Startup Acquisition Stories w/ Tim Schmidbauer – Co-Founder of Inlytics

Tim sold his SaaS startup (Inlytics) on Acquire for six figures to XO Capital. Hear him share his experience and advice for those looking to do the same.

Watch the interview

Learn more about Tim-


Transcription-

Andrew:
All right, I am here with Tim from Inlytics. Am I pronouncing that correctly?

Tim:
Yeah, absolutely. It’s perfect. Inlytics is right.

Andrew:
We were chatting before this, and recently got Acquire’d for five figures, so congrats on that.

Tim:
Thank you

Andrew:
Appreciate the time. To kick things off for those listening, tell me a little bit about what Inlytics did and the problem that it was solving.

Tim:
Inlytics is a LinkedIn-based analytics platform for personal profiles with an attached scheduling tool. So what we were doing at the time is, we started in 2020, we were figuring out or I was figuring out at the time that many people actually, they want to brand themselves on LinkedIn. Some agencies are also involved, and they manage a couple of accounts on LinkedIn, and it’s very hard for them to analyze multiple profiles and also your personal profile. You don’t see much data on LinkedIn, or you don’t have much data on LinkedIn, so this is always or was a struggle for many people, and so we decided to build a tool where you can have all of your data in one place, see all of your posts, like more insights in your data, and in the end, we did focus more and more towards agencies and also companies because they tried to analyze multiple profiles.

Tim:
I was in touch with larger organizations, and they had one person employed just for pulling data from LinkedIn, visualizing it in Excel, and this sucks, this costs a lot of time, and it’s also very expensive to do. So this is kind of the niche that we positioned ourself in and started this venture. Yeah.

Andrew:
Nice. So I assume you’re selling to mostly sales, teams, and stuff like that?

Tim:
Yeah, absolutely. Yeah.

Andrew:
All right. Very nice. So tell me about the acquisition. So you’re listed on Acquire. What were your expectations on going in? How’d it go?

Tim:
Where do I start? So when we decided basically that it’s time to sell or, in other words, find a suitable growth partner to scale our baby, we had to look at the market then and also searched on Google as helping to find potential buyers. How does this whole setup look like? I did end up finding Acquire and was immediately convinced that this platform could work for us, because I saw the value proposition of the website and then clearly indicated to me that there are people involved that know how to sell a business, and also, they know the process. They know how things are going.

Tim:
So I have to be honest, I didn’t know about the acquisition process and all of that stuff in the beginning. So I’m completely new in this relation also. I didn’t know what to expect. So this was also like a big question, a big question mark over our heads basically. How is this whole entire process looking like? What to expect from buyers on a platform like this. So it was great that we had the opportunity to list on a platform where… I cannot speak all this word. Anonymous? No.

Andrew:
Anonymous. It’s a tough one.

Tim:
Anonymous. You know what I’m trying to say.

Andrew:
Private.

Tim:
Yeah, where we are private basically. So we can list on the platform and see what kind of requests we are getting, what kind of people are reaching out, and if also our expectations for the price and also for the fit, the strategic fits are met. So just this entire structure that was put together by you, Andrew, really helped us in the beginning on the structure. Having a centralized place where buyers and sellers meet, seeing also or having the conversation in one place. So we have kind of a command center in there where these people, they reach out to us, and I can qualify them. I can see if they are serious about buying a business, and if they have a vision for a product like ours so I can do that without sharing too much information in the first place and seeing how a stage gate process can look like was very helpful for us in the beginning.

Tim:
Also, kind of having a structure in place, how a data room looks like, how to present this kind of information to a buyer when you get to the next stage, so we’re both just getting in touch and seeing if this is a potential buyer, the next step is to just logically to also share more information about the business. So having this kind of structure really helped us in the beginning to get started.

Andrew:
Nice. How many buyer requests did you get, if I can ask?

Tim:
Roughly speaking, about 30 or something, like in the course of two months, I would say we were in touch with maybe 15, 16, 17 of them. Some were serious, some were not. This is also maybe I can make the transition to some of the errors or mistakes we made in the process because qualifying buyers, this is certainly one of them, there are a lot of people involved on the platform that very seriously know exactly what they want, but some of them, and this is also fair, are not certain, in terms of this is a product I would like to Acquire, and I don’t know, there are a lot of questions. So it is really key, in my opinion, to find out or ask certain questions in the beginning, because this did cost us a lot of time sometimes when people did not know what kind of stuff they were looking to to buy.

Andrew:
Yeah. One piece of advice I always give to sellers is make a buyer work for you. What I mean by that is you ask them a series of questions like, “Have you Acquired a company before?” Or, in your situation, maybe, “Do you have any experience in this space?” They slowly respond back, and you get to know them. Then you’re kind of putting them through these hoops, so to speak, making them… They’re qualifying themselves essentially. So my next question would be just out of those 30, 40 buyers that reached out, how did you find the right one? How did that one individual, and you don’t have to name the person, but how did that one person stand out to you?

Tim:
I can name it, because it’s public, so it’s XO Capital from the United States.

Andrew:
Nice.

Tim:
These guys-

Andrew:
That’s Andrew’s firm, right?

Tim:
Andrew, Henry, yes, and Danny.

Andrew:
Yeah. Andrew, great name.

Tim:
These guys are very serious. They know exactly what they’re doing. They know exactly what they’re looking for. They are buying profitable SaaS companies. When they did reach out to me in the first place, they told me exactly, “Hey, I’m looking to buy something like that. We have a 30 days timeline to do so, and you can also commit.” Well, when I was talking to other buyers, we had a much longer process, because we had to communicate our expectations, and they also, well, some of them, they were clear about their expectations while others weren’t clear. So this was kind of a long communication, and we missed… Also, this was our fault that we did, we missed to set exactly these expectations, and also to pressure these people a little bit to make clearer statements.

Tim:
So this is exactly the piece of advice that you gave me right now, and also the learning, but for these guys, for XO Capital, they knew it from the very beginning. They had a structure in place, and basically all they needed is, or at that time, they asked us specific questions, “I want to see your customer base. I want to know who are you targeting? What are your key customers?” And so on and so forth. So they had very clear expectations, and they communicated that right from the beginning. So we knew these guys are serious, they want to do business, and they are interested in that.

Andrew:
Nice. I think that’s a great tip for buyers too is just the more you’re prepared, in terms of what you’re looking for from a seller, just shows your seriousness, and then also just your capability to Acquire a company. So that’s great to hear. Good job on that. I guess my next question would be there’s a lot of founders like yourself looking to sell startups ranging from five figures, six figures, seven figures. If you had to give two pieces of advice to startup founders who maybe are selling a company for the first time, what would it be?

Tim:
To be honest, if you’re looking to sell, unless you know exactly how much you’re worth, it may be a good starting point to start with make an offer on the platform. So also in the beginning, we had a rough multiply in our heads, and then we put it in numbers, and we put it on the platform. So people were reaching out, some of them with complete unrealistic expectations, but it’s very hard, in my opinion, to evaluate your own startup, because you’re also biased. You think your startup has to be 10x at least or 20x, while others, like more optimistic buyers and sort of more opportunistic buyers, they have clear limits, like maybe three, 3.5, four, 4x under current revenue on your AR.

Tim:
So maybe you also use that option on Acquire to turn around, let’s start with a clear offer, but make an offer to turn around and put the question to the buyer and see what comes. So we did that, and it was very successful in the beginning, because by the time we had 30 people interested in that, in the business itself, 15 of them we talked to, or roughly. So we had a very good picture of what we were worth at that time. So many people gave us numbers and also figures. So we put aside also by the seriousness of the buyer by their offer, their structure, their timeline, all of that stuff if somebody is really interested in making a decision. So we had something

Andrew:
That’s really good advice, just asking. Sometimes, yeah, just asking buyers, “What do you think it’s worth?” They can come back with, “I think this is priced too high.” “Well, what do you think it’s worth?” Because valuing a startup is part art and science. It’s the potential of the business. Is it growing? What market is it in? Do you have Microsoft on a 10-year… There’s so many variables. So just getting that feedback from the market can be the difference maker, because the number one reason that a lot of startups don’t sell on Acquire is they just priced 10x annual recurring revenue, and those multiples are really reserved for when you’re at scale. So when you’re at 10 million revenue and above, that’s when you can really start multiples. So good tips there.

Andrew:
Okay, so you’ve gotten a buyer, you agree on price. Walk me through just on a high level what did due diligence look like? You touched on it a little bit, but you sign an LOI, you start moving towards closing the deal. What were some aspects of it that were easy to go through and maybe a tip for a founder what to expect in due diligence? That’s a four-headed question, so sorry about that.

Tim:
I think every due diligence is individual. So obviously Andrew, Henry, Danny, the guys from, they made it pretty easy for us. So because they knew exactly what is important for them, they could ask us exactly these questions. So we could deliver upon that. So just to give you an expectation of what we went through is we had an LOI and an NDA signed in the beginning. Then we gave them access to the data room where they had all of our processes mapped out, all of our tech structure and stuff like that. Then they asked specific questions on what they want to see. So we did a deep dive from our tech stack. We did have one other meeting with all of the guys involved and showed them all of the tools, showed them all of the basically back-end stuff, front-end stuff, all of the important information that they need to make a decision.

Tim:
From there on, they asked specific questions like, “Could you show me exactly this bucket? Could you show me the secret piece for,” I don’t know, I’m a not tech guy, so I don’t know the structure of that, but really they asked us specific questions for these individual parts, and this also gave us the confidence that they know what they are doing. So this is really also a strong argument, because I think if somebody in due diligence is really clueless what to do, what to ask for, it also kind of shows they don’t have any plan of what to do with the business after that. We always wanted to make sure that we are selling to somebody who has a clear vision for our product and knows what is the value of the business itself, and also the value of the customer base that we have built.

Tim:
So by the time we had 15,000 users on the platform, roughly, and so this was a huge commitment from our side, because we are giving all of these customers all of this value basically in the hands of somebody else. I know a lot of these persons or people personally, or these organizations, these agencies. I want to make sure that these guys get the best possible outcome from this acquisition as well.

Tim:
But back to the topic, in the beginning, then doing a couple of Q&As with the team, and after two to three weeks, we were basically through. They were ready to make a decision, and from there, it was all about the price. It was all about how is the deal structure? How does it look like? So basically was done.

Andrew:
Nice.

Tim:
Sorry. Andrew, I want to add one more thing, because in the beginning, you said we had a deal for five figures. It was actually six. Maybe we can also edit that after that.

Andrew:
Ah, that’s even better.

Tim:
Sorry. I was kind of confused, because five figures. No, it’s six figures, yeah.

Andrew:
Oh, six figure deals, okay. Right on, man. Well, congrats on that. Yeah, I agree with that. Just working with an experienced buyer is just so much easier, because one of my biggest fears when selling a company, depending on the size, like if you have a full time and customers, you get to the ninth inning, and this person has no idea what they’re doing, and you’ve wasted all this time. So again, going back to qualifying the buyer is very, very important because it just makes your life so much easier, especially if you can kind of map out, “Okay, this is what due diligence is going to look like. This is what we’re valuing our company at. This is how we’re going to transfer assets. This is how we’re going to use Escrow, all that fun stuff. It just makes it so much easier for both parties. So that’s great advice.

Andrew:
That’s kind of all the questions I have for you, but I’d love to know, so you just got micro Acquired for six figures. Congrats again on that. Super happy for you there. What are you working on next? What’s next for you?

Tim:
Obviously I’m a founder, so I have always a couple of ideas in my head, but honestly, nothing is too specific right now, because I’m still in the process of the handover and a couple of clients that also caught up to me, and I will make sure that they are forwarded to the right person. But I want to state that I’m very interested to start over in the tech space again in foreseeable time. I’m not quite sure what it will be, if it will be for SaaS or anything else. Maybe also share some of my experiences with other founders and some of the experience that I’ve accumulated over the past five years. I did work for a company builder as well, or company builder plus an agent company builder. So I’m interested in the tech space, and I’m also very open to get in touch with some angels, with other founders that are looking to build something in the tech space, because in the end, I really believe it’s all about relationships.

Tim:
So three things about everything else, it’s the team, it’s timing, and it’s the idea. If you can bring these three things to the table, you can do really great stuff. So I’m very open. So if anybody out there listening to this podcast is interested, just feel free, a link could be in the description, I don’t know how’s the structure, but you can reach out, and very happy to get to know you.

Andrew:
Yeah. So I guess we’ll end it on the final question. How do people get ahold of you? People want to just ask questions, jam with you, email, Twitter, LinkedIn?

Tim:
LinkedIn, absolutely. We built a LinkedIn analytics tool.

Andrew:
Oh yeah. I should have assumed that, okay.

Tim:
Yeah. No, honestly, LinkedIn is the best way to reach me.

Andrew:
Gotcha. I’ll put that in the show notes. Well, Tim, that’s all I got for you. I really appreciate your time, and congrats again on the acquisition. Super excited to see what you do next, and I’m rooting for you, man.

Tim:
Thank you, Andrew. Thank you so much for inviting me to this podcast today. I really appreciate your time and also your guidance through the whole process as well. Thank you.

Andrew:
My pleasure, man. All right. Enjoy the rest of your evening.

Tim:
All right.

Andrew:
Cheers.