The Exchanges

Q So guys, QuestionPro helps you run surveys to do research, understand your customer's experience, and also get feedback from your employees to manage employee engagement. Vivek, with that context, how are you thinking about M&A? Do you go by an adjacent Product categories. Do you double down on the current niches you're in? How are you thinking about it?

A So we doubled down on the current niches we're in. So like you said, you correctly accurately pointed out that three different buyers I look at from the enterprise perspective, the three buyers. Number one is consumer insights and market research. Somebody in a company doing research, um, they typically fall under marketing. Uh, second buyer is customer experience. So people are trying to figure out NPS, like, you know, somebody's in charge of figuring out what's going on with the existing customers. How can we prevent churn? How can we upsell them? And the third component is HR, obviously employee service, really. So any, um, any product or services that sells to each of these buyers, we are interested in. We are trying to kind of build it out. So, so my model has been, look, look at a buyer, put the buyer in the center of our kind of, you know, sphere and say everything that he spends on or he or she spends on, we want to have those tools and services around that. Uh, but that's the kind of general pattern, um, that followed. Uh, so the example, in fact, uh, Valerie from Sweet CX, she was on your show, um, A couple of years ago, maybe a year and a half ago, really. So she, she built a journey mapping platform for the CX buyer, if you think about it. So we do the surveys for the CX buyer. She built the journey mapping platform for the CX buyer. So we kind of combined forces an…

AI assessment note: “So we doubled down on the current niches we're in.”

Q And, and walk me through. So you bootstrapped, I mean, how'd you resist the temptation to raise? I'm sure you got outreach all the time.

A Actually, uh, back when I started the company, it was not cool to raise, I guess. I honestly, to be really honest with you guys, uh, I just stumbled into more customers. Customers give me more money and I never look back, frankly. Um, back in the day, I think when we saw the company, we started off the first year, I think we made like 200 K and the next year we made 800. The year after we made 1.5 million. And so we just kind of kept going that way and we didn't go out and raise money, uh, because, and we were super profitable from day one. Uh, you know, you know, we're, we're pretty probably even today we run at about, you know, 15 to 20% margins. Um, and then back then we were, you know, back when I started the company, we were running almost at 50, 60% margins at that time. So, uh, so the need for raise wasn't there. Um, we were making money and so we decided to kind of, you know, stick to our game plan and, And service the customer and instead of servicing investors, we decided to service the customer.

AI assessment note: “we were super profitable from day one... so the need for raise wasn't there.”

Q Why is it worth your time? I mean, you're rewriting her code base. She only has a million in revenue and 30 paying customers. It takes six months of your time. Why, why is it worth it?

A Because, you know, she's got an expertise in that particular market that we just don't have straight up. I mean, I'll tell you, like, she can sell journey mapping better than anybody I've ever seen in my entire life, right? So yes, it's a pretty small number. Um, but, um, it's an important kind of element in the ecosystem, right? So if you don't have journey mapping, you know, if you think about CX ecosystem, large companies start the conversation online. Off with journey mapping. They don't start off with saying, Hey, let's do an NPS program together. They start off and let's understand the journey of the customer, then find the touch points and then find the kind of different elements that we need to measure. So from my perspective, um, that was an important element in that customer buying journey, right? So if we can get that earlier, we can get the latter part. So that was a thesis. And that's, that's why I spent, um, if it was just another survey company with like, you know, doing the same thing, then, You know, obviously it's not, it's just revenue acquisitions.

AI assessment note: “she's got an expertise in that particular market that we just don't have”

Q And how did you get her? I mean, a lot of people that want to be like you and buy other companies are going to go, how did Vivek get Valerie comfortable paying, you know, a one X cash up front for this? I mean, there's kickers over time, but how did you, why was she okay with that number? How'd you get her there?

A Well, uh, I think two things. One, uh, uh, I flew in and met her, met with her on day one, straight up. Uh, I wanted the deal. Uh, and I think this goes down to basic kind of sales, really like, like you want a deal, you just, you know, go and go and chase it down. Um, uh, even though obviously we were the, we were the acquiring company, it doesn't, it's not beyond me to just pick up, you know, go catch a flight to Charlotte, North Carolina and sit down with her and, um, Just spend a day with her, saying, hey, look, I really want to do this deal. Uh, I mean, I'd be able to pay you, kind of, you know, what you exactly want. Obviously, she wants more than one X cash up front, realistically, right? So, I mean, I'd be able to, but, uh, here's who are, here's who, here's who we are, here's how the combined company, here's how, you know, the things that we bring to the table that you don't have, you don't have a go-to-market function. It's pretty weak, let's assume that we have a much stronger go-to-market function. Um, yes, we have, we don't have a product, you have a product, so let's kind of marry the two together, and we can sell them, Sell the shit out of it. And then the other kind of components that we bring to the table in terms of, you know, uh, size and kind of like, you know, sock to compliance and this, a bunch of other randomized stuff realistically.

AI assessment note: “I flew in and met her, met with her on day one, straight up.”

Q And how many have you done? So how many acquisitions have you done since?

A We've done like five, six or five or seven. Yeah, between five and seven. Uh, honestly, the first ones were pretty small. Um, they were only asset deals. Um, and later on, as we got better at it, um, now we kind of like, we still do asset deals, but we kind of like are looking for more asset plus, um, you know, asset as in tech, plus customers, plus, you know, the standard operation. You know, we want customers, we want, uh, we want people from a, you know, from an HR perspective and, um, obviously some tech, um, Uh, from a software perspective. Um, and the other thing that I want to kind of like, my lesson learned, I would argue, is, um, from a tech, uh, tech integration perspective, uh, the first time I did it, I did not rewrite the platform. I rewrite their code base, um, and I, that's, in fact, um, in long term, a huge mistake, right? So because now you have multiple code bases, and my team doesn't want to work on better, and there's all this, all these cultural issues start coming into play. Uh, so what I've started to do now is like, you know, we model the acquisition, uh, Such that we are going to rewrite the code base. End of story. Right? So the upfront, we say, look, we're going to buy this awesome piece of tech, but we're going to rewrite it because we have a way and, you know, we have a team and we want to manage it. Um, and that is, well, that seems a little expens…

AI assessment note: “We've done like five, six or five or seven. Yeah, between five and seven.”

Q In fact, hold on. You have to break this down. What do you mean someone just sends you a text? How did this thing start?

A So this, this, this is an interesting one. So this guy calls me up and says, like, uh, hey, he was, he had a dev shop, um, and we needed more developers. Um, obviously, who doesn't need more developers? I mean, come on, right? So, and so we were, I mean, obviously, our go-to-market functions have scaled up, but we need to get, we were having a tough time just recruiting developers, and he had 10 of these guys, and he was selling me on the fact that, hey, you know, give me some work. Let me do, let me do work for you, right? Typical, you know, dev shop hustle. And I said, like, no, I'm not going to do, like, individual dev shop stuff, but, you know, why are you kind of, like, you know, bugging around? He's like, yeah, I mean, I have some spare capacity. I'm having a tough time finding new buyers. I'm like, why don't I just buy your company, and just all your developers can work on all the stuff that we need to do. That's it. So I turned that around immediately, and said, like, look, I'll give you this much, and, you know. And the anatomy, you know, on every deal is, you know, most people think that you cannot afford it. It's actually not true. Like, you know, if you think about it, like, whatever price tag you give, you can divide it between what you pay today, and what you pay tomorrow, and what you pay the day after. And whatever you pay tomorrow and the day after usually has …

AI assessment note: “So this guy calls me up and says, like, uh, hey, he had a dev shop”

Q right. Or examples, the volume monthly on that keyword is called like 12,000 or so survey monkey has that, that top spot there. Uh, and then you've got type form you're competing with as well. You're in the fourth or fifth spot. I mean, are there, are there ways for you to milk More out of that, can you get ahead of Typeform and SurveyMonkey, or it's just too difficult?

A No, we were. We used to be at some point. I mean, they've kind of obviously been up. It's a cat and mouse game, obviously. So we used to be number one for survey design, survey questions back in, you know, a couple of years ago, and they've kind of obviously kind of, you know, gotten ahead of us in a couple of different areas. Um, so I think another interesting stat is, you know, around, especially around SEO, is that You know, you know, a lot of, you know, a lot of new keywords are coming online every day. So effectively, you know, people are looking for voice of the customer survey or customer experience survey and all these kind of new keywords are coming online so we can fight those battles over there. Uh, the other thing that I've invested in is kind of global expansion. Uh, so we have a business in, uh, we have a, we have an office in Latin America, uh, rather Mexico that serves the Latin America business in a place called Merida, uh, in near Cancun in Mexico, uh, that, you know, then we kind of dominate kind of, you know, that area, and it's much easier to do SEO in Spanish than to do SEO in English. So there's a, there's an entire team, uh, that is kind of, you know, operating in that.

AI assessment note: “all these kind of new keywords are coming online so we can fight those battles”

Q How do you structure the two X, you know, obviously there's the deal price, which is two X and there's the deal structure. Is it all cash upfront options, earnouts, kickers? How do you think about that?

A Yeah. All of the above, all of the above really, right? Like, so we have to be slightly more creative. So we don't have, you know, we don't, we want to conserve cash. Like, you know, frankly, everybody, realistically. So from a, from a, uh, from a buyer's perspective, we want to, we want to de-risk ourselves, conserve as much cash as possible while still getting the deal past the finish line, simply. But right. That's the way I look at it. Um, and, and in my case, um, kind of what, what I kind of get down to is like how much, what's, you know, everybody's got a minimum cash requirement, frankly, right? I mean, every founder has got some sort of in their head, you know, I think it's in the head, frankly, most of the time it's like, okay, look, there's much, there's the cash I need. Um, and that's what I really kind of hold into and say like, okay, look, can I provide you, can I be comfortable with dropping this much cash up front realistically? So that's kind of the, you know, ultimately, um, Uh, Nathan, that's kind of what it comes down to. Everything else is kind of like, you can hedge against almost everything, both sides, but if your minimum cash, if you said, like, look, if in your head, like, I gotta, I gotta exit this business with at least a million cash, then you gotta find somebody who's comfortable dropping a ten million dollar check cash up front. Now, the deal price…

AI assessment note: “All of the above, all of the above really, right? Like, so we have”

Q I love it. I love that. Well, congrats on giving that deal done. How's it going? You know, a lot of people say you buy a company and it's so hard to actually merge two companies. How many companies have you bought since you founded the company in 2005 and how's the CX integration going with Valerie?

A Yeah, so, uh, when people say it's hard, it is hard. I mean, it's not, it's not an easy thing. Um, there's cultural issues. The tech issues are, you know, there's cultural issues, tech issues, and then obviously business. The business issues are the easiest one, right? You know what, look, look, we're going to cross sell, blah, blah, blah. So that's pretty straightforward. Cultural is the hardest one. Tech is kind of in the middle, realistically, right? So, um, and from a, you know, with Valerie, and obviously Valerie and I hit it off, but there are a lot of, you know, it's not just Valerie. She's got a bunch of people. They don't, you know, usually you have at least I would argue anytime you do a deal, 20% of the people, um, in, in the, in the selling company will just leave no matter what, no matter what you do, really, because they are like, it's a, it's a good kind of like, you know, break point, if you will, the way I look at it, it's a break point, right? So look, you know, if you're working for a company that got sold, you'll be like, let's take a break. Okay, let's see what's going on. And then once you start looking, you know, you're going to find something, quite frankly, you're going to leave. Um, so, um, so I think we are going to, so in my kind of experience, the first time it was kind of a shock, like, look, You know, we lost a bunch of people, uh, but the next ti…

AI assessment note: “with Valerie, and obviously Valerie and I hit it off, but there are a lot”