Ethan Parker spent almost nothing to market his recently Acquired startup, Tomorrow’s Tools. A SaaS app for workflow platform, Monday.com, Tomorrow’s Tools began as a hackathon project and ended with a six-figure exit on Acquire. How? He exploited an ecosystem.
Millions rely on tech giants like Slack, Monday, and Shopify to power performance and productivity1. But with so many users, these platforms can struggle to meet the demand for features. In response, their app stores outsource engineering that enhances their products.
You might download an app that pulls data from other software you use (such as the Acquire Slack app) or install a custom UI, for example. The opportunities are endless, and if you build a popular app, the host platform will promote it to millions of potential customers.
When Monday announced a hackathon to launch its app store in 2020, Ethan trawled the support forums for ideas. People were practically begging for the option to see a combined view of their tasks across different boards. Was this the product idea he’d been waiting for?
A Crappy Employee But Great Entrepreneur
Step into the Brigham Young University (BYU) book store and you’ll see signs of Ethan Parker everywhere. After studying Product Design at Arizona State, he went to BYU in 2006 to study accounting because it was the top in the US at the time.
But Ethan had no intention of becoming a CPA. Between his first and second university courses, he stumbled upon a business idea while working as a missionary for the Church of Jesus Christ of Latter-day Saints.
“The Mission gave us these little planners, but they didn’t sell them to the general public. I then made a version inspired by that planner and we sold it at the BYU bookstore. They still sell there today.”
Towards the end of Ethan’s degree, he became interested in computer science and decided to sell Parker Planners in 2012. He then moved to San Francisco and bopped around different tech companies, joining Owlet in Utah as their first mobile apps engineer (the company later went public in 2021).
When I asked him why he got into entrepreneurship, Ethan said, “It’s more of a condition than a choice. I’ve worked at a lot of different tech companies and been fired many, many times. I’ve got strong opinions, which makes me a crappy employee but a great entrepreneur.”
His future cofounder, Anders Lyman, had also been working at a unicorn startup when he received an email about Monday’s upcoming Hackathon.
“Anders had won some hackathons in the past so he was on a list of some kind,” Ethan said. “He got an email saying Monday.com is going to launch an app store and they suggested he develop an app for it.”
When Enough People Ask, It’s Time to Build
Startup ideas lurk behind every customer complaint, comment, or suggestion. But where do customers voice their opinions? Forums, review sites, and social media groups are just a few fields you might harvest. Ethan and Anders started with Monday’s support boards.
“We looked at Monday’s support boards and many people were asking to see their tasks across different boards. Anders built a prototype, and then he called me up and said, ‘Hey, I think this will be valuable to these Monday people. Can you help me market and sell it?’”
Ethan dug deeper into the problem. A CRM like Salesforce needs specialist engineers to tailor the software to your business, which costs time and money. Monday, however, lets you design custom flows with boards, items, tasks, and due dates without writing a single line of code.
The only problem is that you can’t view your tasks together in one place. Instead, you have to delve into each board separately, which takes time and isn’t much fun. Anders’ and Ethan’s idea was to combine the boards so users could review their tasks together.
“Our app would let you view your current week’s tasks along with those you’re assigned for other projects or with other people. It sounds simple, but people loved how easy it was to manage their tasks. Everyone had asked for it,” Ethan said.
The cofounders launched Tomorrow’s Tools at Monday’s Hackathon and Combined Board View was their first product. Within days, and with virtually no marketing, they rose to the top of Monday’s app store.
“The problem we solved was so important to the ecosystem that everybody gravitated to it,” Ethan said. “Anders engineered it brilliantly – it didn’t have flaws or bugs or mess up anyone’s info, so Monday was comfortable putting it on the front page from the start.”
The launch wasn’t without its challenges, however. The first was the name. Originally called Tuesday’s Tools, the Monday team felt the name was too similar to its brand. Anders replaced “Tuesday’s” with “Tomorrow’s” to settle the issue. All that was left was monetization.
“We sold the app by seat,” Ethan said. “A two-person business would spend three bucks apiece, earning us six dollars MRR. Someone might also buy a hundred seats annually at $30 each. That would be a hundred times thirty bucks, earning us a $3,000 up-front payment. With that kind of revenue, we cycled in and out of the top spot on the app store regularly.”
Why Sell When the Product Was So Popular?
Tomorrow’s Tools’ first product was a hit. The cofounders had the support of a multibillion-dollar tech company, and monthly recurring revenue percolated into their bank accounts. Despite everything suggesting long-term success, Ethan decided it was time to exit.
It’s easier to sell a business when it’s doing well. That much is obvious. But Ethan had only nibbled on his potential market. As tasty as those first few crumbs were, another business idea had tempted him away, one that had nothing to do with task management but finance.
Ethan and his brother Eric had been trading cryptocurrencies in their spare time. They’d stay up late transferring cryptos between decentralized finance (DeFi) protocols to yield profits. When a prominent angel investor from Utah asked Eric for help recovering funds from these protocols, the brothers wondered whether they could deliver a better experience for people new to DeFi.
“My brother was always on these DeFi forums teaching people stuff,” Ethan said. “When he recovered that guy’s funds, we started a business to fix the problem for other people,” Ethan said.
The brothers called the new business Giddy, an intuitive mobile app for people who wanted to trade cryptocurrencies easily and safely.
“When we first started Giddy, we raised a sizeable angel investment, and then a couple of months later, a much larger seed round. Giddy is going to be massive. And it grew so fast, I’d never have had the time to keep nurturing Tomorrow’s Tools.”
After raising $8 million for his new business, Ethan listed Tomorrow’s Tools on Acquire.
How to Negotiate a Higher Asking Price (Hint: Be Honest)
Before selling Tomorrow’s Tools, Ethan had sold two companies, both for under a million dollars. At that scale, Ethan says, the asking prices have little margin for lawyer fees, so trust is critical.
Ethan had listed Tomorrow’s Tools for $75,000. With real-time metrics connected to his listing, buyers were confident his numbers were accurate and genuine.
“Connecting metrics made it easy for people to verify our revenue, churn rate, MRR, customers, and so on,” Ethan said. “It was all transparent. People could immediately see what we were seeing.”
Although he fielded close to a hundred inquiries, Ethan expected to wait months before finding the right buyer. Yes, he was eager to sell and focus his attention on Giddy, he didn’t let that didn’t distract him from hitting Tomorrow’s Tools’ growth goals. Nor did it persuade him to accept a lower offer (of which he had many).
“These deals usually take thirty to ninety days to close because the investor needs to see the business continue growing,” Ethan said. “They don’t want to Acquire a company that fails the moment it changes hands.”
Ethan eventually received LOIs from five candidates, all meeting his asking price. One asked for an earnout and seller financing, but he rejected it: “I didn’t want to worry whether I was going to get paid or not.”
With four engaged buyers remaining, he felt it only fair to inform each one of the current state of play.
“I told each buyer that I’d had multiple offers. One didn’t care. Another offered me a hundred grand and that’s what I accepted. They wanted to close the acquisition quickly and so did I.”
The buyer lived in the same state, Utah, and they met in person before funds and assets changed hands. Ethan felt confident his buyer – who was a respected serial entrepreneur – would fulfill his end of the deal.
“He was local and we had a few mutual connections so there was quite a bit of trust,” Ethan said. “He had the wire transfer ready to go. We made him admin of our payment accounts and he transferred the money. That was it.”
(Although Ethan knew his buyer relatively well, we always recommend using an escrow service when acquiring or selling a business on Acquire.)
Bye, Bye Bootstrapping?
After successfully bootstrapping six companies, Ethan feels he’s now ready to grow his next business at a much larger scale. He’s loved being a serial entrepreneur, and as someone who never had much growing up, bootstrapping helped him succeed with nothing but hard work.
“I was bitten by the entrepreneur bug at a young age and couldn’t resist building businesses. You just use what you’ve got, which is usually nothing. If you don’t know how to code, you learn or make friends with an engineer. You just get it done.
“While I love bootstrapping, Giddy is not a bootstrapped opportunity. You have to grow crazy fast in emerging tech or you’re left behind.”
If you want to get Acquire’d like Ethan, you might consider following in his footsteps. First, scour the market for problems in large ecosystems like Monday, Jira, or Shopify. Fix the problem and then share your solution with the people who need it. If it works, the platform will likely market it for free.
Then, like Ethan, maybe raise money to launch a bigger, bolder business idea where time to market matters. Raising money makes sense when you know how to spend it. With three exits under his belt, Ethan will likely make the most of this investment.
References
1https://slack.com/blog/news/slack-has-10-million-daily-active-users#:~:text=With%2010%2B%20million%20daily%20active,all%20over%20the%20world%20%7C%20Slack
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