Background: I’ve had a small team of engineers working for me nearly my entire career. Through all of the twists and turns of my 8 years as an entrepreneur, I’ve never been able to let go of my team, even when logic said it was time to cut them loose. My days in contract app development and making products for others ended long ago. I’ve been in limbo for nearly a year. I just wasn’t willing to stop having the ability to make products, so I kept paying the team I consider family.
The team was working on a variety of different applications, but nothing I felt passionate about. Part of me wanted to U-turn back to something in the Instagram sphere, but there are these things called non-competes 😎. TikTok is hot, maybe I can come up with something clever a la WhenToPost (which I sold in 2017) but for TikTok, an upcoming platform always offers opportunities to make an interesting product.
My goal was just to keep the engineers busy, and one day to stumble across an idea. In an effort to bring in more ideas, I called my buddy Joe Speiser to discuss my situation. Joe’s got a great track record in a variety of different internet businesses and has spent the last year and change experimenting with different businesses too.
I explained the situation,
Like I expected, Joe was ready to go on another adventure…. So it began, I registered our LLC the following morning.
The first order of business was making a Google Doc to keep track of our concepts, any idea we had — good, bad, big or small — they all had to go there. The range of concepts was huge, and maybe one day we’ll revisit some of the other ideas on there… but initially, we got stuck on Browser Extensions.
I explained to Joe my longtime use of the HubSpot email tracker extension and how it helped me over the years on deals and other insights that you can’t get any other way. I convinced Joe to try it out… Back to the Google Doc we went…
After a few days, Joe messaged me with an excited tone:
“I can’t believe I’ve never used email tracking before, I can’t live without it now!”.
In typical Joe fashion, he started explaining how he’d used a few different ones over the course of those days (Snovio, MailTrack, Bananatag etc.) and he kept going on and on about the shortcomings of his trials:
- Too many features & over complicated
- Prices scaling way too high for paywalled features
- Limited tracking (ex: 50 emails a month)
- Branded signatures giving away the secret you are tracking
- Terrible User Experience
- Haven’t been updated in months
That was the moment we decided to focus on Email Tracking for Gmail, and perhaps Outlook.
We wanted our venture to be ambitious, but we didn’t want to give ourselves the nearly impossible task of creating the next Facebook, Salesforce, Google, Amazon, etc. Although it would be nice, we’d have a better shot if we lowered our gaze and focused on carving out our place within one of their ecosystems. We picked Google (Gmail and Chrome Extensions) as our initial platform.
It seems that the entire world uses Gmail personally (shout out to my mom who still uses AOL), and a significant number of businesses, use G Suite. In addition to our belief in Gmail, the marketplace they’ve created for the Google Chrome Browser seemed somewhat ignored by Google, and also the Developer community, but had a ton of users/install-base. If we did a good job, we’d have an easier time breaking through the noise, and the bonus: free traffic due to a lack of competition on the Chrome Store.
From our research, we could see that there weren’t a ton of products on there, and the good ones were always getting featured by the Chrome Store editors regularly. We surveyed the market and there are definitely some players, but it didn’t seem over-crowded and a lot of the players grew into CRM’s, sort of getting away from a small productivity tool. We named our first product, “DidTheyOpen” — the reasoning for the name was simple, it was good for SEO and also immediately tells you what the product does.
Within 2 weeks we had a functional build but we were spending a ton of time talking about pricing, UX and what features users required. We didn’t have all the answers and knew we’d need to get something out there, and let analytics and user feedback guide us.
It all felt like a long uphill battle. I said to Joe:
“it would be so much easier if we could just buy a small email tracking company and skip the first 12 months of what DidTheyOpen will be… a massive headache”
We started reaching out to the smaller services, we got some replies but no one seemed interested in selling. It was surprising that no one really wanted to bite on an M+A discussion. I wondered, why isn’t anyone interested?
- Are they making THAT much money?
- Do they have such perfect lifestyle businesses that they can’t even be bothered?
Needless to say, my appetite for buying instead of building was growing by the hour.
Finally, we come across MailTag.
MailTag was probably the prettiest of them all, the branding was fantastic, the UX intuitive and it was an overall satisfying experience. On the surface, it looked like a multi-million dollar per year revenue but…there were a few signals of a distressed company and that made us lick our chops a bit, knowing that maybe, just maybe — this one was within reach.
How’s this for an online review?
This business seemed to have no one behind the wheel. It fell into a state of disrepair. To make matters worse, after installing the product, I couldn’t track emails, send PINGs, or scheduled emails on my Mac… that’s sort of a big deal for a tracking company.
Meanwhile, Joe was oohing and aahing at the functionalities on his PC, he loved it.
I thought to myself:
what the fuck is going on here?
MailTag is attractive, but so many issues. Why do I still want it? Sort of like a high school crush. (spoiler: Gmail pushed an update in April 2019 that adjusted the interface just enough to break MailTag for ~75% of the user-base, and most new users. I fell into that category)
Joe agreed that MailTag is exactly what we needed: it’s beautiful and they’ve somewhat figured out the business model, but the owner is totally absent. They haven’t uploaded an updated build in almost 6 months which is why my install wasn’t working. We’ll skip the first 12 months of DidTheyOpen — I’ll email them, let’s see if they want to play ball. The team can fix all of this stuff.
1 week passes…..
Back to work… we keep cranking away on DidTheyOpen, but keep talking about how we want MailTag, we decide to step up our efforts and contact some of the investors that we could find publicly. Joe Facebook messaged an early-stage investor who had listed his relation to MailTag on LinkedIn. He replied, and the next day we had an email from the MailTag Founder:
We set up a call, reviewed the business from a high level and got our questions answered. A few key takeaways:
- The Founder wanted to sell the company
- The engineering teams’ contract had been terminated 9 months ago (EEK!)
- We needed to look under the hood but did not want to sign an NDA due to the fact that we weren’t disclosing that we were building a competitor — in case the deal fell through, we’d have some helpful insights
- We’d need put a list together for due diligence and set up somewhat of a data room
Off went our list of requests, and we got a quick yet odd reply back:
Joe and I are no strangers to the frequent weirdness of acquiring companies, but this was an especially weird reply. Of course we hoped everything was OK… but felt it was just an odd reply, with a hint of white lie. Usually within 24 hours you have your first round of questions answered. At this point I was sure we’d never hear from him again…
Back to frustratedly cranking away on DTO…..
[another week passes]
An email came in with everything we asked for. Higher than expected MRR, 2% churn (amazing!), details on user-base and the subscription details of each, huge email list, efficient use of monthly services to keep the thing running, and a very well documented product roadmap.
After a bit more back in forth, we agreed: the company was really small but in good health. It just needed a couple of growth-focused people to run with it. And for Joe and me growth is… sort of… our thing.
I’m totally pumped up at this point.
We threw together our first term sheet, offering a mix of cash up front and earn-out. The total sticker price of our offer was around $100,000 MORE than his asking price. He quickly declined the offer and demanded all of his cash upfront. I felt this was odd, as our offer was really, really strong. Usually at this point the buyer and seller dance, and eventually land somewhere in the middle.
We appreciated his hard line stance — it didn’t give us a ton to think about. Joe and I let him stew over the course of a weekend as we discussed how we wanted to proceed.
That next Monday morning, we’d felt convinced enough that his asking price was a good enough deal and that we’d skip ahead in time that we HAD to do it.
If all went well on the scaling the business front, we’d save around $100,000 because we removed, what we considered to be — the juicy portion of our offer, which would have de-risked our investment a bit by reducing the up-front cash component. The seller could have looked up Joe’s record (and mine, too) and seen that we’re aiming for an 8 figure exit in a couple of years. If we didn’t think we could get there, we wouldn’t have bothered. He didn’t care… he wanted his cash, and all of it. Now. (Red flag? Maybe, but it’s not too uncommon)
Some more back and forth ensued over a 5 day period over different questions we had, they were mostly around our action items on day 1 of the takeover, customer issues, software updates, tech structure, handoff sequence, etc:
-How many unanswered Zendesk inquiries do you have?
-How many payment disputes are currently in Stripe?
The answers were music to our ears, no backlog of customer issues, and no more customers asking for their money back. YES! We could acquire the business and focus on growth, not the issues we’d seen reported online.
We were ready to make our move and march onto the closing.
FINAL OFFER: Full asking price, all cash, closing in 7 days.
We weren’t messing around — we’ve been on the selling side of the table and know how it feels to get dragged around by the buyer (and their lawyers, etc). It’s soul-crushing, and sometimes kills deals. We didn’t want to make our seller go through that, and we were in the unique situation that we didn’t need to waffle around:
- We didn’t need board approval (we are the board)
- We didn’t need investors (we are the money)
- We were going to be the Operators
It doesn’t get better than this as far as an offer is concerned. We could move at the speed of light.
OFFER ACCEPTED ✅
Many high-fives over Slack. 🎉 No Buyers Remorse yet… that comes later 🙂
Ready for Chapter 2? Here you go → https://blog.mailtag.io/the-unraveling-of-the-business-i-just-bought/