Dayton: Clearview Social hit a TAM ceiling after dominating its niche
Adrian Dayton · How he sold his $2.3m SaaS with approx $500k EBITDA for $6m+ Cash · Dec 1, 2022 · at 2:56
Clearview Social founder Adrian Dayton discusses why he decided to pursue an exit after scaling his legal tech SaaS business.
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“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.”
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More from Adrian Dayton
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.”
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.”
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'…”
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.”
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.”
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.”