Exitwise Productions

Vik Tantry Episode_2.txt
English (US)

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My co-founder and I were very close and we were definitely the face of the business externally. The external perception is like Vic and David are in the business, like they're driving this thing and there's like a real concern what happens when they leave.

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Welcome to the Exit Founder Podcast, a production of Exit Wise where exited founders share what they actually learned selling their companies. So you can do it better today. Exit wise is Todd Sullivan and Brian Dukes. Yes, both of them. Both of our managing partners sit down with Sak Vic Tantric, aka Vic, who co-founded Form Swift, a bootstrap document platform he sold to Dropbox for $95 million in 2022.

The number one thing Vic wishes he'd done differently before going to market. How Vic chose the banker who actually understood his business, and what a potential buyer said in one conversation that completely changed his pitch. Work with Vic on your exit journey and learned more about the Exit Founder Marketplace.

Just visit exit and search. exit founders enjoy the show. Vic, thanks so much for being here. I am really excited. And Brian's joining us today. You're really one of the newest members of our Exit Founder Marketplace, and I'm really excited to hear about selling Form Swift to Dropbox and the fact that you are with us.

They're the exited founder. Whoever gets you on their M&A team is getting so much more than just M&A mentorship because of your lens on growth and positioning and just so many skills of building businesses, not only selling them, I think are going to be extraordinarily valuable. So thank you for being here.

Awesome. It's great to be here. Um, I think just dive in to hear the story. Like why you decided to build what you built and take us through that, that initial journey. So my co-founder and I, we met at another company. He was an engineer and I was running a growth team, and we were, aside from that, doing freelancing, consulting for other companies.

And we ended up having to fill out a lot of forms. So like NDAs and consulting agreements. And we were like, this is really irritating. We should build software to do this. No one's targeting the SMB freelancer market. Companies like DocuSign and Adobe were targeting bigger enterprises for the most part.

So this was in 2012. We saw this gap in the market, and we decided to build from Swift to solve it. And initially was that like a part time job? So we were on our way out from the company. The company had just sold off one of the business divisions that I was working on, and so we were lucky to get a little liquidity from that.

And so as soon as that closed, we knew we'd wanted to work together on something. We were iterating on ideas, and this one just kind of like clicked. It was the first one that really almost took off immediately in terms of usage and and profitability. So out of the gates, I know Brian is a big fan of bootstrapping.

Did you just decide, hey, we're gonna fund this ourselves? Did you guys aspirations of raising capital? We largely self-funded. We took a little bit of friends and family money, but a very small amount, and a lot of how we thought about it was we just didn't know how big the opportunity was. And so we said, let's, let's see if we can get to profitability.

And then if we can build a path to go and and raising a big round to double down. Obviously we could explore that, but we certainly saw the opportunity to just grow profitably and as steady rate. So at what point in the journey did you feel like you really had something? So it was pretty early, probably around six months in.

We had a working product and we had some early traction, some customers, decent recurring revenue, good lifetime value to to cash. And so we were like, okay, this feels like the unit economics could be stable and we have some cash flow to reinvest in the product. So at that point we were like, okay, we're going to stop all consulting and just go all in on this.

And that's kind of your your secret sauce is growth, right? Like that. You're the growth guy. And I know you've worked with some enormous companies after selling this business. I'd love to hear about that. But were there these signals were there where you just said, I've seen this before. This thing's taken off and that is time to jump.

The reason I'm going that way is I love telling. You know, founders like, don't quit your day job. Make sure you see that it's real before you jump, because you're used to having that salary and it's going to be very hard if that spigot shuts off. If you look back at that moment, what was the trigger? Was it like, hey, we're going to take a bunch of risks.

We're like, no, we got this. We're going to be profitable very quickly. There's a framework that I like to use, which is you want something that has repeatability, and then you want to know that there's a set of actions that you can take that would scale that repeatability. And it's the combination of both.

The repeatability is the bird in hand. It's the thing that's going to pay your bills and make sure that you have the cash flows to to reinvest in the experiments you need to grow. But then the scalability, the actions actually justify you working on this full time. You're going to have things to do that are worth putting your effort into.

I've seen situations where there is repeatability, but it's a niche. It's like so small that, hey, you know, maybe this is just like a nice cash flow of business. Keep it at that. But maybe just keep it on the side or go build something else and reinvest the cash flows. That's totally fine. I think when you go all in on one idea, it needs to be big enough that you have that repeatability, but also, you know, a path to annexing it through a set of actions as you were as you were growing, where were you reinvesting?

Was it engineering and technology? Was it customer success and like client service? How did you manage that? Yeah. So our first hires were in customer success because I was literally doing it all myself at the beginning. This is 2012 and I just like, had e-mail. Like an email initially coming to my Gmail, it was ridiculous.

And like I was like, okay, we gotta get a ticketing system. We got to get ahead of customer service. We gotta get analytics in place. So that was the most important first hire. Our second key hire was actually someone to work on product. So she was kind of like a friend of a friend and was basically like a chief of staff.

She could kind of work across the business, but she largely focused on improving our product. And then after that, we started scaling up engineering first through contractors. My co-founder led engineering, and then we built the engineering team, which ended up being the largest overall org. And then how did you think about equity with some of those early hires?

I think it's a it's a question we get from a lot of the early stage businesses of, you know, maybe one or 2 or 3 kind of core founders or co-founders, but now you have some of these valuable, maybe younger, less experienced. How do you think about equity? So we hadn't raised any money. So what we ended up doing was we created what was called a phantom equity program, which effectively was like a profit share.

There are actually a lot of advantages if you're not venture back to doing things this way, because you don't have to issue for nine A's or anything like that. We were an LLC sitting on an S Corp. So from a logistics perspective, it was way easier. You know, my my co-founder and I controlled the company, but we had these obligations, legal obligations that were paid out.

And then periodically, because we were profitable, we basically offered like redemptions. We ran the business for ten years and we were like, hey, we will offer to buy back your equity at some multiple of EBITDA and you can you can choose to do it. You can choose not to do it. You know, the only real I don't even want us to call it a disadvantage, but a reality of it was that, you know, we were the employee would pay income tax on that, not cap gains, and then it would be a tax deduction for the business.

So that just changed the cash flows a little bit. But they didn't ever have to exercise. There was no like early exercise or anything like that. So there was no money out of pocket for them. So that just kept things like really simple. And it's certainly something, something I would encourage exploring.

If a founder is bootstrapping, how do you think about the size of that kind of shadow equity for for a growing company? Depends, right. You know, for us, like we ended up giving like less than 10% of the business away over the course of the business because we didn't end up hiring a ton of people. And we were certainly generous with early team members on a relative basis.

But, you know, as you guys, as one of the more other interesting things about equity, right, is a lot of people don't really understand what it is. And a lot of people think that it's kind of a scam. So we always gave people two choices. We always said, hey, there's a there's everything's going to have some some phantom equity, some cash.

But if you want to take a little more phantom equity, you want to take a little more cash. Like we're indifferent to these. And you can choose. And that gave people the flexibility to make the right choice for them. For early hires, there's so many different misconceptions and bad advice that's out there.

Yeah. You know we get these these questions a lot. And I appreciate you going down this this path because, you know, from the founder side especially first time, you want to be generous, but you're not sure what is the right way to to structure. And for an employee perspective, everybody of course, wants to be an owner, but at the cost of cash compensation.

Like, I'm not I don't know I don't know if I want to be an owner of that badly. Right. Can I ask? We talk a lot about preparing for an exit. And you just mentioned you were an LLC s Corp, so you didn't qualify for the qualified small business stock tax exemption. Right. And was that a conscious choice or were you not aware of that possibility?

When you think about it actually. Um, ultimately there were a couple of things that that pushed us to the LCS core. The biggest one, honestly, was when we were getting going. We just really didn't know what kind of a business it was going to be. We thought maybe this might just be a cash flow business, in which case that single taxation has a lot of advantages.

And we did, you know, distribute out cash throughout the business. So that ended up being true. And then the liquidity event was was far larger. But there were actually a couple of advantages to being an LLC sitting on X Corp even at exit. The first was that the acquirer actually got a substantial deduction because they were able to depreciate the asset.

We were able to do an asset sale, but we paid cap gains on it. So there's there's a special thing in the tax code. So Dropbox was able to get a deduction that they could depreciate on the purchase price, which we cannot do with a C Corp while we still paid cap gains. The second interesting thing, and this is more relevant if you're in a high tax state, is that I don't know if this is still the case with the latest tax changes, but in our case we were able to get a state tax state tax deduction against the federal taxes.

And it was a very complicated, unique thing with $900 attorneys that allowed us to do that, but that basically allowed us to deduct our state taxes against our federal taxes, which actually ended up saving like another 3 or 4% in our case. That's great. Yeah. As an as an asset sale, that's going to make a lot of sense.

And probably, you know, the benefit that you would have had, it's hard to know what kind of company you are going to be. Right. And that was the question you guys were asking ourselves. So sound like a really kind of informed decision. We get that question quite a bit, because if you can save on the first 10 million, be tax free at at exit, right, there can be big wins there because it's not just one person.

It could be multiple equity holders. Can I ask from from the bootstrap perspective which is very enviable. Did you did you feel that that ever held you back that you wished you had a pool of capital to hire faster, grow faster? Or was it? Nope. It just things worked the way they should have worked. No, it was, uh, there were a couple of times that we really explored, like, should we go raise some growth equity and maybe take some money off the table and try to go bigger with this thing?

You know, what I looked for was some leading signal in the business that would be like, okay, we can really inflect. So if you look at DocuSign, for example, they had this viral loop going around their e-signature that really was compounding at a fast rate. And so I was like, okay, if we can replicate that, if and I can show that, then let's go raise a bunch of money and we could just take a head on because we have an engine at the product level.

We just weren't really able to to prove that. And so I was always like, okay, let's wait another quarter to see if we can prove it. And we just never were really able to fully crack it. It's funny, I, uh, I sometimes think that the, the best thing that we actually accomplished was just getting Adobe to move faster.

Adobe executed really well against us. And they you know, if they hadn't executed as well, I think we would have been a much bigger business. But they were just kind of able to, like, take a lot of the market through excellent execution and document cloud. Well, you certainly built something that ultimately Dropbox needed.

Right. So what was the impetus to deciding to sell and how did you become something they needed versus kind of like nice to have? Well, I'll answer the first part, which is we ran the business through Covid 2022 early 2022. My co-founder, I took a walk and were like, all right, it's coming up on ten years. And like, we haven't, we're still growing linearly, solid, solid growth, profitable, but we just haven't hit that inflection.

Like we're not going to be that billion dollar company. And so we said, okay, well we got something interesting here. Let's let's hire a banker and run a process and see where the market lands. And then Dropbox, they had actually been acquiring a few companies that were adjacent to us. They acquired Dachshund and they acquired hello sign.

And so they had set up this new document, Document Workflow Group, which was those two businesses. And they were looking for other businesses to build and acquire in that space effectively with the vision of becoming Adobe. You know, the Dropbox vision is like every document is stored. So if they have that little opportunity to just edit sign right there, that's you can attack Adobe and be $100 billion company as opposed to an $8 billion company.

So that's how they thought about it. And so when we showed up, they were like, oh, this, this fits into our thesis. And they entered the process pretty quickly. So you, you guys made a decision that you should market the business because it felt like we've been at this ten years and we're not seeing an inflection point.

Right. So maybe we're better off in, in the hands of something somebody bigger to really grow the opportunity. And you know, you get take some money off the table yourself. The hiring of the investment banker. Can you talk a little bit about that? Because when you do that right now you're going to signal to the market that, yeah, that you're for sale.

So can you talk a little bit about how you made that choice? We interviewed a number of bankers, and we ended up going with this to point advisors, who, you know, I liked and recommend. And a lot of it was they just they got to our business in particular, they'd sold other businesses that had had similar characteristics.

So we felt like they could model it out and represent us reasonably well. We were not a conventional SaaS business. We didn't have like amazing retention. We had these weird SMB churn characteristics, so required a little bit more complicated modeling than just like a typical SaaS retention curve. And these guys like, they just really understood that.

And from the beginning we just felt like, okay, this is going to be an easy conversation in terms of how to put the materials together. And so that was a big component. Yeah, that's a great way to make a decision that somebody understands your business so well. The, the the nuances of what makes it valuable that you can position it right correctly to the buyers.

And that's what I think somebody like you on an M&A team allows not only to position really well, but maybe slightly differently to different sets of buyers, because buyers have different, right, different visions of what the future is going to look like. And you got to fit into that vision. Well that's great.

It sounds like you chose wisely. And certainly the outcome was fantastic. Did you have multiple bidders for the business or did Dropbox surface right away? We had multiple bidders. Yeah, we ran a full process. So it was very tight, very efficient, went out to like 400 buyers and whittled it down to first round, second round and then, you know, came back, came down to Dropbox and some other, some other partners.

And uh, ultimately decided to go with Dropbox because we, we really felt like it would be kind of the best overall place. Talk to me about the kind of the decision criteria or the grading criteria on those those offers. Right. Dropbox was was one that eventually, you know, you decided on. But in retrospect, you know how you thought about the different components of an offer, would you?

Would you think differently or grade them differently? Having gone through it now, yeah, I did think we in hindsight made the right choice. I think the two things that really drove it for us was one Dropbox, really, they wanted us to stay on for a period of time, but they didn't want us to long term drive the business.

And so I felt very aligned on that. I was like, I absolutely want to see this through. I'm happy to spend some time really doing this properly and integrating and making sure that this isn't a good spot, but I don't want to be. The reason I'm selling this is I don't want to be. And that's not always the case. Some founders really do want to continue, and in those scenarios, private equity could be a great option.

Take some money off the table, get another bite from the apple later. And in this case, we sold the whole company. There was no other bite. So I was like, well, for selling the whole company I want this is a legacy. I want it to be in a good spot, but I'm not going to drive it for five years. You should get someone who's motivated to be the new general manager.

And so we were very aligned on that from the beginning. And then I really felt like they did a great job of of taking care of our team. You know, we didn't even actually ask, but they like gave everyone a big raise like right off the bat. And that was like not even negotiated. Interestingly that like came up after we were in exclusivity and I was like, oh, this is actually like a really this seems like a good cultural fit.

Like they they're not trying to alienate the team. They know the team is going to be a little bit stunned. And they're like, okay, well how do we how do we make this right? And so they thought about that proactively, which I really appreciated. That is the pay raise side of things. It's so refreshing to hear because you can solve for having the best M&A team, right, that really de-risk your transaction.

And you can solve for the seller yourself, understanding what you're getting into right from a valuation perspective or what you want Professionally and personally. Right? More than the dollars. Do you actually want to be there running the ship? One of the hard things is like, who is this buyer? But somebody like Dropbox, unknown buyer.

The fact that they step up and do that for retention, right? They value the employees. They know how expensive it is to to replace them. Just the stories that go the other way, which with with buyers that you might tag as bad buyers, they could be dropping employment agreements if they're not negotiated ahead of time.

That is like a cut in salary and take it or leave it. And they really just want to fire everybody. But it's the easy way to get people to leave. So that's great that you it sounds like you really solve these three buckets. Great representation, real understanding of what you and your co-founders, the equity holders, want out of this.

And then a buyer that treats everybody really well, that's awesome. During that process, obviously it takes a long period of time and it's easy to say, yeah, we picked this buyer. It was a great outcome, checked all our boxes. But was there anything in that engagement that really surprised you, I think that.

Well, I'll answer more broadly, like, I do think that with buyers it's not always obvious why they're actually interested in the business. For example, one of the runners up, we thought that they were a private equity backed strategic and and we had one point of view on why they were interested in our assets.

We thought it was very product oriented. And then we had a, you know, an early call with the CEO on the line. And we were like, what's at the very end? I was like, what's what's the thing that was actually most exciting to you? And she's like, oh, the marketing funnel. Like, how are you doing this? We want to we want to deploy this across the entire business of the portfolio.

And so then, like, you know, reorienting the entire presentation around that was an interesting exercise. So I literally, you know, pivoted everything to that down the road. And so you never really know, like what the mandate is. And it's good to to try to tease that out and do some discovery so that you can speak to it, rather than just assuming that, oh, this is like the logical thing that they care about.

Actually, it might be something totally different. You know, that is something that you can have a real operational conversation with a company of like, how are you thinking about this? There's some interesting assets, there's interesting business model, but what if you took your entire client base and sold through this new product?

What does that look like for a business? You can talk tactically. It's very different than the way bankers might be able to kind of spreadsheet answers. So I think that understanding the why of why the buyer is really interested, it's obviously incredibly important. So you can position appropriately.

And somebody like you on the team is going to figure that out really quickly, because I've been on those teams and you can see the forest beneath the trees or whatever that's saying is you see it differently. So it's just enormous value. Is there anything you would do differently? You know, now in hindsight?

Yeah, I think the number one thing that if I had to do it all over again, my co-founder and I were very close and. You know, we we were definitely the face of the business externally. Internally, we had a great team that by the end was running a lot of the day to day, and we didn't have to do that much intense operational work day to day.

We've done a good job, but that was not the external perception. The external perception is like Vic and David are the business, like they're driving this thing. And so there was like a real concern that what happens when they leave. And so I think like having a really strong number two, who's also more external facing earlier on would have definitely improved prospects.

Valuation eased concern about the long term durability of the business. So absolutely like that would be the number one thing I would have done differently. It's interesting that you said external as well, because you and David are making the decision to sell this business and enter a process. And I'm sure you're not broadcasting that across the organization.

Right. So I do we we absolutely see the value in being able to have that. Number two, that can run the business where you're off on on vacation and you're just not needed. You don't have the owner dependency. But I'm like curious when you use the word external, does that mean that they're in all of those early conversations saying like, you know, I'm the the guy or the woman running this thing?

Yeah, I think so. I got a funny story that I think would illustrate this, as in one one like final round meeting with CEO and a bunch of execs, and I'm walking through like how the product team operates, what our roadmap is, and the CEO looks at me and jokes, wow, you're you're so lazy. Doesn't even seem like you're really doing much of anything.

And I was like, hey, I'm here talking to you. Like, that's that's my job. I got to spend 12 hours a day talking to you. Like, my team is out there doing the work, which is my hope of teaching them that, you know, I am actually a little bit more expendable. And everybody laughed and, you know. but again, I think it was like they kind of got it right.

But of course, like what they're actually believing is that I'm also still going home and getting on slack at midnight and like, hammering away. And so they just don't really know, like how hard I am or am not working. And if they had someone else in the room who was like speaking confidently about these things, maybe that would have alleviated that more.

I think having gone through this ourselves, it's not just the secrecy of not, you know, wanting to broadcast, of course, to your team. What what's happening? But you said it right. You're trying to insulate people that are actually doing work from getting bogged down in this process and not just the day to day work, but the emotional toll of, is this thing going to happen?

What does this mean for me? What? You know, where am I going to live in the new organization? All of these things that inherently slow down and org, the more people that you bring into that process. So it's such a tough balancing act. I agree with you putting additional resources in front of buyers is super valuable.

It's just trying to find the right balance internally on, you know, who's focused on what. So I guess jumping post exit, you stayed with the acquirer for for a period of time. What was the next phase of kind of founder life post transaction. Yeah. So you know we stayed for for integration for a couple of years and kind of made sure that we we saw that through got through the tunnel on that.

And then yeah left in December of 2024. And since then I've been advising consulting largely on growth. And uh, you know, I've worked with lovable a bunch last year, which was really interesting and fascinating place obviously right now, fun to kind of jump back into like fast growth stuff. I'd done some early consulting work for Grammarly, like 14 years ago, and they were really early at kind of like even earlier stage and getting to that rocket ship point.

So that's the stuff that I like. Figuring out those puzzles, is it a bit discouraging in this world of like, yeah, lovable AI, all these kind of tools and tech like, oh my gosh, I could have built this company in ten minutes.

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Uh, versus what it took to to do in ten years. Yes. I definitely think that there is like a okay. Well, and you know, it's funny it affects my my engineer co-founder he he's, I think more effective than I am to be honest as like a growth guy. I'm like, oh this is cool. Like there's you know, I kind of got a little teammate analyst working for me and I, you know, I can do anything I want.

But for someone who really values the craft of engineering, it's definitely, I think, harder to to go through this. What's that advice that you would give yourself, whatever, ten, 15 years ago sitting today knowing what you know today about kind of all these efficiency and automation tools, like what would you give the the younger entrepreneurial kind of founders that are, that are taken on this path that maybe, you know, you have different tools at your disposal, right?

You have the ability to do different things. How would you do things differently? Yeah, I think there's two things like one is incentives within the orgs I think are really important around AI. Like just as an example in form Swift and it bigger companies too, like so much of promotions are based on the number of people you manage, which makes zero sense in AI era.

So I think you have to like from the ground up rethink, like what are the incentives of who you hire, fire and promote. And if you don't do that, then people are not they're going to fall behind. Right. So that's I think very clear. And that's that's an evolving thing. I have that conversation with founders all the time about like, how do we get our companies to actually use this stuff, and what are the incentives, the sticks and carrots that we can use because people are scared, frankly.

And, um, I think that's reasonable. So I, I don't have like a solution as much as I have. Like, I think that's an area that needs much more attention than it's getting. I think unlike the strategic side of the business, a lot of it is like, how do you think rethink moats? Like when we were building Form Swift, we our moat really was like a high quality product.

We were like, okay, we can build very elegant software solutions that connect these things. And that's actually like really hard. It's not now. So what do you have? Right. And so everyone is talking about services and like humans in the loop. And how do you build some sort of complicated workflow that anthropic just can't knock out in, you know, five minutes with a plug in and that requires you really think about like kind of get beyond the tool and more into the outcome.

And everyone talks about like outcome based pricing and and so I think that's that's definitely a direction to go is like moving away from like tools and more into, okay, well, how do I just charge for some work product being done like a service? Yeah, I'm glad you brought that up. We talk so often with prospective clients and and clients.

We're going to market. Buyers are going to really need to dig in and understand is AI a threat to your moat, or can it be used as rocket fuel to something that you have that is really interesting? And it's a really uncomfortable question for a founder that spent ten years building something to say like, wow, that's really scary, that this thing could be gone in a year if I'm not careful.

But that's what that's what most of our buyers are looking at currently is, is this thing can it be disrupted really, really quickly, or is there a rocket that has been built that can now get supercharged with all the efficiencies that can be gained with AI? It's really true, Brian. The the number of buyers that are shying away from deals.

One of those biggest concerns is we're concerned about AI disruption of this business model, right. And what I like about having you on the team, Vic is an excited founder, brings such an interesting perspective. Operationally, what can you do to enhance the business? You know, in your case, you talked about elevating people in your organization to now we're in a process and we're going to position this thing, the real nuances of the business where the real value lies to very specific buyers, your role, having that credibility to call up buyers and say, how are you thinking about this?

Having that understanding automatically allows a business to look more valuable. But then finally, like your expertise growth, AI can really say, how do we answer this question, which every one of our clients almost everyone is going to face, is that risk of how does AI disrupt this industry? And are you going to be on the right end of that or not?

Right. It is a question that everybody's going to be asked. You have to have an answer. And having somebody like you on on that team has a lot of credibility to what that answer is going to be. So we're incredibly grateful to have you on the team. Thanks for that. How can people connect with you on socials? What what's your preferred path to to hear from folks?

I mean, I'm on LinkedIn if if people want to connect, and I'm always happy to have a quick conversation with a founder that's looking to to sell business and provide some, some thoughts. And I like founders and I want them to win. And I, I fundamentally believe that, you know, those who create value should keep more of it.

So I want the founders to to get good outcomes. What a great way to put it. Thank you. Thanks for being here. Awesome. Thanks. Thanks so much for tuning into this episode of The Exited Founder Podcast. For business owners who are looking to sell or want to ensure their exit ready. Our team is here to help you maximize your outcome.

So connect with us at exit Wired.com today.