Summary

In this episode of the Top M&A Entrepreneurs podcast, Kevin Petersen shares his journey from a young entrepreneur selling lemonade to becoming a seasoned expert in acquisitions and SaaS companies. He discusses his early experiences in the stock market, his transition from a music career to marketing, and the founding of his company Growth Stack. Kevin emphasizes the importance of understanding the secondary market for online businesses and shares valuable lessons learned from his investment experiences. In this conversation, Kevin Petersen discusses the dynamics of the SaaS market, focusing on competition, founder mindsets, and the emotional challenges of exiting a business. He emphasizes the importance of personal relationships in deal-making and shares insights on negotiating with bootstrap founders. The discussion also covers funding strategies, the current state of capital markets, and the value of networking within a SaaS mastermind group.

Takeaways

Kevin started his entrepreneurial journey at a young age.
He transitioned from a music career to marketing in a startup.
Kevin founded Noisy Planet to support unsigned artists.
He discovered a thriving secondary market for online businesses.
Traffic and conversions are crucial for online business success.
Investing in micro businesses provided valuable learning experiences.
Kevin learned the importance of accepting offers for quick gains.
He has been scaling up from micro deals to major acquisitions.
The marketplace for lower market SaaS companies is robust.
Emotional attachment can hinder founders from selling their businesses. Competition in the SaaS market is often less intense than perceived.
Founders experience a shift in mindset as their businesses grow.
Emotional attachment can hinder founders from exiting their businesses.
SaaS exits are often driven by personal life events.
Building personal relationships is crucial for successful deal-making.
Bootstrap founders offer more flexibility in negotiations.
Patience is a key skill in sourcing deals.
Off-market deals provide more room for negotiation.
Funding strategies evolve as businesses scale up.
Networking in mastermind groups can lead to significant breakthroughs.

 

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Transcript:

Jon Stoddard (00:00.655)
Welcome to the Top M&A Entrepreneurs podcast today. My guest is Kevin Peterson. Kevin, in his career, has been involved in over 50 acquisitions. Currently he's running a company called Growth Stack where he's been involved in 30 for his company. And he also launched a mastermind for SaaS company founders, which is pretty cool. So, Kevin, welcome to the show.

Kevin Petersen (00:30.254)
John, it's great to be here. Thank you so much for having me. And I'll just start off right out of the gate saying I'm super excited to be doing this with you today because I feel like I have a lot to share for your listeners and so just help me along with the brain dump and I'm happy to share all of my knowledge and experience that I've acquired since I was five years old. So.

Jon Stoddard (00:54.171)
Yeah. Well, what we do is the hero's journey and we rewind and go, hey, Luke, what was that planet you start on and what were you doing? So where did this all start?

Kevin Petersen (01:07.102)
Yeah, so, and I don't know if you really want me to go back to my five-year-old days, but I am, I mean, I am the proverbial CEO that had a lemonade stand, right? I guess that is a common trait of CEOs and people in the C-suite. So I was one of those guys that, or kids, who ran out and set up a table with signs and put signage on the corners and sold, I actually did popcorn and lemonade, that was my angle. Yeah.

Jon Stoddard (01:12.155)
Just a...

Jon Stoddard (01:33.307)
Ooh, popcorn too. Yeah.

Kevin Petersen (01:35.59)
Yeah, and then I started investing in the stock market when I was nine. And this was pre-internet. So I was on a one-day delay on any data. It took at the time, it took like two weeks to get a quarterly reporter, an annual report. And so.

Jon Stoddard (01:48.283)
Yeah.

Jon Stoddard (01:55.131)
Were you reading these reports before you made these or what were you looking at? The Wall Street Journal or Investor's Business Daily or what was it? Yeah.

Kevin Petersen (02:01.93)
Yeah, I was looking at really just business section. I grew up in the Silicon Valley, so I was reading the business section of the San Jose Mercury News and looking at the tickers. So every morning before school, I'd get up and look at the tickers and read business news and then make decisions about what I wanted to do.

Jon Stoddard (02:13.321)
Okay.

Jon Stoddard (02:25.007)
Yeah, what was your best winner?

Kevin Petersen (02:28.714)
Well, I had a really good run with Cisco Foods, not Cisco Tech Company, but yes, exactly. And funny story there, it was one of my best performing positions. And I picked it when after school one day I was eating pizza rolls. You just heat them up out of the box. Right. And I took a bite out of one and the filling fell out on the

Jon Stoddard (02:34.709)
S Y S C O, foots, yes, yes.

Kevin Petersen (02:57.502)
on the page with the tickers and it fell onto Cisco Foods. Yes, I called the broker that worked at my dad's office and I said, hey, I need a quarterly on Cisco. And he's like, yeah, sure. And then I bought it and it was doing great and it was a dividend stock and it's always been up and to the right. And I liked it because they owned a lot of restaurants that I was familiar with as a kid. So I was like, they say invest in what you know. And I did know and frequent the restaurants that they own. So I was like, yeah, I like.

Jon Stoddard (03:01.767)
What's up?

Kevin Petersen (03:27.746)
And so yeah, like exactly, yes. Yeah. So yeah, then the broker at my dad's office, I lovingly called him Uncle Markie and he was like, how did you, like why did you pick that? How did you pick Cisco Foods? I'm like, and I told him the story about the pizza roll falling out. He's like, ah, you know, curses.

Jon Stoddard (03:28.103)
Stock picking fundamentals 101, right? Yeah.

Jon Stoddard (03:40.743)
Cause cheese...

Jon Stoddard (03:48.171)
And then he comes back to you and gives you money to go invest. What was a big loser for you?

Kevin Petersen (03:51.925)
Yeah, exactly. Yeah.

Kevin Petersen (03:57.246)
Hmm. So at a young age, I did learn the correlation between like interest rates and commodities and I almost hate to say it but like geopolitical strife and certain stocks. And there were things that I got into like in commodities specifically. So, golden oil where you know,

Kevin Petersen (04:27.562)
And on a one-day delay on the data, I wasn't able to really keep up with the moves, you know, like frequent moves or frequent variance in commodities. So I didn't, I actually, I'll be honest, looking back, like in my lifetime, I've never done very well with commodities.

Jon Stoddard (04:44.015)
Yeah, there you go. I'm going to just wrap it up and give you the summary. Yeah. I don't think a nine-year-old can stay on top or surf above the global political impacts. Yeah. Yes. So, so fast forward. Uh, how did you start? Did you start building a company yourself? You're working for some other company or what was it?

Kevin Petersen (05:04.906)
Yeah, so in my 20s, I fell into a pre-IPO startup situation where I was number 13. I had founder shares. The company did go public with Sequoia in 1996. Still trading today. Yeah, yep. And so, well, they sponsored the, yeah, they sponsored the IPO. And so...

Jon Stoddard (05:23.835)
So it's Sequoia Fund in BC, yeah.

Kevin Petersen (05:34.778)
Yeah, still trading today. $4 billion market cap, operating in 26 countries. I was there when we opened the 10th branch. And I was running all things. It's called On Assignment. Ticker is ASGN. And I was running all things marketing for about eight years. So.

Jon Stoddard (05:48.427)
What was the name of the company?

Jon Stoddard (05:53.44)
on assignment, okay.

Jon Stoddard (06:00.155)
So is that the marketing part? How did you get pushed into that role? Did you just raise your hand or you took, yeah.

Kevin Petersen (06:00.436)
all of it.

Kevin Petersen (06:08.727)
That's a great question. So yeah, funny story about my background. I went to college for music. So my degree is in music. And this pre-IPO startup was my day job at the time. And so I was writing, arranging, producing music, living in LA. And this opportunity was my day job.

Jon Stoddard (06:17.711)
Interesting.

Kevin Petersen (06:36.106)
I'm a closet data junkie. I had my first coding class when I was eight. So I was a pretty nerdy kid. I was coding and trading stocks before I turned 10. So what happened was I was looking for basically day gigs while I was working in music. And so I went to this one company, and they contracted me to move their database onto Oracle.

Jon Stoddard (06:46.528)
Oh yeah.

Kevin Petersen (07:05.322)
Oracle was fairly new at the time, but it's still a behemoth. It was the big player at the time. And so I took a contract building their database out in Oracle. And then at the end of that contract, the CEO came to me and said, hey, well, now we want to launch our first ever marketing program, and you're the only one here who knows the data. Do you want to stay on? Yeah. And then.

Jon Stoddard (07:32.474)
That's cool!

Kevin Petersen (07:33.782)
Yeah, and then I did take some marketing classes, you know, and from there I was mostly self-taught. I just took it and ran with it. So I was running the trade show program. I was running the print ad campaigns. At the time there was direct mail, B2B direct mail. So I was running that program. I built the call center, hired and trained, and I actually built the first CRM before there was such thing as CRMs. I built the CRM.

call center. So I wore really literally all of the marketing hats while I was there.

Jon Stoddard (08:10.267)
Wow, that's cool. And you're data driven. I'm just curious, was there any...

Kevin Petersen (08:12.502)
Yeah, it was great. It was a great run.

Jon Stoddard (08:18.215)
skills that were transferable from your music to business. And because I've heard this before, because music is about patterns, right?

Kevin Petersen (08:22.871)
Mmm.

Kevin Petersen (08:26.814)
Yes, yes, yes. Yes, so funny you bring that up because there is an absolute correlation between music and data. I know a lot of data junkies that are either musically inclined or music aficionados or big fans and vice versa. I know a lot of musicians that also have that aptitude for big data. There is absolutely a correlation.

Jon Stoddard (08:54.583)
Yeah. Well, let's, let's it's just math at the end of the day, isn't it? Yeah. And it's.

Kevin Petersen (08:56.138)
I mean, it's just math at the end of the day, right? Yeah. Yeah, so, and I can share funny, if you want to take three minutes, I'll share a funny story with you. So yeah, so from that experience and on assignment, when I left there, I had that kind of, now what? Like, what am I going to do next thing, post IPO? And what I realized is that, okay, I started looking for jobs, right? And all the marketing jobs, the companies wanted to pigeonhole me into a thing. They're like, oh, you got trade show experience. You can be our trade show guy.

Jon Stoddard (09:04.935)
Absolutely.

Jon Stoddard (09:25.647)
Oh God, let's just don't ever get stuck into that, right? Yeah.

Kevin Petersen (09:25.93)
You got, you know, right? Exactly. So I said, screw that. I'm going to go out on my own and just take all the experience that I have from this IPO run and start consulting. So I did that, right? So I moved to the Bay area. I was consulting for 20 years, mostly in the financial industry. So I was able to kind of marry up my marketing and finance backgrounds.

And so, but the funny piece of that story is, you know, I'm kind of a big nine inch nails fan.

you know, whatever, say what you want about it. I love Trent Reznor's production values and the intensity, but the funny piece of that story is, there's so many coders I know from my career who wear headphones and have music cranking while they're coding. It's like a left brain, right brain thing where the noise helps them focus on the coding. And so I had a really funny experience around, it was like 2003, 2004.

in the Bay where I went to a Nine Inch Nails show. And it was like this bizarre scene of like, you've got people that are like goth head from tail. They got piercings and tattoos and they're wearing all black and they have black makeup and platform shoes. And then you also, because it was in the Bay area, right? We had people coming to the show that were in like suits and ties. Like they just came in from work and they're Silicon Valley people that want to see Nine Inch Nails. But the funniest thing I saw was there were guys in the audience that

brought their laptops and were coding during the show. And I'm like, I applaud that. Cause for them it was like, normally I've got it on in my headphones, today they just happen to be on stage. Right? And I'm just doing my job. Right? I just thought that was, it was such a funny scene.

Jon Stoddard (11:13.411)
Yeah. Did they ever like, if somebody ever interviewer ever asked nine inch nails, Trent Reznor, those guys like this, like, Hey man, some of your audience are sitting there with laptops coding. Are they stealing your music or what are they doing, man? Yeah. That's cool. It's cool. So, uh,

Kevin Petersen (11:25.483)
Yeah

Kevin Petersen (11:28.877)
Yeah, no kidding, right?

Kevin Petersen (11:33.238)
Yeah, pretty funny stuff.

Jon Stoddard (11:35.995)
Fast forward to when you started launching this company called GrowStack, which was, we acquire, operate, grow cash flow companies as a software as a service.

Kevin Petersen (11:41.299)
Sure.

Kevin Petersen (11:48.586)
Yeah, exactly. Yeah, so and there was kind of an intermediate step there as well where I started, while I was consulting, I started a company called Noisy Planet, which was virtual management for unsigned artists and musicians. And so it was effectively my, it was like my own founders view or introduction to SAS. And.

Jon Stoddard (11:57.594)
Yeah.

Jon Stoddard (12:04.313)
Uh-huh.

Jon Stoddard (12:15.505)
Was it more like a marketplace?

Kevin Petersen (12:18.366)
No, it was really back office. Like we were, the message we were telling our unsigned artists is this is like a virtual management platform. So like if you need t-shirts for your next show, call us. If you need a street team to help promote the show, call us. If you need, you know, whatever you need for, if you need contract review, right? We have music attorneys that we can connect you with. Like whatever you need that you would normally get from a label, do it with us instead, right?

Jon Stoddard (12:39.057)
Yeah.

Jon Stoddard (12:47.525)
Yeah.

Kevin Petersen (12:47.55)
And everything was just, it was like all pay-as-you-go for services.

Jon Stoddard (12:52.519)
Did you do it to make money or to get access to up and coming artists and, or both, yeah.

Kevin Petersen (12:58.51)
Yeah, it was both. And it was a way for me to kind of merge my music and marketing backgrounds. And we had a really good run until the bottom, well, until everything went streaming, the bottom fell out of monetization for music. And then the next phase of that decline was that, there was the shift from

Jon Stoddard (13:15.293)
Ah.

Kevin Petersen (13:25.118)
single song purchases and downloads to streaming and then a decline in revenue for the artists. And so then the only artists that were making money were artists who played live and then COVID hit. And then suddenly nobody was playing live, right? So they're like, okay, so I'm getting 0.0001 cents per spin and I can't play a live show because of pandemic. So independent artists were

Jon Stoddard (13:42.692)
Yeah.

Jon Stoddard (13:50.917)
Yeah.

Kevin Petersen (13:53.214)
screwed for a number of years there. And so, so Noisy Planet kind of fell by the wayside during that period. And we're actually just working on bringing it back now. I've got a new CEO I'm hiring. We are gonna relaunch that.

Jon Stoddard (14:06.263)
Yeah. Any, any artists that we're up in company and are not signed that made it big that you knew pretty well.

Kevin Petersen (14:12.858)
Not so much. I mean, we did have artists that did get major label contracts, but for any of your listeners who know the music industry, even getting a major label deal doesn't... it's not the end-all. It's like another starting line where artists celebrate, like, hey, I've always dreamed of being on a major label, and then they get there and they're like, oh, this kind of sucks, because now they own my life, everything in my life.

And I got to pay back the front money through future royalties. And they now have artistic direction over my career. And this is the common description. There are exceptions, of course, where there is a certain level of artists who can go to the majors and call their shots, but most can't. And in fact, I know.

Jon Stoddard (14:48.653)
Yeah.

Jon Stoddard (15:04.579)
Mostly no.

Kevin Petersen (15:08.118)
There were a number of Noisy Planet artists who even got to the point where they got the major label deal and they recorded their first album under contract with that label. They printed up, you know, whatever, 100,000, 500,000, million copies at the time, you know, CDs, right? They printed the material and then the label decided not to promote them so that all their stuff is sitting in a warehouse and they can't get out of the contract.

So they're on a major label deal. They recorded an album, it's ready to go, and the label won't release them.

Jon Stoddard (15:41.119)
Yeah. Do they still require ownership of the rights of the songs or they moved away from that?

Kevin Petersen (15:49.198)
It really depends on the artist. Mostly though, they're doing what they call wrap-around deals, which are really intrusive. They technically own a piece of anything you get. Somebody buys you a birthday present, technically speaking. They own a percentage of that. But the idea is, on the flip side of it, I'm kind of going dark on the labels, which we probably always should. But on the flip side, from the label perspective...

Jon Stoddard (16:05.767)
Jesus, yeah.

Kevin Petersen (16:16.846)
What they're looking for is, hey, this artist might actually sell more shirts than music, or they might sell more cologne than music, or perfume than music, right? So we just want a piece of whatever they're able to successfully sell under their brand. So the contracts shifted from focusing on music to focusing on artists as a brand. Yeah, merch. Yeah. Yep.

Jon Stoddard (16:36.547)
Merch, yeah, yeah. That's like, what's her name, that singer just recently. I mean, from her concerts, did a billion dollars in sales. From the merch, yeah.

Kevin Petersen (16:47.806)
Yeah, yes. Yeah, and then a lot of even like big artists like, you know, you think like Katy Perry, people at the Katy Perry level of success are saying, I'm not going to play as many shows anymore because most of them aren't profitable, but all the other stuff I sell is great. Right? Like I can't make money going out and filling a stadium anymore, but there are 10 other ways I can turn a buck. Yeah.

Jon Stoddard (17:08.323)
Yeah. Heh.

Jon Stoddard (17:15.267)
Yeah, and it's a lot of energy to do a show like that.

Kevin Petersen (17:17.586)
it is a lot of energy. Yeah. So anyway, that was kind of a tangent into the...

Jon Stoddard (17:21.407)
I guess I did. Yeah, no, I love that stuff, man. I used to go to a lot of concerts. I was more of a rock guy. I mean, not the nine inch nails stuff. That's the nineties. I was more like the eighties rock guy.

Kevin Petersen (17:30.093)
Nice.

Kevin Petersen (17:34.026)
Yeah, very cool.

Jon Stoddard (17:36.743)
the ACDC, Motley Crow and the, yeah. I got myself to the US Festival.

Kevin Petersen (17:39.566)
There you go. Yeah. Wow, well done. Those are the days, yeah, the 80s were amazing. The 80s were, I don't know, you could argue that the 80s were one of the best eras ever for music.

Jon Stoddard (17:44.727)
Yeah, that was crazy. Anyway, those were it. Yeah.

Jon Stoddard (17:56.959)
I for rock and roll. I feel like a, you know, ACDC or Van Halen or Motley Crue. Yes, I would agree. So, yeah. Any. So how did you get, let's talk about this, uh, growth stack and like, Hey, I'm going to start acquiring companies. Like what was the thought process to go to get there and just buy a company?

Kevin Petersen (18:02.118)
Yeah.

Kevin Petersen (18:09.239)
Yes, my transition into SAS, yeah.

Kevin Petersen (18:18.634)
Yeah, so what happened was, as I mentioned, I was consulting for about 20 years and I had a great run. I mean, I was working for a lot of Fortune 500 brands that you would recognize and working on really high budget, interesting projects with super smart people around me all the time. So that was great. And then one day I was actually at a meeting in a big conference room with one of my clients and I looked around the room and it hit me.

When I started my consulting career, I was usually the youngest guy in the room. And I had this epiphany one day where I looked around and I was like.

I'm not the youngest guy in the room anymore. And I'm still technically, as a consultant, I'm still technically an hourly worker. Like if something happens to me and I can't show up for a day or a week or a year, yeah, yes. And so I'm like, I need to look for something else. Like I need another, there needs to be another phase in my career. And I'd rather make that switch while I'm at the top of my game, right? It's kind of like, it's almost like, you know, quarterback mentality, right? Like I want to go out when I'm at the top, not when...

Jon Stoddard (19:05.979)
They cut you like that.

Kevin Petersen (19:26.05)
People start whispering like, hey, who's that guy over there in that cube? He's asleep. And they'd be like, oh yeah, that's Kevin. He's super smart. But only wake him up if it's really important, right? I was kind of seeing that vision of my future and I was like, I can't do that. So I started actively looking for what would become the next phase of my career.

And what I discovered is that there is a thriving secondary market for online businesses. I mean, there's a whole community. It's pretty, it's robust, but it's also tight knit. Everybody kind of knows everybody. There's only a handful of, you know, there's founders and brokers and investors and whatever at every level of play. And so once I discovered this, you know, kind of community or culture, I just, I fell in love with it. I was like, this is cool. Like...

And the way I describe it to people, because even now I've got family members who don't really understand what I do, right? Like, I mean, I hear my mom, who's in her eighties, like at a holiday party, I'll hear her whisper to somebody like, oh yeah, that's my son Kevin and he's really good with computers. And I'm like, that doesn't mean anything, right? Yes, it is. I'm good with computers. That's what she's got out of this. So.

Jon Stoddard (20:25.765)
Yeah.

Jon Stoddard (20:37.372)
That's it. It's a broad, it's a broad general statement. Yes. Yeah.

Kevin Petersen (20:47.178)
And nothing against her, but the point really is not about her. It's about the fact that it's, I recognized early on that it's a space that people are, they just don't have a lot of awareness of. So the way I describe this to people is, hey, if Apple buys Beats for a billion dollars, people know about it, they hear about it, it's in the news, there's a buzz, right? People are excited to talk about it. They're like, hey, did you hear Apple's buying Beats for a billion dollars? Right?

So I'm doing the same thing just on a level where nobody cares. Like if I pay a million or five million or even 50 million dollars for a company, it's not going to make any headlines. Nobody cares. And there's this thriving marketplace for businesses that are, you know, micro market, lower market, middle market, where again, like most of the companies, most, some will, but most will not become household names or brand names. You might read about some...

in TechCrunch or Crunchbase, but generally speaking, the public is not going to be aware of those transactions or those companies, maybe ever.

Jon Stoddard (21:56.215)
It's all niched. I mean, it's the tapped out at let's say 5 million in revenue. And that's all no matter how much marketing you put into it. They're probably going to be tapped out.

Kevin Petersen (21:57.791)
It's all neat. Yeah, that's right.

Kevin Petersen (22:08.33)
Right. Yeah, more or less. I mean, the reason the marketplace exists is because, let's say there's 20 to 70% growth left in that brand, right? To your point, like let's say there are 5 million and you can take them to 7 million or 10, even 10 million. VCs don't care about that. They're like, wow, you doubled it from 5 million to 10 million. It's like gold star. Like they don't care.

Jon Stoddard (22:09.381)
Yeah.

Jon Stoddard (22:24.42)
Yeah.

Jon Stoddard (22:28.027)
They're not gonna make any money on it. Yeah, they're-

Jon Stoddard (22:34.423)
They actually try to get out of that company, out of their portfolio. I mean, it's great, but let's move out of it because there's no return on it.

Kevin Petersen (22:38.686)
Yes. That's exactly right. So this marketplace exists and it exists in a meaningful way. Because it is micro market or lower market, I think there is inherently more risk in those deals. Like the path to zero is a lot shorter than it is with something that a VC would invest in. Maybe.

Jon Stoddard (23:05.893)
Yeah.

Kevin Petersen (23:07.446)
I don't know, as I'm saying that, I'm like, is that even right? Cause I mean, statistically speaking, VCs get it right, like, you know, one out of 20 times.

Jon Stoddard (23:18.151)
Well, statistically most nine SMBs, 93%, you know, don't do $1 million. And the chances are very small they'll ever make it to five.

Kevin Petersen (23:31.158)
That's right. Yeah.

Jon Stoddard (23:32.279)
Yeah. Or they're out of business in five years. Yeah.

Kevin Petersen (23:35.242)
Yes. And VCs do throw money at stuff that's pre-revenue on the hopes that they got it right, but you know, sometimes they do and sometimes they don't. Yes. Exactly.

Jon Stoddard (23:42.491)
Big markets though, billion dollar markets, unicorns. Yeah. So what did the market look like 10 years ago for SaaS companies? And I mean, did you just go to these larger, you know, broker sites that were around 10 years ago? Or...

Kevin Petersen (24:04.57)
Yeah, exactly. I started out with, you know, marketplaces and brokers. Yes. And at the time I was doing like I was willing to invest in my education. So I was buying really micro stuff, like think, you know, 10,000 to 50,000, just to look under the hood and see if I could run it and see if I could make money. Like, I wanted to understand how the money flowed and what was

Jon Stoddard (24:11.205)
Yeah.

Jon Stoddard (24:28.079)
Yeah.

Kevin Petersen (24:33.174)
The name of the game in any online business is traffic and conversions. Right? You got to drive traffic and you got to convert it into money. Yep. And then there's other stuff that happens after like stickiness and churn, like you don't want your customers to churn, you got to onboard customers faster than they quit. Right? And especially if your audience is SMBs, your customer base is going to be pretty dynamic. Right? So

Jon Stoddard (24:36.775)
Traffic and conversions. Right.

Jon Stoddard (24:58.071)
Yeah. Well, how many, can you translate that to a number of companies and how much you spent to get your education, you know, swings at the, at pitches?

Kevin Petersen (25:05.63)
Yes, sure. So I would say in the first year to two years, let's just say it this way, in the first 24 months after I proclaimed that I was not going to take any more consulting gigs, and I had to say it out loud, I had to tell my clients, like, no, I'm not doing this anymore, right?

Jon Stoddard (25:25.291)
I'm the oldest guy in the meeting room, so no.

Kevin Petersen (25:27.434)
Yeah, I'm done. I'm out. That's right. And they offered me jobs and whatever. And I was like, no, thank you.

Jon Stoddard (25:35.683)
Yeah. Did you almost ever turn back? Like, oh my God, I should do it. Yeah.

Kevin Petersen (25:43.011)
Hmm. Okay. So honestly, maybe one day a year for the last, it's, this is my nine year anniversary right now, since I switched gears. And maybe once per year, I have a day where I'm like, man, I'll tell you what drives that is I'll see a friend of mine who's like, oh, I've been at the same company for 12 years. And I'm, you know, I'm going on a big vacation. Like, hmm, there's, so this, this is something I know you can relate to, which is the myth of.

Jon Stoddard (25:51.431)
Yeah.

Kevin Petersen (26:10.05)
freedom and entrepreneurship. Like people say to me all the time, like, oh, it must be so nice. Like, you know, you run this show and you call all the shots and you make your own schedule and you can work from anywhere in the world. And all of that is true and false at the same time, right? Like I work a lot of hours.

Jon Stoddard (26:25.791)
Yes. Yeah. You know, I, whatever you think of Elon Musk, I saw an interview with Joe Rogan and he just goes, you know, the way he answers questions goes, you know, it's hard. It's hard to run a company. And he goes, well, you're running like five. And he goes, yeah. And I haven't caught my in my office.

Kevin Petersen (26:47.922)
Yes. Yeah. And so I do enjoy that ability to work from anywhere in the world anytime, but it's a double-edged sword because I am running global companies with global clients. And so I'm a, like me personally, I'm a 24-hour operation. Sometimes I'm working at one in the afternoon and sometimes one in the morning. And it's all the same to me. I don't care. I'll talk to anybody anywhere in the world anytime, pretty much. So...

So, I mean, when I am enjoying it, I really enjoy it, right? Like when I turn off for a few hours here and there, and I'm like, you know, I mean, like today, I'm working from like Tahoe, it doesn't suck.

Jon Stoddard (27:29.287)
It doesn't suck. No. Is there still snow in Lake Tahoe?

Kevin Petersen (27:33.066)
At the higher elevations, yeah. Although the mountains are still snow capped, but it's mostly melted now. But yeah, so when it's good, it's really good. And there are times where it's, there are, to your point, like there are times when I'm like, man, I could just take a job. But then every time I play that through in my head, I'm like, no, I can't, right? Because over the years, like while I was consulting, all but one of my consulting clients offered me a full-time job. They're like, hey, you're a great consultant, why don't you switch? And I said, and I always told them, I'm like,

Jon Stoddard (27:50.971)
No you can't.

Kevin Petersen (28:03.102)
I might be the best consultant you've ever had. I would be the worst employee you've ever had. Like day one, like if you take away the incentive for me to do a good job as a consultant, then I have no incentive at all. Like first day I'm gonna show up in a robe and fuzzy slippers around 10.30 a.m. And I'm gonna be talking about where I'm going for lunch all day. I'm not going to team building exercises or team meetings. I'm not doing the annual goal setting to get my 3% bump.

Who care?

Jon Stoddard (28:32.611)
Yeah, that's a economy between the W-2 and the consultant or the entrepreneur. Yeah.

Kevin Petersen (28:37.398)
Yes, yes, yeah, exactly. And I'm like, and the reason you wanted me as a consultant is because I have a broad base to draw from, right? In terms of experience and skills. Like I've seen it all. I've helped 300 companies grow or launch stuff. And that's why I'm here, traffic and conversions, yep. So.

Jon Stoddard (28:46.916)
Yeah.

Jon Stoddard (28:55.271)
Traffic and conversions, yeah. Yeah.

Kevin Petersen (29:01.694)
Yes, so then, yes, I discovered this thriving secondary marketplace for online businesses and I jumped in. So yeah, first 24 months you'd ask me that question, so I'm going to answer that one directly. First 24 months I probably bought 12 businesses, maybe 15. Tiny, tiny. Yeah, at that time they were all, yeah, they were all in the 10,000, 100,000 range. Yeah.

Jon Stoddard (29:13.895)
12 businesses and they're all what sub 100,000 tiny.

10,000, okay. So that's your education, your MBA right there. Just like, yeah.

Kevin Petersen (29:25.97)
Yep, it is. Yeah, and I learned some important things. Like there was this one business I bought where this is this is horrible. I hate I almost hate telling this story because it hurts every time. But there was one business that I bought for sixty thousand. And not kidding. Yeah, sixty thousand cash took over the whole thing. And it was a great business. And then like 90 days later, I'm at a conference at a bar.

Jon Stoddard (29:42.427)
60,000 cash or yeah.

Kevin Petersen (29:55.178)
And this guy's like, hey, what are you up to? And I'm telling him, and then he's like, well, what do you own? And I told him, and he's like, I love that business. He's like, I've been using that business for years. I'm like, oh, awesome. You know, thank you for being a customer. Later that night, I'm going back to my hotel room and he sends me a text. He texted me an offer to buy it. So I paid 60 and he was willing to pay 120 and I turned him down, which is stupid in hindsight. Yeah. Cause yeah. Cause at the time I was like,

Jon Stoddard (30:19.819)
Well, I guess see what's coming, right?

Kevin Petersen (30:24.602)
Oh man, like I've only been running it for 90 days. This guy's offering me 100% return. Like, it must be worth even more. Like I just started. Like once I go all in on this, right, maybe I can sell it for 3X or 5X.

Jon Stoddard (30:45.963)
Everybody thinks that, right? If somebody offers me 120,000, there's probably somebody out there who's gonna offer me 360,000 at some point, yeah.

Kevin Petersen (30:47.562)
Yeah.

Kevin Petersen (30:53.726)
Right, yeah. But in hindsight, anytime anybody offers you a 100% gain in 90 days on something, take it. Just take it. Yes, yes, everything's for sale. And it's hard, I get it. And especially for founders. Like in that case, I wasn't the founder, I was a buyer. So I bought it and it's...

Jon Stoddard (31:05.243)
Take it. So is that your rule now? Is that your rule now? Yes, okay. Okay.

Jon Stoddard (31:20.133)
Yeah.

Kevin Petersen (31:21.95)
assigned my team to it, and we had growth plans and a roadmap, and we're executing, and seeing growth and feeling really good about it. But I wasn't the founder. For a founder, you even have a deeper emotional connection to that asset or that brand.

Jon Stoddard (31:38.947)
Yeah. You put more than, you know, 50 hours a week in that year. It's yeah.

Kevin Petersen (31:44.825)
Yeah, yep, yeah, so that's hard. It's hard to say, it's oddly hard for founders to say yes to exits.

Kevin Petersen (31:55.27)
And that's a whole nother ball of wax. Just the psychology and the emotional attachment to our businesses.

Jon Stoddard (31:58.071)
Yeah. To, to, to try and get it what it, what it, what it's worth. I go, well, you know, it took me 120 hours a week for three years to get this off the ground. So what's that worth? Like if you sat in front of shark tank, they would just go, well, that's your skin in the game. Yeah.

Kevin Petersen (32:06.57)
Yep. Yes.

Kevin Petersen (32:14.57)
Right, yeah, right, exactly. Yeah, so yeah, taking that full circle. So in the last nine years, I've just been stair stepping the marketplace. So I started out with these really micro deals and then eventually we're doing six figure deals and then eventually our first seven figure deals and then now we're working on our first eight figure deals. I'm not sure if we're gonna get into the nine figure acquisition territory just cause there's a, there's kind of a soft spot in the marketplace for

Jon Stoddard (32:34.703)
Yeah. Well, well...

Kevin Petersen (32:43.594)
lower market SaaS, where the deals are out of reach for most solopreneurs and they're flying under the radar of most PEs and VCs. So there is a soft spot there where companies are producing, let's say, 2 to 10 million EBITDA. And again, like growing at 20 to even 40% annually, VCs and PEs aren't going to care about them.

Jon Stoddard (32:56.729)
Yeah.

Kevin Petersen (33:13.23)
until they get to 100 million ARR.

Jon Stoddard (33:13.604)
Right.

All right. But now you have a lot more competitors like Tiny Company, those guys, and there's a couple others out there doing the same thing now.

Kevin Petersen (33:26.41)
Yeah, there's a handful, but even then, like I have investors ask me that question, like, hey, well, tell me about the competition and like, is it going to be hard for you to get to source these deals and get them done? And my answer is, well, it's surprisingly rare that like I and another firm like Tiny would be in market and liquid and chasing the same target at the same time.

Jon Stoddard (33:53.295)
at the same time. Yeah.

Kevin Petersen (33:56.554)
Like we might be as close as a few weeks apart on something, but the odds of us both submitting LOIs in the same like 30 day time period, it's just gonna be rare.

Jon Stoddard (34:06.031)
That would signify a pretty small market if that was the case. Yeah.

Kevin Petersen (34:10.506)
Yeah, and it kind of is. It kind of is. And the reason is, it goes back to what we were just talking about founders, right? So founders go through very, I feel like I don't need to tell you this, but your audience, right? Like founders go through a progression where at first it's exciting. They want to take it to market. They want to see if a customer will pay a dollar for their widget. Yeah, exactly. And then they're in market and then it's kind of like, okay, now it's harder than we thought.

Jon Stoddard (34:30.703)
billion dollar market opportunity. Yeah.

Kevin Petersen (34:39.914)
17 different things that we have to get done today to succeed. And then they got to start prioritizing. And then if they are successful in those early stages and cash starts coming in, then their emotional attachment to that business evolves. So one thing that happens, and I think this is especially true of SaaS. Right. Yes. So you don't want to let it go. Right. Five years later. Exactly. And then at that point, you're like,

Jon Stoddard (34:59.467)
Oh, it's finally worked! 5 years later!

Kevin Petersen (35:09.894)
I got an offer. The offer sounds fair, but the truth is now I'm at the point where the cash is flowing. I'm working 20 to 40 hours a week depending on the week. Like if they at some point, depending on the founder, but most founders who get to that level are going to start treating it like a lifestyle business, not a future venture. Right?

Jon Stoddard (35:36.231)
That's correct. Yeah.

Kevin Petersen (35:37.386)
And the guys that I know, like there's one founder that I consider a friend and a colleague, I've watched his progression over the last nine years, maybe he's going on 10 years now, and he and his partner are bootstrapped to 100 million ARR, never taking a dime of outside capital. And yet I interviewed him for my mastermind. And...

Jon Stoddard (35:56.911)
Yeah, that's amazing.

Kevin Petersen (36:03.702)
The one takeaway I got from him is, I mean, and he is not kidding when he says this and you can see it, you can like see it in his body language and hear it in his voice, right? He's like, every day I wake up as though it's the first day we've ever been in business. Like he has that founder, day one founder mentality every single day. So every day is about how do we, how do we get a, you know, 30 basis points lift out of that one channel.

Jon Stoddard (36:23.768)
Yeah.

Kevin Petersen (36:31.594)
or how do we improve efficiency such that we get a 50 basis points lift in net income or whatever. Right. He's always thinking about how do we take what we've got and make it a little bit better today. And I applaud that because most founders at some point there's a curve right. There's a curve where they're going.

Jon Stoddard (36:37.798)
Yeah.

Jon Stoddard (36:50.915)
Yeah, it's a, I, that's like an, almost an exception because to keep, maintain that passion over, I don't know how many years is, um, but if you turn it into a lifestyle business where it's like, you know, you're living your life personally and professionally at the same time and you're satisfied, you don't need more. Yeah.

Kevin Petersen (37:17.526)
That's right. Yeah, and so then the next phase is when a business starts to become that person's identity, right? Like we, there are founders that I've been negotiating exits with for, you know, more than two years. And they can't get to the finish line because every time they get close, like we submit an offer, they accept it, we go through diligence, you know, we're getting financing in place, like the cap stack is ready, everybody's ready. And they're like, oh, no, we're not doing it.

Jon Stoddard (37:47.716)
Yeah.

Kevin Petersen (37:47.982)
And the reason is they can't imagine what they're going to do next. Like they can't imagine, okay, what happens? Like I've been running this business for five years or eight years or 12 years, right? They can't imagine what life will be like once they exit. So then they start questioning, you know, multiple. They're like, well, you know, you're giving me six years up front or seven years up front. I mean, that's how you have to think about multiples, right, on valuation is how many years.

Jon Stoddard (37:51.335)
Right.

Kevin Petersen (38:16.118)
Are you advancing that found the exiting founder in cash?

Jon Stoddard (38:19.879)
The, I don't know if somebody's whispering in their ears, the likelihood if you strike riches twice is very, very small. Like to start a second company and it becomes successful and it gets stalled, it's even smaller than the first, doing it once. Yeah.

Kevin Petersen (38:30.262)
Right.

Kevin Petersen (38:33.911)
Yeah.

That's right. Yeah. Yes. So it's hard for most founders, especially if they started treating their business like a lifestyle business, and there's a point at which they just can't let go of it. So anyway, just bringing that back, to me that is the why behind why it's kind of a small and tight marketplace.

is because you've got to catch the right person at the right time, right? Where something is going on and they're like, yeah, I do want to exit this. And, and there's, yeah, go ahead.

Jon Stoddard (39:12.247)
Now, what are you seeing, what are you seeing about the SaaS founders versus like an SMB selling an HVAC business? You know, they, they tap out, they're retiring SaaS and they say the three D's, uh, divorce, death, or disinterested in an SMB HVAC business. SaaS business. What is it? They could still be 35 years old, right? You know, and yeah.

Kevin Petersen (39:37.034)
That is right. Yeah, so the number one reason given on any prospectus for SAS, number one reason for exit, is I have other projects and this will fund my next venture, right? Yeah, usually that's not the driving force. That's what they'll say. Seven out of 10 is what they'll tell you. But usually there is something else going on. And sometimes it is.

Jon Stoddard (39:50.316)
I have other projects.

Kevin Petersen (40:07.362)
death and divorce, but more often than not it's something, it's some other life event that's driving it.

Jon Stoddard (40:14.879)
Yeah. And, and do you have a conversation with them to kind of find out a little bit more about them personally to find out what that is? And I mean, if you're, you know, looking at prospects over a two year period and you contact them every three or six months, it sounds like you're having these personal conversations, you get to know them with the relationship.

Kevin Petersen (40:24.235)
Yes.

Kevin Petersen (40:38.07)
Absolutely. Yeah, so there's one deal we're working on today, in fact, where I've known the founders for about seven years. And their brothers. Can't give away too much on this call, but You know, we I made them an offer five years ago. I made them another offer right before pandemic. And then what happened is this year, they came to me and said, hey, we're finally ready to sell this business.

Jon Stoddard (40:45.359)
Wow.

Kevin Petersen (41:07.21)
and we're calling you first because we've been talking about it for years. You know the business, you know the model. Like I know they're finding, I knew their financials before they sent them over. Like, you know, most, most of the business, most of the founders I meet with, like on a seller call, I have a pretty good idea of their revenue and their net and their churn before they even, yeah. I know what I'm saying is even before, even before I see the docs, I can usually

Jon Stoddard (41:28.707)
Yeah, they already turned over their docs to you before. I mean.

Kevin Petersen (41:36.182)
guess within a pretty close margin of error, just because I've looked at so many deals, right? So it's not a mystery. I look at...

Jon Stoddard (41:41.519)
Yeah. Where do you start from? What do you, how do you know this? What's the secret? Yeah.

Kevin Petersen (41:47.038)
Yeah, so I was just going to say a lot of it is just look at the marketplace and competitor analysis. You know, we can research things like, you know, have they raised before or not? You know, they made it to a series A. Do they have multiple series that they've already funded? You know, what stage are they at? Is it bootstrapped? Is it friends and family seed money? Is it, you know, have they gone through some actual formal series of fundraising?

Jon Stoddard (42:13.603)
And if they, there are signals there. I mean, they may get their founder money then their series A. If they don't get to series A, that's a signal.

Kevin Petersen (42:16.418)
Yes.

Kevin Petersen (42:24.298)
Yes. Yeah, and then just to share with you my criteria. So as it turns out, what I've learned from my own experience buying a bunch of businesses that are very different from one another, the criteria that's most important to me now is bootstrapped, because then we can make a play on it without having intermediaries evolved or a VC board of directors.

calling any shots. So bootstrapped and high barrier to entry. So I have become vertical agnostic but what I'm attracted to now are founders and technology, you know, models that are deep, right? Like the founder is exceptional. They've got a core knowledge that very few people on the planet have.

these founders have brought to market something that has a really deep model. Like it'd be hard for somebody in Croatia to wake up tomorrow and compete, right? Which, yeah, which happens in like MarTech. I learned the hard way that MarTech and AdTech that happens. Like as soon as a new business has traction with a new model, there's cheap knockoffs around the world in weeks.

Jon Stoddard (43:33.304)
And copy it. Yeah.

Jon Stoddard (43:44.443)
Oh yeah. Who are those two guys from Germany that were doing that for, for all the big apps, you know?

Kevin Petersen (43:51.759)
Yeah, yeah, and they can afford to take something to market for like, you know, less than $100,000 and charge.

Jon Stoddard (43:59.431)
Jeez, it's like really, you guys already did the business model. We're just going to re-engineer and it's pretty easy, right?

Kevin Petersen (44:05.034)
Yep, yeah, and we're gonna offer 40% of the features that you offer, but we're gonna charge 10% of the cost. Right, so they're really focused on, let's get the lower end of the marketplace where we're gonna offer something for $9 instead of $99 or whatever, right? And it works, and that's, so by the way, for anyone listening, that's a great model if you wanna do it. But my, yeah, go ahead.

Jon Stoddard (44:31.399)
But now that you have your criteria, it's been refined over the years, you have the luxury of time going, okay, we have better success, we have better profits, we have everything looks better if it's bootstrap, but originally you were starting, looking at companies that were VC funded and there was still VC shares and you had to go negotiate with the VC. And sometimes I've had this experience where

I was looking at a company and the, the founder had to buy the shares back from the VC. And I've also seen it where the VC just wrote it off. Yeah.

Kevin Petersen (45:10.166)
Right, that is right, yeah.

Jon Stoddard (45:13.923)
What, what, what did you have any of those experiences yourself or did you?

Kevin Petersen (45:19.146)
Yeah, there is. So I am still interested in dead weight on VC's portfolios. But I'm not going to go through the founder for that. Like if we're talking to a VC and we're like, hey, show us your SaaS that's dragging on your portfolio that you don't care about anymore. Right. And we'll look at those. But

Jon Stoddard (45:38.671)
That's just one avenue of potential prospects. How long do you think that deal sourcing takes works?

Kevin Petersen (45:42.539)
Yes.

Kevin Petersen (45:49.282)
Uh, it takes time. I think, well, that's kind of why I, um, favor bootstrap founders because boot for bootstrap founders. Like I've been, I have been a bootstrap founder. I know what that's like. And so I can meet somebody where they're at pretty, pretty quickly where I, I can have that conversation, whether it's just a cold call or meeting somebody at a conference or I'm introduced by a developer or something, right.

Jon Stoddard (45:57.509)
Yeah.

Kevin Petersen (46:17.642)
or somebody joins the mastermind, or they know somebody in the mastermind knows somebody, right, I can, in minutes, I can make a connection with the Bootstrap founder and get it, and have a pretty good understanding of where they're at in their life cycle and what their motivations might be.

Jon Stoddard (46:35.639)
Yeah. Is it different negotiating with a Bootstrap founder than it is with somebody that's taking...

Jon Stoddard (46:48.719)
money from a VC.

Kevin Petersen (46:52.222)
Yes, yes it is. Yeah the thing is with a bootstrap founder you can get, you have a lot more flexibility. So the why behind, you know, why did they start the business, why are they even thinking about exiting, those become really important, right? Like their life connection to that business becomes important, such that you can create, you can craft an offer that is super flexible and hits on their why.

Like their why might be like, hey, you know what? Like I'm not seeing my kids enough. And I just had a third, I got a newborn at home, my third kid, right? And it's just not, I can't do 60 to a hundred hours anymore. But I would still work for you for 20 hours a week and consult and share with you the, you know, like manage the roadmap, product roadmap, while you do all your, you know, sales and marketing stuff.

Jon Stoddard (47:29.572)
Yeah.

Jon Stoddard (47:47.427)
Do you offer that or do they offer that? You just like, hey, I don't see my kids much. That's the complaint. You've got to provide the solution.

Kevin Petersen (48:00.414)
Yeah, so that's exactly it. So I'll learn to your earlier point, like I learned what's really driving their motivations to be in the business or not in the business. And then I craft an offer that matches, where I can go to the, like with the Bootstrap founder, you can get super creative because they're not necessarily thinking about like 10 year IRR. Like with the VC, you've got a team of analysts that are looking at 10 or 20 year IRR projections. So, and they're like,

Jon Stoddard (48:09.413)
Yeah.

Kevin Petersen (48:30.066)
It's a formula. But with the Bootstrap founder, you can say like, hey, what if, you know, you could work from home in the Bahamas while running this business part-time and we take these things off your plate that you have always hated anyway, and we do that, and you can just focus on X, and you retain some equity for doing that. How does that sound?

Jon Stoddard (48:49.38)
Yeah.

Kevin Petersen (48:57.15)
And then, and you can also get creative on terms, right? So the adage in our mastermind is, you know, it's never the price, it's always the terms. You can offer just about any valuation, but what matters at the end of the day is, well, what are the terms? And the terms have to make sense for both parties. So some bootstrap founders are gonna want more cash up front, some are gonna want less up front, some are gonna really appreciate having some retained equity.

getting a second bite. Some are gonna want to work a lot of hours, some are gonna want to work zero hours, right? Like all these things, there are a lot of levers that can pull to satisfy, you know, their motivations for transferring controlling interest while still managing risk on our side of the table.

Jon Stoddard (49:28.964)
Yeah.

Jon Stoddard (49:48.323)
Yeah, so this sounds like a much more patient game. Did, did you always have this skill of patience or you had to learn it more and more over the time to

Kevin Petersen (50:02.078)
Yeah, that's a great question. So I would, I think, and it's funny, I don't think anyone's ever asked me that, but I think it's, I learned it from my consulting career. Because if you're working as a consultant for a Fortune 500 company, you've got a lot of chefs in the kitchen on any project. And there were times where I was working on, you know, nine, with nine figure budgets.

And so, and in the financial industry, there's like, there's players touching the project from every angle, you got legal and compliance and accounting and finance and you got to show the models. And, and I can't tell you how many times I had, but where I was hired to take a product or a service to market and it was big budget, high visibility in the organization. And then like after months.

or even a year of work on it with the project team, somebody at the senior executive level scrapped it at the last minute. Like, hey, we're gonna go to launch. Like, this is our launch, this is the rollout plan. Like, you know, October 1, you're gonna be in market. And then they're like, now we're not doing that anymore. Right? In a different direction, exactly. So that teaches you.

Jon Stoddard (51:15.591)
Different direction!

Jon Stoddard (51:21.055)
Thanks for your time and effort. We're heading in a different direction. Yeah.

Kevin Petersen (51:24.05)
Exactly, yes. So that is something that will teach you patience because as a consultant, like you know, I hate to undervalue it, but like I kind of don't care. Like they hired me for a job and I did my job, so whether they launch it or not has no bearing on my life. I'm a contract work.

Jon Stoddard (51:40.515)
Right. So you didn't have create the emotional attachment to the outcome, which would create it suffering, let's say. Yeah.

Kevin Petersen (51:47.698)
Yes. Yeah, but then the like the full-time employees I'm working with, it does matter to them because they're people who are like, like it's not that different from founder mentality, right? They're like, oh man, like I put my lifeblood into this project for a year. Now you're killing the project. Like for them, it's impactful. And then they start thinking things like, am I going to get laid off? And is there going to be another project? And if I, if not this one, what about, you know, and they get really upset.

Jon Stoddard (52:03.427)
Yeah, yeah, we're not reinvesting in it, right?

Kevin Petersen (52:16.638)
So as a consultant, I guess that's how I learned that. It's like, well, there's always another project. And you're always focused on what you can control. And you do the best with the data that you've got every day. That's pretty much it. So.

Jon Stoddard (52:34.659)
Yeah. Do you, on deal sourcing now, is it all off market and relationships, or do you see something on FE International or some of the bigger ones and say, hey, that looks like a good deal, it's a reasonable price, let's go check it out.

Kevin Petersen (52:52.874)
Yeah, so I really don't care where a deal comes from, but those that we source off market, again we've just got a lot more room to negotiate. If there's no broker in between, whispering in the seller's ear, yeah. Yep. Yeah. And the broker is less likely to get creative on terms too. I mean I'll just give one example.

Jon Stoddard (52:56.356)
Okay.

Jon Stoddard (53:07.323)
They're gonna ask for the price because the broker's gotta get paid, yeah.

Kevin Petersen (53:22.066)
something I've done in the past is, you know, we'll say, okay, it's X amount of cash upfront, you got X percent rollover equity. And then there's this other piece that you'll get at month X based on performance, right? So it's different from seller financing, but there's still a component where you're deleveraging risk and motivating the seller to continue consulting.

you know, focusing on growth. So, and brokers, they almost can't do it because, and I've tried that with brokers and then what they tell me is, oh, well I want my full commission up front as though they hit that target and you're paying out the full amount. I'm like, well, that's not really fair to me, right? I don't care. Exactly. Right. They're like, you just pay, if you pay the, like the seller will agree to your terms, but we will only

Jon Stoddard (53:51.78)
Right.

Jon Stoddard (54:09.724)
They don't care! Next!

Kevin Petersen (54:21.654)
do it if you pay our full commission right now. Yeah, up front. So it's just, it's more restrictive, but it's not impossible.

Jon Stoddard (54:23.991)
Up front. Yeah.

Jon Stoddard (54:31.115)
Yeah, not impossible. I've heard it. They go, Hey man, as long as you pay my commission, I don't care how you work out this creative deal, right? So let me ask you your cap stack and where you get your money to buy the companies now. Now you, uh, I'm taking it. I see that you paid it out of your pocket for these smaller deals. Now you get larger. How did you finance these deals?

Kevin Petersen (54:55.434)
Yeah, so early on it was all friends and family, right? So people saw what I was doing and they were excited about it. And they're like, hey, man, like, I don't know SAS and I don't know what you're doing, but I see that you're excited and making money. So what if I gave you money and then you invest it for me? And then I just get dividends off of that. So that's what I did early on. I built micro portfolios with the GPLP structure.

Jon Stoddard (55:22.479)
Gotcha. Was there some kind of, was there some kind of subscription? It was his friends and family. Did you need any subscription agreement? Just curious. And was there any like, hey, there's an exit. There's a multiple uninvested capital you get after five, seven years.

Kevin Petersen (55:23.926)
But then what happened was, yeah, go ahead.

Kevin Petersen (55:33.55)
Yeah, now we did.

Kevin Petersen (55:40.254)
Yeah, so we had a subscription agreement in the GPLP portfolios and paid out dividends. Yeah. And then what happened was, you know, we've just been going up market, you know, and so I hit a critical point where it didn't make any sense to reach out to any friends and family and say, hey, you know, we need, you know, how soon can you wire $3 million or five or 10 or 80? Right.

Jon Stoddard (55:44.236)
Okay, gotcha.

Jon Stoddard (56:08.593)
How many people did you have? 20 years in consulting business, nine figure, but you probably have a lot more in your network than I do that could do that.

Kevin Petersen (56:14.116)
Yeah.

Kevin Petersen (56:19.686)
Yeah, so and then the once you go up market, like once you're talking to family office analysts and PEs and you know institutional capital, they've totally frowned on my GPLP micro portfolios. They're like you're going to spend like you're asking me to wire 10 million dollars while you're still kind of part-time running this other portfolio that's got a

AUM of 1.2. Like I'm 10x bigger than your than that portfolio. So I don't want you spending any time on it. Right. Yes.

Jon Stoddard (56:55.119)
This is a distraction, Kevin. Yeah, this is a distraction, right? Doesn't move the needle, blah, yeah.

Kevin Petersen (57:03.382)
Yep. And so, and I'll be honest, like just full transparency, I'm still at kind of a crossroad where now we're working eight figure deals. I've got some legacy early micro investors that are like, what's going on with the 15k I put in? Like, like in one call I'm negotiating terms on, like literally.

you know, $35, $40 million. And on the next call, I'm taking a call from somebody who's like, hey, you know, what am I gonna handle at 15K? Yes, yes, yes. So it's hard because I have to give them.

Jon Stoddard (57:37.287)
Check it in on that investment I made three years ago. Yeah.

Well, that was a rule. Rule number three was you don't call me.

Kevin Petersen (57:49.298)
Right, yeah, no kidding. I know, I know. It's frustrating a little bit. I'm just sharing that. It's a little frustrating because I do owe them an appropriate level of respect and attention and transparency. Yeah. But there's something else. There's another dynamic. I was talking with another founder this morning about this. There's another dynamic where right now capital markets are tight. Investment for...

Jon Stoddard (58:01.883)
Transparency, yeah.

Kevin Petersen (58:17.598)
early stage pre-revenue or pre-profit companies is gone for now. The only people that are getting funding are cash flowing, you know, cash flowing businesses that have growth.

Jon Stoddard (58:30.071)
more money on their successful portfolio companies. Yeah.

Kevin Petersen (58:32.83)
Yep, exactly. So yeah, exactly. The way to say it is that the risk profile has shifted. And now people are talking about profit coins instead of unicorns. Like that's a real thing right now.

Jon Stoddard (58:39.803)
That's right. Yeah.

Jon Stoddard (58:48.167)
profit co-

Kevin Petersen (58:52.522)
And the other dynamic is that while the capital markets have tightened, individual investors have recently lost money in pot and crypto. And now they're scrambling to find cash. So they're calling founders where they've got five or ten or twenty or fifty thousand

Kevin Petersen (59:16.81)
Like I don't want to tell you that I just lost 300,000 in crypto, but I can really use that 50,000 back. Right. That's kind of what's happening. So I'm hearing from other founders that whereas a year ago they got almost zero calls from micro investors. This year, everybody's calling. Everybody's looking for cash.

Jon Stoddard (59:25.085)
Yeah.

Jon Stoddard (59:37.532)
Huh.

Kevin Petersen (59:39.058)
And so the dynamics have changed a bit. So it is what it is. For me,

Jon Stoddard (59:47.186)
How does that favor you? How can you turn that into a positive?

Kevin Petersen (59:52.97)
That's a really good question. I don't know that I have a great answer for that because like I mean what I've done over the past 18 months is I've really shifted my focus To eight figure deals and eight figure funders and I've got them I've got the deals and I have the investors and so Yeah

Jon Stoddard (01:00:07.355)
Yeah.

Jon Stoddard (01:00:15.607)
And I will, let me give some context to that because like money always finds an opportunity, right? And I was, I think it was reading in a Wall Street Journal article about active investors are targeting ESG companies because they're slower moving and there's more opportunity to take over.

Kevin Petersen (01:00:37.582)
short. Yes, always does. Yeah, and there's a lot of cash on the sidelines right now. So yeah, so I've got some pretty good, you know, traction on both, you know, buying and funding, like deal flow and funding, and I just need to keep my

Jon Stoddard (01:00:37.699)
It always finds a way, right? They always like, okay, where's the opportunity? Yeah.

Kevin Petersen (01:01:07.574)
happy for a little bit longer so that I can offer them liquidity and say, okay, here today's the day. Here's your offer. You can exit, but before you do, you might want to consider that we just closed on this other thing and it's doing, you know, whatever 50 million a year and growing, and you can still participate in that. But now, now's your chance.

Right? You have to say so today. Like you have 24 hours to say, yeah, I'm heading for the exit. I just want my 15 K or now I'm going to stay in and see if I if that turns into 60 K in the next three years.

Jon Stoddard (01:01:31.779)
I'm sorry.

Jon Stoddard (01:01:42.471)
The test of a good marketer is to turn somebody that was looking for their money and exit and ask them to invest more.

Kevin Petersen (01:01:46.001)
Hahaha

Kevin Petersen (01:01:50.826)
Yes, yes, so true. Yeah, no kidding. Yeah, so there will be that offer is coming. I can't really say anything more about that because I'll get into legal trouble. But that's coming down the pike where I'll be able to offer something for my early investors where and like we just said, it's just take it or leave it, right? And then just focus on lower middle market deals from here on out.

Jon Stoddard (01:01:53.295)
Yeah, that's great. Hey.

Jon Stoddard (01:02:20.483)
Yeah, makes sense. And then go to, to find the money for the cap stack from the bigger check writers. Yeah.

Kevin Petersen (01:02:27.134)
Exactly. Yeah, and I've got commitments. It's such a funny thing. I'll just tell you like the first time you get a funding letter from somebody saying that they'll give you, you know, 25 or 50 or 100 million dollars. It's exciting. I'm not gonna lie. And now I got a bunch of them.

Jon Stoddard (01:02:41.131)
Yeah, yeah, yeah. And is that low interest debt or is that some equity?

Kevin Petersen (01:02:48.446)
Usually it's some combination of debt and equity. Yeah. And well, so actually, let me quantify that a little more. Some of those letters are from venture debt and some of those letters are from equity players and could even be family offices. So it just depends. But when I got my first one, man, I was like, this is it. It's like, I made it. Yeah, it is validation. But you know, you still.

Jon Stoddard (01:02:51.161)
Yeah, yeah.

Jon Stoddard (01:03:05.103)
Right.

Jon Stoddard (01:03:12.143)
Well, here we go, man. This validation, right? There's a lot of strings attached to that though.

Kevin Petersen (01:03:18.142)
Yes, yes, you still have to turn it into a wire. And then once the wire hits, then you have that moment where you celebrate for about 30 seconds and you're like, okay, now I actually have to get to work, right? The real work begins, yes.

Jon Stoddard (01:03:33.103)
Now the real work begins. Yeah. Hey, Kevin, we're already on an hour and I appreciate that, but can you stand a few more minutes to talk about this level up SaaS mastermind you got going and what that looks like?

Kevin Petersen (01:03:46.866)
Yes, sure. Yeah, so this is a mastermind that I've been running for two and a half years for SaaS founders and investors. The community has grown enough that we're now running two monthly calls where the first Wednesday of every month we meet and talk about all things growth. So growth strategies, growth hacking. Yes, yep. And then, yeah.

Jon Stoddard (01:04:09.219)
And that's you on the phone. Yeah. And what is the SAS, somebody if I want to join a SAS mastermind, do I need to be a specific size? Got to be doing 500,000 or a million or what does that look like?

Kevin Petersen (01:04:25.566)
No, but if you don't have a SaaS that's running at that level yet, then I would expect that you've had an exit in the past. So like we have guys that are between gigs really, like they had an exit maybe six months or 12 months ago, and they're looking for their next acquisition.

So, but then otherwise, yeah, people are, they're from early stage to eight figures revenue.

Jon Stoddard (01:04:54.167)
Yeah. And what kind of mastermind is that? Like some masterminds you go to and it's a call and some others, like, it's a lot of hand holding where they, you know.

Kevin Petersen (01:04:55.766)
I don't have any nine finger.

Kevin Petersen (01:05:05.81)
Yeah, no, ours is, yeah, it's a call. It's a check-in call. We go through a process called breakthroughs and blockers, right? So biggest breakthrough since we last met and any blockers that were profaning from hitting your goals. So we do set, we just set biannual goals and that you can track against and really the magic, like any mastermind, really what you're getting more than anything else is networking. So what I tell members as they're coming in is, you know, you're never more than two degrees of separation from the expert you need.

Jon Stoddard (01:05:12.229)
Yeah.

Kevin Petersen (01:05:35.554)
any given day, right? So like if you come to a call and you're like, hey guys I got this thing I've got going on in my business. Could be anything, could be hiring, it could be accounting, it could be... yeah. Yes. Anything. Yeah. Either the person you need to talk to is on the call or somebody on the call is going to connect you to that person in real time. Like before the call ends somebody's going to be like, oh...

Jon Stoddard (01:05:36.389)
Yeah.

Jon Stoddard (01:05:44.807)
It could be capital, it could be money. Yeah.

Kevin Petersen (01:06:00.426)
When I face that in my business, this is what I did. And you need to talk to so and so, and I'm going to connect you guys right now, right? That's the magic. And then I have guys that come to me and say like, hey, I hit my goal months ahead of schedule because of this group, just because of the networking and the support and the interaction.

Jon Stoddard (01:06:09.417)
It was a-

Jon Stoddard (01:06:20.875)
One of the successes of a mastermind is how long people stay with the group. Because they, whatever money they put in, they get a three 10 X return. What, what's that look like for your mastermind?

Kevin Petersen (01:06:33.482)
Yeah, absolutely. So I mean, I have people that are still on after two and a half years since I launched it. The one surprise I've had is I've had a couple people leave the mastermind after making an acquisition, which to me was kind of counterintuitive. Like they kind of used the mastermind for networking and deal flow, deal structure, and you know, everything, everything related to getting a deal done. And then once they did, they're like, oh man, I'm up to my eyeballs. Like I don't have time to dial into the monthly meeting.

Jon Stoddard (01:06:38.916)
Yeah.

Kevin Petersen (01:07:04.282)
And I appreciate that, but it's also kind of counterintuitive because I'm like, well, now that you're actually running the business, seems like you'd want the support from the network. But I do, I can say that I understand their perspective. Like when you close, the day you close, you feel like, oh, wow, like the level, the volume in my life went up.

Jon Stoddard (01:07:13.755)
Right.

Jon Stoddard (01:07:25.444)
Now I got this freaking list like this long of things to do.

Kevin Petersen (01:07:29.97)
Yes, and plus you may have investors, like if you're not self-funded, or even just partially self-funded, right, then you've got investors to answer to, and you got the dynamics of the exiting team, like who are you retaining? Yeah, it's just, it's all of it. It's hard. So day one is hard, so I get that. In a way, I'd be surprised if some of these people didn't come back now that they've been, like they were in the mastermind.

They completed an acquisition, they stepped away, wouldn't be at all surprised if they came back at some point and said, okay, now I've got capacity for this again.

Jon Stoddard (01:08:08.431)
Yeah, I bet you they do. Right. That's fantastic. Kevin, we went past the hour. Normally I, you know, it's usually an hour call, but I want to thank you so much for spending time with me.

Kevin Petersen (01:08:20.926)
It was a good time, so I really appreciate it as well, John. And I don't know, you and I can talk about this offline, but I'd be happy to come back and talk just about fundraising, if that's interesting to you.

Jon Stoddard (01:08:32.719)
Would love it. It is a hot topic. Everybody wants to know how to raise money from investors. Everybody. Like, how do I buy bigger companies, you know?

Kevin Petersen (01:08:43.638)
That's right. Well, say the word. Happy to do it.