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Oct 13, 2022 · 22m · top-founders

Masters of Debt: How to buy a $5m SaaS Company Using Debt, Grow to $20m, Then Flip for a Huge Gain

Brad Miller · 14m spoken Nathan Latka · 5m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

At the Founder 500 conference, serial entrepreneur Brad Miller explains how he acquired a distressed software company for $6 million, scaled it to $20 million through SaaS conversion and strategic bolt-on acquisitions, and exited for $35 million before new debt-heavy management collapsed the business.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 27.4% of the talking time here. How this is scored →

Nathan as informed peer 4.6 Guest teaching 2.0 Guest disagreement 1.2 Nathan pushing back 2.0
05100:0010:0020:000:00–6:15 · Nathan as informed peer 5/10 Nathan Latka Introduces Founder 500 and GetLatka Platform Nathan probes into Brad's acquisition of Awareness Tech, teasing him aggressively when Brad admits turning down a 10 percent equity offer in Quest Bar. Nathan pushes on the financial metrics, ensuring the audience distinguishes between revenue and dividend payouts.6:16–8:51 · Nathan as informed peer 4/10 Executing Inorganic Growth with a Parental App Acquisition Brad explains buying a parental control app after his wife started using it at home. Nathan probes deal terms and cash structures, while Brad recounts holding firm when the bootstrapped sellers attempted to double the purchase price before closing.8:52–13:15 · Nathan as informed peer 5/10 Acquiring Distressed Competitor Variato and Scaling to Exit Brad narrates how competitor Variato collapsed from a 45 million dollar valuation to a 3.5 million dollar distress sale, which he acquired and restructured. Nathan provides strategic framing around inorganic deal sourcing and calculates the 9x return multiple.13:15–16:45 · Nathan as informed peer 4/10 Audience Q&A on Distressed Valuation and Founder Retention Audience members ask questions regarding distressed asset packaging and founder retention after acquisition. Brad details the B2B versus B2C valuation differences, while Nathan interjects takeaways on founder board control.16:45–21:59 · Nathan as informed peer 5/10 Post-Sale Debt Default and the Failure of Professional Management Brad recounts how the PE buyers destroyed value by hiring bloated management, switching from daily cash metrics to GAAP accounting, and defaulting on senior debt. Nathan prompts the debt structure context and jokes about Brad buying it back for a dollar.0:00–6:15 · Guest teaching 2/10 Nathan Latka Introduces Founder 500 and GetLatka Platform Nathan probes into Brad's acquisition of Awareness Tech, teasing him aggressively when Brad admits turning down a 10 percent equity offer in Quest Bar. Nathan pushes on the financial metrics, ensuring the audience distinguishes between revenue and dividend payouts.6:16–8:51 · Guest teaching 1/10 Executing Inorganic Growth with a Parental App Acquisition Brad explains buying a parental control app after his wife started using it at home. Nathan probes deal terms and cash structures, while Brad recounts holding firm when the bootstrapped sellers attempted to double the purchase price before closing.8:52–13:15 · Guest teaching 1/10 Acquiring Distressed Competitor Variato and Scaling to Exit Brad narrates how competitor Variato collapsed from a 45 million dollar valuation to a 3.5 million dollar distress sale, which he acquired and restructured. Nathan provides strategic framing around inorganic deal sourcing and calculates the 9x return multiple.13:15–16:45 · Guest teaching 3/10 Audience Q&A on Distressed Valuation and Founder Retention Audience members ask questions regarding distressed asset packaging and founder retention after acquisition. Brad details the B2B versus B2C valuation differences, while Nathan interjects takeaways on founder board control.16:45–21:59 · Guest teaching 3/10 Post-Sale Debt Default and the Failure of Professional Management Brad recounts how the PE buyers destroyed value by hiring bloated management, switching from daily cash metrics to GAAP accounting, and defaulting on senior debt. Nathan prompts the debt structure context and jokes about Brad buying it back for a dollar.0:00–6:15 · Guest disagreement 2/10 Nathan Latka Introduces Founder 500 and GetLatka Platform Nathan probes into Brad's acquisition of Awareness Tech, teasing him aggressively when Brad admits turning down a 10 percent equity offer in Quest Bar. Nathan pushes on the financial metrics, ensuring the audience distinguishes between revenue and dividend payouts.6:16–8:51 · Guest disagreement 1/10 Executing Inorganic Growth with a Parental App Acquisition Brad explains buying a parental control app after his wife started using it at home. Nathan probes deal terms and cash structures, while Brad recounts holding firm when the bootstrapped sellers attempted to double the purchase price before closing.8:52–13:15 · Guest disagreement 1/10 Acquiring Distressed Competitor Variato and Scaling to Exit Brad narrates how competitor Variato collapsed from a 45 million dollar valuation to a 3.5 million dollar distress sale, which he acquired and restructured. Nathan provides strategic framing around inorganic deal sourcing and calculates the 9x return multiple.13:15–16:45 · Guest disagreement 1/10 Audience Q&A on Distressed Valuation and Founder Retention Audience members ask questions regarding distressed asset packaging and founder retention after acquisition. Brad details the B2B versus B2C valuation differences, while Nathan interjects takeaways on founder board control.16:45–21:59 · Guest disagreement 1/10 Post-Sale Debt Default and the Failure of Professional Management Brad recounts how the PE buyers destroyed value by hiring bloated management, switching from daily cash metrics to GAAP accounting, and defaulting on senior debt. Nathan prompts the debt structure context and jokes about Brad buying it back for a dollar.0:00–6:15 · Nathan pushing back 3/10 Nathan Latka Introduces Founder 500 and GetLatka Platform Nathan probes into Brad's acquisition of Awareness Tech, teasing him aggressively when Brad admits turning down a 10 percent equity offer in Quest Bar. Nathan pushes on the financial metrics, ensuring the audience distinguishes between revenue and dividend payouts.6:16–8:51 · Nathan pushing back 2/10 Executing Inorganic Growth with a Parental App Acquisition Brad explains buying a parental control app after his wife started using it at home. Nathan probes deal terms and cash structures, while Brad recounts holding firm when the bootstrapped sellers attempted to double the purchase price before closing.8:52–13:15 · Nathan pushing back 1/10 Acquiring Distressed Competitor Variato and Scaling to Exit Brad narrates how competitor Variato collapsed from a 45 million dollar valuation to a 3.5 million dollar distress sale, which he acquired and restructured. Nathan provides strategic framing around inorganic deal sourcing and calculates the 9x return multiple.13:15–16:45 · Nathan pushing back 2/10 Audience Q&A on Distressed Valuation and Founder Retention Audience members ask questions regarding distressed asset packaging and founder retention after acquisition. Brad details the B2B versus B2C valuation differences, while Nathan interjects takeaways on founder board control.16:45–21:59 · Nathan pushing back 2/10 Post-Sale Debt Default and the Failure of Professional Management Brad recounts how the PE buyers destroyed value by hiring bloated management, switching from daily cash metrics to GAAP accounting, and defaulting on senior debt. Nathan prompts the debt structure context and jokes about Brad buying it back for a dollar.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 55.2% · guest 44.8%0:00 · Nathan 55.2% · guest 44.8%3:00 · Nathan 33.2% · guest 66.8%3:00 · Nathan 33.2% · guest 66.8%6:00 · Nathan 29.6% · guest 70.4%6:00 · Nathan 29.6% · guest 70.4%9:00 · Nathan 13.3% · guest 86.7%9:00 · Nathan 13.3% · guest 86.7%12:00 · Nathan 36.4% · guest 63.6%12:00 · Nathan 36.4% · guest 63.6%15:00 · Nathan 14.8% · guest 85.2%15:00 · Nathan 14.8% · guest 85.2%18:00 · Nathan 8.3% · guest 91.7%18:00 · Nathan 8.3% · guest 91.7%21:00 · Nathan 28.9% · guest 71.1%21:00 · Nathan 28.9% · guest 71.1%
Sharpest disagreement ▶ 4:06 Quest Bar banter and self-deprecating pushback

Brad defends his decision to turn down 10 percent of Quest Nutrition after Nathan calls him an idiot, jokingly snapping back that he isn't shitting money.

 Hardest push from Nathan ▶ 5:15 Nathan halts narrative to clarify dividend timeline

Nathan interrupts Brad to clarify whether the six million figure was annual revenue or cash dividends taken out by the owners.

 Biggest teaching moment ▶ 17:55 Brad explains how GAAP accounting blindsided management

Brad breaks down why relying on GAAP 12-month trailing averages instead of daily cash PPC metrics masked catastrophic revenue drops from new management.

 Nathan holds their own ▶ 13:15 Nathan synthesizes the 9x return multiple

Nathan quickly aggregates Brad's disparate transaction data points into an exact 1 dollar into 9 dollars return on a 5 million base.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Nathan Latka Introduces Founder 500 and GetLatka Platform 5223 Nathan probes into Brad's acquisition of Awareness Tech, teasing him aggressively when Brad admits turning down a 10 percent equity offer in Quest Bar. Nathan pushes on the financial metrics, ensuring the audience distinguishes between revenue and dividend payouts.
Executing Inorganic Growth with a Parental App Acquisition 4112 Brad explains buying a parental control app after his wife started using it at home. Nathan probes deal terms and cash structures, while Brad recounts holding firm when the bootstrapped sellers attempted to double the purchase price before closing.
Acquiring Distressed Competitor Variato and Scaling to Exit 5111 Brad narrates how competitor Variato collapsed from a 45 million dollar valuation to a 3.5 million dollar distress sale, which he acquired and restructured. Nathan provides strategic framing around inorganic deal sourcing and calculates the 9x return multiple.
Audience Q&A on Distressed Valuation and Founder Retention 4312 Audience members ask questions regarding distressed asset packaging and founder retention after acquisition. Brad details the B2B versus B2C valuation differences, while Nathan interjects takeaways on founder board control.
Post-Sale Debt Default and the Failure of Professional Management 5312 Brad recounts how the PE buyers destroyed value by hiring bloated management, switching from daily cash metrics to GAAP accounting, and defaulting on senior debt. Nathan prompts the debt structure context and jokes about Brad buying it back for a dollar.

Statements from this episode (11)

Assertion Not checkable as stated
Miller: Converting Awareness Tech to SaaS added $2M profit overnight
“And so we converted the business From a one-time payment to a subscription, and that added two million dollars of revenue overnight. So it went from five million to seven million, and as all that revenue was profit, the business went from losing a million to m…”
Brad Miller Oct 13, 2022 ▶ 3:08
Disclosure
Miller: Turned down 10% of Quest Bar before its $1B exit
“So to shut me up, they offered me 10% in their new venture, which was a protein bar company. Don't ask me why. they were bodybuilders. And I was like, I, the world does not need another protein bar company that they later sold it for a billion dollars.”
Brad Miller Oct 13, 2022 ▶ 3:36
Disclosure
Miller: Awareness Tech acquisition funded with $5.5M equity and $1M debt
“Well, five and a half million myself and a financial partner split at fifty-fifty, and we did a little bit of bank debt on top of that. a million bucks of bank debt to fund, you know, the purchase price and some other expenses and all that kind of stuff.”
Brad Miller Oct 13, 2022 ▶ 4:44
Assertion Not checkable as stated
Miller: Awareness Tech distributed $12M in dividends prior to exit
“Well, it was total of 12, so there was one million for a couple of years, and then it grew to three, then grew to six, but yes. Correct. Yeah, we took out double what we put in before we sold it.”
Brad Miller Oct 13, 2022 ▶ 5:50
Assertion Not checkable as stated
Miller: Parental app target doubled to $100K MRR during M&A negotiations
“They were doing 50,000 a month when we were negotiating. And the, by the time we closed it, five months later, it was doing a 100,000.”
Brad Miller Oct 13, 2022 ▶ 7:29
Assertion Not checkable as stated
Miller: Variato Sold to VCs for $45M at $15M Revenue, $6M Profit
“I got outbid heavily because they got sold for forty five million to Two VCs. And it was a nice, you know, business doing fifteen million of revenue, making six million of profit.”
Brad Miller Oct 13, 2022 ▶ 9:12
Assertion Not checkable as stated
Miller: Acquired competitor Variato for $3.5M after initial $19M valuation
“We started a negotiation where we were going to pay them. Nineteen million dollars on it. Then they were doing twelve million of revenue. But by the time we close the deal, they were on a Eight million dollar run rate, and they had run out of money, and they c…”
Brad Miller Oct 13, 2022 ▶ 10:20
Assertion Not checkable as stated
Miller: Awareness Tech exited for $35M in 2020 after turnaround
“They went from losing money to making two million dollars, and so we were before we bought them, we were you know, a twelve million dollar business making four at this point, and they added they were eight and two now, and so now we were 26, and then we said, …”
Brad Miller Oct 13, 2022 ▶ 12:30
Prediction Not checkable as stated
Miller: Post-exit, Awareness Technologies' revenue will halve to $10M in 2022
“The business will do ten million in revenue this year.”
Brad Miller Oct 13, 2022 ▶ 16:54
Assertion Not checkable as stated
Miller: Awareness Technologies' new owners defaulted on debt payments in 2022
“They haven't made a bank payment or an interest payment since March, and they might not for quite a while.”
Brad Miller Oct 13, 2022 ▶ 20:47
Assertion Not checkable as stated
Miller: Investors injected another $3M into Awareness Technologies
“The VC has put in another three million bucks to fund, so it's not only not making six, they're actually losing money”
Brad Miller Oct 13, 2022 ▶ 21:05
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