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Mar 23, 2021 · 16m · top-founders

The Capital Efficient Founder: $2m in, $12m dividends out, Just Exited

Brad Miller · 9m spoken Nathan Latka · 4m spoken
0:00 / 0:00

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

In this episode of Conversations with Nathan Latka, serial entrepreneur Brad Miller details how he acquired Awareness Technologies for $5.5 million, transitioned it to recurring SaaS, and utilized regional bank debt to scale the company to $20 million in revenue and nearly $50 million in total enterprise value.

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 34.3% of the talking time here. How this is scored →

Nathan as informed peer 6.0 Guest teaching 5.2 Guest disagreement 1.2 Nathan pushing back 1.6
05100:0010:001:29–4:16 · Nathan as informed peer 6/10 Introducing Brad Miller and His Capital Efficient Track Record Latka introduces Miller with a detailed recap of his past track record and structures direct questions about the capital stack. Miller explains transitioning the acquired business from a legacy one-time fee to a recurring subscription model to instantly create profit.4:17–6:19 · Nathan as informed peer 6/10 Scaling Through Debt-Financed Add-ons and Remote Work Demand Latka aggregates the cash invested versus the enterprise valuation to underscore extreme capital efficiency. Miller details how add-on acquisitions and the shift to remote work during COVID boosted their employee monitoring revenue.6:20–9:02 · Nathan as informed peer 5/10 Targeting and Capitalizing on a Distressed VC-Backed Competitor Latka asks whether Miller had special VC connections to buy out the competitor at a discount. Miller outlines the history of a rival that VCs acquired for $45M, which subsequently deteriorated from high profits to severe losses.9:15–12:32 · Nathan as informed peer 6/10 Executing the Three-Week Distressed Acquisition Without Equity Cash Latka probes the cap table and debt load leading up to the exit. Miller corrects assumptions by explaining they financed acquisitions entirely via bank debt while extracting $12.5M in dividends.12:34–15:24 · Nathan as informed peer 7/10 The Turnaround Playbook for Fixing Founder Blind Spots Latka shows strong domain understanding of debt leverage multiples and interest rates while critiquing traditional VC banking. Miller details using a regional bank rather than venture debt lenders that dismiss profitable companies.1:29–4:16 · Guest teaching 5/10 Introducing Brad Miller and His Capital Efficient Track Record Latka introduces Miller with a detailed recap of his past track record and structures direct questions about the capital stack. Miller explains transitioning the acquired business from a legacy one-time fee to a recurring subscription model to instantly create profit.4:17–6:19 · Guest teaching 4/10 Scaling Through Debt-Financed Add-ons and Remote Work Demand Latka aggregates the cash invested versus the enterprise valuation to underscore extreme capital efficiency. Miller details how add-on acquisitions and the shift to remote work during COVID boosted their employee monitoring revenue.6:20–9:02 · Guest teaching 6/10 Targeting and Capitalizing on a Distressed VC-Backed Competitor Latka asks whether Miller had special VC connections to buy out the competitor at a discount. Miller outlines the history of a rival that VCs acquired for $45M, which subsequently deteriorated from high profits to severe losses.9:15–12:32 · Guest teaching 6/10 Executing the Three-Week Distressed Acquisition Without Equity Cash Latka probes the cap table and debt load leading up to the exit. Miller corrects assumptions by explaining they financed acquisitions entirely via bank debt while extracting $12.5M in dividends.12:34–15:24 · Guest teaching 5/10 The Turnaround Playbook for Fixing Founder Blind Spots Latka shows strong domain understanding of debt leverage multiples and interest rates while critiquing traditional VC banking. Miller details using a regional bank rather than venture debt lenders that dismiss profitable companies.1:29–4:16 · Guest disagreement 1/10 Introducing Brad Miller and His Capital Efficient Track Record Latka introduces Miller with a detailed recap of his past track record and structures direct questions about the capital stack. Miller explains transitioning the acquired business from a legacy one-time fee to a recurring subscription model to instantly create profit.4:17–6:19 · Guest disagreement 1/10 Scaling Through Debt-Financed Add-ons and Remote Work Demand Latka aggregates the cash invested versus the enterprise valuation to underscore extreme capital efficiency. Miller details how add-on acquisitions and the shift to remote work during COVID boosted their employee monitoring revenue.6:20–9:02 · Guest disagreement 1/10 Targeting and Capitalizing on a Distressed VC-Backed Competitor Latka asks whether Miller had special VC connections to buy out the competitor at a discount. Miller outlines the history of a rival that VCs acquired for $45M, which subsequently deteriorated from high profits to severe losses.9:15–12:32 · Guest disagreement 2/10 Executing the Three-Week Distressed Acquisition Without Equity Cash Latka probes the cap table and debt load leading up to the exit. Miller corrects assumptions by explaining they financed acquisitions entirely via bank debt while extracting $12.5M in dividends.12:34–15:24 · Guest disagreement 1/10 The Turnaround Playbook for Fixing Founder Blind Spots Latka shows strong domain understanding of debt leverage multiples and interest rates while critiquing traditional VC banking. Miller details using a regional bank rather than venture debt lenders that dismiss profitable companies.1:29–4:16 · Nathan pushing back 1/10 Introducing Brad Miller and His Capital Efficient Track Record Latka introduces Miller with a detailed recap of his past track record and structures direct questions about the capital stack. Miller explains transitioning the acquired business from a legacy one-time fee to a recurring subscription model to instantly create profit.4:17–6:19 · Nathan pushing back 2/10 Scaling Through Debt-Financed Add-ons and Remote Work Demand Latka aggregates the cash invested versus the enterprise valuation to underscore extreme capital efficiency. Miller details how add-on acquisitions and the shift to remote work during COVID boosted their employee monitoring revenue.6:20–9:02 · Nathan pushing back 1/10 Targeting and Capitalizing on a Distressed VC-Backed Competitor Latka asks whether Miller had special VC connections to buy out the competitor at a discount. Miller outlines the history of a rival that VCs acquired for $45M, which subsequently deteriorated from high profits to severe losses.9:15–12:32 · Nathan pushing back 2/10 Executing the Three-Week Distressed Acquisition Without Equity Cash Latka probes the cap table and debt load leading up to the exit. Miller corrects assumptions by explaining they financed acquisitions entirely via bank debt while extracting $12.5M in dividends.12:34–15:24 · Nathan pushing back 2/10 The Turnaround Playbook for Fixing Founder Blind Spots Latka shows strong domain understanding of debt leverage multiples and interest rates while critiquing traditional VC banking. Miller details using a regional bank rather than venture debt lenders that dismiss profitable companies.

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

0:00 · Nathan 68% · guest 32%0:00 · Nathan 68% · guest 32%3:00 · Nathan 13.3% · guest 86.7%3:00 · Nathan 13.3% · guest 86.7%6:00 · Nathan 41.1% · guest 58.9%6:00 · Nathan 41.1% · guest 58.9%9:00 · Nathan 21.4% · guest 78.6%9:00 · Nathan 21.4% · guest 78.6%12:00 · Nathan 24.5% · guest 75.5%12:00 · Nathan 24.5% · guest 75.5%15:00 · Nathan 43.3% · guest 56.7%15:00 · Nathan 43.3% · guest 56.7%
Sharpest disagreement ▶ 12:34 Pushing back on standardized acquisition playbooks

Miller rejects Latka's suggestion of a repeatable copy-paste playbook, pointing out that every acquisition has idiosyncratic market dynamics and non-obvious operational fixes.

 Hardest push from Nathan ▶ 14:08 Challenging conventional VC banking choices

Latka challenges the mainstream startup standard of relying on brand-name VC banks like SVB instead of relationship-driven local lenders.

 Biggest teaching moment ▶ 14:20 Venture banks ignoring profitable businesses

Miller explains the paradox of venture banking where institutions like SVB preferred unprofitable companies with brand-name VCs over cash-flow-positive businesses.

 Nathan holds their own ▶ 14:55 Calculating acquisition debt capacity and interest rates

Latka quickly works out the exact EBITDA leverage formula, calculating how a million in profit unlocks a 3x debt facility under favorable interest terms.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Introducing Brad Miller and His Capital Efficient Track Record 6511 Latka introduces Miller with a detailed recap of his past track record and structures direct questions about the capital stack. Miller explains transitioning the acquired business from a legacy one-time fee to a recurring subscription model to instantly create profit.
Scaling Through Debt-Financed Add-ons and Remote Work Demand 6412 Latka aggregates the cash invested versus the enterprise valuation to underscore extreme capital efficiency. Miller details how add-on acquisitions and the shift to remote work during COVID boosted their employee monitoring revenue.
Targeting and Capitalizing on a Distressed VC-Backed Competitor 5611 Latka asks whether Miller had special VC connections to buy out the competitor at a discount. Miller outlines the history of a rival that VCs acquired for $45M, which subsequently deteriorated from high profits to severe losses.
Executing the Three-Week Distressed Acquisition Without Equity Cash 6622 Latka probes the cap table and debt load leading up to the exit. Miller corrects assumptions by explaining they financed acquisitions entirely via bank debt while extracting $12.5M in dividends.
The Turnaround Playbook for Fixing Founder Blind Spots 7512 Latka shows strong domain understanding of debt leverage multiples and interest rates while critiquing traditional VC banking. Miller details using a regional bank rather than venture debt lenders that dismiss profitable companies.

Statements from this episode (10)

Disclosure
Brad Miller and Partner Acquired Awareness Tech for $5.5M
“No, they were we were 50, 50 equity partners. We each put up 2.75 million. We, you know, we put up five and a half million.”
Brad Miller Mar 23, 2021 ▶ 3:07
Assertion Supported
Awareness Tech Founders Used Sale Proceeds to Start Quest Nutrition
“The founders, I may have told you this, went on to take that money and start a billion dollar company called Quest Nutrition.”
Brad Miller Mar 23, 2021 ▶ 3:22
Assertion Not checkable as stated
Switching Awareness Tech to Subscriptions Turned $1M Loss Into $1M Profit
“And but the business when I bought it was doing, you know, sort of five Five million losing a million. And even though it was structured as a SAS cloud delivery model, they were only charging a one time fee, though providing service and cloud forever. And so t…”
Brad Miller Mar 23, 2021 ▶ 3:34
Assertion Not checkable as stated
Awareness Technologies Hit $20M Revenue and $6M EBITDA in 2020
“The business grew from seven million, well, I guess five to seven, and then and then and then to 20, you know, last year we did twenty million making six.”
Brad Miller Mar 23, 2021 ▶ 4:54
Assertion Not checkable as stated
VC-Backed Competitor Collapsed to $3M Loss Before Brad Miller Acquired It
“Two VCs bought it for forty-five million, and they And the business went from doing fifteen million making six to doing seven million losing three when we bought it.”
Brad Miller Mar 23, 2021 ▶ 6:43
Assertion Not checkable as stated
Brad Miller Closed Competitor Acquisition in Three Weeks to Save Payroll
“And so we did a deal literally in three weeks because they weren't going to meet payroll.”
Brad Miller Mar 23, 2021 ▶ 10:07
Disclosure
Brad Miller Bought Distressed Competitor for Zero Cash Upfront
“We were able to basically buy it by taking over that two million dollar line of credit, and then pay the investment banker fees and lawyer fees that they couldn't afford to pay because there was no cash changing hands.”
Brad Miller Mar 23, 2021 ▶ 10:33
Assertion Not checkable as stated
Awareness Technologies Distributed $12.5M in Dividends Under Brad Miller
“We had also taken out 12 and a half million of dividends along the way.”
Brad Miller Mar 23, 2021 ▶ 11:02
Assertion Not checkable as stated
Brad Miller's Total Exit and Dividends Reached Nearly $50 Million
“The combination of the dividends and the price was just shy of 50, of just shy of fifty million.”
Brad Miller Mar 23, 2021 ▶ 12:07
Opinion
SVB Refused to Lend Without VC Backing Despite Strong Cash Flow
“SVB wouldn't touch us because we didn't have, like, a traditional VC in the deal. They would rather fund a company that's losing money with a brand name VC than, you know, they don't do cash flow lending.”
Brad Miller Mar 23, 2021 ▶ 14:20
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