Oct 16, 2024 · 26m · startup-acquisition-stories
How to Build SaaS for an Industry No One Knows About (Except Your Customers)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Startup Acquisition Stories, host Andrew Gazdecki interviews Harris Osterman about pivoting Talk Hiring into a profitable mock-interviewing platform and navigating a multi-offer acquisition on Acquire.com.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Andrew holds 19.3% of the talking time here. How this is scored →
Andrew as informed peer 2.7 Guest teaching 2.6 Guest disagreement 0.0 Andrew pushing back 0.0
speaking balance: gold is Andrew, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 12:34 Debunking the idea that acquisition was uniformly enjoyable
Harris lightly rejects Andrew's suggestion that the entire sale was enjoyable, detailing the intense stress and illiquid risk of finding a legitimate buyer.
Hardest push from Andrew ▶ 22:26 Clarifying SBA bank loan stringencyAndrew expands on Harris's point about SBA financing by emphasizing how stringent banks are when underwriting SaaS acquisitions.
Biggest teaching moment ▶ 20:40 Explaining SBA entity separation pitfallsHarris educates the audience and host on the corporate structuring trap of commingling multiple product lines onto a single tax return, which disqualified potential SBA buyers.
Andrew holds their own ▶ 18:11 Contrasting durable profitable businesses against hype-cycle AI startupsAndrew draws directly upon data from over a thousand marketplace transactions on Acquire.com to validate why a 3-year track record commands premium valuations.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Andrew as informed peer | Guest teaching | Guest disagreement | Andrew pushing back | Why |
|---|---|---|---|---|---|---|
| Harris Osterman's Entrepreneurial Background and Early Startups | 1 | 2 | 0 | 0 | Andrew opens with basic introductory prompts about Harris's entrepreneurial beginnings. Harris walks through his college incubator experience, prior startups, and the initial pivot that led to Talk Hiring in a completely collaborative manner. | |
| Early Customer Acquisition and Product-Market Feedback | 2 | 3 | 0 | 0 | Andrew inquires about early customer acquisition and validating product-market fit. Harris explains his guerrilla sales tactics, volunteering, and establishing free beta partnerships in exchange for mandatory weekly feedback. | |
| Reaching Product-Market Fit and Core Offerings | 1 | 2 | 0 | 0 | Andrew asks about finding product-market fit and the core business model. Harris shares the breakthrough moment when high schools discovered the tool organically and outlines the company's two distinct product lines. | |
| The Decision to Sell Talk Hiring | 2 | 2 | 0 | 0 | Harris discusses personal catalysts for selling, notably becoming a new father and balancing startup stress. Andrew bonds over fatherhood in an empathetic, supportive exchange. | |
| Navigating the Acquisition Process with Acquire.com | 2 | 3 | 0 | 0 | Harris recounts his acquisition experience and gives positive feedback regarding Acquire.com's team support. Andrew listens attentively as Harris details how deadlines and listing blurbs were constructed. | |
| Evaluating Multiple Offers and Structuring the Sale | 2 | 3 | 0 | 0 | Harris explains the stress of evaluating seven distinct buyer types and avoiding unfavorable earn-out or stock structures. Andrew follows along with open questions as Harris explains choosing a search fund over corporate buyers. | |
| Diligence Preparation, LOI Dynamics, and Deal Finalization | 4 | 2 | 0 | 0 | Harris details due diligence preparation and LOI exclusivity dynamics. Andrew steps in with industry validation, reinforcing why entering diligence with multiple backup buyers gives founders leverage. | |
| Key Acquisition Lessons: Profit History and Revenue Concentration | 6 | 4 | 0 | 0 | Harris shares lessons on requiring three consecutive years of profit and managing customer concentration. Andrew brings strong expertise from observing thousands of acquisitions, contrasting durable businesses with trendy AI SaaS apps. | |
| Financing Challenges and Corporate Structure Lessons | 5 | 4 | 0 | 0 | Harris explains how commingling multiple product lines under one corporate tax filing blocked SBA financing. Andrew affirms this common acquisition hurdle and elaborates on the stringent requirements banks impose on SaaS loans. | |
| Post-Acquisition Transition and Future Ventures | 2 | 1 | 0 | 0 | Andrew wraps up the interview by asking about post-sale celebrations and future plans. Harris shares his transition activities in Atlanta and potential consulting interests in legal tech in a casual wrap-up. |
Statements from this episode (12)
Osterman traded free beta access for mandatory weekly feedback meetings
“Like they were one of our probably 10 or 15 design partners. So we started off giving away for free as like a free beta. And as a condition of using this thing for free, you had to meet with me. Every week, so I got a lot of feedback.”
Osterman: Career readiness organizations are an underserved and viable SaaS niche
“We really focused on the niche of career readiness organizations because they were very underserved as a market and a good, you know, business to build off of.”
Osterman previously tried selling Talk Hiring but overpriced it
“A few years ago, I considered selling the business because I was considering raising money for the job searching tool and thought, like, I can't be running two product lines at the same time, so I priced it way too high, did not get enough interest”
Osterman: Acquisition buyers wait for competing offers or firm deadlines
“There's also a point when you're in an acquisition process where you have a bunch of people interested, but no one's going to jump until someone else jumps and like gives you an offer or like there's some deadline.”
Osterman: Talk Hiring evaluated seven acquisition offers from varied buyers
“We had seven different offers that we were considering but it was tough to vet all of them, and, like, some of them were public companies, some of them were private startups, some of them were, like, individuals, some of them were search funds”
Osterman: Working capital requirements can secretly gut your acquisition proceeds
“Working capital requirements can really screw you over, you know, cut your deal.”
Osterman: Buyers hold all negotiating leverage after an LOI is signed
“Once you sign the LOI now the buyer has all the power, and, like, if they back out, now you have to go back to the other buyers.”
Osterman rejected higher acquisition offers to avoid post-sale earnout requirements
“There were offers that would have earned me a lot more money, but I'm not going to be running the business anymore. So I don't really want to do that.”
Osterman: Three consecutive profitable years guarantees buyer confidence in SaaS
“If you run a business, and it has at least three consecutive prior years of profit, and like, let's say six figures of profit, like a very small amount that's what buyers want. So, like, there are a lot of companies that have had a lot of profit, but they're p…”
Osterman: Mitigating revenue and distribution concentration is essential when selling a business
“Buyers are always, not always, but generally wary about if you have certain, like, a certain percentage of your customers, or a certain percentage of your revenue comes from a small percentage of customers. It's tough to avoid that, though, as a company. Like,…”
Osterman: Commingling product lines prevents buyers from securing SBA acquisition loans
“The problem for our business was that we had multiple product lines under the same corporate entity, and therefore we were filing taxes every year as like a combination of all of our Product lines. And then, like, the SBA always wants to see the tax filings, a…”