How QuestionPro Grew Past $20M Revenue Bootstrapped by Buying Small Companies for Cash (Talk by CEO Vivek Bhaskaran)

Nathan Latka

00:00Founders, what's going on? You guys know I love in person events and they are back. The recording you're about to hear is from our most recent event where we had hundreds of founders come together, share intimate details, templates, KPIs, OKRs about their business, and it was something special, something special. We'd love to meet you in person. If you want to see the next live events we have coming up via our schedule. The link will be down

00:23below in the description. If you're listening on iTunes, check this out on YouTube, you'll see the links in the description. Or you can just Google Founderpath or Latka Next Event. We'd love to see you in person. In the meantime though, enjoy this recording. It's a good one.

Vivek Bhaskaran

00:36>> All right. So I did lose a lot of money to Nathan over here. He got me into a poker game. I actually don't like, I just play poker for social reasons, not the way these guys play. I think I lost like a grand maybe that night or maybe.

Nathan Latka

00:53You've another game tomorrow night if you want to come.

Vivek Bhaskaran

00:55>> Well, no.

Vivek's origin story: BYU, SurveyPro split, and founding QuestionPro

Vivek Bhaskaran

00:56>> I know. I'll I'll to keep my grand to myself. I don't have the sexy pants on, so it's alright. So, very quickly, since you brought it up, we've not talked about this. So I I came to The States as a poor student at BYU and was in the computer science room, a market research professor comes into the lab and says, hey, I want somebody to build me a survey tool. I looked at him and said, how

01:22>> much are gonna pay me? Obviously, right? He's like $17 an hour. And I had to do a lot more for $17 an hour right now.

01:30>> That guy was Scott Smith. His son is Ryan. He was a sales guy. I was the tech guy. Scott obviously was the professor. They don't tell the story that way, but that's what happened. And then we divorced in 2003, 2005 is when we divorced. They kept SurveyPro. I kept QuestionPro. Obviously, they've done 27 times better than what I've done, clearly.

01:55>> That's the back story. But I want to talk about M and A today. And so most people think that I kind of stumbled into this kind of path, not necessarily thinking through this. This kind of like gives you kind of an idea of how we've been doing. As you can see, we've doing this for a long time.

02:13>> And what I want to talk about today is just opportunistically doing deals as they come along. And most people, I was even talking outside,

02:23>> do you kind of suss it out and how to actually execute really fast. A little bit about ourselves, like I said, we've been at it for a while. We start up in Seattle and then currently we're in Austin. So we are part of the cohort of companies that got the fuck out of Bay Area, guess, and into Austin.

Zero to one: bootstrapping from the garage

Vivek Bhaskaran

02:44>> And let's talk a little bit about my journey. Obviously in the next fifteen minutes I'll just talk very, very briefly through my journey for a couple of years now, or many years now. The first zero to one is obviously a hustle. Everybody knows this. Every one of you guys are in some way, shape, or form have done it, will do it. And for us also, that's me. That's actually my garage. And the story here is that

03:08>> I used to build my own computers because I was too cheap to buy a regular computer. And the most important part was that CD ROM that you see in my hand. So you have to install Linux on the computers. I was so cheap that I used to install the CD ROM, install Linux, and then take the CD ROM out and put it on the next computer. So you don't have to buy multiple CD ROMs. So that

03:31>> gives you an idea of being cheap. But also, in fact, the other gentleman was and you were talking about revenue based kinda like acceleration. Like, you know, I did that quite a bit in the first spot, which I said, like, I never said no to any feature. Right? Anybody said that they wanted something, I said, I'll get it done. Really. Right? Will you buy it? And I and I was just like, on the spot, I've done

03:52>> deals where like, pay me $10. I'll build this feature overnight. And obviously, I was the developer slash janitor slash customer success and everything else in between. So the zero to one angle was that one thing worked for us really well, obviously. And the second thing that I want to talk about in terms of SEO is something that we anchored on even back in the day. Because we jumped onto SEO before SEO was frankly SEO. But in

SEO strategy and LATAM expansion

Vivek Bhaskaran

04:24>> this particular case, we also did a LATAM expansion. And this gives you an idea of how we did the Latin America one. So that gives you how much we grew in the last couple of years. We almost 9x ed our traffic. And the game plan for the LATAM stuff was pretty straightforward. We had a bunch of content. We translated everything, auto translated all our content into Spanish, obviously. And then we waited for traffic to come. And

04:51>> as soon as traffic came to any particular piece of content, we started manually optimizing that content. Because the auto translation obviously does not work long term but it's a great strategy for say like if you have a bunch of English content and you want to get into a particular market, but obviously you've created tons of English. Had almost like 2,000 blog entries on our blog in English. So we're like oh we want to optimize this in

05:14>> Spanish. So the normal way would have been like oh look we got hand translate 2,000, it's just too much work. So we auto translate 2,000 articles, wait for traffic, look, and every week we used to look at the traffic, and the traffic that bumped up, which means obviously Google was picking it up. And so and then we go back and fix those fix those ones. So this gives you an idea like and obviously we compete against

05:37>> survey monkey type form a lot of people. And we have better traction than most of those guys. And and if you think about it, SEO is a game of not how good you are, but how everybody else is playing that game really. They have, SurveyMonkey has 15 guys working on English SEO, we have four guys working on Spanish SEO. Let's put it that way. So we can win the Spanish market. And we did the same thing

06:00>> for German. So even obviously English is really hard because the whole planet is fighting for it really. So that was one of the kind of hacks that worked for us at least. And these are some examples of fairly generic keywords that are pretty difficult to get to number in the top three on. Now let's talk about going from one to 10. We have to really pivot at this point. And I struggled quite a bit because the

06:29>> hustle was on, it was fun, you did everything. And you really have to put process in play, really. I mean, as founders we're all doing everything, janitor / customer success / developer. But then from the one to 10 you really have to kind of step back and say like look, everybody needs to have a function and each function needs to be optimized and more and most importantly you need to have people on all those kind of you know all those

06:53>> functions. It took me honestly it took me quite a while to understand that. Since we were bootstrapped and I probably don't like listening to other people also, I so never figured out what to do. And then eventually we figured it out. We struggled for two or three years we struggled quite a bit. Or four years we struggled. So we got up to like 3,000,000 or $4,000,000 really fast. So from 2005 to 2009 we got to $4,000,000

07:17>> Then we got stuck over there. For almost four years, I got stuck. I'd been going from four to 4.2 to 4.3, and then eventually kind of at 6.5. And so then we got from 6.5 to 10. That's when that happened because all the process systems started working together at that point. That's pretty important.

Acqui-hire strategy: buying small companies to bring in founders

Vivek Bhaskaran

07:41>> We have talked a little bit about M and A. Another way to get, and I was talking about this, another way to get people into the company, into those systems is to hire smart people. One way to hire founders, I mean obviously we're all founders here. We wanna work for anybody. But you can hire founders by just acquiring their companies, simply put. Smaller companies that they're kinda either exhausted or they're looking, they just need more, they're

08:08>> not able to get beyond the $1,000,000 ARR function. This is an example of, like I just said, like, look, I needed you to be the president of kind of one of the divisions. I'll just pay you some cash. I'll buy your company, and you can keep all the money that you have through that process. And in fact, all the invoices that are gonna come through, and I'll give you all the support around you that you're kind

08:29>> of like obviously, those functions are in there as a smaller company.

Buying Enprecis from Bregal Sagemount: $800K, all cash

Vivek Bhaskaran

08:34>> Then this is where things got really interesting. And I'll tell you the story around as you can see over here, let me just go back a little bit. Yeah, so that. So this is in the middle of the pandemic in May 2020, a private equity company calls me and says like, hey Vivek, I've been talking to a bunch of PE guys one way or the other, like hey Vivek we really want you to buy this company,

08:59>> one of our portfolio companies. I'm like dude are you kidding me? Right, you're the billion dollar PE firm, why are you calling me up and I'm the bootstrapped guy and isn't supposed to be the other way around right? No not me. They're like no no no you really have to take a look at this. And I knew the company too, was called Enprecis and they're like okay cool, send it you know they kind of we

09:18>> have a call and I said okay I'll spend and first of all I said it's May 2020, Who's doing anything right? Like we don't want to do anything. Nobody knows the world's gonna end day after tomorrow. What's gonna happen really right? And so they said like alright let's talk about it. And then I talked to them. The one important thing the managing director of the PE firm said like Vivek tell me what's it worth to you.

09:39>> I'm like, that's a good point. I can get behind that. I don't know how much you think it's worth, but I'll tell you what's worth to me. Right? So it was making $3,500,000. I said, well I'm not going to pay anything for this. So I typed in that email. I just put an offer letter on my iPhone, and I offered them $800,000. And they came back and said, would you do 1,000,000? I'm oh, shit, we have

10:03>> a deal now. I'm at 800. You're at a million. Somebody's going to close at this point. And am I getting $3,000,000 in revenue? I'll take that deal any day of the week. The key part was just making the call. Now, the backstory is really like they needed to sell obviously, they needed to sell the company because they were shutting down the fund. So it didn't matter whether they got whatever they got, they just needed it. And

Deal structure: all-cash, 30-day close and LOI simplicity

Vivek Bhaskaran

10:27>> most importantly, I offered them all cash, thirty days. That's it, right? No dicking around, no screwing around with earn outs and this and that and all that stuff like dude, it's a foreclosure sale. Thirty days you get your money, you can shut down your fund and you're happy, I'm definitely happy, let's so do this. So that's the way we closed that deal. And that's kind of a quick example of, you know, a lot of people gotta

10:55>> think through like, hey, how do I set up an LOI and this and that? And LOI and term sheets are nothing but just whatever you think, just write it down. It's not that complicated. Just write down like okay this is how much I'm gonna pay right now, here's how much pay in the future and so on so forth. I just wrote that down in like twenty four minutes, sent it over and they said well okay it

11:12>> seems like, seems it's gonna work, let's do this. And then we kind of like then went through 30, eventually it took more than thirty days to go through diligence, it took more than, but that doesn't, nobody cares. Once you're in LOI, you know, it takes thirty days, nah, sixty days, who cares, really, it just goes through.

Global office expansion and regional data centers

Nathan Latka

11:28Vivek, this this was Bregal, right?

Vivek Bhaskaran

11:30>> Yes. It was. Yeah. I'm probably gonna get sued for saying all this shit. That's But I I as you can see, I don't care. So

11:39>> so they're pretty uptight about it, but whatever.

Nathan Latka

11:42We're we're building the slides and and Vivek goes, I'm definitely getting sued for this. And I wonderful. Great content.

Vivek Bhaskaran

11:48>> Yes. The other thing that worked for us is global expansion. We can obviously, as you know, are competing against folks who have 24 times the money that I have in terms of marketing spend, execution, and everything else. And so one of the goals was like, let's just open up offices and sell in those markets. And we have a pretty good playbook now. And the whole story started off because

12:15>> we are at one point, this was like five years ago, we said like, dude, you know what, we should sell in Spanish. I mean like half the world speaks Spanish and we should start selling in Spanish. So we hired this sales guy who walks into the door in Seattle and he's a Mexican American guy. I'm like of course you speak Spanish dude, here's the phone from now on, you're gonna handle all the Spanish conversations right? And

12:34>> so we do that and then at some point he comes back — he's a regular AE really right? He walks into my room and says hey Vivek I got a question for you. He's like yeah, hey look I'm in Seattle, does it make sense to you that we are selling to a bunch of Mexicans from Seattle? I'm like no it makes no fucking sense right. I'm gonna go down to Mexico, I'm gonna build a team there,

12:55>> I'm gonna build a team there. I'm like here's the ticket, I don't know, just go do it. So we start off at $100 and now it's $4,500,000, just out of Latin America, not just Mexico but all of Latin America, That includes Brazil and everything else really right. And that thing is gonna hit $10,000,000. I'm guaranteeing you that. And so we replicated that same model in other markets. So same thing, I had somebody in Dubai. Dubai we

13:20>> can beat out Qualtrics and Medallia very, very easily because we walk into the door and say, hey, look, we are right here. And our enterprise sales is largely about, hey, you work on Sundays? We work on Sundays. All right? Do you drive on that side of the road? I also drive on that side of the road. Whatever, right? So my sales team can walk in and say hey this is what, know I'm here. Then they're like

13:41>> yeah screw Qualtrics, screw Medallia. There was some Irish guy who's gonna show up from London at some point. We don't like that shit right? So we can win that deal. I mean we can't do that in The States obviously, right? We win in those markets. So our global revenue is going up fairly well. And in conjunction with that, what we did that was interesting and I think was actually needed, we just built out other data centers.

14:04>> So our platform. So that was our conversation. So hey, look, we are here and we have a data center here in your region. And all the data issues are kind of like, it's all bullshit, but everybody wants to talk about it, and so GDPR and all that crap. So that solved that problem together, and that obviously accelerated revenue. What do we do to go from 20 plus? Actually, I don't know. I'm writing it as we go

Going from $20M and beyond: share of wallet and product expansion

Vivek Bhaskaran

14:32>> along. But one thing that we've started doing is build out more products, more offerings, round out the offering. One of the ways that we do it now is we look at a persona, and then they say, okay, all the products that a particular persona needs. So, you know, typically we are selling on the enterprise we are selling to three different personas. One is the director of insights, market research and insights. So they need they need audience

14:55>> services. They need, you know, qualitative, quantitative research services. So we kinda provide tools for all of them. The other persona that we sell to is CX. So a whole bunch of kind of tools around CX we are building. And obviously, the HR buyer for employee experience, so we are building a bunch of tools around that. So when you start getting to this kind of scale, we just have to have more product to sell to the same

15:15>> buyer and we round it out. And we I call it the share of wallet model. So, you know, that's how we do it. And, yeah, I mean, this is how most m and a conversations start. Like, somebody sends me a text and I just make an offer on the spot.

Nathan Latka

15:28And Vivek, hold on. You have to break this down.

15:31What do mean someone just sends you a text? How did this thing start?

Dev shop deal: acquiring a dev shop via text message

Vivek Bhaskaran

15:33>> So this is an interesting one. So this guy calls me up and says, hey, he had a dev shop and we needed more developers. Obviously, who doesn't need more developers? I mean, come on, right? So we were I mean, obviously And our go to market functions have scaled up, but we need to get We were having a tough time just recruiting developers, and he had 10 of these guys, and he was selling me on the fact

15:53>> that, hey, you know, give me some work. Let me do let me do work for you, right? Typical, you know, dev shop hustle. And I said, no, I'm not gonna do individual dev shop stuff, but why are you bugging around? He's like, yeah, mean I have some spare capacity, I'm having a tough time finding new buyers. I'm like, why don't I just buy your company and just all your developers can work on all the stuff that

16:11>> we need to do? That's it. So I turned that around immediately and said like look I'll give you this much. And the anatomy on every deal is most

16:22>> people think that you cannot afford it. It's actually not true. If you think about it like whatever price tag you give, you can divide it between what you pay today and what you pay tomorrow and you what you pay the day after. And whatever you pay tomorrow and the day after usually has some contingencies right? If you think about it like yeah I mean you are in the shared board at that point. So your risk on

M and A framework: upfront cash risk and price anchoring

Vivek Bhaskaran

16:42>> that money is nearly zero. In fact it is zero. So the real risk you're taking is how much are you gonna pay cash upfront today. That's it. That's the only number that you really care about that's at risk to the conversation. So if you can keep that thing as low as possible that you can absorb, and that's like in the Bregal deal, all looked at each other and said like, dude, we don't know anything about this

17:05>> company. Okay, great, it makes $3,500,000 from seven clients. So high concentration, so two of those clients are paying a million bucks each, which means if those two clients canceled, we're done, right? I mean the whole company is done. So it's not really a great kind of asset from a SaaS kind of valuation perspective. So then you have to make a decision. How much are you willing to throw money into it and not worry about it? That's

17:28>> it, right? I mean if that goes away, that goes away. But you do that risk reward analysis. And that's the upfront payment. That's why we just offered, I was like, okay, how much can I throw at this problem without stressing myself out, it'll be $800,000 for 3,000,000, okay, that's a good kind of like ratio? If I had paid 3,000,000 for 3,000,000, then everybody would be stressed and then we have to do all this drama and all

17:48>> that stuff really. So the smaller companies, what you can do is just you know negotiate the price first. I've seen a lot of people, and even I've done them, make the mistake of, oh, want talk about tech diligence, we want to do this, we want to do that, we want to do all this other conversation. All those conversations are irrelevant. The only thing that really matters is like, dude, how much are you gonna That's it. So

18:10>> get that conversation, at least that's what I do, get that conversation out of the way first. And then start worrying about the diligence and everything else. Because now the deal's on your side. So you've at least anchored the price. And once you've anchored the price, then you can figure out whether you want to do this deal or not. Otherwise you spend three months talking about all kinds of stuff, and in the end, then you're like, oh

18:31>> look, you know what, the founder wants 2,000,000. Okay, you can't pay 2,000,000. That's it. Now you're back to, now that's a problem. So so you might as well and it's a pretty easy way from my perspective at least. I know how much I can afford. That's it. It doesn't matter how much you're worth really. Right? Because we are not chasing after kind of competitive deals. If it's a chase of a competitive deal, we are not in

Opportunistic M and A and ditching formality

Vivek Bhaskaran

18:51>> it really. We are trying to do, we try to do M and A opportunistically, not structurally, if you will. And if you're opportunistic, just like sales, you will win a few. It's not that you're gonna win all of them, you're gonna win a few of them. And the last thing I'll say is like, and I'm done, is ditch the formality, really. I mean, think everybody thinks that, oh, we got to go through a process. The process

19:10>> is whatever you do. That's it. And you could send out term sheet on an email, send out a term sheet on a text message. Who cares, really, right? They just need to know the numbers. And you don't have to even think about it too hard. Like okay, this is how much I can afford. This is what I want to do.

19:26>> And then the negotiations begin and then you definitely will close at something or the other. I think that's about it.

Nathan Latka

19:33Guys, Vivek with QuestionPro, give him a round of applause. Thank you guys.