Jun 27, 2022 · 1h 26m · top-founders
Details of $20m Revenue Profitwell and $55m Revenue Paddle Deal and what led to the $200m Acquisition
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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 in-depth SaaS interview hosted by Nathan Latka, Paddle founder Christian Owens and ProfitWell founder Patrick Campbell break down their $200 million acquisition deal, sharing cap table lessons, revenue milestones, and their vision for the 'Do It For You' subscription economy.
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 23.4% of the talking time here. How this is scored →
Nathan as informed peer 6.0 Guest teaching 4.1 Guest disagreement 2.3 Nathan pushing back 3.2
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:05:59 Patrick rejects confirming Latka's revenue figures
Campbell firmly pushes back against confirming or denying Latka's precise ARR estimates, defending company privacy after joining a venture-backed scaleup.
Hardest push from Nathan ▶ 1:05:00 Latka corners founders on exact revenue breakdownLatka refuses to let revenue ambiguity stand, systematically calculating the exact dollar split between Retain and Price Intelligently using stated percentages.
Biggest teaching moment ▶ 7:50 Campbell educates on Merchant of Record liabilitiesCampbell clearly explains to Latka why Paddle's take rate is justified, demonstrating how Merchant of Record status absorbs legal and tax liability away from founders.
Nathan holds their own ▶ 1:07:41 Latka benchmarks revenue using employee headcountLatka leverages industry revenue-per-employee benchmarks ($250k/FTE across 71 staff) to independently calculate ProfitWell's ~$23M run rate when the guest refuses to confirm it.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Announcing the $200M Paddle and ProfitWell Acquisition | 6 | 3 | 2 | 3 | Latka opens by drilling into the strategic justification for publicly announcing the $200M valuation and cites Owens' past 2020 interview comments regarding customer churn from Zuora. Both founders collaboratively detail their TAM and transaction-based pricing model. | |
| Paddle's Merchant of Record Value Proposition and Tax Liability | 5 | 6 | 2 | 2 | Campbell and Owens educate Latka on why Paddle's 5% take rate is not comparable to raw payment processing like Stripe, noting Paddle acts as Merchant of Record and assumes full legal liability for international sales taxes. | |
| Christian Owens' Early Career and Parental Influence on Curiosity | 4 | 2 | 1 | 1 | Latka explores Christian Owens' background, early career milestones, and how parental encouragement of curiosity enabled him to start software projects as a teenager. | |
| Founding Paddle and Structuring Initial Founder Equity | 5 | 2 | 2 | 3 | Latka presses Owens on the exact founding cap table equity split with his co-founder Harrison, prompting Owens to clarify how bringing initial capital shaped the majority split. | |
| Patrick Campbell's Background from Intelligence and Google to Startups | 4 | 3 | 2 | 2 | Campbell outlines his early career path through the NSA, Google data science, and Gemvara, discussing how navigating bureaucracy and Asperger's led him toward startup entrepreneurship. | |
| Price Intelligently's Launch and Early Co-Founder Equity Mistakes | 5 | 4 | 2 | 2 | Campbell reflects on the major mistake of dividing initial equity into equal thirds with part-time co-founders without vesting schedules, creating long-term cap table complications. | |
| Restructuring ProfitWell's Cap Table via Milestone Equity Grants | 6 | 5 | 3 | 4 | Latka probes how Campbell rectified the equity imbalance without outside recapitalization. Campbell reveals how ongoing milestone grants diluted inactive co-founders over nearly a decade and acknowledges Christopher O'Donnell and Aaron White. | |
| Cap Table Lessons, Early Exits, and Long-Term Team Dynamics | 6 | 4 | 2 | 3 | Latka contrasts bootstrapping with an early exit versus starting from scratch, before shifting focus to the historical timeline of reaching the first $1M in ARR. | |
| Paddle's Early Venture Fundraising and Series A Financing | 7 | 3 | 2 | 4 | Latka cites granular metrics from Owens' previous public appearances ($14M ARR, 900 customers, $20M cash) to dissect Paddle's venture funding rounds, Series A valuation, and historic dilution. | |
| Founderpath SaaS Valuation Tool Advertisement | 6 | 3 | 2 | 3 | Following a Founderpath sponsorship announcement, Latka quizzes Campbell on transitioning from a $50/month SaaS tool into high-ticket tech-enabled pricing consulting for major enterprises. | |
| The Genesis of ProfitWell Free Metrics and Seed Funding Regrets | 5 | 6 | 2 | 2 | Campbell details how the crowded metrics market (Baremetrics, ChartMogul) forced ProfitWell to offer core financial analytics for free, reflecting that not raising seed capital cost them a full year of growth. | |
| Scaling Price Intelligently to $10M ARR Alongside Free Metrics | 7 | 4 | 3 | 4 | Latka tests Campbell's recollection of revenue milestones and customer concentration. The guests banter about Latka's rigorous background research and calculation tactics. | |
| Monetizing Retain and Recognized with Performance-Based Pricing | 8 | 6 | 3 | 5 | Latka rigorously breaks down ProfitWell's monetization on Retain, pushing past ego metrics to determine net recovered ARR and pricing mechanics relative to baseline churn. | |
| ProfitWell's Growth Trajectory, Service Margins, and Employee Metrics | 9 | 4 | 4 | 6 | Latka constructs a detailed reverse-engineering model of ProfitWell's revenue split, backing it up with LinkedIn employee count and revenue-per-employee SaaS benchmarks to pin ARR at $20M-$25M. | |
| Initiating Acquisition Talks and Running a Strategic Process | 6 | 5 | 2 | 3 | Campbell describes the inbound acquisition discussions and reveals his board deck's tracking list of 15 strategic buyers, explaining how they rapidly mobilized a formal sale process. | |
| Negotiating Terms, KKR Series D, and SVB Debt Financing | 8 | 4 | 3 | 6 | Latka drills down into the deal's financing structure, pushing Owens on the initial lower term sheet, KKR Series D capital calls, and SVB debt facility terms. | |
| The 'Do It For You' Paradigm and TAM Expansion into Gaming | 5 | 6 | 2 | 2 | Campbell and Owens articulate their unified vision for the 'do it for you' software category and discuss expanding beyond traditional SaaS into gaming and microtransactions. |
Statements from this episode (42)
Campbell: ProfitWell and Paddle kept acquisition valuation opaque at "over $200M"
“We were a little non-specific, like over two hundred million. Cause also like we're continuing to work on a team. And so it's like, I don't know, there's some advantages in like being public. There's advantages in being opaque. We kind of chose translucent bas…”
Campbell: Paddle will do for subscription revenue what Salesforce did for CRM
“We're going to do for The subscription dollar, what Salesforce did for the customer record where a dollar through paddle is going to be worth, you know, a lot more coming out of paddle than using infrastructure that, you know, is currently on the market basica…”
Owens: Paddle charges no monthly or setup fees, taking only a percentage cut
“We monetize the transaction volume that flows through Paddle. We don't take a monthly fee. We don't take a minimum. We don't take a setup fee. We don't do any of that stuff. We only win when the customers win. So we monetize the payments that are coming throug…”
Owens: Paddle charges 5% plus $0.50 as maximum self-serve pricing
“Five percent and 50 cents is the kind of publicly available pricing. If you kind of self-serve sign up on the website, obviously there is a whole spectrum of customers. If you're doing a hundred million dollars a year, sort of the pricing does go down. If your…”
Owens scaled a previous software company to $3M-$5M ARR before Paddle
“So sort of pre paddle, I built a software company. And I really ran headfirst into the problem that we try and solve, scaled it to three to five million in ARR sort of, and ran into this problem where we were, we had a few 100,000 kind of people using these pr…”
Campbell: Paddle assumes full legal tax liability for its software customers
“Tax is completely taken care of. Like, not like, Hey, we show you how much tax it's like, no, no, no. It's completely taken care of. Like if your tax gets messed up, we go to jail. Like you don't go to jail. We go to jail because we're the ones that are actual…”
Owens invested roughly $100,000 of initial capital to launch Paddle
“It was probably because it was like in little chunks. As we kind of like built this stuff, it was probably call it a hundred K sort of to begin with.”
Owens says Paddle's founding equity split was roughly 70/30 or 75/25
“I think I don't even remember what the initial kind of equity split was. It was sort of like two thirds, one third or three quarters, one quarter or something like that.”
Patrick Campbell discloses he has Asperger's
“I have Asperger's, so that's another thing I don't think I've ever told you, and I've been more open about that recently”
Campbell: Google gave me a $5K bonus before shelving my algorithm
“I made Google a ton of money, but the point I was trying to make was like, they gave me an award and like a 5000 dollar bonus. And they were like, yeah, we're going to shut this down.”
Campbell: Startups must always implement founder equity vesting
“Founder vesting, like always do founder vesting, like always, always, always everyone should vest. I think like it will work if you don't do that, but I think that helps a lot.”
Campbell: ProfitWell used Amazon's backloaded 10/20/30/40 equity vesting for employees
“We actually have profitable. The one thing that we did is we did like backward bending vesting. So it was 10, 20, 3040. It's kind of like how Amazon used to do it. So like you only get a 10% of your shares allocated shares when you get over that one year cliff…”
Campbell: SaaS customers want pricing done for them due to trust gaps
“Pricing, there's a trust gap. Like there's a lot of products out there that have trust gaps where it's like, you can give them the tools to do the thing, but at the end of the day, they're like, can someone just do this for me? And help me understand like what…”
Campbell: ProfitWell reached $200K in sales within nine months completely unfunded
“Within nine, nine months, like I had closed probably about a 200 grand in, in, in sales. And I wasn't paying, I wasn't making anything. I was like, we had no, that was the funding in the business.”
Campbell: ProfitWell exec delayed signing employment agreement for a year
“Like we did like FACU didn't sign his employment agreement for like a year because we were like worried that we were going to have to like take the source code.”
Latka: Founders should secure any first exit to self-fund future ventures
“This is why I try and get founders all the time. I say, guys, just get your first exit done. It doesn't have to be 10 X. It doesn't have to be a Christian Patrick deal. Just get your first deal done. So you have some money so you can go double down on yourself…”
Owens: Paddle lost 87% of its ARR when one $350K customer churned
“We got from like zero to 400 and then went back down to about like 50. Because we lost like a customer that was like contributing like 350 K and error. And then we had to then rebuild from 50 kind of back up.”
Owens: Paddle raised an initial £150k seed round from one angel
“So like actually raising capital was the first thing that we did as a business. Like can I, and it kind of comes back to kind of Patrick's point earlier, and it wasn't the initial round of money round of kind of funding, which was just a seed round from like o…”
Owens: Paddle at least doubled revenue from 2020 to 2021
“It was really high. Like it was because it was a sort of a little bit of a COVID aberration. Because we were, we saw like the tailwinds of all of that. We at least doubled the business like kind of over that kind of period of time.”
Campbell: ProfitWell's early $50/month software made under $1K MRR
“Oh yeah. Like probably under a thousand dollars MRR. Right. Like cause we got it out there and then you have to understand like at that time there wasn't this like indie hacker community. There wasn't product hunt.”
Campbell: Free software must outperform paid competitors to gain user adoption
“What a lot of people don't realize it has to be better than the paid competition. If it's worse than the paid competition, what ends up happening is people just, they don't use it, right? Because it's not worth it. Like their time, most of the time.”
Campbell: ProfitWell lost a year of growth by not raising a seed round
“We should have raised money right there, at least a small seed fund or seed round or something like that in order to like, you know, accelerate that probably by a year. Like we probably lost a year by not raising a small round for that.”
Campbell: Price Intelligently drove vast majority of early ProfitWell revenue
“In 2018, 2019, it was. The vast majority. So our revenue, like, cause we didn't start stepping on the gas for retain basically, or recognize our two paid like other products until probably 2019. So we had a trickle of revenue probably in 2018 from retain. We s…”
Campbell: Price Intelligently ACV was around $150K in 2018-2019
“I think the ACV was lower, like, closer to one 50, I think during that time.”
Campbell: Superior free software with great support drives outsized brand power
“If you can have a free product that's better than the paid competition and the support is good. Holy cow. Like it's an amazing thing for your brand and your market. So we made serious dedication that we wanted like great support, even though it was free. And s…”
Owens: ProfitWell Retain charges a 4% to 6% take rate
“It's roughly between four and six percent.
Like it's still tiered right now.”
Campbell: Quoting flat rates instead of percentages makes B2B sales significantly easier
“A percent cut feels punitive, but if I position it as a flat rate, that is essentially a percentage anyways, like that little mind trick, like makes the sales process so much easier.”
Campbell: ProfitWell Retain recovered $22M per month in subscription MRR
“The ego number is like the amount of dollars that go through all retained forms. That's the number I know. That's twenty two million dollars a month.”
Campbell: ProfitWell Retain revenue more than doubled in 2021
“So retain, we more than doubled in 20, 21.”
Campbell: Price Intelligently margins are 55-60% versus 95% for Retain
“Like the margin on that business is closer to like 55, 60%. Then, you know, like retain the margin is like 95%.”
Latka: US bootstrapped SaaS companies average $250k revenue per employee
“If most customers or employees are in the U S they do about 250,000 bucks of revenue per employee.”
Campbell: Bootstrapped founders should always keep basic M&A decks and data rooms ready
“I think you should always be ready to like run a process. And that means like, even if you're bootstrapped, have a deck, have like an overview, like memo or a deck or whatever it is have like some of your financials or a data room. Like you don't have to have …”
Campbell: Track and nurture potential acquirers on a dedicated board deck slide
“This is another thing that you should do is you should always keep potential acquirers, I would say, warm. So for the past number of years, we had like a slide in our board deck of like, here are the potential acquirers. And then basically like, where is the s…”
Campbell: ProfitWell rejected potentially more lucrative buyout offers to protect team
“And we did get other offers. Those other offers, they were not as compelling from a team perspective. They might have been more lucrative depending on how you look at it, but it was one of those things where the core of us as well as like myself wanted to keep…”
Owens: Paddle's initial acquisition offer for ProfitWell was tens of millions lower
“It was several, it was tens of millions, like lower.”
Owens: Paddle might have raised at a $3.5B valuation two months earlier
“Two months earlier and we might have raised it like a three and a half billion dollar valuation.”
Owens: The ProfitWell acquisition likely wouldn't have happened two months later
“Two months later, I think the deal might not have happened like at all.”
Owens: Total Financing Including Debt Was Substantially North of $200M
“It was vast majority cash. Sort of, I actually think the number, if you include sort of like, we rounded it to like a whole number, but the actual number, including the debt was pretty like substantially north of two hundred million.”
Campbell: Salesforce is built for manager reporting, not sales reps
“Salesforce isn't built for the sales rep. It's built for the VP or the director level, the reporting, making sure the AEs are doing their activities.”
Campbell: Next wave of SaaS focuses on 'Do It For You' automation
“This next wave of SaaS is basically focused on like, how do I enable you, Nathan, the ability to focus on your customer and focus on basically your product and your team, the three things that you should be focused on by basically taking all this other stuff o…”
Owens: Expanding Paddle to gaming is simpler than physical D2C e-commerce
“The step for us between do we do this for SAS business and do we do it for a game is sort of fairly short versus the step of like, do you do it for SAS business? Do you, versus do you do it for Glossier or like kind of like one of these sort of D to C e-commer…”