Disclosure
Dayton: Blind competing term sheet price drove a higher valuation and earnout
“And they didn't know all the terms. They just knew the price. Right. So, so they had much better terms and they bumped up the price and, you know, structured a two year earn out so that I could get all the money I wanted for the company.”
Disclosure
Dayton would consider a $6M all-cash buyout for Clearview Social
“That's probably in the ballpark of where I would be. I would listen to that.”
Assertion Not checkable as stated
Dayton: Clearview Social hit a TAM ceiling after dominating its niche
“We had a great product and we kind of hit up against a TAM problem. So the industry just wasn't that big and we'd eaten most of the market.”
Insight
Dayton: Startups under $1M EBITDA cannot rely on M&A bankers for exits
“Now, look, if my company had been a little bit bigger or we'd had, you know, been to a million in EBITDA, it would have been simple. We could have hired a banker. We could have done a full process. They could have shopped the product. But really like when you'…”
Disclosure
Dayton: Clearview Social sold at a 13x multiple on ~$500k EBITDA
“So our EBITDA is, Was between, let's just say between four and 700,000 dollars at the time of the sale. Okay. And the framework that we were bought under is 13 times EBITDA.”
Insight
Dayton: Private equity buys SaaS at 13x EBITDA to sell at 20x
“But this is also the private equity game is this kind of EBITDA arbitrage because if they can buy companies at 13 X, they put them all together into a bigger company and then they can sell them for 20 X.”
Disclosure
Dayton: Personal add-backs like coaching and cars added $200k+ to EBITDA
“Like I had a company car and I had extra like coaching resources that I use that didn't need to be part. Right. And so it's like, when I started adding all these things back, You know, we're looking at like two or 300,000 dollars of EBITDA.”
Insight
Dayton: Software startups should immediately incorporate as C-Corps for QSBS protection
“Every, every company, every software company out there, if you're not a C corp, like change to a C corp immediately. Cause you have to hold for five years as a C corp to get QSBS protection.”
Assertion Not checkable as stated
Dayton: Clearview Social retains customers for 90 months on average
“We're retaining our customers for 90 months on average, right?”
Assertion Not checkable as stated
Dayton: Clearview Social Loses Customers Only to Non-Adoption, Not Competitors
“The only reason we lose customers is because they never started using it, right? They buy it and they never start sending out the emails to get people sharing. And so they get to the end of the year and it's like, oh, we didn't use this.”
Assertion Not checkable as stated
Dayton: Clearview Social's addressable market is only about 3,000 customers
“So law firms and accounting firms and recruiting firms that are a fit for us, there are only about 3000 total customers. Like that's our addressable market.”
Assertion Not checkable as stated
Dayton: Clearview Social reached $1M EBITDA within two years of sale
“By the way, Clearview Social has now hit a million dollars in EBITDA in the two years since we sold.”
Assertion Not checkable as stated
Dayton: Clearview Social acquisition paid 70% upfront and 30% in earnouts
“So, so the way they structured the deal, it was about 70% up front, 20% year one, 10% year two.”
Assertion Not checkable as stated
Dayton: Year-two earnout was tied to shareholder equity, not continued employment
“But then the thing is, if they hit the number in year two, I still get the money because it's based on my stock ownership, not on my participation.”
Disclosure
Dayton: Clearview Social paid a fractional CFO $15k to clean pre-sale books
“So we paid them five or six grand a month. But that was just for the three months for them to clean up our books, right? So once they did that, we actually transitioned to something else”
Assertion Not checkable as stated
Clearview Social finished 2019 at over $2.3M ARR
“So we finished 2019 just over 2.3 million in our run rate.”
Assertion Not checkable as stated
Dayton: Clearview Social sees 10% logo churn and 14% revenue churn
“So our logo turns about 10%. Overall churn is about 14% on revenue in the year.”
Assertion Not checkable as stated
Clearview's average customer expansion dropped from 10% to 5% in 2020
“In past years, average upgrades were about 10% of ARR each year from current customers. Now we're, we have in our contracts a seven percent annual upgrade, and we're just like, we're lucky to get that seven percent now. So the average is five percent.”
Assertion Not checkable as stated
Dayton: Clearview Social is EBITDA positive and barely profitable
“Yeah. So we're profitable, but we're right on the line.”
Disclosure
Clearview CAC doubled to $25k for a $13k ACV customer during COVID
“In the current market, we're currently paying 25,000 dollars to get a 13,000 dollar customer. And that's been through the pandemic. Pre-pandemic, we were closer to nine or 10,000 dollars as a CAC.”
Disclosure
Dayton: Owns more than half of Clearview Social
“Yes, I own more than half of the company.”
Assertion Not checkable as stated
Law firms comprise 70% of Clearview Social's customer base
“So, so law firms are probably 70% of our customers. Including about 30 of the top 100 law firms in the country.”
Disclosure
Dayton: Clearview Social reaches just under $1.5M ARR
“Yeah, so total ARR, we're just under 1.5 million ARR.”
Assertion Not checkable as stated
Dayton: 90% of Clearview Social customers pay annually upfront
“Now that we, since we've made that switch, about 90% of them choose to pay annually, which has been really great for cash flow.”
