How Three Serial Entrepreneurs Went From Side Project to Scale to Sale

It’s a good time to be a bootstrapped SaaS Founder, and it’s not unusual to meet serial entrepreneurs in my line of work — one of the main reasons bootstrapped Founders sell to SureSwift is because they have another project they want to work on. It is pretty unusual to meet a group of three bootstrapped Co-Founders, though.

Mike Machado, Brett Owens, and Carson Gross are the founding team behind LeadDyno, and they leveraged their diverse set of talents over the course of nearly a decade to build this powerhouse of a product in the affiliate marketing space.

I got to chat with the trio recently about the story behind building LeadDyno, all the way up through their decision to sell the business.

‍

An interview with LeadDyno Founders, Mike Machado, Carson Gross, and Brett Owens

‍

Tell us a bit about your background. How did you all meet, and how did LeadDyno become a business?

Mike:
Brett and Carson were actually working together on a different project when I first met them. And I was working on my own startup along with Matt, who works for SureSwift now. We all got to know each other around the local entrepreneurial circles in Sacramento. As we got to know each other better, the opportunity came up to start a new project.

It was something that Carson and Brett wanted to build, but rather than build it as an internal project Carson really championed the idea of starting it as a new entity. Matt and I were winding down our startup, so it was perfect timing.

Carson:
Yeah, Brett and I wanted to build out software for a reseller/affiliate program and I said, “Hey, we might as well build this as an external system, and maybe we can sell it to other people, too — who knows.”

I also really wanted to work with Mike as an engineer because I thought he had a really good skill set and I like that collaborative aspect.

Mike:
The idea of it being a three-person startup was definitely intriguing to me, too. Most of the startups I'd worked on before were just two people. So, the fact that Carson and I were both developers, and having that second engineering mind on the product at the very early stages was something that was really interesting to me. That was a big part of what made me want to take the leap to join them.

Brett:
The full background is that a Co-Founder and I founded that original company, Chrometa , in 2008 and then maybe around 2011 we started having conversations about resellers, like Carson mentioned.

We were in the legal software industry. And the customers we were trying to tap into were solo and small firm attorneys. They were all not only running the same software they had been since the 90s, but they would also listen to this old-school reseller model.

Imagine a lawyer’s office in a shopping strip mall in Nebraska (or wherever), and there’s an IT person who will physically go into that office and tell them what software to run. We wanted that IT guy to tell them to run our software. We knew it wasn’t as simple as getting a website up to acquire subscribers — we really needed a boots on the ground approach.

So the question became, how do we do that? How do we get these established resellers who are making money selling their existing products to sell ours? How do we incentivize them? That's when we knew we needed a reseller/affiliate program.

And then I guess fortunately for us we were all stubborn software guys. We could have just gone out and bought something, but Carson and I checked out the landscape and just didn’t find anything we cared for much, so we decided to build it ourselves.

‍

How did the product evolve over time?

Mike:
Well, initially Chrometa, and the startup I had that was going to be a customer of LeadDyno were really what drove the feature set. We had this initial vision that software and SaaS would be big for us, but when the rubber hit the road, we found there was a better market fit in the e-commerce world.

‍

Well, I want to throw in here — I think you may have been early, not wrong, when it comes to affiliate marketing for software. I've had a couple conversations recently where people are sort of realizing that all the headaches that come with a traditional reseller relationship are no longer worth the hassle. So from my personal perspective, part of the excitement about LeadDyno is that I think affiliate marketing is continuing to become more and more mainstream as a marketing channel.

Mike:
Yeah, for sure. We basically reacted to what was driving revenue immediately. For us, it was a no-brainer to at least build out the initial feature set for e-commerce, and then there was some more development to do in that space once we started getting that product-market fit signal. But absolutely — I definitely see that SaaS could be a big part of it going forward. That was always the vision.

What did that discovery phase look like? You built something for a certain type of customer that looked a lot like your own business. But then you wound up discovering maybe e-comm was the bigger market, and those customers had different needs. What was the point when you started noticing that, or what were you looking at to get those signals?

Mike:
That discovery really came from working with marketplaces. One of the first marketplaces that we integrated with was Salesforce, because initially we were looking for marketplaces where SaaS people lived.

As part of that research on what marketplaces were out there, we came across Shopify, which was pretty new at the time. We looked at what we could build on their API. And since we were already doing integrations to other third-party platforms and marketplaces, we said, ‘Hey, why not?’

But that’s what really started to move the needle and Shopify started really eclipsing all of the signups from the other platforms. That really cemented the idea of e-commerce, but it also really cemented the idea of building for marketplaces. Then we started looking at BigCommerce and all the different e-commerce platforms that we integrate with now.

‍

Do you think having three Co-Founders lent itself to being able to do that? Working across multiple APIs for all those integrations definitely adds some complexity.

‍Mike:
For sure. Having that product-market fit signal was great for the company. And it really led me to focus on additional integrations, Brett took the lead on the relationship side of that, and Carson took on the hardcore algorithmic architecture of the affiliate compensation models.

So Brett would reach out to the new marketplaces that we were exploring. And then Carson, and I could focus on the technology and the actual implementation of it. It was a great multi-pronged approach. Carson and I could focus on the tech side, and Brett could focus on the relationships and the product side.

‍

Was there a specific moment where you realized that you had built something that could be big? What were your early goals?

Mike:
Personally, my first goal was just to finally work on one of my own startups full-time. I'd started a number of businesses over the years and I’d always let my business partners take the full-time role first. I’d also always maintained other contracts and income sources. So, I was really ready to just focus on one thing.

‍

How long was it from launch to where you are all working full time on the product?

Mike:
We all did it at different times. I was one of the earlier ones — for me, I think it was about two and a half, three years. So it took awhile to reach that goal.

‍

And how about for you, Brett? Were your goals the same — to work on it full time?

‍Brett :
Focus was a definite thing, because I had two startups and I was bouncing between the two. On the LeadDyno side, my initial goal was to get to market as soon as we could. And we did a really good job there. I think sometimes startups spend too much time on the details. We got the LLC going in December 2012. And we had something out to market around mid-2013, with a few paying customers.

‍

Customers don’t know how new you are, or how many other people are using the tool. But we literally still had watermarks on the stock photos on our website, and I think one of our earliest customers sniffed that out. There's just a huge value in getting there and getting established and being a part of the market, though. Once you're there, then everything else makes a lot more sense for the product decisions that you're trying to make.

So, for me that was the first big thing — just get to market.

Then it became — can we get some better economics? We knew there were established competitors in the space charging up in the multi $100 range for plans. In the early days we used traffic as a proxy for willingness to pay, and we felt like if we could get to a $70 or so average price point, everything would fall into place.

You just have to kind of feel your way through that stage. It was my second time through, so I knew I just needed to take it one step at a time and get the model established, then get the marketing working, then figure out what channels people were coming in through.

‍

Well you definitely got established. By the time you sold to us this year, you had a team of eight that moved over to SureSwift. I was curious what hiring looked like for you over the years and what it took to build that team? And then on the flip side, how did that impact your decision to sell and your conversations around selling?

Carson:
I wouldn't say we should write any books on hiring. We built a really good team, but we kind of fell into it. I can't say there was any rhyme or reason, and a lot of it was just the chaotic emergence of a good team.

The one thing I do think that we did a good job of is that all three of us felt that we were going to stay a Founder-only company, so we knew we were going to stick to a contractor model. But we still really wanted to treat people right and pay well. We wanted to keep equity with the Founders, though. We were just hesitant to make that move to where we would become a company that needed an HR department. There are good things and bad things about the model we used. You end up paying a little bit more for your team — at least in cash — but it did give us a lot more flexibility and it made the exit a lot cleaner.

Mike:
For the first four to five years of the business, Carson was the CEO and I was the CTO, and we ended up switching roles some years back. So, for the early days I don't have the perspective he had, but hiring has always been a challenge.

I can tell you that it's always one of those things where you try to find that talent early on, and then you have to try to balance compensation with growth. But in terms of the acquisition, one of the challenges was trying to feel that we were making a good decision for the team and that they were all going to have the opportunity to continue on with the product. Knowing that was your goal certainly made it easier.

‍

And did you ever consider raising money vs. selling? I was curious, because starting to scale a team is often a decision point, and you’d already done a good amount of work there.

Mike:
We did look at raising a little bit in the early days, but not too seriously. And I know you always hear about success bias, but I just think bootstrapping makes a lot of sense. As a Founder it gives you the opportunity to grow and optimize the way you want to.

Tell me about deciding to sell — what did that decision and conversation between the three of you look like?

Mike:
I don't want to speak for Brett and Carson, but I'm more of an early-stage guy. So going on seven or eight years into the business, I was starting to think about the next thing. And then I think we all had different ideas of where we wanted to take the company. Rather than trying to tug each other in any particular direction, the simpler solution was to sell. Those two things are what really drove the decision for me.

‍Brett:
Yeah, I had similar sentiments and when Mike met your team and introduced us, it just seemed like a no brainer. That was the best-case scenario from my standpoint — being able to sell but get the company in good hands.

I had gone through the sale roadshow process a little bit with my first company, and back then I was playing the role Mike did this time around — taking the calls. Those calls ranged from people you’re comfortable selling to, to people you’re terrified of selling to where you can tell they’re just going to take as much cash flow as they can get, but the product and the team are going to be in trouble. So that was my main concern with selling this time as well.

‍Carson:
I was probably the least motivated to sell since I really like the idea of a cash-flow based company, but I also understood that it’s just different when you hit a certain point where the technology is mature. It’s a different company at that point than it is at the earlier stages. And if the other Founders want to exit, it’s probably time.

I was very happy to find out that SureSwift had done this before, and no one else we talked to had the engineering infrastructure that you had.

So for me personally, it was a best-case scenario too for an acquisition by someone who isn’t just going to ride it into the ground and extract as much money as they can. They're actually going to take it and try to grow it.

‍

It sounds like you all got aligned before talking to us, which we always think is really important in a situation where there’s more than one Founder — the sale process just can’t run smoothly if you haven’t had those conversations.

‍Mike:
Yeah, we had the luxury (if you can call it that) of going through a couple sale/acquisition attempts before this, but we were all fairly aligned on what we wanted so I think that that certainly made it a cleaner, easier process.

Carson:
One process thing that surprised me that I think is worth mentioning is that Mike went through the MicroAcquire marketplace for the sale, and that just worked out so well. I'm a technical guy, and I just kind of expected that to not work, but I was pleasantly surprised by how well it did work, and it really provided a much higher-quality acquirer.

Mike:
Yeah, I was initially concerned that maybe we were a little too big for a marketplace sale, but I actually reached out to Andrew Gazdecki (the Founder of MicroAcquire) directly to get his input. He was able to point us to other listings that were a similar size and who’d had success, so that's what convinced us to go forward with it, and I’m glad we did.

‍

Carson, I know the most about what you’ve been up to since you’ve been working with us briefly to roll out your passion project, htmx, out to more of our products. But what about you, Brett and Mike? What’s next for each of you?

Mike:
I've always been fascinated with finance and cryptocurrencies and blockchain stuff. So I'm doing a little bit of investing and playing in the crypto world, and then I also have some ideas for a new project around some of the new business structures that are starting to evolve out of the crypto world called the decentralized autonomous organization. It's a new concept around business formation that really fascinates me, so I'm going to spend the next six months or so exploring possible projects in that space.

Brett:
I actually already have another project going in an adjacent space — it was something we had kicked around doing with LeadDyno for years — it’s an affiliate network where we connect merchants with affiliates in their space, and it’s called Afluencer.

With the new project, we’re building a stable of influencers, especially people in a specialized niche — for example, someone in the U.S. with 10,000 or more followers who has a skincare focus, their engagement rate is above 2%, and they're on TikTok and YouTube.

E-commerce brands are all looking for ways to get out, be visible, and get more coverage right now — especially on social media. (We all know Google and Facebook are doing really well on their ads by their earnings, but it’s really expensive to run ads there.)

So we've got that built out both from a platform technology standpoint, but then also the influencer database. Right now we have an app in the Shopify store and a web app and we’re building up both sides, so it's interesting. It's different from the early days of LeadDyno because when you have a SaaS tool you can just sell the tool, and if you only have two customers they don’t know they’re the only two.

But if you have a network it’s really obvious if there’s nobody in it. So you try to balance both sides of the network and make sure everyone's engaged and having someone to talk to. We also have a lot of LeadDyno links from brands in there too, so there is a little bit of that overlap, which is cool.

Want to hear more from these Founders?

• Check out Brett’s 2018 interview with Nathan Latka.
• Listen to Carson talk about his passion project, htmx with the .NET Rocks! podcast crew.
• Connect and keep up with Mike on Linkedin.

‍

Interested in selling your SaaS?

If you’re thinking about selling your SaaS we’d love to be on your radar and answer any questions you might have about valuations or our process. Get in touch.