

11:28>> Yeah. So we were an unusual cap table. It's quite quite good. We had no preferences when we flipped the company from being Danish to American. As part of that as part of a deal between me the founders and the investors we agreed that everybody would have be treated equally. There were no preferences.

Nathan Latka

11:50Just to be clear there were only common shares of the company.

Joe Hyrkin

11:53>> There were basically there were preferred shares but they were treated the same as common.

11:57>> All the same.

Nathan Latka

11:58Okay.

Joe Hyrkin

11:59>> So what it meant is when we got to a point where we wanted additional capital raising money. So in '21, given where we were at a revenue and growth trajectory, '21, you know, everybody was pushed to raise way more money than they wanted at higher valuations than were reasonable, and we're seeing a lot of fallout from that now. Right. So I wanted to make sure that we maintained our flexibility. So instead of raising we would have

12:29>> to raise 30,000,000 on a $250,000,000 valuation which meant that for everyone to feel successful, we would have had to have a billion dollar exit, which may have happened, but I want to make sure I maintain flexibility around things. Plus we're not at this big preference stack. So we got introduced to a lender, very highly recommended. We took on $20,000,000 of debt actually and had access to another 10. So it announced as 31, but it was really

13:00>> 20.

13:03>> And I won't give you their name, but we had three lenders in our history. One was SVB, where we took a very tiny amount of debt actually during that 2014 raise. And then the third one was a firm called Eastward Capital in Boston who are absolutely fantastic to deal with. We ended up refinancing this 2021 lender with Eastward.

Nathan Latka

13:29I want people to take the lessons you learned from that. I know I don't talk negatively but this is important stuff. What went wrong about the first debt deal.

Predatory Lender Experience and Refinancing

Joe Hyrkin

13:35>> I don't want to talk negatively but I will talk honestly. We worked with a firm who were

13:43>> really essentially predatory lenders.

13:47>> Lending has a bad rap. However, I think there are great lenders.

Nathan Latka

13:51Joe, I gotta hold on.

Joe Hyrkin

13:52>> There's one of his information they have to have. What was the interest rate on the first piece? Was

13:57>> Like 12 ish percent.

Nathan Latka

13:58So the reason I bring that out is he most of you wouldn't put the idea of predatory lender and 12% together. Most of you, if I told you, hey, what is a predatory lender charge? You're gonna say something like 40%.

Joe Hyrkin

14:10>> Okay.

14:10>> Right.

Nathan Latka

14:11So now the rest of the story.

Joe Hyrkin

14:12>> Yeah. There's two forms of predatory. There's interest rates and then there's process. So we raised $20,000,000 of debt against that. There won't be additional preferences etcetera.

14:26>> And we had.

14:29>> We used that money to power innovation, to power launching an enterprise product and to start powering deep integrations with folks like Canva and Adobe. We use the money well. However, about a year into it, we missed our revenue covenant by a footfall. So on a $7,000,000 quarter, we missed by about 150 k.

Nathan Latka

14:56So just to be clear, covenant is gonna see something like when you're sending a term loan, it's gonna say as part of the compliance certificate covenants, you must grow revenue by 10% year over year to remain compliant. Otherwise, we can call the debt back to us. That would be a similar kind of covenant.

Joe Hyrkin

15:09>> So we knew we would have to pay a penalty and increased interest. All that was fine. That wasn't the predatory part. Predatory part came in when we agreed verbally to change the covenant terms moving forward. And this firm continue to negotiate with us after we had verbally agreed and kept squeezing and adding in more and more and more and more terms to the point where they started to demand. They wanted one point an additional point in

15:44>> the company for each month that we didn't refinance the business and want to charge us a penalty of a million dollars if we didn't give them those 1% warrants within three days. Prior to all of that coming into play, we refinanced with Eastward Capital who are fantastic, and we didn't end up having to pay much of those penalties. But anyway

16:11>> through all of this we continue to grow the business brought on better and deeper integrations.

16:21>> I had a health scare but we never Let

Nathan Latka

16:26me pull the story through now. Right? So so and remember, 1,000,000 1% of the company, they sold for 9 figures just recently. So every 1% penalty is paying on the company if he even sold warrants on a debt deal of 2%. Well, if you sold for north of a $100,000,000, that's just the 2% warrants, it's $2,000,000 right there. And then every extra 1%, that's another million dollars off the sale. I mean, right now, I mean, you

16:46gotta calculate that into your cost of capital. I'm beating this down a little bit because it's self serving. Founderpath is always more expensive on an interest rate level, but we never take warrants. And we never do these process tricks that put founders like we don't charge a revenue growth covenant for example for this exact kind of reason.

Joe Hyrkin

17:01>> The point of it is like we got through it and it didn't actually hurt the business, but it's a distraction, you know, and one of the things that I focus on as a CEO is CEO's main job is to limit distractions. That's it. We talk about CEOs and supposed to make sure there's money and all that stuff, of course. But if you don't have money, it's a distraction. So the key is limit as many distractions as

17:24>> it possibly can. Yep. So came through it, landed Bending Spoons, and

Nathan Latka

17:32Let me fast forward to this because I was gonna play a clip here, but I wanna also be respectful and you name the firm in the clip on the podcast and I don't wanna create an awkward situation right now, but people wanna privately do their own research. Yep. They can go. But I would just say in the moment when I interviewed in 2021, right after you did the dead deal, you loved it.

Joe Hyrkin

17:49>> Loved it.

Nathan Latka

17:49He had no idea. I mean, you know, the rate is so cheap, Nathan. This is incredible.

Joe Hyrkin

17:54>> It was great. They were a really highly recommended firm.

17:59>> And I'm happy to talk one on one afterwards or they're still running around trying to do debt financing. Don't work with them. Work with the Eastward Capital or Nathan. Or there's a set of really good lenders and debt financing can be a really positive thing for the business.

18:19>> But if you get in with the wrong folks, it's important to understand how to navigate out of it.

Nathan Latka

18:23Over the last minute, Joe, I wanna wrap up because there might be people in this room thinking I actually do want to go sell to a private equity shop like a Bending Spoons or a Rocket Internet or one of these kinds of companies. So you get this deal done just recently. For those of you that joined late over a $100,000,000 exit on $32,000,000 of revenue, this is a company that is known for doing these kinds of

18:40deals. They bought these other kinds of companies which Joe mentioned. What should people be prepared for if they're entering an M A process with a Bending Spoons? Lawyers, banking fees, process.

M&A Process with Bending Spoons

Joe Hyrkin

18:49>> Yeah. So, you know, you have if you typically have a banker, that's a couple million dollars. Your lawyer I think most people think, oh, I'll just get an M and A lawyer at the time I'm doing an M and A. Maybe your law firm does it. The lawyer you use makes a big difference. We worked with Goodwin Procter, Larry Chu. You know, when I talk about folks we work with, I try to be as honest as

19:13>> possible. Like, they're not good, I'll tell you. If they're great, I'll tell you. Larry Chu is a fantastic lawyer, Goodwin, and he helped make phone calls and talk to people in the midst of this process that enabled us to navigate through both the term sheet and the contract way more efficiently than other otherwise.

Nathan Latka

19:31Did the term is drastically changed.

Joe Hyrkin

19:33>> No. She's signing and final.

Bending Spoons as an Acquirer

Joe Hyrkin

19:35>> One of the great things about working with Bending Spoons they they didn't retrade with us. I don't think they've retreated with others. Meaning change the price terms with the terms. We agreed. There was lots of stuff that lawyers haggled over and things like that. But price was the price and they're very high quality folks to work with. And I think one of the things as you're thinking about selling that's really important is most of us, me

20:02>> included, think, oh, these will start to get interested in us and there'll be five to 20 strategics of some form or other, some quality or other that we think can and should buy us. And I think all of us in the room, once you're north of $10, $15, $20,000,000 become attractive to PEs and strategics. And so you know there's 50 PEs that could be interested 20 strategics. But the truth is in the moment that this starts to

20:32>> happen the people that are interested start to winnow away fast because you know if it's a strategic Canva was one of the folks that could have and should have bought us potentially but they had just bought Affinity. And when you term sheet we were we had really deep conversations with Canva and Adobe. Part of Bending Spoons was good very good terms really fast. We an all cash. If I'd signed with Adobe we'd still be negotiating and

21:02>> I worked there for four more years.

Nathan Latka

21:03Was the deal price though higher with Adobe.

Joe Hyrkin

21:05>> They would have all in been higher.

21:07>> You know we were kind of around the same.

Nathan Latka

21:09Okay.

Joe Hyrkin

21:10>> Some of the some of the strategic may have been a little higher. But

Advice on Selling to PE and Strategics

Joe Hyrkin

21:14>> my point is many of the strategic that you think are going to buy you have something else going on. I say they're trying to get sold themselves. If they're private they might be buying something else. They may have just let someone go. That's important. All kinds of things happen. Most companies when they get acquired, there's one to three that really come to the table. So don't be disappointed if the 20 folks that you thought were going

21:41>> to buy you, that you thought were going to keep raising the price and quadrupling it if that doesn't happen. It happens with AI companies. It happened with, you know, a few here or there, but it's pretty rare. At the end of the day, there's one to three companies that are right for that time when you're ready to pull the trigger. You can stop and say, I'll wait two years or whatever.

Nathan Latka

22:05But if you hang out on surface like this all the time, you would think the $100,000,000 exit is the norm. It should happen every day. It's, you know, of course, that's what we wanna do, but it is actually the rarity. Growing, coming in in 2013 at $4,000,000 of revenue as CEO, scaling it to $32,000,000 of revenue in a very competitive space. I I won't name all the other companies, a very competitive space. Then running a successful

22:24process to get a all cash, 9 figure deal done, doing it all with vulnerability and transparency, working through debt deals, personal health scares as well. Gotta give it up for this guy for being so vulnerable. Give it up for Joe from Issuu.

Joe Hyrkin

22:36>> Thank you.

Nathan Latka

22:38I appreciate you, man.

Joe Hyrkin

22:39>> That was awesome.

Nathan Latka

22:40Thanks. That was great. Alright. We'll keep the slide