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Ottawa-based phone company Versature was acquired by net2phone in the fall of last year and in this episode of Built to Sell Radio, you’ll hear Versature co-founder Jonathan Moody describe:
One of Versature’s strengths was its recurring revenue. Not only did it give the company stable income, but even banks recognized it as a key driver of company value when Moody and his partners sought new funding. Module 5 of The Value Builder System™ explores how you can incorporate recurring revenue into your business. Get started for free right now by completing Module 1.
Jonathon Moody is the President, Chief Operating Officer and a co-founder of Versature. With over 15 years of experience in the technology sector, Moody has become a champion of customer success and creating a superior customer-centric user experience. He coaches businesses on how to improve their productivity, efficiency and decrease costs with cloud technologies.
John Warrillow: Next up, you’re going to hear from Jonathon Moody, who was one of three founders of a technology company called Versature, which is a phone system. I’ll let him describe the company to you. What I want you to listen to were the strategic reasons they got acquired. I counted two or three of them. Number one, they were a pure play, meaning they did one thing. They weren’t just a sloppy spaghetti ball of a bunch of things. They did one thing. They were actually offering their acquirer a geographic footprint into a market they didn’t operate in. The acquirer happened to be in the United States. They were operating in Canada, and that was a market they wanted to enter, and so it allowed them to have a kind of geographic foothold, which is another strategic reason that big companies buy small ones.
John Warrillow: The third one is a little less obvious, and it is how Jonathon and his colleagues were running the company on salesforce.com. This is not intended as an advertisement for a CRM platform, but it goes to show you that having all of your data at your fingertips and being able to demonstrate how you acquire customers, how you serve customers, can be incredibly important to your acquisition conversation. Here to tell you the rest of the story is Jonathon Moody.
John Warrillow: Jonathon Moody, welcome to Built to Sell Radio.
Jonathon Moody: Thank you. Pleasure to be here.
John Warrillow: Tell me about this company Versature. What did you guys do? What did you offer?
Jonathon Moody: Versature offered, and still does, a hosted business phone service. We’re replacing traditional phone service like a Bell Canada, but we’re also replacing the piece of equipment that goes in the basement. We call that a hosted PBX. In most of the industry, the term cloud’s really snuck in there, but we were doing this a long time before the word cloud was really discussed. They’re really using the same model, taking that equipment out of your office, selling it on a seat model, right, so we’re selling it based on the number of staff members you have. In our case, we’re actually even delivering a piece of equipment, a physical phone on a desk, as part of that monthly service. It’s kind of a Spotify slowly catching up with us, if I was to think in the modern world.
John Warrillow: How did you guys get into this business? I understand there was two other co-founders. Maybe talk about how the three of you came together.
Jonathon Moody: About 12 years ago or so, it feels like forever now, we came together working in an IT business. We were doing a managed service provider. We were offering a all-inclusive help desk seat. If you had a business, and you had 10 staff, and you didn’t want to have an IT person, for a flat monthly fee per staff member, we would offer to take care of all of your equipment in terms of upgrades and updates. We also offered staff, to answer questions, so your staff might call in and can’t figure how to plug their mouse in or the printer’s not working, and so they’d call in and get help from us.
Jonathon Moody: What happened was these businesses started approaching us, and my partner Paul was the executive on that side of things. They’d come to him and say, “We really love what you guys are doing with the computers. You’re keeping us reliable. We understand the pricing model. It’s a very sustainable business. Can’t you do our phones?” Rolling back 15 years ago, the technology was totally different. The technicians were different technicians. The software interfaces were different. Everything was a different animal, and so we had to stay out of it.
Jonathon Moody: Eventually, what happened was the technology aligned, and so we moved over to the same network cable, for example, and you actually plugged it into your internet connection for these Voice over IP phones. In the early days, we got in and actually had a staff member move from our Ottawa head office to Chicago after he got married and took his phone with him and actually led our support team out of Chicago which, again rewinding back 12, 13 years ago, was pretty unbelievable. Long distance was still expensive, and so-
John Warrillow: Yeah. You’re losing me in the story, though. How did the three of you guys come together as a partner group?
Jonathon Moody: Paul had a tech firm, and I came in to help with product management, or project management, excuse me, so to help out with his largest clients, take care of their details. Our CTO was doing some consulting for him, or what became our CTO. When we launched this phone business, we actually built … he built a piece of equipment running on UNIX hardware, so computer hardware. I took care of the client side, and Paul took on the sales side, but-
John Warrillow: How did it come about that you guys were partners? Because Paul owned the IT services company. Why didn’t he just start this product, and you guys would stay on as employees? Why did he take the step to make you kind of shareholders in Versature?
Jonathon Moody: It’s probably a good question to ask him. My belief would be that it was really he saw the value that you needed to drive a business and to get people bought in, and so to be partners, to have the vision, and be able to put in the hours that were needed. This was not a proven technology so, in a lot of ways, it was a forward-looking statement from him in the sense of this is what … “It’s going to be a big deal. It’s not going to be easy, and I need these guys bought in and part of it,” and we appreciated that.
John Warrillow: Yeah. Did you do two jobs at once? Did you continue your job as a project manager for the IT company and kind of play around with your early days of Versature, or did you go all in on the phone company?
Jonathon Moody: We ran the two companies in parallel. For the three of us, initially, it was very much we did both roles. What worked well for that is that the client base was the same, so we were selling the phone services into the IT clients. It wasn’t like we were doing outside lead gen and closing deals in other business initially. We were purely selling into the IT side of the client base. I think it’s worth noting we were a bootstrap organization. We had a little bit of debt in the early days but, really, we were bootstrapped, and we were growing out of another successful organization.
John Warrillow: How did you guys figure out the equity piece, like who would own what portion of the new company? Because, in a lot of ways, it sounds like Paul, the owner of the IT, he had the customers, he had the office, but he was … he seemed to be bankrolling a lot of it. Is that fair to say, or am I missing … Did you guys kick in cash and sort of break out the equity that way?
Jonathon Moody: No, absolutely he was bankrolling for sure. We were significantly younger, Adam and I. He’d kill me for that one, but we were a little bit younger then and were newer to the space, and so he definitely bankrolled it. The Versature itself had an earlier life, if you do a little bit of googling, in the anti-spam space and then the whole dot com bust came upon it, and it sort of got put away on the side and then got revived to go into this Voice over IP space. He already had the core structure in place, and so that defined a lot of how we set up the business.
John Warrillow: Tell me how you guys thought about fundraising. You bootstrapped the business. There was this big kind of debt raise in 2016. It looks like over $1 million that you raised. Maybe talk a little bit about why you chose to use debt as opposed to equity, why you needed the money rather than continuing to bootstrap. What was the thinking there?
Jonathon Moody: Being in the space a number of years ago, and that’s a little bit different now in the SaaS world but not totally different, that we talked to banks, and we … The original money, we did actually two rounds, I guess, in a way, with … The debt with BDC was they looked at the business and, really, it was all about the owner, right? They couldn’t value the business. We didn’t own garbage trucks, right? We didn’t own property. What did we have? We had a growing, quickly growing, group of clients who were paying us reliable recurring revenue each month, but there was not a bank out there that was interested in having a conversation of that. To be honest, there wasn’t a lot of VCs. Unless your scale is really big or you’re in California, we weren’t going to have conversation about it back then, and so we had no choice really.
Jonathon Moody: It wasn’t until the round you’re referring to … I don’t know. It was not that many years ago, and that was really to double down on the business and accelerate the growth … that RBC and a few of the banks looked at our books and said, “Wow, you guys have got a big recurring revenue source here. It’s reliable. You’ve proven it works. You’ve got a negative churn rate. You always have happy customers, and we’re willing to put up money against it.” That’s in the last four, five years.
John Warrillow: What was the revenue ballpark at that point?
Jonathon Moody: Oh, we would have been in few hundred thousand dollars a month in the … just in the recurring portion, not including one-times, things like that.
John Warrillow: Right, right.
Jonathon Moody: Not a little business. You hear people talk about $10,000, I think, they can raise VC. In my opinion, that’s you’re dreaming. You got to be able to prove more than that and prove it’s reliable, but everyone wants to talk about it because the valuations they’re seeing in the SaaS companies are like the Shopifys of the world.
John Warrillow: Right, so it’s interesting because we’ve heard that banks, traditional banks at least, don’t really lend at a competitive interest rate to companies without sort of fixed or hard assets that you could liquidate at an auction. In this case, I’m assuming that the interest rate was sort of at a higher level because you didn’t have the assets to back it up? What kind of interest rate did you guys pay on that debt?
Jonathon Moody: I don’t have the number right in front of me, but I’ll give you a quick story that I think will agree with you and counter it a little bit. When we first went shopping before we closed that round that we did, we actually reached out to BDC again because we had done business with them, I don’t know, seven years earlier and paid it off and-
John Warrillow: BDC, of course, is the Business Development Bank of Canada.
Jonathon Moody: Exactly. They came back to us with a number which felt too high for us.
John Warrillow: What was the interest rate they were offering?
Jonathon Moody: I’d say it was high teens is probably where it was.
John Warrillow: High teens, like 16, 17%, kind of like-
Jonathon Moody: Yeah, and I’m speak-
John Warrillow: Wow.
Jonathon Moody: … having it front of me, but it would be in that space, I would imagine, and so we actually looked at some private lenders who were interested around Canada and went down the road with them. By the time we kind of got through that process and decided it didn’t really make sense with the one that wanted to do it, we actually got back in touch with BDC. That was a year later, and all of the financials we had put together, all the forecasting we had done, we were hitting everything and so, at that point, they went back to the drawing board, knocked a little bit off it. I’m sure they wouldn’t let me disclose what that is, but they got more aggressive on their offer, and we went ahead with it.
Jonathon Moody: The other part of that was RBC, and I believe most of the major banks at this point, actually have staff that actually take care of this side of the business now, and so they actually had a specific product. We still have it til today, a credit line based on the monthly recurring revenue, so that should give you a ratio. I believe it’s 3X, but can move around, of your recurring revenue, and they don’t need any other hard asset to secure it, and so it’s really targeted at these SaaS companies. I’m sure there’s a bunch of hoops you got to jump through. As always, when you need money, they don’t usually have it for you, but when you’re in that situation where you have enough recurring revenue and a history, they’ll back you up now or more than.
John Warrillow: How did that debt help you grow? How much did you guys grow between 2016 and 2018?
Jonathon Moody: Significantly. We brought in a VP of sales, a VP of marketing. We really grew a sales team from one and a half, let’s say, up to … at that point, I think we probably hit six or seven on the sales side. Then, from then, we pushed it again another doubling, a tripling. We really went from a tech-oriented organization to a sales-marketing-oriented organization. After that debt round, we were about 50/50 sales and marketing one side of the shop, the other side onboarding, support, and taking care of our customers.
John Warrillow: How many people did you have in the company when you sold it? How many full-time people?
Jonathon Moody: High 30s, 30, 35, 37.
John Warrillow: Got it. What was the trigger that made you want to sell?
Jonathon Moody: The belief was always, when the business was built, that, at some point, there was going to be some type of a transaction. We didn’t know which end of it we’d be on. We didn’t know sort of what the final picture would look like. For us, taking care of our staff, taking care of our customers, were two really high-valued things that we wanted to do and-
John Warrillow: How does taking care of your staff relate to being acquired? What’s the thinking there? Were they all shareholders or option holders or …
Jonathon Moody: There was some of those, but really, to be honest, more about having … We value culture highly here. We want people to want to be here. We have a good time at work, and so the idea that we would, unfortunately, do what happens sometimes in this space, which is you sell off to a US or an international person who just wants to buy the … or even Canadian wants to buy the clients, right? They take the clients, close down the office, move it to Toronto or Utah or California and, really, they’re buying the recurring revenue. We were not excited to go down that road, and that was one of the requirements as we grew. At the same time, I think everyone would tell you that, as a group of founders and as the valuations start to go up, it becomes a bit of a challenge to sit on that kind of a bank and have a fair amount of risk that you’re sitting on.
John Warrillow: In your sense, you felt that you were kind of risk on. You were risking a lot of wealth, if you will, as you continued to kind of grow the businesses, that this shareholding that you’d accumulated was worth a considerable amount of money.
Jonathon Moody: Well, especially if you want to continue to push, right? I mean it’s one thing if you want to sit back and sort of milk it, per se, but it’s another thing if you want to continue to push the growth curve. I mean we’ve been a top 10 fastest growing company a number of times in the last few years. We were hiring and running this thing to grow, and so these are challenging conversations. Paul, who again was the … really the founding … the core founder, I guess, he as well had some other ideas on what he was looking to get into and, hence, wasn’t involved the last couple years in day-to-day management, and so it was also a chance for him to look at other opportunities.
John Warrillow: Again, was there a sort of a trigger event? Oftentimes, these things are triggered by an inbound inquiry. Did you receive some sort of inbound interest that made you guys look up and say, “Well, maybe we should take advantage of this,” or was … What was the trigger, the kind of straw that broke the camel’s back, so to speak?
Jonathon Moody: It wasn’t necessarily a specific trigger. Any business like this, as you grow it, and I like to think if you do it properly, you’ve always got bodies that are interested, and you’ve always got individuals trying to figure out how to, be honest, take advantage of you, but also to start conversations, right? What is the plan? What are you looking to do, whether that’s to add to adjacent space, look at other products? We had had, I’d say, conversations regularly, which I would encourage everyone to do. It’s very healthy. To understand to valuation is to understand how other people out in the space are looking at your business so you can shape the stats, the growth curves, the financials and make it make sense for those that might be interested at some point. We just kept having those conversations, kept having those conversations and eventually found some that made sense.
John Warrillow: Where does it go from there? Tell me the story.
Jonathon Moody: I’m trying to think the numbers. We probably chatted with 5 to 10 different groups fairly seriously once we decided that we thought there was an option. Then you’re trying to find out what the market looks like competitively. We went through kind of two processes, I guess. Originally, we went down the road with one that just didn’t quite make sense in the end. If you’re smart, you got to make sure you always have an exit, right, and it’s not that kind of an exit, a non-exit, I guess, to get out of the conversation and continue business. We were very lucky that way. We had a reliable business that was generating cash, didn’t need … We didn’t need to raise money, and so we could walk out of any negotiation and decide that it just wasn’t the right time or the right people and …
John Warrillow: What was it that gave you cold feet about that process, if you will, that potential acquirer?
Jonathon Moody: Yeah. I mean there’s lots of different little things that go on, right, I mean in terms of what they’re looking to do with the organization. In that particular case, a lot of it came down to price, for better or for worse, and the dollars just didn’t always make sense, and so that was probably the straw that broke the camel’s back, per se, but lots of little details that weren’t quite coming together. Having been through the process a couple of times in my life from a distance, I would suggest that sometimes the more you talk the little details, you start to understand what’s being thought about more than you did when you first had a conversation with them. Looks just like dating.
John Warrillow: Yeah. I’d like to know more specifics so that I can understand what went wrong. The valuation that you were getting, you weren’t happy with. What sort of range were you getting in those conversations? Sound like you spoke with kind of 5 to 10 different people. Did they give you a sense of what they thought it was worth?
Jonathon Moody: In this business, most are looking to work in the multiple revenues when you’re at the growth curve that we’re at in the space, and so most of the conversations started around one times and sort of moved upstream from there depending on everything from how they were structuring the deal. We spoke to some firms that were eventually going to IPO, and so they were looking to do shares, right, and obviously are more excited to pay a bigger multiple because, in our space, the public multiples are very nice. Companies that were looking to pay cash were looking to do it for a different way, so it did really vary but, generally, it was a multiple of revenue starting around one and working its way to three and some discussions at four, although I think those are probably mostly advertising.
John Warrillow: Got it. Got it. Did it get to a letter of intent from more than one firm or were there multiple kind of letters of intent that you were evaluating, like real kind of firm offers that were on the table?
Jonathon Moody: Yeah, multiple letters of offer. Without getting into too much of the mechanics of it, and that’s usually the game, right, is to get some different bids going on from different parties and then play them off each other so, for sure, that’s where we ended up. Be honest, we didn’t talk to … I mean we did talk to everyone serious, but at the … When we got to that level, they’re all very serious, have good intentions, and they were all business owners that we would have been interested in working with.
John Warrillow: How did you evaluate the various offers that you received? What were the pros and cons to each?
Jonathon Moody: I think it came back, a lot of it, again, to staff and clients, so the businesses that were going to take care of these customers that we’ve been adding over the last 12 years. Were they going to run and grow the office, invest in the business here in Canada? Then I would say number three really was the valuation.
John Warrillow: Got it. What were the types of offers from the standpoint of structuring? You mentioned, in some cases, they wanted to do shares. Other cases, it was cash. Did most of them have some sort of a structuring where part of the payment would be in the future for an earn-out purposes, or were they mostly kind of paid totally up front? How did they kind of structure their offers?
Jonathon Moody: It really varied based on where they were coming from, so depending on what their space was used to. We did see a little bit of that but, to be honest, we had some up front, all cash, ride off into the sunset, which, as I’ve said, really wasn’t the plan here. We wanted to take care of the customers and the staff. There was some that were the exact opposite of that, right, basically entirely stock and roped onto future value of what you can do with it, but you obviously have some up side, so it was … That was something that, as co-founders, we had to circle the wagons and discuss but, as I said, we had been working on this since the start together and so had a pretty good idea what we thought would be acceptable and how we wanted to take care of both the customers and the staff.
John Warrillow: What did you guys think would be acceptable?
Jonathon Moody: Those were the two pieces realistically. The valuation, as I said before, was number three for us. Obviously, we wanted to get a fair price for what we felt we had built, but at the same time, the real important piece, we were not going to sell this thing to someone that was going to shut it down and move the clients away. We weren’t going to sell it to somebody that wasn’t going to invest in Canada and continue to push the boundaries here.
John Warrillow: I’m curious about that because you guys, admittedly, started the business to kind of sell it. It was something that you talked about a lot. It was a commercial venture, and so I’d be curious to know why you cared so much about what was going to happen in the future. I hear that a lot from people who have family businesses, and it’s like third generation, and they’ve run it for 46 years. I get it in that situation, but you guys were … you saw an opportunity in the marketplace, three young founders. Why didn’t you just sell it to the highest bidder?
Jonathon Moody: I think there would be a simple answer. It should be that it wouldn’t be the right thing to do. That wasn’t how we had operated the business is probably the reality. We really were a client-first organization. We’re a premium product. We had gone around saying that and believing it for 14 years, 12 years, and so we were going to stand behind that all the way through the whole process.
Jonathon Moody: I think the other side of it is what I said earlier, which is that we weren’t in a situation where it had to go, and so, as I said, we kind of went through a first process and didn’t go with it. Nothing was forcing our hand. We could keep it going the way it was going. We keep growing and pushing it if we needed to, if that didn’t make sense and it wasn’t the right transaction. If we were in a different situation where we needed cash or unable to sustain the business, we might have made different decisions, but we, luckily, were not in that position.
John Warrillow: That’s helpful for sure. Going back to the multiple offers that you received, would it be fair to say that the ones that were sort of, as you described, sort of all cash, ride off into the sunset, was it fair to say those were on the lower end of the multiple, and the ones that had some structuring, future payments, take some shares in our company, et cetera, were on the higher end of the multiple? I mean that would be my assumption, but I just wanted to validate that with you.
Jonathon Moody: I think that would be common sense, but it wasn’t quite that clear.
John Warrillow: Okay.
Jonathon Moody: It wasn’t necessarily that way. You got to put some other pieces in play like currency, all right? We ended up working with a US-based firm, so that obviously, especially where the dollar is right now, puts a pretty big twist on it. You get into some other, as I said, some public market valuations for existing players in our space, and how they look at the valuation of these organizations is very different than how we look at them, or as a private firm, or as a park, or anyone else. They’re going to value it very differently than those public firms do, so we really did see a full gamut.
John Warrillow: Yeah. I’d be curious to know how currency impacted your deal. Most of our listeners are in the United States. You’re in Canada. Right now, as we record this, the Canadian dollar is trading at about 75 cents for every one US dollar. How did that difference in the currency … Obviously, your acquirer was a US-based acquire. How did that impact the deal as it played out?
Jonathon Moody: Well, as I looked at it, it provided great value for them, right, because the … If you look at the history of the currency, obviously, and I’m not going to pretend that I can play that game because I would be sitting on a beach somewhere, but odds are it wasn’t going to stay where it was. I think we were down exactly 30% discount, basically, and so if you look at it that way and you’re buying a firm with recurring revenue down the road, there is a currency play involved, which has some theoretical upside for them.
Jonathon Moody: Did they look at that? They knew what it was worth. I would argue that few of them discounted the revenue the same way, although, of course, they did on their spreadsheets, but in the conversations, that wasn’t so much the case. It was kind of a, I guess, a little bit of a quiet discussion around currency, but it wasn’t like it was a 4% difference. It was a pretty significant cost structure difference when you talk to a Canadian firm who had to figure out how to make that make sense.
John Warrillow: Yeah, because, of course, the acquirer, while they would have a more powerful US dollar to buy a Canadian asset, the profits that you guys would make would also be discounted as they came into the United States, obviously, so it kind of works both ways unless they thought that they had fairly good visibility into idea that, over time, the Canadian dollar would somehow appreciate so they could buy it with powerful US dollars today but, tomorrow, the Canadian dollar may go to parity, and those profits would come across the US with the same strength. Did they allude to any sense that that was part of their strategy, this kind of currency … playing the currency market at all? It doesn’t sound like that was a major part of it.
Jonathon Moody: No. To you and I, that makes a lot of sense, and I do think, in some of these conversations, that was going on at the other end. I think, in our case, because of the high growth rate that we were looking at, because of our access to the Canadian market, that was kind of a side story. I’d say it was more of a struggle for the fellow Canadian companies looking to try and get a valuation figured out, right, rather than the American companies looking at it as an advantage.
John Warrillow: Talk about, if you wouldn’t mind, the importance of being a pure play, meaning kind of do one thing better than anybody else in your space, because you guys made some proactive, thoughtful decisions around not diversifying your product suite. Maybe talk a little bit about that, if you wouldn’t mind.
Jonathon Moody: Yeah, so we’d always been a pure play, so we only sold business phone service. It sounds kind of lame when I say it that way, but the idea was was we were really focused. Our sales team, we do demos. We were building product. We were working with organizations to create ecosystems around it, but we weren’t confusing it with, let’s say, the internet service provider business, which I think is a mistake, generally, in our space that a lot of businesses get into. It becomes an easy one. You just resell it. It’s why not? Stick it alongside. The margins are much lower. You don’t have control over it, so you can’t ensure the quality, and so it became a … realized it was a distraction for us when we got into those deep discussions.
Jonathon Moody: All of a sudden, all the spreadsheets were simpler, right? All the results were simpler. What did it look like? How are you guys being successful? What was working? Who was buying it? We didn’t have 14 different products to have those discussions on. We had one, and there was no debate that it had been working, that it was successful, that we had happy clients, and so it became a really clean knife edge of a story to look at and understand. Either people were interested in what we were doing or they weren’t.
John Warrillow: Talk, if you could, about what Net2Phone, you acquirer, the subsidiary of IDT, what they saw in your company. What was the strategic reason they were buying Versature?
Jonathon Moody: Net2Phone is taking a global approach to our business, and so they have a existing client base in the US already. They have offices in Brazil, in Mexico. They are Argentina. They’re really looking at our space. There’s a few gorillas in the space that are public that are very serve out of one facility, without naming specific places, and so they’ll service the world out of the southern US. The Net2Phone view on the world, and I happen to agree with it, is that we need boots on the street locally. That means we support with Canadian. When you call in and need help, it means we onboard you and get you set up with Canadians. It means that we’re selling and can go visit you in Canada with Canadians. Their view is global that way. The same thing in Brazil. The same thing in Mexico. The same thing in the US.
Jonathon Moody: Canada, for them, was they were going to build it or they were going to buy it, and we aligned with their view on quality and our approach. Obviously, we aligned in terms of being a pure play because they’re not in a whole bunch of space. The Net2Phone product is very similar to the Versature product, and they were going to the same place as us. They were fast-growing and trying to dominate the market, so it aligned right into their business plan, and that’s what made the conversations so nice.
John Warrillow: The software that you guys were selling, was that something you owned or something you essentially resold on behalf of somebody else?
Jonathon Moody: We’re really a service provider, so we run a platform. We run it in facilities, but we’re really a service business so, no, we don’t … The intellectual property of the product itself is not owned by us. We have some, I like to call them glue, but some pieces that do things like when we take call recordings out of the system, we’re now doing transcription of them and keyword analysis, for example. We build some pieces there that add value, but the core platform itself, if I can describe it that way, is not something that we own. They have their own that they’re using, and we have our own. We’re going to come together at some point but, for now, it’s not something we own.
John Warrillow: Got it. That’s helpful. Your value to Net2Phone was that you had a footprint in the Canadian marketplace, you had customers in the Canadian marketplace, and you knew the marketplace. It wasn’t necessarily some technology they were trying to acquire. It was really your sort of beachhead in Canada. Is that right?
Jonathon Moody: Exactly, yeah, the beachhead, the revenue, right? We had an existing business that paid the bills. Of course, we also had a, I’m going to say a record of pursuing growth, right, and being successful in Canada, so they could learn from that and use that. To be honest, they’ve actually taken a lot of our approaches and technologies, and they’re rolling them into the US, into their team to … and we’re doing the same the other way, obviously, but to really learn from our direct-sell approach and how we do it. We think very much like a SaaS, like a modern SaaS company, if I can say that, for those without a SaaS base, as opposed to a traditional phone company.
John Warrillow: Maybe talk a little bit about how you’ve run the company, because I understand that Salesforce, the CRM platform, is kind of the plumbing or the backbone for your business. Maybe talk a little bit about how that played out with Net2Phone.
Jonathon Moody: I mean with Net2Phone, but in general you’re absolutely right. We’ve been a Salesforce shop from end to end for about seven years now. We do everything in Salesforce. For us, it was a necessity. We didn’t want to have to innovate and build back office tools. A lot of companies get tied up in that. We had a few developers. We wanted them working on things we could sell, and so what we ended up doing was working towards Salesforce and slowly adding entire ecosystem connects. We do billing and invoicing. We do comp payments all through Salesforce.
Jonathon Moody: What that meant when we got into this process was, and it didn’t matter who we were speaking with, I could pull out a laptop and slice and dice our data in a million different ways as they needed to try and get their head wrapped around it without resorting to the classic 42 tabs in Excel, and some filters, and a pivot where no one really trusts what’s going on. It’s all there. It’s all in Salesforce. It’s almost a trusted third party that’s holding that data. Pull it up, break it down, split it, look at the data in a different way. That became amazingly useful in tons of those conversations as they tried to understand where our clients were, maybe geographically, or what the average revenue spend was or, I mean, what AR looked like. All these things were available at our fingertips even when we were meeting offsite in a boardroom with them.
John Warrillow: Fascinating, and so being able to kind of talk apples to apples, because I’m assuming most of the acquirers also use Salesforce as their back end.
Jonathon Moody: Well, it was a real mix. Actually, some of the best conversations, to be honest, were people that had none of these things.
John Warrillow: Oh, really?
Jonathon Moody: Looked at each other and went, “How did they just do that? Did they really just slice and dice their client base based on what we just asked them 45 seconds ago? We asked them to build some cohorts and tell us what the valuation of those cohorts was.” We could pull all that stuff up on the fly for them, including marketing, so a lot of our conversations came into lead gen which, again, is all in Salesforce. What does that funnel look like? Where are we getting our leads from?
Jonathon Moody: Those are questions that people would ask and really try and get their head wrapped around because, when you’re pushing those valuation numbers higher, those are the soft things that people can actually put value on. Depending who the conversation was, they were different things, but again, it wasn’t someone just making up stories and drawing pictures on a whiteboard. This was data that we could pull up in front of us and show what it had been, how it was working, and project, in a lot of cases, what that looked like in the future.
John Warrillow: Fascinating. I’d be curious, Jonathon, how you personally have been impacted by the sale of the company. I’m assuming this is a fairly significant financial event for you personally. Maybe just talk about what impact it’s had on your kind of personal outlook and personal life.
Jonathon Moody: I mean for all the founders, for us, we’d been bootstrapped organization, so we paid ourselves below market for a number of years, and so, absolutely, it was a chance to, I’d say, catch up on what we’d been behind on. I can tell you that I was not the top-paid person in the organization. In some of those conversations, they looked at the salaries. There was people who looked at me and said, “The president and the COO is not at the top of the salary chart. What’s going in?” That wasn’t how we operated. We were looking to grow a business and be successful, and so, absolutely, personally, that was a chance on that.
Jonathon Moody: For me, I believe the bigger opportunity is actually now, and so we’ve hired 15 staff or thereabouts since we closed in September. We are looking like we’re going to do that probably again. We’re on track to double our rate of growth. For me, this is a chance to really light it up and show what we can do when we sort of dial up the marketing and the approach.
John Warrillow: You got topped up. Did you buy yourself a trophy?
Jonathon Moody: My trophy is this nice desk I’m sitting in, I guess. No. For me, I love to see the success, so it’s been a long time coming where we have all new desks in the office this week, so I love seeing the staff happy with the new office furniture. That’s the kind of stuff that really does it for me, to show that the hard work of all of the team is being rewarded.
John Warrillow: Isn’t that interesting that it’s some of the, not intangibles, but the very tangible things such as desks that are emblematic of having a new acquirer? Jonathon, it’s been great to chat with you. Where can people find out about you? Maybe they want to check out Versature. What’s the best place for them to do that?
Jonathon Moody: Yeah, for sure. Versature.com is our website. Welcome to find me on LinkedIn as well. My first name has an O at the end is usually the biggest trick for people tracking me down.
John Warrillow: Jonathon Moody, thanks for joining us.
Jonathon Moody: My pleasure. Thank you.