Exiting an Enterprise SaaS to a US Strategic Owned by Vista Equity

[00:00:00] Alexej: Hi, David. Thanks so much for making it. 

[00:00:03] David: Hey, thank you very much for having me. 

[00:00:04] Alexej: Awesome. Super excited about this episode. So, this is fascinating. It’s been seven years since you launched the business. And a year ago, you acceded it to Duck Creek, and it was a listed company, and then they got acquired a day after you got acquired by Vista Equity—

[00:00:27] David: Yup.

[00:00:28] Alexej: —the largest software, you know, buyout shop on the planet. So—

[00:00:34] David: Yup.

[00:00:35] Alexej: —in short, Imburse provides payment solutions for insurance companies, and—

[00:00:42] David: Yes, that’s right.

[00:00:43] Alexej: —you’re the co-founder and the CTO. So, maybe tell us a bit more about what problem you solved, right, and what solution you actually provided.

[00:00:54] David: Okay, sure. So, we are an enterprise solution, predominantly a SaaS solution. So we’re cloud-hosted. And the problem that we solve for large companies, mainly tier one and tier two insurers, is the capability to connect to the payments ecosystem. Traditionally, if they wanted to be able to go global, work with multiple payment technologies, and offer a great user experience to their customers, they would have to absorb all the costs of the development teams to be able to power that, and even the operational process.

[00:01:28] So through us, they would connect once, and the integration is very simple. It would take maybe a matter of a couple of weeks to get it done on their side. And then from there, they can open themselves up to the marketplace that allows them to offer any payment type to, to their customers. So, really, it was an efficiency play really around operations and integration to the payment networks, banks, and payment service providers.

[00:01:50] Alexej: Mm-hmm, that’s super interesting and obviously, enterprise plus insurance, it’s so niche and specific. What’s the founding story?—

[00:01:59] David: Yeah.

[00:02:00] Alexej: —How did you come up with that idea?

[00:02:03] David: So, well, initially, we were actually working on a very different product altogether, but within that product, which was an insurance product, we experienced the nuances and the complexities of payments itself. We tried to integrate with multiple banks. No one would do it because one, we were very small, but when we worked with the insurers themselves, they also experienced the same pain.

[00:02:23] So, we had a sort of pivotal moment where we realized actually the true value of what we could offer someone was this payment middleware. And so, we really shifted our focus around seven years ago to focus on Imburse payments. And from there, we never looked back, you know, we never went back to the old insurance products. I think it’s a very typical startup founding story. You start something and you realize that there’s potentially a pain somewhere else that’s much, you know, a much bigger problem to solve and has probably more value to the same customer that you’re targeting.

[00:02:50] Alexej: Yeah, absolutely, absolutely. Yeah. Pivots are very common, right? Twitch, Snapchat, etcetera. We obviously pivoted as well. So yeah, no, that’s, that’s fascinating. You mentioned a lot of that figuring out, let’s say, of the product came via working with one particular insurer, right? How did you get that—

[00:03:10] David: Yup.

[00:03:11] Alexej: —very first one client, right? That’s usually the tricky part for a lot of SaaS companies.

[00:03:17] David: Absolutely. By luck. Oliver, who came from the insurance industry before, was actually at one of the old firms that he worked at. And we managed to get some network connections through that. And we realized that they had one specific use case that they were struggling with internally.

[00:03:34] I think it was voucher payouts at the time. And they wanted to be able to not have to work with all these different voucher vendors out there. So again, people think of money or FinTech just as being money transactions. It’s not. Vouchers are very much part of that group. And we got lucky, you know, they said they would work with us. And I think the funny thing really was that even though they were our first customer, they didn’t actually integrate for two years. They signed a multi-year SaaS agreement and they only started integrating, I think, after two years with us.

[00:04:05] Alexej: Wow.

[00:04:06] David: —but it was enough time for us to be able to take that feedback and build something out and also to show traction to investors.

[00:04:11] Alexej: Mm-hmm, mm-hmm. So, so let’s talk a bit about that traction part and also the investors part. So, you raised your seed with Lakestar, which is one of the top funds in Switzerland and also globally at an early stage.

[00:04:23] David: Yeah.

[00:04:24] Alexej: And then in your Series A, you did a 12 million dollar round which was led by DST Global, which is also one of the best names out there, right? So, I guess in terms of your journey, so, you figure out there is this problem and you started working with the first client. When did you start fundraising? Because obviously in enterprise SaaS, because of the really long sales cycle, it might take forever to show the investors that somebody actually wants to pay for your product, right?

[00:04:57] Probably a lot of people say, ‘Hey, it’s really interesting,’ but then you really need to go back and actually build it, right? So, could you take us through that journey?

[00:05:05] David: Sure. So, in terms of fundraising, our first initial fundraiser was through Angel investors. We actually were part of a Swiss investment group called SICTIC.

[00:05:14] Alexej: Okay.

[00:05:15] David: Through there, we managed to meet our first Angel investors. As founders, we also put our own money in. So, what we did was create a Swiss AG, and to do that, you needed initial capital upfront payments to the bank. I think that’s one of the benefits of going with a Swiss company. We raised, I think it was 350,000 at that point, to be able to build a proof of concept and to then also potentially try and bring on more customers in terms of interest.

[00:05:41] It wasn’t so much to even close sales, it was more to gauge whether the feedback from customers would be like, ‘Yes, we’re very interested in this.’ But, sales cycles will take about a year and a half to two years. You know, like you said, sales cycles in enterprise are not fun at all. Once we’d done that, we managed to get another customer on board at a very low ticket in terms of licensing. Again, that was enough to trigger what we wanted to do. Instead of going directly to seed, it was more around the convertible notes.

[00:06:09] And that was to actually buy us more time in terms of getting to a better valuation, you know, in terms of what the investors would want to see, what we would want to see. And that also wasn’t just enough to bridge. We actually got PostFinance as part of that. And another company called BackBone Ventures were very supportive of helping us. I think all of the investors knew that we were going after tier one insurers and they understood the business in terms of, yeah, these guys don’t move.

[00:06:32] In fact, I think the longest sales cycle we have is three years, in terms of warming up the company to the point of execution. And then the strategy, I mean, the strategy has really changed. I would say we got lucky up until Series A, but I think as soon as you get to Series A, then metrics start changing in terms of what do investors really start to look for.

[00:06:53] And I think as most companies saw at the beginning of last year, things really changed in terms of what the investors were looking for. You know, it was more revenue-based, not so much the traction points anymore. But I think with us, because we’re going for tier one insurers, they get surprised. The actual value, once they sign you up, and the stickiness of staying within the enterprise, it’s far better because you don’t get a high churn rate. Once you’re in there, you’re there for about five years before they say, ‘Actually, this is not working anymore.’—

[00:07:19] Alexej: Mm-hmm.

[00:07:20] David: —because the integration costs are too high and the lifetime of all the project cycles that they have run every year. So they know that you’re at least there for two years minimum when you sign an enterprise contract.

[00:07:32] Alexej: Mm-hmm. Mm-hmm. Makes sense.

[00:07:34] David: So for them, that was—

[00:07:36] Alexej: Yeah, but the traction element, let’s say without receiving actually money, what if they’re checking your correspondence with potential clients or, and then, you know, allocating some sort of weighted probability to it, or how did they do it?

[00:07:54] David: Yeah, I mean, we managed to get letters from potential clients. Some of them that didn’t even sign up, by the way—

[00:08:00] Alexej: Okay.

[00:08:01] David: —they were really keen.

[00:08:03] Alexej: Interesting.

[00:08:04] David: I think the way how they draw the proposal is to say like, ‘This is something that we would use. We don’t know when, but we see a lot of value in this because we suffer this pain a lot.’

[00:08:12] Alexej: Mm-hmm.

[00:08:13] David: I think maybe out of the two, we did manage to convert, I mean, sorry, out of the five we managed to convert two within a year, which is great, even if it’s low value. But then the idea is that at the same time we, we managed to upscale or upsell one of the existing clients from about 50,000 a year, all the way to 400,000 a year.

[00:08:32] So there was upselling the same service and also bolting on new types of services and functionalities. But they saw that the growth wasn’t just the main product. It was also all these sort of side cart services that you could actually cross out. Yeah?

[00:08:42] Alexej: Interesting.

[00:08:43] David: So that was again, that also showed traction for them.

[00:08:46] Alexej: Right, right. So it’s kind of a combination of, let’s say, having this MVP and then having commitments and interest from other parties. And that’s because otherwise maybe you don’t build a product, right? You ask a bunch of enterprise clients, ‘If I built X—’

[00:09:04] David: Yep.

[00:09:05] Alexej: —’Would you buy it?’ They all say yes. And then on the back of that you raise, but probably it’s not as simple as that anymore. You really need to have an MVP and some sort of, you know, use case, like real use case, right? And then the letters of interest. Okay, that’s cool. That’s interesting. And so how do—

[00:09:23] David: I was gonna say, sorry, I would also say that a lot of investors who invest in enterprise B2B SaaS, they understand how much money you actually need to be able to create a successful company. They know you’re not going to do it on a thousand dollars. They’re not going to do it on a million, maybe 10 million, that’s the sort of entry point to build a scalable SaaS solution for enterprise.

[00:09:44] Alexej: Mm-hmm.

[00:09:45] David: I think one of the other biggest criteria that they’re looking for is that you’re not going to be turning out to be a development shop for them because a lot of enterprises, if they could use you for their own development resource pool, they will, and you’ve got to be really strong and say no. But they also want to be part of this lens is that they want to make sure that they’re actually buying the product and not you as a development house.

[00:10:02] That’s really critical, that a lot of startups have seen fail when they try to go after enterprise. They have to have one client and that’s the only client they have.

[00:10:10] Alexej: Mm-hmm, mm-hmm. Yeah. Makes sense. Makes sense. And then, so let’s say, how did you go about scaling and client acquisitions? Once you had, you know, a few clients and, you know, money in the bank, what were your main drivers? Was it still a lot of like direct sales and enterprise sales? Or any other virality hacks you had?

[00:10:35] David: So I wouldn’t say there was a lot of virality within the insurance industry. I think it is to a degree. So one of the biggest things is networking. You go into the right events. You know, one of them is called DIA, it’s a Digital Insurance Agenda, where most insurers will go. There’s one in Munich, there’s one in Amsterdam every year. And they tend to have the really key players in terms of decision-makers. So that was one of the best events we could go to because it’s specifically for insurance. And that’s also where we, I think, we signed up most of the leads—

[00:11:06] Alexej: Wow.

[00:11:06] David: —that we had.

[00:11:07] Alexej: You had a booth there?

[00:11:08] David: Yeah, we had a booth and we also were on the main stage. Yeah, so we were on the main stage a couple of times. Yeah. And being able to demo something in real life is really important. Now, you’re not going to sell your software there. It’s just purely getting that lead in terms of getting a conversation going.

[00:11:26] Alexej: Mm-hmm.

[00:11:27] David: And then that could take up to nine months to one and a half years, depending on the insurer. But networking was the biggest part of it. Oliver did an amazing job at doing that. You know, he was the one that was mainly going to the events. I was going to them more around the UK. But they had the biggest deals for us.

[00:11:44] We did pivot into having a fairly good sales team and marketing team. And they really, they really brought the brand from the Series A onwards, we didn’t put that much into our branding and marketing before, in hindsight, maybe we should have, but generally, cold sales don’t work with an enterprise, you know? So, because the idea is that you need a very different approach compared to an SMB, direct sales doesn’t work at all. And we sort of proved that while we did have a sales team, we didn’t actually have any sales through them.

[00:12:14] David: We eventually started to have different strategies. The first one that worked the best was the land and expand strategy. So the idea is that you go in with a very small ticket size because a lot of these enterprise companies have procurement limits. So as long as you go under that sort of limit before procurement really starts to kick off, and then you get through that very quickly and then you start expanding because once you’re already signed off within the procurement side of it, they don’t ask any more questions. They just want to know what value or ROI they’re going to be getting later on.

[00:12:42] So it’s much easier to upsell and cross-sell. That was probably the biggest lesson that we learned. ‘Cause we actually went away from that. We started with that. We thought, okay, that’s too startup mode. And then we wanted to go more omnichannel. Let’s try working with partners in distribution channels and stuff like that. And that kind of worked to a degree, but I think you have to be a much bigger brand for that to work.

[00:13:04] Alexej: Mm-hmm.

[00:13:05] David: So yeah, from Series A we tried moving away from the land and expand. We realized actually that’s not the right thing. We went back to it. And it worked really well still. And then we really focused more on the marketing and the distribution channels rather than having a big sales team.

[00:13:18] Alexej: Mm-hmm, mm-hmm, mm-hmmm. So to summarize, a lot of in-person networking and really more about, yeah, let’s get the conversation started and then yeah, land and expand, versus with SMB SaaS, because the tickets are so much smaller and there’s so many more customers, right? You could do much more direct call, like cold calling and email outreach, etc, right?

[00:13:49] David: Yeah, absolutely. I would say the difference, if you want to sell SaaS, B2B SaaS between an SMB and an enterprise, I’ll probably categorize it in six different areas that they are vastly different. The first one would be customization. So a lot of enterprises require some customization for them to want to purchase you, which, you know, it makes things a lot more expansive operationally, but if you’re going to go with the SMB, they usually just take what’s off the shelf and then they will do the customization work.

[00:14:17] So that’s one of the key differences there. Risk tolerance is very different. Enterprises don’t take risks. Because they want to make sure that this is going to be a five-year plan, not just implement something and I can get rid of it in a year’s time. There’s also a lot of regulatory rules that they have to conform to compared to a lot of SMBs.

[00:14:36] So they’re very stuck to their ways of thinking. Marketing and communication are vastly different. You can go with a very direct approach with SMBs. And, you know, you can have a very clever email campaign and all that, but that just doesn’t work for enterprise. So enterprise, it’s more around the networking, really trying to get to know the right people. It is sometimes a bit of a handshake deal, you know, it’s all about who do you know within the industry.

[00:15:01] And if you go around these circles enough, you start meeting the same people and start forming good relationships with them. Budgeting and pricing is also very different. So SMBs don’t have as much budget as enterprises, but at the same time, enterprises really lock in their budgets at least once a year.

[00:15:17] So they do all the financial upfront forecasting once a year, and then they might pivot slightly where SMBs are probably a bit more fluid. So they can make quick decisions in terms of sales. And that’s why you typically see long sales cycles, because sometimes enterprises don’t know what they need. And then they see you and then they start working through pricing and they’re like, ‘Cool, well, we can’t do it yet. We have to wait for the beginning of next year before we can even start going through procurement and sales—’

[00:15:41] Alexej: Mm-hmm.

[00:15:42] David: —and finance, which is why sales cycles can take a long time. And then in terms of the decision-making process, you never talk to one person with an enterprise. You can talk to five or six different layers of management before you actually get to a key decision-maker.

[00:15:56] David: And sometimes, if the ticket’s big enough, it has to go all the way up to the board for approval. And that in itself also is big delays compared to SMBs. So let’s say it goes up to the board, that happens once a quarter, someone’s sick, and now they have to wait for another three months for that next person to come back—

[00:16:13] Alexej: Wow.

[00:16:13] David: —and help make a decision or vote on it. So, you know, that’s one of the flaws that you see with enterprise versus an SMB. You get, I would say, higher value tickets and less risk once you’ve signed on an enterprise compared to an SMB, your churn is not as high or it shouldn’t be. I think it’s just the diversification, you know, SMBs are much better.”

[00:16:33] You can actually get a lot more of them. And if your churn rate is 8 to 10%, that’s kind of a good medium. 8 to 10 percent in enterprise is not good because that could be 50 percent of your revenue for you.

[00:16:44] Alexej: Yeah. Yeah. Yeah. Really interesting. Yeah. So let’s say, now, after the acquisition, we talk about, you know, the acquisition a bit more, but is your team doing any of the marketing or sales anymore, or are you just building the product now? And then Duck Creek’s, you know, marketing and sales team is doing all the heavy lifting now.

[00:17:09] David: So they’ll do all the heavy lifting. So, I mean, Duck Creek’s got a really impressive sales strategy, you know, due to their success. You know, they’ve done really well throughout the years. They’ve been around for about 20 to 30 years. So really what they’re trying to sell now is a suite of tools from billing to payments to policy management.

[00:17:30] And the idea is that they want to be able to sell a suite of all these different products to make one big product. And you can chop and choose what you want. So now it’s Duck Creek payments. And the idea is that they could sell payments as a bolt-on to their customers. And I think what’s great is they’ve got so many customers already that they can go and upsell or cross-sell to, you know, on the payment side. And in terms of any new clients, the idea is that they can sell us as part of the suite going forward. So it’s, it’s, you know, you’re not their main product. It’d be just part of a suite of their products, if that makes sense.”

[00:18:01] Alexej: Okay. So let’s say, for example, in a hypothetical world of, you know, you not exiting and continuing to grow the business. And let’s say you would have more budget. Do you think, given that you were so domain-focused on the insurance space, that you could probably build a personal brand or you or Oliver or somebody else in your team around, okay, we are the payments integration guys in the insurance space.

[00:18:30] And I don’t know, leveraging LinkedIn and maybe YouTube, especially maybe LinkedIn, right? Because I’m not sure a lot of insurers watch YouTube, especially in payments, but on LinkedIn, would that be potentially an interesting strategy in terms of the authority plane?

[00:18:47] David: Absolutely. And that is something we started doing within the last year. So post-Series A, you know, we hired a good marketing team to actually specifically do that.”

[00:18:56] Alexej: Okay.

[00:18:56] David: So we really started working on the brand of Imburse being the go-to payments company for insurance specifically. And we saw within the last year, the uptick, you know, people knew who we were within the insurance circles. It wasn’t, I would say, made a huge difference in terms of adding value to the company, because now if you still, if we still go to the same events, even though we’re part of Duck Creek, they will still know who Imburse payments was. And there was still reference us as that. So I think for Duck Creek, now there’s a bit of work to undo that, you know, they want to be known as Duck Creek payments—”

[00:19:28] Alexej: Got it.

[00:19:28] David: —but you know, once the brand is set up, we, yeah, we’re still quite recognized within the industry.

[00:19:34] Alexej: Interesting. Interesting. And then in terms of challenges, was retention a challenge for you or was it, let’s say not a challenge yet? So, and then maybe other challenges.

[00:19:47] David: So, yeah, I would say it’s a constant challenge. I mean, I think we sat at about seven percent over two years, I think. And we were aiming for it to be a little bit lower and actually from a development perspective, that’s fantastic, you know, because I was really looking after the sort of development and product organization with Bruno. From the development perspective, we had very little risk with people wanting to leave because one, we really made the mission of what the problem that we’re trying to solve.

[00:20:18] It was great. You know, so they felt like they were part of a mission in terms of technology. We never hired what I would consider people who thought they were the best in the industry. You know, the, the A class, what people might call them. The idea is that I always wanted to hire people with a great attitude and aptitude and then really supply an environment to learn. And that really kept a lot of loyalty within the team to the point, even post-acquisition, we didn’t have many leavers. I think we had maybe two or three and that was it in a team of 20 that we had, so we were very lucky in terms of providing the right environment.

[00:20:53] And I think that was a challenge, you know, in terms of when it came to money, that was always a difficult conversation because one, we paid fair wages, but did we pay the same as Facebook and Amazon and Google? Like, no, definitely not. We couldn’t afford to as a startup. But the idea is that we always made them feel like they were happy with what they started with, but they also had the knowledge that they were gaining. My promise to them is that, you know, you’re in a startup. It’s always a risk. If something happens to Imburse, you’ll always be way better off compared to when you first arrived and you’ll be sought after in the market.

[00:21:24] And at one point we did go through a round of redundancies, like many startups out there, we went from 40 developers down to 20, you know, so that’s 50% of the team that I had to let go of. And it was very difficult. But all of them found a job within two to three weeks.

[00:21:41] David: You know? So we were very lucky in terms of one, we had loyalty to, they felt like they were relevant within the industry, maybe even more. So we always sort of cutting edge in terms of the right technologies, in terms of the other teams, it was the same deal. You know? we, we just had a really good culture. We had a very people-centric culture. I think people already felt that. So yeah, the, the, the idea of having a high churn of staff, there wasn’t a thing for us, but it was constant effort.

[00:22:07] Alexej: Yeah. Yeah.

[00:22:08] David: That’s really make sure the company always stayed at that level.

[00:22:12] Alexej: Yeah. Makes sense. And so what was the split between your developers in, let’s say Portugal versus UK versus other countries again?

[00:22:20] David: So, yeah, so we, we were mainly split between Portugal and the UK, predominantly the UK. I think in Portugal we had about six people in total and that was including also our customer success manager. And then the rest was in the UK. So. I think we were sitting at about 50 people within the UK at one point then about six in Switzerland and six in Portugal because we’re about, yeah, we were about 62 in the company.

[00:22:44] Alexej: Got it. Got it. And we discussed it before, I mean, not on this call, but in terms of hiring, you know, talent from the likes of South Africa and, you know, other countries, like, do you still think that’s a really good strategy and, you know, what other countries could you recommend to other SaaS founders to hire from?

[00:23:04] David: Yeah, absolutely. So I think, I mean, to answer the question, there’s another sort of question I would also maybe want to add before that is what do we think the future of development is going to be? You know, if I look at the way how engineers are now, even compared to 10 years ago and where they’re going, AI is going to be a very big part of the tool set that they use in terms of helping them develop. And in terms of what do developers focus on is also going to be very important for a SaaS company.

[00:23:33] So a lot of SaaS companies always want to have these really complex platforms, which means they need some very specialized engineers with a lot of experience. And you don’t really get that as much in emerging countries because they’re still quite young in their knowledge of computer programming.

[00:23:46] So therefore you do have to go to more countries with a bit more experience. So yeah, I would hire from the UK, hire from places in Europe, maybe America as a base underlying team with a lot of expertise in building base SaaS platforms, but then in terms of feature development, you know, the stuff that’s a little bit higher level, that’s more user, user-focused things that actually are more IP to a, to a company. That’s the sellable stuff. That’s where I would start looking at emerging markets for sure.

[00:24:13] Because the idea is that there’s, there’s a lot of great talent that might be junior, but with the right mentorship and knowledge and training camps, you can upscale them to a great degree to develop features on top of that baseline platform.

[00:24:24] So it should be a mixture of the two. The idea is I wouldn’t just hire within one country now, you know, the, with inflation that’s gone up, it’s the operational costs for a startup. You have to be really smart with how you want to deploy your money and also to try and get as much from that, from your development team.

[00:24:40] Yeah. So it’s a, it’s a bit of a tricky one, but I would say in terms of feature seems definitely looking at emerging markets, South Africa is great. South America is great. Even Eastern Europe is still amazing in terms of talent, even though the big corporates have sort of moved in there. But when it comes to more expertise skill, yeah, you need, you need to look at more developed countries with that experience.

[00:25:00] Alexej: Yeah. That’s interesting. That’s a good combination basically. Cool. So, and then basically a year ago now, right? I mean, I think in three days it will be your one year anniversary since the announcement at least. You got acquired by Duck Creek, which is a US listed conglomerate. So, maybe walk us through, how did that come about? I mean, were you looking to acquire some customers in the US and then they started talking to you or, you know, you were trying to raise and, you know, they then were one of the potential investors, but then, you know, decided to acquire you, like, how did that come about?

[00:25:37] David: Yeah, it’s an interesting one. So yeah, we always wanted to go to the US. And at one point we were actually looking to acquire someone, a payments rail company that built infrastructure, but it wasn’t the right thing for us. Oliver had known Mike Joukowsky, you know, through some of the networking events. I think Mike had found us through Accenture because Accenture was also part of the software. Not so much part of the funding, but they were, they were really there in terms of support and trying to be like a channel partner, and Duck Creek was actually an Accenture company before it was Duck Creek. They spun out completely.

[00:26:13] So Mike Joukowsky got introduced to Oliver that way. And yeah, I think at one point there were more talks around them investing in us because they really loved what we did. They actually went in the shops around the market. They couldn’t find anything in terms of what we could do because they’re also a SaaS platform. That’s also they won’t be able to deploy to their insurance companies. The idea is that we worked really well in terms of the ideology of how do we build our platform and how are they building a platform and they couldn’t find anyone else out there.

[00:26:41] So, at first, there was more around investment that they were more keen to look at us as part of their investment portfolio, but what we didn’t know at the time is that they were going to be bought out by Vista. So they got bought out by Vista I think a day after us, after we signed, they signed. So for them, it was actually much better to do the acquisition path and trying to get the investment path.

[00:27:05] And because from a strategic alignment perspective, we really worked to their vision of what they want. You know what we want to do at Duck Creek in terms of having more global market coverage. The idea is that we were already a market player in terms of the global space. So for them, it was a bit of a no-brainer, and they, I think like many other companies, always try to build this stuff themselves and they realize how complex payments is. Because it’s not so much about the technology. It’s about the domain knowledge, understanding payments to a really good detail. There’s not much knowledge out there so they saw it as a sort of two birds in one stone solution.

[00:27:41] And then afterwards, they, I think what they saw the value was, is that they also going through a digital transformation, like most enterprises are, and they really saw a lot of value in the way how we built our platform that they could probably, you know, leapfrog and actually build rather using out the same way how we built our stuff and take all the domain knowledge that we’ve learned over the years and how to build scalable SaaS and take all the learnings and implement it within the internal solutions as well. So, and that’s what we’ve seen for the last year is that they really want to learn and they really want to learn how to be like the best SaaS company out there. So the attitude’s been really great.

[00:28:14] Alexej: Mm-hmm. And then predominantly US based, right? Like even the developers.

[00:28:18] David: They are. So there have been no, from a development standpoint, they, they based out of the US, in India, a Spanish team—

[00:28:28] Alexej: Okay.

[00:28:28] David: —They got a, they bought a lot of French companies. So they’ve got a French team, they’ve got developers in the UK, so they, they quite global from that standpoint. And now they are going global, you know, so that they, they’re not just looking to stay in the US they want to be able to also take the platform that they have and move all over the world to Australia, to India.

[00:28:46] Alexej: Interesting. Yeah.

[00:28:46] David: So they’ve got fairly ambitious dreams.

[00:28:49] Alexej: Yeah. And it’s fascinating. So you basically got acquired. And then the day after there was an announcement that they themselves were acquired by one of the largest enterprise software, private equity funds, Vista. Right?

[00:29:04] David: Yep.

[00:29:05] Alexej: So were they communicating to you at all about that deal? No, they couldn’t. Right?

[00:29:14] David: They couldn’t. No, absolutely not.

[00:29:16] Alexej: Interesting.

[00:29:16] David: I mean, I think it’s always in hindsight. I mean, as a founder, you kind of start thinking about did we sell too cheap or should we have been a little bit more pushy if we had known, you know? Imagine the sort of power we could have had as leverage to the point that it could be in self destructive, that we could have gone too cheeky and they, they would have said no to that.

[00:29:35] So, yeah, I mean, just, I wouldn’t even know what I would have done if we had, if we had known that they were going to get bought out themselves, but you know, I think, I think what was more important for us is we saw where the markets were going. In terms of startups, you know, we, we’ve seen a lot of friends that have suffered through the economy crisis last year. Some have lost their companies, downsized, had to really pivot.

[00:29:59] For us, it was really important to keep the vision going, but also more importantly, we made a lot of promises as founders to the employees that we had, that we wanted to bring them stability. You know, the idea is that having that stability was way more important for us. And regardless of whether this was buying or not. You know, the outcome would have been the same.

[00:30:17] Alexej: Mm-hmm, mm-hmm, makes sense. And so what we may be through the process of post-merge integration, right? So let’s say. You sign the deal, right? And now you’re no longer just share information with your board, but you suddenly have somebody you report to, right? So maybe walk me through that. And, you know, maybe if you can disclose even some of the reporting structures or the titles, how does it usually work? And, you know, in reality.

[00:30:48] David: So I can, I can talk to you about how it works with Duck Creek and I can also tell you more as a, as a, as a founder that sold the company, the emotional journey that you go through.

[00:30:57] Alexej: Perfect.

[00:30:57] David: Cause I don’t think a lot of founders actually talk about that side, right? They, everyone just sees acquisition are way amazing.

[00:31:03] Alexej: For startups, there are not many founders who even exit. So that’s, that’s already a good start, right?

[00:31:09] David: Yeah, absolutely. So I think, I mean, personally, the first thing you go through is more of an identity crisis. Because one, I was a CTO of a company for six years, and then all of a sudden, you’re no longer that same position. So you are still the leader of that, that, that team. But in terms of strategic decision making, in terms of stress that you go through as a founder, some of that goes away. But it does start used to, you start questioning yourself by saying, okay, am I still relevant for the market?

[00:31:36] If, you know, am I going to go into Duck Creek and be the startup CTO that can maybe perform within an enterprise? And I knew I could, but you go through this bit of an identity crisis. And apparently I was talking to another founder that’s gone through and he went through exactly the same thing, but no one talks about it.

[00:31:54] So yeah, it’s going to be an emotional journey for the first six months because you have to get used to a new identity altogether. It’s no longer your baby, even though you feel like it is, you still want to make sure it’s alive. The idea is that you’re no longer in control of decision making as to the future of the company.

[00:32:09] All you can do is advise, you know, so that that’s the biggest step that you have to realize when you’re going to get acquired. It’s not your money anymore. Its someone else’s. And therefore the decision making is with them. That’s, that’s fair. You know, they, they, they paid for the company and they should make decisions around it.

[00:32:26] In terms of Duck Creek, it’s very much like a center. So they have all the different levels from C suite to senior VP, to VP, senior director. So it’s like a big ladder of titles that you will go through. And each one has very different responsibilities in terms of how big a department you run, in terms of like what sort. Strategy or decisions are you allowed to make without going back up? 

[00:32:51] And I guess that was quite a lot of getting used to, you know, we were very dynamic in our approach in terms of wanting to make quick decisions and just get on with it, but all of a sudden you have to be used to the fact now there’s a procurement team that you have to go through. There’s a security team you have to get approval for if we wanted to use new software. And it’s not like it’s ever been a struggle. It’s just that all of these extra steps do add up.

[00:33:12] And the idea is that what should have taken a day or even a week in terms of decision now takes two months. And that’s just some of the getting used to. Things like reporting to my, who is my boss now, his name’s Jeff. He’s the senior VP for engineering. He’s been great. I think in terms of experience, I think he’s recognized that I’m a very strong technical leader and he’s actually leveraged a lot of our experience and knowledge, and he wants to reflect that within the rest of Duck Creek.

[00:33:41] So he’s been really, really supportive and I, I can’t say I’ve heard similar stories to other acquisitions. For instance, one of the, the, the guy I mentioned earlier went through the same rollercoaster. He was let go of within a year of his own company because they really had a CTO. They didn’t need another CTO and they really struggled to find a good position with him in the company. It’s not like they didn’t try. But eventually it led to frustration to the point where he’s just like, look, he doesn’t have to be here. He can act more as a consultant and then he left and I think it was mutually beneficial for both of them. So that’s a bit of a harsher exit, I would say. But yeah, I would say with Duck Creek, we’ve been really lucky.

[00:34:18] They’ve been really welcoming. Things haven’t really changed operationally for us. You know, they actually see us as the gold standard within the way how payments work. And since then Jeff, my boss, has asked me to take on a couple of other teams to bring them up to standard. So the idea is that they really want to promote the good stuff as a startup. So he’s been great. Even in terms of bringing over the product side, I can say the same thing. You know, we haven’t had any problems in terms of incorporating the company.

[00:34:48] I would say if anything, Duck Creek’s probably had a lot more advantages for the staff, you know, they came up with a far more formal way for knowledge-based learning, training. That’s something we never had as a startup or even had the budget for. And actually that’s been one of the plus sides, but I think like any, any bigger company, if you’re coming from a startup, you will start seeing that it doesn’t have the same flexibility and that can cause frustration. And I think that’s where it comes down to personal preference as to what type of organization do you want to work for? I’ve seen some of the staff that we have thrive within the environment and some of those just don’t enjoy it because they feel like they are within a big machine, you know, they don’t feel like they, they, they are adding much value, which is not true. I think it’s a small perception thing.

[00:35:34] But yeah, I would say the integration part was difficult at first because we didn’t know what to expect. It was a different culture. You know, we, we were an English based company going into a US-based company. We didn’t think about half the stuff that they thought of, and they didn’t think about some of the stuff that we thought of. So there’s been a lot of learning and sharing. I think we’ve been quite fortunate from that perspective.

[00:35:53] Alexej: Interesting. Interesting. Cool. So in terms of maybe lessons for other SaaS founders, right?

[00:36:02] David: Yeah.

[00:36:03] Alexej: From building the product, customer acquisitions, scaling, you know, and the exit. Anything, you know, the top two lessons learned, you know, for the founders out there?

[00:36:15] David: Absolutely. And I think I can be fairly controversial, and I’ll talk more from a product and engineering standpoint. One, doing something simple and doing it well, is everything. The moment that you start diversifying yourself into too many value streams in your product, that’s when you start getting into a bit of a mess because you don’t know where to prioritize your effort.

[00:36:37] And we see this, you know. You have something, and the customer says, ‘Oh, but if you just add this little feature, and you could just develop it for us.’ You do it because you want the money coming in. You’re so desperate for revenue at some points, because that’s the sort of constant nag that you have to succeed in terms of metrics. But the idea is it can lead you astray. You can actually make some pretty bad decisions in terms of pivoting away from the actual product that you should be developing. So, keeping something simple, doing it well, and doing it on a repeating loop so you get good sales cycles. So you can sell the same stuff. That should be the first point that you reach, and it doesn’t have to be sexy. And I think, you know, a lot of SaaS founders that I meet diversify too soon. So that’s my first piece of advice.

[00:37:19] In terms of scaling up, you don’t need bums on seats. If you get your money from Series A, don’t feel enticed to scale your team four or five times. The reality is that when you look at your product itself, if you get a big chunk of money, like Series A, you need to reinvest a lot of it. You’ve got a lot of technical debt. And I don’t think I’ve ever met anyone going up Series A that would say otherwise. But the idea is throwing another 50 people in while you’ve got that huge technical debt is that you’re going to slow down your company a lot.

[00:37:50] And I’ll give you a really good example of this. We went from 15 developers to just under 40 within the space of about six or seven months. So a lot of time was spent in the recruitment process. My time should have been spent more on the vision and strategy of leading a product, but I was in interviews all the time. We had to develop a software development life cycle that was very clunky. It was very sort of enterprise, and we slowed down to the point where we were capturing metrics on how the team was performing and 50 percent of the time, we were in meetings, which is deadly for a startup.

[00:38:26] And as soon as we reduced the team down, we actually moved away from the, say, agile methodologies stuff. And we lost no productivity at all. In fact, we were doing better than we were before we had that huge team. So I would say, before you scale, make sure you have the foundations right before you throw people at it. The idea is that you want to be able to optimize everyone that you have within your team before you start adding more bums on seats. And I think that’s something that a lot of founders get enticed by. They think, ‘Hey, we got money. Let’s just hire.’

[00:39:02] Alexej: Yeah, yeah.

[00:39:03] David: And you can start hiring; you can drag that money on a bit more.

[00:39:06] Alexej: Yeah, yeah, yeah. Well, I guess, I guess, founders have the pressure by the VCs or, you know, investors, to, you know, recruit and scale faster, but I think, yeah, if you, in hindsight, you can also just say, ‘Look, guys, thanks for the money. Give us six months, let’s clean up shop, and then start scaling again.’ Right? That would be the wiser thing to do. So, David, we discussed a lot in this episode, right? How you launched the business, who to hire, how to acquire clients, you know, how you exited the business, how the whole post-merge integration process works.

[00:39:45] And what’s really rare out there is to actually understand, or like, listen to somebody who went through a process with one of the leading software private equity firms, and about the acquirer who actually acquired a business. And if I remember correctly, you know, a while ago when we caught up, you mentioned that you are reporting to the VP of Engineering at Duck Creek. Right? But I think for the listeners and for the viewers, it would be really interesting to understand what value does this equity actually provide, and what are they doing to Duck Creek after acquiring them?

[00:40:32] David: For sure. So, you know, when Vista looks at a company, they look at the potential of a company, and, you know, Duck Creek in itself has been very successful for a very long time, but I think it’s now at this point where it needs to be operationally way more efficient because it can drive way more value, right? And I think a lot of companies of that size tend to go through the same thing. So what Vista is really good at is that they look at a company as a whole, and they can see the potential value of where it could be within the next four to five years. And then from there, they start saying, ‘Okay, what efficiencies do we need to start bringing into the company?’

[00:41:06] And some of them might be very difficult decisions to make, but ultimately, then they tend to make the hardest decisions within the first year in terms of what the company structure needs to look like, and they bring on a lot of experience from outside of the organization to try and help encourage the company onto the right track.

[00:41:23] So, for instance, they’re bringing on people that have scaled companies from all the legacy systems to more modern, new systems. They recognize, for instance, how we could actually have a very big role within the company going forward, because we already are at the sort of target operational model architecture of running a SaaS platform, where they could leverage us to be able to go into other teams and other, you know, product departments already.

[00:41:48] So the idea is that within the first year, they really want to look at optimizing more the costs and the running efficiencies of the company. And then from there, it’s really about bringing more money into the company, trying to expand the company’s operational capability more than the actual product itself, because they realize that if you sort out the machine, the output of the machine will look after itself. So I think that’s the sort of mantra that they have.

[00:42:10] Alexej: Mm-hmm. Got it, got it, got it. So, yeah, obviously, in these times, valuations are now a multiple of profit, not sales anymore. Right? So they are basically increasing the profit, cutting some of the costs, and improving, you know, the whole operation, optimizing a lot of processes, bringing in new talent, yeah, stronger leadership as well. And then, as you said, I guess in the future, they are also doing kind of like a buy and build strategy. Where they, you know, provide a bigger suite of solutions to the same clients, basically, right?

[00:42:46] David: Yes, absolutely. And I think in terms of any SaaS platform that they’re looking at, typically, the profit margins that you’re looking at are about 70 to 80 percent profit margins. So that’s the sort of numbers they’ll be looking at. And then they’d be also looking at the ability to go global. You know, in this case, Duck Creek is going global. They’ve been very much just a US market player for a very long time. So the opportunity for them to be able to grow, not just the profitability in terms of efficiency, but they know that by going global itself, they can also get brand new revenue streams that have never probably been there before within Duck Creek.

[00:43:19] Alexej: Amazing. And then let’s do a quick fire of, you know, four questions we always ask every interviewee. So what’s, yeah, what’s your favorite book in terms of maybe SaaS or, or tech out there?

[00:43:36] David: I think the recent one I read was ‘Build’, it was ‘Build’ by Tony Fadell. So he’s the creator of the iPod and he was a big influence on the iPhone, and he also built Nest. And he tells you a story of how he fumbled through those, from a young entrepreneur all the way to being sued and stuff like that. So it’s kind of like a mentorship book in terms of everything I experienced. And there was a lot of parallels to what he, I mean, he did way more successfully over years, but the stuff that he says is, I would say you hear it in lots of conversations when you talk to people, but he really encapsulates what it means to be an entrepreneur and building something worth building. That’s his main takeaway. So, if I were to be encouraged to read a book on entrepreneurship and building something, that would be a good place to start.

[00:44:23] Alexej: Okay, okay. And then, which entrepreneur/business leader do you admire the most?

[00:44:28] David: I would say Bob Iger of Disney, the CEO of Disney. If you look at the way how Disney has been turned around under his leadership, it’s chalk and cheese, you know? Disney at one point weren’t doing so well, and he came in with a very creative mindset. He was very visionary, he saw what technology could do for Disney. Even buying up Pixar, he didn’t have a big ego. He went back to Steve Jobs, you know, after the Disney relationship had broken down. And he wanted to do the right thing, and he had a big vision behind him. His ability to articulate communication and strategy is unlike many people that I get to watch. So I would say Bob Iger.

[00:45:08] Alexej: Cool. Yeah, I did read the corporate story of Disney. It’s a great book as well, actually. Yeah. Awesome. And then, what is a SaaS tool you use which a lot of other people don’t know of?

[00:45:24] David: So one that we purchased about a year ago and we’re using a lot, and they’re awesome, is a company called Zuplo. So that’s Z-U-P-L-O. They’re an API gateway management software SaaS, but they’re very unique in the way how they build. They’re very developer-friendly, and they’ve just been a great experience to work with. And I can see really big things coming up for them in the next few years. I think they just raised a Series A now. So yeah, great company. I’d recommend them.

[00:45:52] Alexej: Okay. Awesome. And then finally, what’s the best advice you’ve ever received?

[00:45:58] David: Oh, word. Probably, to be honest, it’s from my architect, James Wilde. He’s an incredible guy, super intelligent, and very humble. And his favorite saying is, you know, to keep everything simpler or to make things as simple as possible, but not simpler. You know, the Einstein saying. And it’s something that has really made me aware of, I would say, more being his CTO. He’s given me a lot of advice just around keeping things simple, the simpler, the better. You know, we want things to be boring in the software, not exciting and trying to change everything every two seconds.

[00:46:34] Alexej: Interesting. Yeah. Awesome. Look, I mean, it’s been really, really interesting. I think you can really hear and understand that you have so many years under your belt. So yeah, thanks so much.

[00:46:47] David: Thank you. Yeah. And there’s still plenty to learn, right? The thing is that I think a lot of it’s luck, and I think if you’re paying attention, you’ll learn something along the way, but yeah, there’s just so much to learn. I think that’s the main point of wanting to be an entrepreneur, is that you’re self-suffering all the time, but for good reasons.

[00:47:05] Alexej: Awesome. Amazing. Well, good luck on the journey and yeah, we’ll chat soon.

[00:47:10] David: Yeah, we’ll chat soon. Cheers.