Learn more about Chris-
- https://twitter.com/chptung
- https://www.linkedin.com/in/christopher-tung/
- https://www.reporty.app (Company Acquired)
- https://www.trycoffeechats.com (New Company)
Transcription-
Andrew Gazdecki:
All right. I am live with Chris Tong. He recently sold an application on Acquire for five figures. So excited to hear your story and thanks for joining me on this podcast.
Christopher Tung:
Yeah. Thanks for having me Andrew. Really appreciate the product that you’ve built, connecting SaaS founders with potential buyers. I think we don’t all need to be IPOs. We don’t all need to be Acquired by like Salesforce or whatever. So having an outlet and exit strategy that is quite lucrative for those of us that are MicroSaaS builders or solo founders has been great. So happy to be here.
Andrew Gazdecki:
I should probably hire you to like pitch Acquire because I completely agree. I’m glad it all worked out and I’m really excited to just hear the story. So I guess to start things out, do you want to tell me a little bit about Reporty? What it did? Just details on that they’ll move into the acquisition and all that fun stuff.
Christopher Tung:
Yeah. So I’ll start with, what was the pain point? Because I think we always want to build products for those who build specific pain, because that leads to lucrative exit and all that kind of stuff. But the pain point was I was working at an e-commerce startup that you Shopify at the time Shopify was growing, but it wasn’t… I think this current share price is $1,500 a share. I think at the time it was $200 a share. It’s big, but not what it is right now. And there was no way for you to get UTM tracking specifically and coupon code redemption data in your Slack channel from Shopify, there were a lot of apps out there that would do light Shopify to Slack integration, but not what I needed. And so I decided at the same time I was learning to program on my own using Ruby on Rails.
And I found out that Shopify, it makes it very easy to build a Ruby on rails application for the Shopify app store. So I was like, “Great, let me go build my own solution”. And so the solution was let allow someone to connect their Slack to a Shopify store, select the kinds of notifications they get select the kinds of signals and data fields that they want in their notification and then take it from there. And so that’s what I built.
Andrew Gazdecki:
That’s a good app, man. I mean nice. You built it all yourself?
Christopher Tung:
Correct. So yeah, as I mentioned, solo founded, solo built.
Andrew Gazdecki:
Nicely done. That’s not as easy as it sounds and that sounds extremely badass. So I know the new owners super happy. So moving into your experience on Acquire, tell me about it. So you listed on Acquire, walk me through how you met the buyer? How you negotiated terms? And then maybe we’ll move into due diligence and actually how you guys ended up closing the deal?
Christopher Tung:
So listening on Acquire and then at the time, I didn’t know that your team does the magic background to make it more attractive, which I hugely appreciate.
Andrew Gazdecki:
You’re welcome.
Christopher Tung:
[crosstalk 00:03:11] Make the listing a little bit better.
Andrew Gazdecki:
You’re welcome.
Christopher Tung:
And from there just buyers started coming in, which is actually really great because I had used other listing market of places before and it didn’t happen like that. Whereas Acquire was so much better. And so I actually proactively created a public profit and loss statement and a public FAQ because the kinds of questions you get from a Acquire buyer are very common. What’s the app? How many paying customers? What’s your retention? What’s your return? Whatever. So I put that into a Google doc and a Google spreadsheet, and I was just very open about it. And the lucky position I was in is that the product is very passive income for me. And so I was pretty rigid in the valuation that I put out. And if a buyer said, “I don’t think it’s worth that much”, I was like, “Great, good luck on all your other Acquire acquisitions. I’m not really eager to sell”.
Ultimately I found a buyer who understood what I was building, understood the potential of the product and understood that I was at a life stage where I was ready to find a new home for it, but someone who actually cared about the product and the customers and so connected through Acquire, we used the in-app messaging flow, which is great. The notifications you get are good and sharing assets and things back and forth was good. And then we agreed that, “Hey, this is going to happen”.
Andrew Gazdecki:
Nice. What was the life change?
Christopher Tung:
Oh, I just had a baby boy.
Andrew Gazdecki:
I know, we were talking about that for the podcast. I’m a dad too. So congrats to you.
Christopher Tung:
Thank you.
Andrew Gazdecki:
On that.
Okay. So you found a buyer, I assume you guys are on good terms in terms of same page. What did due diligence look like? What was the next step after you come to terms?What’d you guys do next?
Christopher Tung:
Yeah. I think a big part of it is trust. How do you build trust so that the numbers that I’m showing are accurate and how do I understand that? He will post funds and all that kind of stuff. So on my part, I was very eager to chat with him through a Google video call. So we did that, I got to learn more about him, his point of view, the fact that he also is a human being and is not a representative of a giant conglomerate or didn’t seem sketchy was really helpful. And then while we were doing that video chat, I was very public and so I present my screen, I show him the Shopify portal. You could see all the numbers, you could see all the customers, you can see how much revenue the product was generating to date.
And so I think that helped him trust me. And then we ended up building a terms of sale document that was a contract that outlined what he would be buying, how would we transfer the assets, what would customer support look like for me once he Acquired the assets, all that kind of stuff.
And I think what was really important that I would recommend to anyone who goes through a process like this, is we did a Google video call where we both mutually recorded the call and then transferred everything on the call. And so as the call was happening, which took over the course of about an hour, because my app was really Heroku, GitHub, Codebase and the Shopify assets and stuff, we just kept crossing them off and every time an asset was transferred, I was like, “Hey, did you receive it? Can you log in? Does it look good?” And he said, “Yep”. We crossed that off a list. And then we worked our way through a list of about, I think, six or seven things. And then once that was done, well earlier he had deposited funds into escrow.com and once he said, “Yep, looks good”, he released the funds on his side, which then I got a notification saying the buyer has release funds from escrow. Escrow will now handle depositing the funds in the next two to three business days. This is not a graphic about Acquire more a graphic about escrow and Andrew, you and I have chatted about this. I very much think your next place should be a way to make the fund transfer better.
Andrew Gazdecki:
I got you, dude. Don’t worry.
Christopher Tung:
But yeah, there’s a lack of on that side and I think what has been wonderful is Acquire has so much transparency on the actual relationship building experience that it was ultimately, it was great going to Acquire though.
Andrew Gazdecki:
Awesome. Glad it worked out like that. Did you do any post-sale support?
Christopher Tung:
Mm-hmm (affirmative).
Andrew Gazdecki:
Okay. You got everything transferred, you got the funds. What did post support look like? Sorry to interrupt. Go ahead.
Christopher Tung:
Oh, no problem. In the contract we had outlined 30 days. And so that was what I committed to. Also, he knew that I had a full-time job and he had a full-time job. So he both mutually agreed it would be 30 days within reason. And so generally we always got back to each other within 24 hours. We’re both very active on Twitter and so we would chat on Twitter or DM each other through Twitter or LinkedIn. And, it’s been more than 30 days, but he messaged me two days ago, just asking a question and I’ve reached out to him.
I think if I would’ve put myself in the buyer’s shoes, if I put myself in his shoes, I think what he got out of me is someone who knows the product inside and out who knows the code base, because he built the code himself. And so when the buyer has a question from the seller, he knows he can get the answer from the source. I think if I was doing due diligence and buying a product in my own through Acquire I would look for something similar because it has been helpful to interact with people who intimately know the product and therefore can help with that kind of post-sale support versus being “Oh, let me go talk to my dev team, blah blah, blah, blah, blah”, takes forever. And then you don’t get an answer right away.
Andrew Gazdecki:
Yeah. I like that. And I love how you guys have… I know who the buyer is. I won’t mention him, but you guys seem to have a great relationship, you guys trust each other and I’m sure if he emailed you with a question a month from now, you’d still answer it.
Christopher Tung:
A hundred percent.
Andrew Gazdecki:
So just that component of trust in building that relationship because when you Acquire a SaaS application, it’s not like “Here’s the keys, all right. You’re good”. There might be a part that you just didn’t cover and due diligence and a month goes by and you’re going to want to have the original owner available even for just light support. So, that’s awesome that you did that. So this was a really quick and smooth transaction. I don’t really have any other questions. Do you have any advice or guidance? So for founders maybe thinking about listing their startup on Acquire, maybe one or two tips perhaps.
Christopher Tung:
Yeah. Into your point, it was very smooth. Well, working with the final buyer was very smooth. I would say the initial due diligence outreaches from I think it was probably 40 or 50 people reached out through Acquire, which was great. That was a little bit of a slog simply because you get the same questions over and over and over. And so, the first step I would give is if you’re comfortable make as much of those kinds of questions available in an FAQ, because you may not post this directly on your product and you probably shouldn’t because your product is really focused on the customer. But when you are going through Acquire, you have a new set of customers and it’s potential buyers. And so building an FAQ document, kind of a pseudo help center for these buyers will allow you to focus more on the buyers that really are serious. And then the ones who you say like, “Hey, I have some questions you send in a document” and never get back to you. Great. You can weed them out.
So I’d say that was a really good thing, but it also involves you being in a position of full confidence in your product, right? If you’re fire selling the business, you might not be so eager to make that available. But if you are in a good position where I was, be confident in your business, put that information out there and if people engage with it, great and if they don’t, then they’re probably not the right buyer.
So, that would be one. And then the second one I think is [inaudible 00:11:10] as much communication as possible. I feel trust is directly correlated with the amount of communication you have with a human being and so the more communication interaction you have with them, the more trust you can build. And so if you can use Acquires texting tool, DMS and things like that, that’s good. But at some point during due diligence, probably want to hop on a phone call. We sold the business during the height of COVID. So if probably can’t do it in person, but to meet in person or video call is perfectly fine, but it’s good to just chat with them and understand who they are. If you can check out their LinkedIn, find their Twitter just make sure that they are representing themselves properly. That’s valuable.
And, I think that’s probably what I would say. I guess the other thing that comes to mind is as a seller valuations, is that I think something that people struggle with. So maybe I’ll talk a little bit about that if that’s all right. Is if you are building the SaaS and numbers are growing that magical number is 20% month over month. If you’re showing that kind of growth, then being able to anchor your valuation to either annual reoccurring revenue X, some multiple is a good place to start. You can use gross revenue, if the business doesn’t have significant margin hits, if it does have significant margin hits, you might want to reevaluate your evaluation, things like that. But I ultimately picked a five X valuation, which was quite lucrative and helpful for me. And then I stood by it and you justify it by having FAQ docs and a PNL that’s available. And so people can say , “Great, it’s not smoke and mirrors. It’s in fact the numbers that he’s saying” and so then you find people that agree with your valuation.
Andrew Gazdecki:
I agree with that on so many levels, just being able to justify your valuation is so critical buyers, just having like “I’m going to take my revenue and just multiply it by 30” isn’t going to work, I wish maybe Acquire grows to a point where it does, but just being able to talk to a bar and say, this is how I got to my evaluation. And whether you’re doing that off of [AR 00:13:30], or just [inaudible 00:13:33] best from what I’ve seen and business isn’t growing too much, it’s flat or it’s just extremely profitable and then AR if it’s growing. So if you’re growing 20%, month of a month, you can definitely command those five X multiple.
So congrats to you on that, man. That’s badass. And I’m super happy to hear that. So to wrap things up, this has been an awesome story. A lot of entrepreneurs are going to benefit from this. I always like to end these with a couple personal questions.
What’s your favorite book? Where do you go to educate yourself on startups, it can be a podcast too.
Christopher Tung:
I think recently I really enjoyed how I built this with Guy Raz as a podcast.
Andrew Gazdecki:
I got to check that out. I [crosstalk 00:14:27] do.
Christopher Tung:
How I built this, I think it’s available on apple podcast or wherever you listen to your podcast, but it has been a really interesting of learning about what companies that you kind of see out there that are either unicorn valuations or things like that and understand what was that story? What was that struggle in the beginning? I think who knows, Andrew, you’ll probably be on how I built this in two to three years forever having the conversation of like, “How did you Acquire your first customer? Those are the stories that people talk about though, which I really appreciate. So, that’s been good. To be totally [crosstalk 00:15:07].
Andrew Gazdecki:
Favorite book?
Christopher Tung:
So I’m a big graphic novel person, comic books are my life. My first real job was actually as an editorial intern at Marvel for the X-men line.
Andrew Gazdecki:
That is badass. What’s your favorite superhero of Marvel?
Christopher Tung:
Gambit from the X-men is probably my favorite.
Andrew Gazdecki:
Gambit. Really? I’m a Venom guy. I used to be really into Spiderman as a kid. And I was like, Venom.
Christopher Tung:
You should check out their newest thing is the King in Black. It’s a core, big Marvel event that Venom is the anti-hero, the whole thing but it establishes that this idea that there’s a God of symbiotes, the God of all the Venoms. And it’s quite interesting. So you might want to check it out.
Andrew Gazdecki:
I got to correct that. I’d probably say Ironman. I mean, Ironman, at least from a movie perspective that those are my favorite movies.
Christopher Tung:
So, then favorite graphic novels I’ll go that way. Watchman, I think is an important piece of literature that everyone should read. It examines a question in a world of superheroes, who watches the superheroes? Has applications for a lot of how we analyze the world and what we view as super people, whether it’s people, companies, founders, whatever. I think that one is great.
And then I’ll go a different way. I’ll go with Blankets, which by Craig Thompson, it’s I think one of the few graphic novels that has some very notable award, but nonetheless, it’s a simple size of life story about two people falling in love and I’m a big romantic as well. So I felt that it’s beautifully drawn and illustrated and was just a really important book for my development.
Andrew Gazdecki:
Nice. Yeah, Chris, you’re awesome. I really, really appreciate you joining this podcast and just hearing your story congrats on the successful acquisition and if people want to get ahold of you, where’s the best place. Twitter, LinkedIn?
Christopher Tung:
Yeah. So, follow me on Twitter. It’s C H P T U N G, is my handle and then it’d be a shame if I didn’t plug the thing that I’m actually building right now is called Coffee Chats. It is a way to create a personally branded website with built in caling functionality. And you can book a Coffee Chats with me at Chris.trycoffeechats.com.
Andrew Gazdecki:
I like that. I’ll include a link in the show that’s for you.
Christopher Tung:
Yeah, exactly. Yeah. And if anyone is interested in being part of the Coffee Chat community and making yourself available to talk about building products, founding products, selling things on Acquire, it’s completely free to make a website.
Andrew Gazdecki:
Right on Chris. Thanks again for coming on this podcast. Congrats on becoming dad, congrats on the acquisition and congrats on the new product.
Christopher Tung:
Yeah. Thank you so much.
Andrew Gazdecki:
All right. Cheers, bud.
Christopher Tung:
Thanks.
