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Sep 5, 2018 · 17m · top-founders

1138 Goldman almost sold us for $12m, thankfully it failed

Nathan Latka · 8m spoken Scott Brandley · 6m spoken
0:00 / 0:00

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In this episode of The Top Entrepreneurs, host Nathan Latka interviews Scott Brandley, co-founder of Shopper Approved, examining how the customer review platform bootstrapped to over $6 million in ARR with lean unit economics, managed multi-product software portfolios, and turned a collapsed $12 million acquisition into accelerated long-term growth.

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 55.4% of the talking time here. How this is scored →

Nathan as informed peer 4.7 Guest teaching 3.0 Guest disagreement 1.7 Nathan pushing back 3.0
05100:0010:002:13–5:27 · Nathan as informed peer 5/10 Software Background and the Active Review Concept Nathan questions why any business would pay to broadcast bad reviews. Scott educates him on active versus passive reviews, showing how active collection captures representative positive sentiment using Newegg as an example.5:28–8:08 · Nathan as informed peer 7/10 Customer Count, Grandfathered Pricing, and Monthly Revenue Nathan quickly calculates the historical average ARPU ($70) versus current list pricing ($150) based on total revenue and customer counts. He also presses and clarifies the math behind Scott's monthly revenue churn figures.8:11–11:26 · Nathan as informed peer 5/10 Thinkific Course Platform Sponsorship Following the sponsorship segment, Nathan calculates customer payback velocity from CAC and pushes Scott to lean into an aggressive competitive mindset against VC-funded rivals.11:28–14:26 · Nathan as informed peer 6/10 The Collapsed $12M Acquisition Backed by Goldman Sachs Nathan breaks down the 6x revenue multiple of the failed $12M Goldman-backed acquisition and pushes Scott on how they distribute high profit margins into other ventures.14:26–16:43 · Nathan as informed peer 5/10 Venture Investment Criteria and Project Management Scott details his operational criteria for incubating SaaS software and Nathan immediately connects call center distribution to a minimum $100 recurring price floor before running through the famous five questions.16:43–17:22 · Nathan as informed peer 0/10 Episode Summary and Conclusion Solo host outro summarizing Shopper Approved key metrics and financial highlights.2:13–5:27 · Guest teaching 6/10 Software Background and the Active Review Concept Nathan questions why any business would pay to broadcast bad reviews. Scott educates him on active versus passive reviews, showing how active collection captures representative positive sentiment using Newegg as an example.5:28–8:08 · Guest teaching 3/10 Customer Count, Grandfathered Pricing, and Monthly Revenue Nathan quickly calculates the historical average ARPU ($70) versus current list pricing ($150) based on total revenue and customer counts. He also presses and clarifies the math behind Scott's monthly revenue churn figures.8:11–11:26 · Guest teaching 2/10 Thinkific Course Platform Sponsorship Following the sponsorship segment, Nathan calculates customer payback velocity from CAC and pushes Scott to lean into an aggressive competitive mindset against VC-funded rivals.11:28–14:26 · Guest teaching 3/10 The Collapsed $12M Acquisition Backed by Goldman Sachs Nathan breaks down the 6x revenue multiple of the failed $12M Goldman-backed acquisition and pushes Scott on how they distribute high profit margins into other ventures.14:26–16:43 · Guest teaching 4/10 Venture Investment Criteria and Project Management Scott details his operational criteria for incubating SaaS software and Nathan immediately connects call center distribution to a minimum $100 recurring price floor before running through the famous five questions.16:43–17:22 · Guest teaching 0/10 Episode Summary and Conclusion Solo host outro summarizing Shopper Approved key metrics and financial highlights.2:13–5:27 · Guest disagreement 2/10 Software Background and the Active Review Concept Nathan questions why any business would pay to broadcast bad reviews. Scott educates him on active versus passive reviews, showing how active collection captures representative positive sentiment using Newegg as an example.5:28–8:08 · Guest disagreement 2/10 Customer Count, Grandfathered Pricing, and Monthly Revenue Nathan quickly calculates the historical average ARPU ($70) versus current list pricing ($150) based on total revenue and customer counts. He also presses and clarifies the math behind Scott's monthly revenue churn figures.8:11–11:26 · Guest disagreement 2/10 Thinkific Course Platform Sponsorship Following the sponsorship segment, Nathan calculates customer payback velocity from CAC and pushes Scott to lean into an aggressive competitive mindset against VC-funded rivals.11:28–14:26 · Guest disagreement 3/10 The Collapsed $12M Acquisition Backed by Goldman Sachs Nathan breaks down the 6x revenue multiple of the failed $12M Goldman-backed acquisition and pushes Scott on how they distribute high profit margins into other ventures.14:26–16:43 · Guest disagreement 1/10 Venture Investment Criteria and Project Management Scott details his operational criteria for incubating SaaS software and Nathan immediately connects call center distribution to a minimum $100 recurring price floor before running through the famous five questions.16:43–17:22 · Guest disagreement 0/10 Episode Summary and Conclusion Solo host outro summarizing Shopper Approved key metrics and financial highlights.2:13–5:27 · Nathan pushing back 4/10 Software Background and the Active Review Concept Nathan questions why any business would pay to broadcast bad reviews. Scott educates him on active versus passive reviews, showing how active collection captures representative positive sentiment using Newegg as an example.5:28–8:08 · Nathan pushing back 5/10 Customer Count, Grandfathered Pricing, and Monthly Revenue Nathan quickly calculates the historical average ARPU ($70) versus current list pricing ($150) based on total revenue and customer counts. He also presses and clarifies the math behind Scott's monthly revenue churn figures.8:11–11:26 · Nathan pushing back 3/10 Thinkific Course Platform Sponsorship Following the sponsorship segment, Nathan calculates customer payback velocity from CAC and pushes Scott to lean into an aggressive competitive mindset against VC-funded rivals.11:28–14:26 · Nathan pushing back 4/10 The Collapsed $12M Acquisition Backed by Goldman Sachs Nathan breaks down the 6x revenue multiple of the failed $12M Goldman-backed acquisition and pushes Scott on how they distribute high profit margins into other ventures.14:26–16:43 · Nathan pushing back 2/10 Venture Investment Criteria and Project Management Scott details his operational criteria for incubating SaaS software and Nathan immediately connects call center distribution to a minimum $100 recurring price floor before running through the famous five questions.16:43–17:22 · Nathan pushing back 0/10 Episode Summary and Conclusion Solo host outro summarizing Shopper Approved key metrics and financial highlights.

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

0:00 · Nathan 72.4% · guest 27.6%0:00 · Nathan 72.4% · guest 27.6%3:00 · Nathan 30.9% · guest 69.1%3:00 · Nathan 30.9% · guest 69.1%6:00 · Nathan 64.8% · guest 35.2%6:00 · Nathan 64.8% · guest 35.2%9:00 · Nathan 59.6% · guest 40.4%9:00 · Nathan 59.6% · guest 40.4%12:00 · Nathan 46.4% · guest 53.6%12:00 · Nathan 46.4% · guest 53.6%15:00 · Nathan 58.8% · guest 41.2%15:00 · Nathan 58.8% · guest 41.2%
Sharpest disagreement ▶ 13:07 Scott guards profit strategy from competitors

Scott pushes back against Nathan's probing question regarding how they extract wealth, refusing to reveal specifics to protect competitive advantage.

 Hardest push from Nathan ▶ 7:04 Nathan challenges churn percentage math

Nathan refuses to accept the ambiguity between logo versus revenue churn and corrects the monthly to annualized rate calculation.

 Biggest teaching moment ▶ 4:33 Scott contrasts Trustpilot and reseller review distribution

Scott explains the core mechanics of passive review skew using Newegg's 1.2 Trustpilot rating versus 4.9 active rating to educate Nathan on why companies pay for his service.

 Nathan holds their own ▶ 6:03 Nathan deduces legacy ARPU vs new pricing

Nathan instantly divides $500k monthly revenue by 7,000 customers to identify an implied $70 ARPU and deduce how heavily legacy customers were grandfathered.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Software Background and the Active Review Concept 5624 Nathan questions why any business would pay to broadcast bad reviews. Scott educates him on active versus passive reviews, showing how active collection captures representative positive sentiment using Newegg as an example.
Customer Count, Grandfathered Pricing, and Monthly Revenue 7325 Nathan quickly calculates the historical average ARPU ($70) versus current list pricing ($150) based on total revenue and customer counts. He also presses and clarifies the math behind Scott's monthly revenue churn figures.
Thinkific Course Platform Sponsorship 5223 Following the sponsorship segment, Nathan calculates customer payback velocity from CAC and pushes Scott to lean into an aggressive competitive mindset against VC-funded rivals.
The Collapsed $12M Acquisition Backed by Goldman Sachs 6334 Nathan breaks down the 6x revenue multiple of the failed $12M Goldman-backed acquisition and pushes Scott on how they distribute high profit margins into other ventures.
Venture Investment Criteria and Project Management 5412 Scott details his operational criteria for incubating SaaS software and Nathan immediately connects call center distribution to a minimum $100 recurring price floor before running through the famous five questions.
Episode Summary and Conclusion 0000 Solo host outro summarizing Shopper Approved key metrics and financial highlights.

Statements from this episode (20)

Assertion Open · timeframe Dec 2017
Shopper Approved generated $4.7M in 2017 revenue
“We did about 4.7 million.”
Scott Brandley Sep 5, 2018 ▶ 1:54
Assertion Supported
Shopper Approved generated $3.8M in 2016 revenue
“3.8.”
Scott Brandley Sep 5, 2018 ▶ 2:00
Prediction Not publicly verifiable
Shopper Approved is on track to exceed $6M in 2018 revenue
“We're on track to do over six.”
Scott Brandley Sep 5, 2018 ▶ 2:05
Insight
Brandley: Active, Business-Driven Reviews Produce More Accurate Customer Scores
“What we do is active reviews where, or business driven reviews where the business hires us to collect reviews for them. And that way we collect reviews from everyone equally, which we feel gives a better score.”
Scott Brandley Sep 5, 2018 ▶ 3:23
Disclosure
Shopper Approved charges businesses $100 to $150 per month
“It depends on the size of the business, but I would say between a hundred and a 150 a month.”
Scott Brandley Sep 5, 2018 ▶ 3:46
Assertion Partly supported
Shopper Approved is one of just ten Google Ads review syndicators
“So if you go to Google and you see five-star listings next to a pay-per-click ad, we're one of about 10 companies that have the ability to do that.”
Scott Brandley Sep 5, 2018 ▶ 4:11
Assertion Supported
Trustpilot's passive reviews skew heavily negative compared to active collection
“So if you go to like Trustpilot and there, people are just leaving passive reviews that are pissed off, their score is like 1.2. But if you go to like reseller ratings who Newegg hires to actively collect reviews for them, their score is like 4.9.”
Scott Brandley Sep 5, 2018 ▶ 4:51
Assertion Not checkable as stated
Shopper Approved passes 7,000 paying customers
“We've passed 7000 customers.”
Scott Brandley Sep 5, 2018 ▶ 5:34
Assertion Not checkable as stated
Shopper Approved achieves nearly $500k in monthly revenue
“Close to 500,000.”
Scott Brandley Sep 5, 2018 ▶ 6:03
Assertion Not checkable as stated
Shopper Approved has a 0.8% monthly revenue churn rate
“Churn is .8%.”
Scott Brandley Sep 5, 2018 ▶ 6:23
Assertion Not checkable as stated
Goldman Sachs required Shopper Approved to calculate churn during acquisition talks
“We almost sold out a couple of years ago, and Goldman Sachs made us figure it out.”
Scott Brandley Sep 5, 2018 ▶ 6:29
Assertion Not checkable as stated
Outbound call centers drive almost 100% of Shopper Approved's revenue
“Almost a hundred percent of our revenue is driven by direct by call centers, direct calls to our to different businesses.”
Scott Brandley Sep 5, 2018 ▶ 7:50
Disclosure
Shopper Approved CAC is about $400
“It's about 400 dollars.”
Scott Brandley Sep 5, 2018 ▶ 10:02
Opinion
Brandley: Shopper Approved is anti-VC and only bootstrapped player left
“We're in fact, we're kind of anti VC at this point. Everybody else in our industry is sold out and we're the only ones that haven't.”
Scott Brandley Sep 5, 2018 ▶ 10:37
Assertion Not checkable as stated
Bootstrapped 30-person Shopper Approved competes against $100M-backed Trustpilot and Yotpo
“We're less than 30, which is kind of cool because like Trustpilot and Yotpo, they've had over a hundred million in BC and they have between 300 to 500 employees and we have less than 30 and we're giving, we're neck and neck with them.”
Scott Brandley Sep 5, 2018 ▶ 10:46
Disclosure
Goldman Sachs-backed competitor nearly acquired Shopper Approved for $12M in 2014
“It was twelve million.”
Scott Brandley Sep 5, 2018 ▶ 12:31
Assertion Not checkable as stated
Brandley: Shopper Approved profit margins are way higher than 20%
“Yeah, way more than that.”
Scott Brandley Sep 5, 2018 ▶ 13:32
Disclosure
Brandley: Shopper Approved profits are reinvested into launching new software companies
“So what we, what we've been doing is taking the money out and investing it into other companies.”
Scott Brandley Sep 5, 2018 ▶ 13:35
Disclosure
Brandley's six rigid criteria for launching any new software venture
“Everything that had, so it's gotta be sexy. It's gotta be sticky. It's gotta have recurring revenue. We have to be able to sell it in a call center. It has to be able to be developed within six months and it has to have low low customer support.”
Scott Brandley Sep 5, 2018 ▶ 14:30
Assertion Not checkable as stated
Brandley has built over 30 companies and actively operates five
“So we've built over 30, but we probably have five that are currently actively running and we're building.”
Scott Brandley Sep 5, 2018 ▶ 15:09
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