Almost every founder starts out with the same set of goals: world-changing vision, market traction, media coverage, money raised, real revenue and the sale of the company. With Snapsort Inc., I hit all the milestones, including the sale, within three years. At the time, the sale made sense, but I still felt like I sold out. That's part of the reason I decided to buy my company back.
Snapsort was a vertically focused product-recommendation site powered by an intelligent decision engine. When the acquisition offer came, it seemed decent: Reduce risk in exchange for money up front and a chance at more in the future. Our private equity-backed acquirer had started picking up a wide array of Internet companies in an attempt to go public. They drove revenue scale, and we provided something else: the ability to launch and monetize high-quality content using leading-edge technology.
It was, in many ways, a match made in heaven. We were given the capital to do what made sense, and we increased the team from seven to 27. Unfortunately, despite our growth, the parent company couldn't reach the revenue scale the investors required. We had built a good business, but not one that made a significant enough difference in the plan to go public. When the chief financial officer asked me how many people I really needed to run Snapsort, I knew what was coming.
In my previous ventures, I learned a lot about shielding my team from the unpleasant aspects of startup life. It was harder this time. People knew something was going on and a few weeks later, a week before Christmas, we let 23 people go. I managed to keep a team of five that could move forward with a new but related idea: using our existing decision engine to help publishers optimize advertising on their sites. As publishers, we had been frustrated by a fundamentally broken system and, as engineers, we set out to fix it.
Buying the business back was important to me personally, but it also made economic sense. By using the cash flows from Snapsort to fund our new idea, Sortable.com, it meant that we could spend aggressively on scaling up the new business with only half the seed investment we would have needed otherwise.
Raising those funds was scary. I had no idea whether people would be receptive to my idea, but I built a spreadsheet of 40 angel investors, and worked my way through the list. There were no pitches or slide decks, just me talking about what I thought was possible and why. I had been building relationships with investors and angels over the years, and those who ultimately invested did so because they knew and trusted me.
Unfortunately, it turns out that buying your business back is easier said than done. Once I built interest in the product and showed the ability to raise money, the price of our business started to move. As the deal dragged on, we lost two more team members and team morale became a problem. Fortunately, we were able to close a deal after about 10 months of negotiations, and the two staff members who had left rejoined as part of the founding team.
In the end, buying the business back made sense, both economically and to keep the founding engineering team together. We've been in a sprint for the 15 months since, growing Sortable to 23 employees, with plans to grow to 50 by the end of 2016. We're not only growing fast, but we're profitable and have an incredible team.
In the end, I learned and relearned that people and relationships matter – having a team I can lean on, investors whom I respect and trust me, and a support network during an incredibly stressful time. The people around you are the most important factor in your success; seeking out, developing and nurturing those relationships was key to successfully buying my company back.
Christopher Reid is chief executive officer of Sortable, a Waterloo, Ont.-based ad-optimization company that uses machine learning to maximize revenue for publishers.
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