How Issuu Got Acquired for 9 Figures in 2024

I am very excited about this next guest because every time I have them on the had them on the podcast, I cannot get You guys know how I push. The I just cannot get the data I wanted. And then all of a sudden, I say let me put you on stage at SaaStr Open, and he says, "Well, we actually just had a big transaction. I'll come to SaaStr Open. We'll talk about it." That's all I'm going to say. Please help me welcome to the stage Joe from Issuu. Joe, COME ON UP. GOOD TO SEE YOU, MY FRIEND. THANK YOU FOR THE WATER. SO, I want to keep

chatting while I ask you questions, and I'm going to grab my coffee while you make yourself comfortable. Um First off, Go ahead. to say um you should change the name of this conference to the Resilience Open. Because all we're hearing about is like one experience of resilience after the next. It's sort of the core of these businesses. Anyway. I I also want to tell you guys uh enjoy I hope you don't I hope you don't mind me doing this, but we'll get to this later because conference is not always just about business, but he actually feels great.

He just sounds terrible. We'll talk about that in a little bit. Uh we'll let that be an open loop. vocal cord nerves. Joe, this is called an open loop and foreshadowing. Just let it sit. Let it sit. They'll pay attention. We'll get to it in about 4 minutes. I know. This happened about a month ago. What did you do with Bending Spoons? Yeah, so uh first of all, I should just say I'm no longer the CEO of Issuu. I was the CEO of Issuu for 11 years, 11 and 1/2 years, and we got acquired by Bending

Spoons at the end of July. Mhm. Um so, any Is anyone familiar with Bending Spoons? So, um they're a a company everyone in this room should know more about. They're uh Italian-based, and they are acquiring primarily product-led growth SaaS companies, but also doing more as well. They bought uh Evernote, Meetup, uh they just bought WeTransfer. They

bought us as well. Um Hoppin. Yeah. Um and what they're doing is they're buying companies that have uh some pretty good scale kind of revenue in the 25 to 200 million-dollar range, profitable or close to it, and then they go run them. They buy to own. It's not a PE firm. And we found them uh through some of their earlier acquisitions, and they were sort of always on my list of folks that we

should be reaching out to at the time when we were ready to look at getting acquired. We're going to get your backstory here, but I want everyone to understand what the end looks like. So, this is sort of what the end looks like. And can we put a dollar value on the deal or maybe uh a range on the on the AR multiple? I Sure. We can I can't give you specifics cuz you're never allowed to give specifics like this. But, I've never given you anything, so I'm going to give you a good range, and which will be pretty good. Um so, you know, we we

did um uh as a company, we're doing just north of 30 million in revenue, profitable, um not not very profitable, but sort of barely profitable. And uh we sold the company for nine figures. Yeah. So, fair to say like a 4 to 6x revenue multiple, something in that range? Yeah. All right. Not six. I mean, uh unless you're AI right now, you're not getting north of five. I mean, there's the the There's all these companies

uh you know, given the stage of where Issuu was when we sold it in July, if we had sold it 2 years prior in '22, we would've gotten two to three x what we got. Why didn't you? Because we weren't at the size we're at now. I mean, one of the things that when you're selling a company, it's important to understand our lane, right? So, and where the market is. So, uh we could've held on and continued to grow and build Issuu for another 2 years and hope that the

market comes back. But, I think it's also important to understand where we are in the business, where we are in the uh opportunity cycle, and um we felt like uh you know, profitable, growing, north of 30 million in revenue, good business, um huge number of really happy customers. We had a million free customers a year, marketers, content

creators, uh 65,000 of them paying Issuu. And um we had gotten some inbound interest, and once we got that inbound interest, we started talking to folks uh in the market. So, here's what we're going to focus on over the next 14 minutes and 30 seconds. You know, going from zero to a nine-figure exit, right? We're going to talk about how Joe used debt, how he scaled ARR across three key sort of story points, and then exiting, right? And you paid your bankers how much to do the deal? 2 million dollars. Over 2 million.

too over 2 million. Over 2 million dollars. Uh was it all cash or cash with earnout, a mix? Whole deal was all cash, no earnouts. Um we actually just let let it hang, so we'll talk about that. Another hanging that's good, right? And then we'll talk a little bit more about the layer the lawyers and the process you did on the exit. So, all that in the next 14 minutes, but let's talk about the product for a second. This is your home page. This is what you do. Yeah. So, Issuu is this massive digital publishing platform

primarily catering to marketers to take their marketing content, collateral, sales materials, brochures, um publications, all the the whole range of different documents mostly created in using Figma, Adobe, or Canva. It gets uploaded to Issuu. Issuu hosts it, um transforms it into a range of assets. So, you create one piece of content, and it can get transformed into a video and

link-enhanced paginated version, uh an article using AI, social post, whole range of different assets that can then be shared anywhere, embedded anywhere, and then provide a whole range of data and analytics around that content. We landed on this home page about 2 years ago. Um we had our version of the purple home page Yeah. also. I'm going all the way back. I just put the revenue graph up. You First revenue is back here. Launch is 2006. Is that about right? Company launched 2007. Uh very slow

revenue growth for the first five or six years. Focus initially was massive scale. So, I joined the company in 2013, took over for a from a previous CEO. Um and up until that point, the focus has been go find anybody that's got a longer-form, high-quality PDF, brochures, catalogs, marketing materials, magazines, publications, all that stuff.

Get it into Issuu. Because from there, make it look great. Issuu launched like as the iPad was launching, right? So, it was a different time. Um make it look great, get lots of data, and then start to figure out what aspects of this are valuable to businesses and start to charge. And we really honed in on being a B2B company in that 2013-2014 time frame. You guys can see again the story here. Just doubling down on this

idea of it's not always like, you know, zero to a billion dollars of revenue in 2 days. You know, this is like Well, it is for most companies, but Yeah, it is for everybody else except you, right? But, we we all It's I mean, look at this. I mean, that is That's 10 years of hustle before your first 5 million of revenue, right? And now we see it. We're seeing the big exit on LinkedIn. It's a great story, but it takes a decade, two decades almost, of hustle, right, to get to this point. So, you're scaling at this point. You come in as CEO in 2013. Should we dive deeper there? Was there a contention with

founders and investors, and they brought you in, or what happened? is founded in Denmark. In where? Denmark. Denmark. And the lead investor is a firm called one of the largest Scandinavian VCs. Would they have led the 2007 round for 10.3 million? Yeah. Okay. The bottom one? Yes. Um Yeah. I don't think it was Whatever. Yes. Um This is wrong. It's Crunchbase's fault, not mine, but doesn't have everything, but it's close. I think it was a little less, actually. Uh I think some of that

2007 was actually being the lead of that Series A is Yeah. Northzone Capital. They also put them the bulk of the rest in um in 2014 when I raised, and KDDI, the big Japanese telco, came in as part of that. Uh They had a There was a founding group of five people. They were doing a nice job of scaling use, um but the but there's sort of two main growth opportunities. One was

partnerships with content tech platforms in Silicon Valley primarily, Facebook, Pinterest, uh Adobe, ultimately later Canva, etc. Um and then the other was really an emphasis on revenue growth. And so, they decided to go find a Silicon Valley season percent uh come in and and run the business. So, I joined They had actually gotten rid of the CEO 6 months before I joined, which was

really great. Most times when there's a CEO switch, the board will bring in the new CEO and then say, "Hey, lucky you. You've got this previous CEO, and you can have them do whatever you want." And even in the best circumstances, and often it's, you know, it's challenging. Um it's confusing because the people who are still in the company aren't sure where their loyalties are supposed to lie or who's really in charge or whatnot. So, are the brass tacks here though? So, they they got rid of the CEO because he

wasn't performing or she wasn't selling or what what was the Wasn't What didn't have any connections outside of Denmark, and wasn't really growing the business. Couldn't grow internationally. They find you. Were you already involved in the company, or they brought you No, they brought me in from scratch. From scratch. You are talented guy. You can do anything you want. How did they recruit you? What was your comp package like? Did you get equity? Yeah. So, we flipped the company First of all, we flipped the company from being a Danish company to a US company. Um that was uh somewhat complicated process. Um I got

uh I got a nice comp package. I'm not going to give you the specifics, but I got a high a much higher percent of the company than normally when you bring in a CEO. What a normal CEO be like 4 or 5%? Yeah. So, you're higher than that. Yeah, significantly higher than that. Okay. Um Nathan always asks these questions really fast hoping that you'll answer them. Um but we've done this a lot, so uh you know, I'll give But I'm giving you more today than You're great. I'm not complaining. This

is wonderful. Um but you So, you come in you're well incentivized. You you get the thing international. let me just finish on the point why I came in. So, I've spent my career in this intersection around creativity, content, and technology growth. Uh I was at a company called Verage back in the late '90s, early 2000s. They did video search. Uh I ran the business side of things at Flickr. So, I've certainly my wheelhouse is content. Uh and I I loved the background and the basis and

foundation of what Issuu was doing. So, I was excited about the product. I thought, "Wow, I think there's a lot we can do here." Um good comp package, and uh exciting. Yeah. So, you're in you're in now full-time. You're running the business. You did the series B. I want you to just to just quickly on What was the thinking in 2021 when you did this debt deal? And can you share the terms? Yeah. So, we were an unusual uh cap table. It's quite quite good. We had no preferences. When we flipped the company from being

Danish to American, as part of that as part of a deal between me, the founders, and the uh investors, we agreed that everybody would have be treated equally. So, there were no preferences. Just to be clear, there were only common shares of the company. There were basically There were preferred shares, but they were treated the same as common. It's all the same. Okay. Um So, what it meant is when we got to a point where we wanted additional capital,

raising money, so in '21, given where we were at a revenue and growth trajectory, '21, you know, everybody was pushed to raise way more money than they wanted at higher valuations than were reasonable, and we're seeing a lot of fallout from that now, right? So, I wanted to make sure that we maintained our flexibility. So, instead of raising, we would have had to raise 30 million on a

$250 million valuation, which meant that for everyone to feel successful, we would have had to have a billion-dollar exit, which may have happened, but I wanted to make sure I maintained flexibility around things. Plus, we would not have had this big preference stack. So, we got introduced to a lender uh very highly recommended. We uh took on $20 million of debt, actually, and had access to another 10. So, it was

announced as 31, but it was really 20. Um and uh I won't give you their name, but uh we had we had three lenders in our history. One was SVB, where we took a very tiny amount of debt, actually, during that 2014 raise. And then the third one was a firm called Eastward Capital in Boston, who were absolutely fantastic to deal with. Um We ended up refinancing

this 2021 lender with Eastward. I want people to take the lessons you learned from that, and I don't want to talk negatively, but this is important stuff. What what went wrong about the first debt deal? I don't want to talk negatively, but I will talk honestly. Um we worked with a firm who were uh really essentially predatory lenders. Um lending has a bad rap. However, I think there are great lenders. Joel, I got to hold on one There's one piece of information they have to have. What was the interest rate

on the first piece? It was Like 12-ish percent. So, the reason I'm bringing that out is he Most of you wouldn't put the idea of predatory lender and 12% together. Most of you, if I told you, "Hey, what is a predatory lender charge?" you're going to say something like 40%. Okay. Right? So, now let's take the rest of the story. There's two forms of predatory. There's interest rates, and then there's process. Uh so, we raised $20 million of debt again, so that there wouldn't be additional preferences, etc.

Um and we had um we used that money to power innovation, to power launching a an enterprise product, um and to start powering deep integrations with uh folks like Canva and Adobe. We used the money well. Uh however, about a year into it, we missed our revenue covenant by a footfall. So, on a $7 quarter, we missed

by about 150k. So, just to be clear, revenue covenant is going to say something like when you're signing a term loan, it's going to say as part of the compliance certificate covenants, you must grow revenue by 10% year over year to remain compliant, otherwise we can call the debt back to us. That would be a similar kind of covenant. So, we knew we would have to pay a penalty and increased interest. All that was fine. That wasn't the predatory part. Predatory part came in when we agreed verbally to change the covenant

terms moving forward. And this firm um continued to negotiate with us after we had verbally agreed, and kept squeezing and adding in more and more and more and more terms to the point where they started to demand um they wanted uh at one point an additional point in the company for each month that we didn't refinance the business, and wanted to charge us a penalty of a

million dollars if we didn't give them those 1% warrants within 3 days. Prior to all of that coming into play, we refinanced with Eastward Capital, who are fantastic. Um and we didn't end up having to pay much of those penalties. But anyway, um through all of this, we continued to grow the business, brought on uh better and deeper integrations. Um

I had a health scare. Um but um We navigated through Let me pull the story through now, right? So, so and remember, 1 million 1% of the company they sold for nine figures just recently. So, every 1% penalty he's paying on the company, if he even sold warrants on the debt deal, 2%. Well, if he sold for north of 100 million bucks, that just the 2% warrants is $2 million right there. And then every extra 1%, that's another million dollars off the sale. I mean, right out. I mean, that You got to calculate that in your cost of capital. I'm beating this down a little bit cuz it's self-serving.

Founderpath is always more expensive on an interest rate level, but we never take warrants. And we never do these process tricks that put founders like we don't charge a revenue growth covenant, for example, for this exact kind of reason. The point of this like we got through it, and it didn't actually hurt the business, but it's a distraction, you know? And one of the things that I uh focus on as a CEO is CEO's main job is to limit distractions. That's it. We talk about CEOs and supposed to make sure there's money and all that stuff. Of course, but if you don't have money, it's a

distraction. So, the key is limit as many distractions as you possibly can. Yep. So, uh came through it, uh landed Bending Spoons, and um Let me fast-forward through this because I was going to play a clip here, but I want to also be respectful, and you name the firm in the clip on the podcast, and I don't want to create an awkward situation right now, but people want to privately do their own research, Yep. they can go. But I will just say in the moment when I interviewed you in 2021 right after you did the debt deal,

you loved it. Loved it. You had no idea. I mean, "Oh, the rate is so cheap, Nathan. This is incredible." They were a really highly recommended firm. Um and I'm happy to talk one-on-one afterwards, or um they're still running around trying to do debt financing. Don't work with them. Work with Eastward Capital, or Nathan, or There's a set of really good lenders. And debt financing can be a really positive thing for the business.

Um but if you get in with the wrong folks, it's important to understand how to navigate out of it. O- Over the last minute, Joel, I want to wrap up this There might be people in this room thinking, "I actually do want to go sell to a private equity shop like a Bending Spoons, or Rocket Internet, or one of these kinds of companies." So, you get this deal done just recently. For those of you that joined later, over $100 million exit on 32 million bucks of revenue. This is a company that is known for doing these kinds of deals. They've bought these other kinds of companies, which Joel mentioned. What should people be prepared for if they're entering an M&A process with a Bending Spoons?

Lawyers, banking fees, process. Yeah. So, you know, you have If you typically have a banker, that's a couple million dollars. Um your lawyer, I think most people think, "Oh, I'll just get an M&A lawyer at the time I'm doing an M&A." Maybe your law firm does it. The lawyer you use makes a big difference. We worked with Goodwin Procter, um Larry Chew. You know, when I talk about folks we work with, I try to be as honest as possible. Like if they're not good, I'll tell you. If

they're great, I'll tell you. Um Larry Chew is a fantastic lawyer at Goodwin, and he helped make phone calls, and talked to people in the midst of this process that enabled us to navigate through both the term sheet and the contract way more efficiently than it would have otherwise. Did the terms drastically change between the term sheet signing and final One of the great things about working with Bending Spoons, they they didn't retrade with us. I don't think they've retraded with others, meaning changed the price. Terms

were the terms we agreed. There was lots of stuff that lawyers haggled over and things like that, but uh price was the price, and um, they're very high quality folks to work with. And I think one of the things as you're thinking about selling that's really important to me is most of us, me included, think, oh, PEs will start to get interested in us and they'll be, you know, five to 20 strategics of some

form or other, some quality or other, that we think can and should buy us. And I think all of us in the room, once you're north of 10, 15, 20 million, become attractive to PEs and strategics. And so, you know, there's 50 PEs that could be interested, 20 strategics. But the truth is, in the moment that this starts to happen, the people that are interested start to whittle away fast because uh, you know, if it's a strategic,

Campbell was one of the folks that could have and should have bought us, potentially. But they had just bought Affinity and they were Did they give you a term sheet? We were We had really deep conversations with Campbell and Adobe. Okay. Um, part of Ending Spoon was good, very good terms, really fast. We uh, and all cash. If I'd signed with Adobe, we'd still be negotiating and I'd work there for four more years. Was the deal price though higher with Adobe? They would have all in been higher? You know, we were kind of around the same. Okay, yeah. Some of the Some of the

strategic may have been a little higher. Yeah. Um, but my point is, many of the strategics that you think are going to buy you have something else going on. Either they're trying to get sold themselves, if they're private, they might be buying something else, they may have just let someone go that's important. All kinds of things happen. Most companies, when they get acquired, there's one to three that really come to the table. So, don't be disappointed if

the 20 folks that you thought were going to buy you, that you thought were going to keep raising the price and quadrupling it, if that doesn't happen. It happens with AI companies. It happened with, you know, a few here or there, but it's pretty rare. At the end of the day, there's one to three companies that are right for that time, um, when you're ready to pull the trigger. You can stop and say, "I'll wait two years." or whatever, but If you hang out in circles like this all the time, you would think the $100

million exit is the norm. It should happen every day. It's, you know, of course, that's what we want to do, but it is actually the rarity, right? Growing coming in in 2013 at $4 million bucks of revenue as CEO, scaling it to $32 million of revenue in a very competitive space. I mean, you I won't name all the other companies, it's a very competitive space. And then running a successful process to get a all cash nine-figure deal done, doing it all with vulnerability and transparency, working through debt deals, personal health scares as well. Got to give it up for this guy for being so vulnerable. Give it up for Joe from Issue. Thank you.

[Applause] I appreciate you, man. That was That was awesome. That was great. Uh, we'll keep this side