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The Closers M&A Playbook: How I Sold Grasshopper for $100m+

What Grasshopper's founder checks when buying companies: addressable market, ROAS and 11 metrics that raise your exit value

David Hauser · Grasshopper

Published September 1, 2022
About this resource

David Hauser, Founder of Grasshopper, exited for $170m. Now he acquires companies. In this keynote, he says what he’s looking for:

- How we measure addressable market

- Importance of return on ad spend (ROAS)

- Why revenue growth doesn’t always matter

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What you’ll learn

David Hauser discusses the Grasshopper exit through growth channels, business quality, and acquisition readiness. He focuses on the characteristics that raise a company’s value, including repeatable customer economics, a strong management team, and a thoughtful M&A process.

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Key moments

Find the ideas you need and go straight to the source.

Investing in growth channels

“people that come to you and say David here's what I'm going to do and here's why I'm going to do it and I'll come back to you when it's done right so those were those changes that happened there also the biggest changes that really happened through these periods paid advertising each of these periods we found a new marketing channel and put more and more money into it plain and simple right like people want to stand up here and give you complex things we paid more marketing dollars we”
Watch at 02:53

Timing and acquisition value

“I I I I I have to say that I think there was a definitely a timing and luck factor to that we built a great company but someone way overpaid for it so tricks um and uh they've done very well now right so I think the company will do 85 million dollars this year and you know definitely will hit their 100 million dollar Target which was part of the metric that they decided on before they bought things um but they overpaid at the time um and that that really I think”
Watch at 05:24

What makes a business valuable

“um how how much do I have to resell right if I have to resell my entire customer base again and again that's much more risky much less valuable right so each of these metrics are the things in your business that make it more valuable addressable Market is really one that's interesting to me because a lot of people think about size of addressable market and I think quite honestly that doesn't matter for most of us in the room right unless you're doing hundreds”
Watch at 08:45

Why a management team matters

“suggest thinking about all of these categories for how you can make your business most valuable for yourself and then how we on the other side of it think about these things so a few of the stuff that's not on the Matrix um necessarily but I did want to talk about from an m a standpoint um first like I mentioned at grasshopper we got out of the business we had a management team this was tremendously valuable to the acquirer for so many reasons first the transition was easy”
Watch at 11:38

Navigating the M&A process

“conversation is a no-go go conversation we learned this from the the bankers we had involved to help us through that process so at grasshopper we sold the company in May um we closed the deal in May um six weeks later after we closed that deal an activist investor uh told Citrix they had to sell off all of their SAS business so we were weeks away from the deal not”
Watch at 14:51

What I Learned From Exiting for $170m

“What I Learned From Exiting for $170m”
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Invested in Founderpath because of my Grasshopper

“Invested in Founderpath because of my Grasshopper story… :)”
Read slide 6

11 Metrics I look at Before I

“11 Metrics I look at Before I decide to Acquire”
Read slide 10

This excel file template available on USB

“This excel file template available on USB”
Read slide 15

Over the last 20 minutes…

“How we measure addressable market”
Read slide 19

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Resource files

  • Video

    Watch video

  • How to set up a SaaS Data Room

  • The Closers M&A Playbook: How I Sold Grasshopper for $100m+ - Slide Deck

About the speaker
David Hauser

David Hauser

Managing Partner · Grasshopper

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David Hauser is an American entrepreneur, speaker and angel investor He is best known for co-founding the Grasshopper Group, a virtual telephone service acquired by the Citrix Systems for $170 million in 2015. Hauser is a founding member of the National Entrepreneurs' Day and has co-founded a number of tech companies including Grasshopper, Chargify, Spreadable PopSurvey, Deck Foundry, and others

Company revenue
$43M
Team size
5000

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Slide by slide

Each slide with a short explanation of what it shows. Open the slide text for its exact wording.

20 passages

Founderpath mastermind context

  1. Slide 1Open deck

    Founderpath mastermind introduction

    Founderpath pairs its private mastermind with expert access for financed SaaS businesses. Event photos show the audience and a speaker on stage.

    Slide text

    Founderpath CEO Private Mastermind When Founderpath finances your SaaS business, you get exclusive access to industry experts. Get your offer at Founderpath.com

Grasshopper growth and exit

  1. Slide 2Open deck
    Slide text

    What I Learned From Exiting for $170m David Hauser Founder of Grasshopper Founder500, Sept 2022 .. And 11 metrics I analyze today before buying companies

  2. Slide 3Open deck

    Hauser brings operator and investor experience

    Hauser points to building and selling Grasshopper and Chargify, alongside investing in more than 75 companies. The slide also notes Grasshopper reached $30m+ ARR after 11 years and that a separate labs effort lost over $1m.

    Slide text

    Why David? Bootstrapped Grasshopper to an overnight success after 11 years, $30m+ ARR and sale to Citrix Bootstrapped Chargify to $3m ARR, investment from Mark Cuban and sale to Scaleworks Lost over a $1m building a “labs” concept within Grasshopper Investor in over 75 companies, mostly SaaS Grasshopper

  3. Slide 4Open deck

    Grasshopper revenue rose steadily

    Grasshopper's chart shows annual revenue climbing from $1m in 2004 to $43m in 2016, with growth accelerating in the later years.

    Slide text

    Grasshopper Revenue Growth

Using debt to fund known marketing

  1. Slide 5Open deck

    Debt funded known marketing channels

    Grasshopper used $15m of debt in 2013 to stay bootstrapped and fund familiar marketing. The stated terms were a five-year payback, 12% interest, no warrants, and three months of negotiation.

    Slide text

    Grasshopper Revenue Growth Wanted to stay bootstrapped, get cash Raised $15m of debt in 2013 2013 5 year payback period Poured it into known marketing 12% interest rate No warrants 3 months to negotiate

  2. Slide 6Open deck

    Grasshopper story led to investment

    The speaker says his Grasshopper experience motivated his investment in Founderpath.

    Slide text

    Invested in Founderpath because of my Grasshopper story… :)

  3. Slide 7Open deck

    Citrix acquisition details

    The slide's callout says Citrix paid $165m in cash and $8.6m in stock for a business with 40 employees and $30m in bootstrapped revenue. It equates that revenue with $800k per employee.

    Slide text

    Grasshopper Revenue Growth Citrix Pays $165m Cash, $8.6m Stock Had 40 employees, $30m bootstrapped ($800k rev/employee) 2015

  4. Slide 8Open deck

    Brief branded pause

    A nearly blank Founderpath-branded slide creates a pause between the acquisition story and the session outline.

    Slide text

    Citrix Pays $165m Cash, $8.6m Stock Had 40 employees, $30m bootstrapped ($800k rev/employee)

The acquisition evaluation framework

  1. Slide 9Open deck

    Acquisition analysis spans three areas

    The talk groups its acquisition review into market, customers, and money. Topics range from market size and competition to order value, ad returns, growth, margins, and EBITDA multiples.

    Slide text

    Over the next 20 minutes: How we measure addressable market I’m going to show you how I acquire companies: MARKET CUSTOMERS MONEY Why we care about competitors Are existing channels a real moat or not? How I use average order value (AOV) Importance of return on ad spend (ROAS) Spend on new customers, exp. opportunity Why revenue growth doesn’t always matter EBITDA multiples I pay Gross margin has to be above 70% for me to care

Ranking acquisition targets

  1. Slide 10Open deck

    Eleven metrics guide acquisition decisions

    The checklist names 11 inputs, including revenue, EBITDA, order value, repeat purchasing, market direction, channels, competition, customer returns, margins, acquisition spend, and growth potential.

    Slide text

    11 Metrics I look at Before I decide to Acquire

  2. Slide 11Open deck

    Each metric has three ranking bands

    The table sets low, middle, and high filters for each metric, such as revenue, margin, channel mix, and growth potential. These bands provide consistent categories for comparing companies.

    Slide text

    11 Metrics Each Have 3 Stages of “Rankings”

  3. Slide 12Open deck

    Ranking bands carry different weights

    Each metric's three bands receive weights of 0, 3, or 5, so stronger fits contribute more to a company's comparison score.

    Slide text

    With Weights of 0, 3, and 5

  4. Slide 13Open deck

    Five companies receive weighted scores

    The matrix applies each metric's filter and weight across five companies. The totals differ, allowing the buyer to compare candidates using the same criteria.

  5. Slide 14Open deck

    Company three ranks highest

    Company 3 earns the top score at 36, so the example buyer selects it. The highlighted total connects the decision to the weighted comparison matrix.

    Slide text

    I’d Go Buy Company Number 3 Because Scored 36 (The Highest)

  6. Slide 15Open deck

    The scoring template was shared

    The slide offers the Excel comparison template on a USB drive at the Founderpath booth, making the scoring method available for reuse.

    Slide text

    This excel file template available on USB (at Founderpath booth)

Operating beyond the founder

  1. Slide 16Open deck

    Build a business others can run

    Owners should reduce their day-to-day involvement, build an independent team, and document systems. The example dossier organizes personal and operational records into sections.

    Slide text

    Outside the Matrix: Get yourself out of the business (use assistants, create dossier’s) Build a strong and independent team Document all systems and processes do anyone could learn

  2. Slide 17Open deck

    A data room creates discipline

    The checklist extends the operating advice into a buyer-ready data room, with requests grouped under people, marketing and sales, operations, and financial records.

    Slide text

    Outside the Matrix: Get yourself out of the business (use assistants, create dossier’s) Build a strong and independent team Document all systems and processes do anyone could learn Actively think about or build a data room, creates discipline

  3. Slide 18Open deck

    Prepare for a buyer conversation

    The closing advice is to preserve room for a buyer, focus on finding the right buyer over running a formal process, and treat timing and every conversation as decision points.

    Slide text

    Outside the Matrix: Get yourself out of the business (use assistants, create dossier’s) Build a strong and independent team Document all systems and processes do anyone could learn Actively think about or build a data room, creates discipline Leave some meat on the bone Don’t worry about running a “process” as much as finding the right buyer Timing matters Every conversation is a go / no go conversation

  4. Slide 19Open deck

    Review the acquisition framework

    The recap returns to the three areas of market, customers, and money, with the same questions on market size, channels, order value, advertising returns, growth, margins, and multiples.

    Slide text

    Over the last 20 minutes… How we measure addressable market I showed you: MARKET CUSTOMERS MONEY Why we care about competitors Are existing channels a real moat or not? How I use average order value (AOV) Importance of return on ad spend (ROAS) Spend on new customers, exp. opportunity Why revenue growth doesn’t always matter EBITDA multiples I pay Gross margin has to be above 70% for me to care

  5. Slide 20Open deck

    Thank-you and final encouragement

    The speaker closes with thanks and a portrait beside his Grasshopper identity. A book cover presents a four-step personal transformation framework and an endorsement.

    Slide text

    March 2022 David Hauser Founder of Grasshopper