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We bought a struggling VC-backed company for $200K.
18 months later, it was cash flow positive and we raised on a $28M valuation.
Here’s the story of how we did it (and how you can too):
18 months later, it was cash flow positive and we raised on a $28M valuation.
Here’s the story of how we did it (and how you can too):
In 2012, @UpCounsel was founded on a big idea:
Build the “Uber for legal services”
It would be a marketplace where startups could connect with lawyers.
The business quickly attracted some of Silicon Valley’s best investors…
Build the “Uber for legal services”
It would be a marketplace where startups could connect with lawyers.
The business quickly attracted some of Silicon Valley’s best investors…
In 2018, they raised a $12M Series B.
They grew their team to 40+ people.
But then their growth came to a screeching halt…
They grew their team to 40+ people.
But then their growth came to a screeching halt…
The company was growing fast, but not fast enough.
A lawsuit distracted management and made it difficult to raise another round of funding.
Shortly after, the core team was snatched up by Linkedin…
A lawsuit distracted management and made it difficult to raise another round of funding.
Shortly after, the core team was snatched up by Linkedin…
Despite having 1M+ monthly SEO views and $10M in sales on their platform, without funding and their core team, the company was in trouble.
In early 2020, @upcounsel announced they were shutting down…
In early 2020, @upcounsel announced they were shutting down…
My partner @XavierHelgesen knew the CEO and told him that we might be able to help.
Quick math told us it could be profitable in short order.
The brand, SEO power, and concept had great long-term potential.
Not as a VC-backed rocketship, but as a cash-flow generating beast.
Quick math told us it could be profitable in short order.
The brand, SEO power, and concept had great long-term potential.
Not as a VC-backed rocketship, but as a cash-flow generating beast.
We were going to buy UpCounsel and make it the company it was destined to be.
We couldn’t use traditional financing and we needed some reserves for operations.
So we proposed an asset purchase at $2M with 90% seller financing.
We couldn’t use traditional financing and we needed some reserves for operations.
So we proposed an asset purchase at $2M with 90% seller financing.
The keys to getting the offer accepted?
1. Understanding VC logic
UpCounsel was a big loss for them. We had to provide a graceful exit.
2. Making sure the founders shared in the proceeds
We are founders. We know what it means to have a stake in what you‘ve built.
1. Understanding VC logic
UpCounsel was a big loss for them. We had to provide a graceful exit.
2. Making sure the founders shared in the proceeds
We are founders. We know what it means to have a stake in what you‘ve built.
Once we took over, @XavierHelgesen served as CEO for 90 days.
The first order of business?
Rebuilding a lean, remote team.
We brought in Paul Drobot, former CRO of Atrium, Danny Page as COO, and @ycombinator alum @Kjer as CEO.
The rest of the team was scaled offshore.
The first order of business?
Rebuilding a lean, remote team.
We brought in Paul Drobot, former CRO of Atrium, Danny Page as COO, and @ycombinator alum @Kjer as CEO.
The rest of the team was scaled offshore.
The second order of business?
Rebuilding the model.
Customers were leaving the platform after they met their lawyer because marketplace fees were too high: 20%.
We added value for the lawyers and charged monthly fees for a limited number of spots: reducing fees to 8%.
Rebuilding the model.
Customers were leaving the platform after they met their lawyer because marketplace fees were too high: 20%.
We added value for the lawyers and charged monthly fees for a limited number of spots: reducing fees to 8%.
After rebuilding the team and business model, we were cash flow positive.
Big win!
But an even bigger opportunity was on the horizon…
Big win!
But an even bigger opportunity was on the horizon…
Laws had changed, allowing full-service legal firms to be owned by non-lawyers.
We needed more funding.
But we didn’t want to raise traditional venture capital.
So we tried crowdfunding.
We needed more funding.
But we didn’t want to raise traditional venture capital.
So we tried crowdfunding.
The team executed exceptionally.
With the help of @MariaSpringer, we raised $2.5M from 1,100 investors!
Today, UpCounsel provides high-quality legal services to over 10,000 businesses and generates strong annual cash flows.
With the help of @MariaSpringer, we raised $2.5M from 1,100 investors!
Today, UpCounsel provides high-quality legal services to over 10,000 businesses and generates strong annual cash flows.
In this environment, we’re going to see a lot of VC-backed companies fail.
But that doesn’t mean they have no value.
Finding a way for these companies to live on as cash-flow generators can be a win for all.
Be on the lookout for these opportunities!
But that doesn’t mean they have no value.
Finding a way for these companies to live on as cash-flow generators can be a win for all.
Be on the lookout for these opportunities!
If you enjoyed learning about how we bought and turned around a business, follow me @SievaKozinsky for more of these detailed breakdowns.
Here’s another one of my threads that you might enjoy.
Here’s another one of my threads that you might enjoy.
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Hopefully they find it useful too!
Hopefully they find it useful too!
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Sahil Bloom @SahilBloom
·
Jun 12, 2022
Great thread