Creative ways to scale SMB customer acquisition

Many startups begin life selling to small business (SMB). SMB is a very appealing market. For one, it’s big (30 million businesses in the US alone). Also, they make quick buying decisions. Sounds great!


The challenge with SMB as a customer segment is that each customer is small. It might be easy to get your first few customers. But over time you become a victim of your own success. The bigger you get, the higher your customer acquisition costs go. Hubspot’s CEO Brian Halligan illustrates this challenge beautifully in his recent post ‘why aren’t there more Intuits”.

Building the next Intuit…

If you sell more to the ‘M’ (i.e. mid-sized businesses), then you can build a large inside sales team. This is what Hubspot does. This is also why they raised boat loads of capital. Once they got their fundamental unit of growth working, they never stopped hiring sales reps. Continue reading Creative ways to scale SMB customer acquisition

Exits in Canada: March 2016

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March was the biggest month for software exits in Canada so far this year, with two significant deals announced. Highlights:

  • 15 deals announced (14 last month, 8 in January)
  • 4 deals had a disclosed value. The largest disclosed deals were Wind Mobile’s sale to Shaw Communications ($1.2B), GGY’s sale to Moody’s ($115M) and Bitstrip’s sale to Snapchat ($100M) – all amounts in USD
  • 8 of the companies were in Toronto, 2 in Vancouver, the rest were distributed
  • 4 of the 15 companies were VC-backed, 2 were private equity backed, the rest were either bootstrapped or had not raised any institutional funding
  • 10 out of the 15 buyers were Canadian. One was from the UK, one from Europe. The rest were American
  • 4 of the buyers were public
  • Median time to exit: 11 years (4.5 years for last months’ deals)
  • Shortest time to exit: 2 years
  • Longest time to exit: 35 years!
  • All of the buyers were strategic. No private equity deals this month.

For those of us that follow the VC-funded startup space by far the biggest deal was the Bitstrips acquisition. Bitstrips was founded in 2007, originally as a comic maker. It later pivoted into a mobile avatar app and got massive traction. The company had raised $11M from Kleiner Perkins, Horizons Ventures and Allen Lau’s Two Small Fish Ventures.

The Bitstrips outcome is a perfect illustration of B2C companies. The outcomes tend to be binary. Most often they don’t work. But when they do, they work big.

Apart from that deal the only other notable one was Wind. All the others were modest, with nominal or no disclosed value.

As always, I report on these each month. If you’re interested in seeing the underlying data, I keep it here.

Continue reading Exits in Canada: March 2016

The Spotify debt deal: A cautionary tale


Techrunch reported yesterday that Spotify has raised a whopping $1B debt deal. This is on top of the $1.1B in equity that the company has raised to date. As I read about this deal I noted some terms that raise concerns and serve as an important lesson for the rest of us as we think about how to capitalize our companies:

TPG and Dragoneer get to convert the debt to equity at a 20% discount of whatever share price Spotify sets for an eventual IPO. And if it doesn’t IPO within the next year, that discount goes up 2.5% every extra six months.

Spotify also has to pay 5% annual interest on the debt, and 1% more every six months up to a total of 10%. And finally, TPG and Dragoneer can sell their shares just 90 days after the IPO, before the 180-day lockup period ends for Spotify’s employees and other investors.

Continue reading The Spotify debt deal: A cautionary tale

Exits in Canada: February 2016

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As we get busier and busier with exit work at SurePath, I thought I’d share some of the data that we track. We work primarily with SaaS, e-commerce and marketplace companies. But we track activity across the entire software spectrum.

February was another month filled with mainly modest software exits in Canada. Highlights: Continue reading Exits in Canada: February 2016