The Inside Story Of Elsevier’s $50.6 Million Acquisition Of 3D4Medical.com

March 6, 2020 |  

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Back in 2004, John Moore started 3D4Medical.com, a company that created three-dimensional models of the human body, photographed them and licensed the images to textbook publishers. When the Great Recession hit, Moore’s business took a turn, and he realized he needed to re-invent the company.

To read a transcript of this episode, click here.

Back in 2004, John Moore started 3D4Medical.com, a company that created three-dimensional models of the human body, photographed them and licensed the images to textbook publishers. When the Great Recession hit, Moore’s business took a turn, and he realized he needed to re-invent the company and decided to offer an application students could use to learn about anatomy. 

They started selling their app directly to students, teachers and medical professionals. The business began to hum as more Universities – including the likes of Stanford and Cambridge – signed on.  

By 2019, 3D4Medical was up to 75 employees, including a reliable management team. Moore was making plans to continue to grow the business when one of the biggest textbook publishers in the world made an offer to buy 3D4 Medical for $50.6 million. 

Moore offers a ton of critical insights to an aspiring value builder, including:

Keep Your Partners Close: Elsevier, a book publisher, enjoyed a great relationship with 3D4Medcial and Moore for years leading up to the acquisition. The idea of an acquisition came up during the course of a friendly business meeting. Sometimes your best acquirer is an existing partner where there is already a bank of trust built up on both sides. 

Create Automatic Customers: 3D4Medical’s growth stalled for a few years leading up to the decision to move to a subscription model. Moore credits the introduction of a subscription service with transforming his business into a growth company again. 

Know and Protect Your Crown Jewels. Moore had created the most extensive library of stock medical images in the world using some of the most sophisticated 3D technology available. Elsevier could have created a bank of images for their textbooks. Still, they knew Moore had a 15-year head start, and the technology would be hard to replicate, which is one reason they decided to buy Moore’s company, rather than compete with it. 

Lot’s more nuggets in the interview, including:

  • How software companies are valued
  • The impacts growth has on your valuation
  • A formula for sharing sale proceeds with your employees
  • How to know when to overhaul your business model

What Makes You Tough To Compete With?

Moore’s library of images is difficult to replicate, which made 3D4 Medical an attractive acquisition candidate. What makes you tough to complete with? We’ll help you find out when you complete Module six of The Value Builder System™ — complete module one by getting your Value Builder Score now. 

Our guest

John Moore is a serial entrepreneur who has built several mutlimillion dollar businesses. Moore has become known as a “rebel entrepreneur” because of his unique style in building his businesses. 3D4Medical, which Moore built from scratch on a shoestring budget, has single handedly revolutionised how anatomy is studied throughout the world through disruptive proprietary 3D technology. By the time that Moore sold 3D4Medical to Elsevier PLC, his company had replaced traditional textbooks and medical learning in over 300 of the world’s top universities, over 25 Million downloads and over 1.2 million subscribers. 3D4Medical's award-winning medical platform Complete Anatomy has dominated the top spot on every single app store in over 160 countries. John Moore is now CEO of Moorezey Innovation Labs which owns companies committed to having a positive impact on the world using technology, innovation, health and wellbeing and investments that allow people to help themselves.

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Transcript

John Warrillow:

So how’s business? I hope it’s great. Maybe it’s sucks, maybe you feel like you’re hitting your head against the wall. No matter what you do, you can’t punch through, and every episode you listened to of Built to Sell Radio, you feel like you’re the only person on earth who hasn’t been acquired for some astronomical multiple. Well listen, I empathize and I understand what you’re going through and my next guest does too. He built a company that over time reached a plateau for four straight years. They couldn’t punch to the next level. Their revenue was completely flat and he was frustrated, but they made a big change to the business, a courageous change, and John Moore will describe that change they made. Ultimately, a few years later, the company went on to be acquired for $50.6 million. The spoils go to those who stick it out the longest, and in this episode I think you’re going to hear some great lessons.

John Warrillow:

Listen to how the acquisition came about. In particular, the conversation he had with a preexisting partner that translated or transferred into acquisition discussion. Listen for how important subscription revenue was to the acceleration of John’s business after he reached that plateau. I also want you to hear how John describes his crown jewels, that image bank of photography that he will describe for you in great detail. But he knew that was a differentiated value proposition, something that an acquire couldn’t easily replicate, which gave him negotiation leverage in his acquisition with Elsevier. Here to tell you the entire story is John Moore.

John Warrillow:

John Moore, welcome to Built to Sell Radio.

John Moore:

Thank you very much.

John Warrillow:

Tell me a little bit about 3D4Medical. You guys had a key product called Essential Anatomy. What was the product? What did you guys do?

John Moore:

So actually Essential Anatomy was a precursor to our main product, which was Complete Anatomy, and Complete Anatomy, we had 1.2 million registered users around the world. And we were in 300 of the top universities by the time we sold. So what did it do? So it sounds a little bit corny, but really I think we could be credited for changing the way anatomy has been learnt, not just by individuals, but across universities, not just medical students, but anybody that has to learn anatomy, whether it’s chiropractitioners, whether it’s medical students, whether it’s physiotherapists, nurses.

John Moore:

If you look at history over the last couple hundred years, people use books. And if you think of a book, they show, let’s say the skeleton, they show it flat from the front and they show it from the side, or they show it from the back, the posterior view. So what we did was we created these 3D models in a 3D space that were almost photorealistic, and it allowed you to zoom in to any area that you wanted, look at it from any angle, remove the skin, cut structures.

John Moore:

We had 20,000 model structures at the end by the time I left. And you’re able to pull those structures out, see what’s underneath them, and see the relationship of those structures to other structures and form virtual operations, and then be able to send those virtual operations out to your friends and colleagues or whatever.

John Warrillow:

It’s so cool because I saw your product for the first time about three months ago. I did my hip in running, and I went to an osteopath here in Toronto. I think it was your product. You can tell me if it wasn’t, but I’m pretty sure it was.

John Moore:

I hope it was.

John Warrillow:

Yeah, exactly. He pulls out an iPad, and he tried to explain to me why my hip hurts. The human body comes up in three dimensional, right? He punches the hip and then all of a sudden the skin is removed and now I’m looking at the muscles. Right?

John Warrillow:

And he’s like, “Your muscle hurts.” And then he hits the muscles and then beneath the muscles are the tendons, and then he’s like, “Because this tendon’s rubbing you’re getting…” Then he hits the tendons and then it gets down to the skeleton, the actual hip socket.

John Moore:

Yeah. Yeah.

John Warrillow:

And all of a sudden for me it came to life in real time about why my hip hurt. And like in 30 seconds he described it, which would’ve taken, I’m sure, hours to explain to a lay person.

John Moore:

Exactly. We were very strong in that sort of innovation space, and we were able to cut the 3D models so that you’re able to manipulate and show where a fracture was on the hip.

John Warrillow:

That’s so cool.

John Moore:

So you could really personalize it too for… And it was very useful for doctors to be able to explain it to patients as well.

John Warrillow:

So what was your business model? Were you selling into physicians, to hospitals?

John Moore:

No, that was another issue for us. It was a problem too. It was difficult for us to get into hospitals and getting doctors to use it. And even professors, as I was talking about earlier, I mean they were using books for 200 years, and why change? They produce good doctors, why would anybody ever change anything? So we had a difficulty trying to persuade people at the beginning to use it.

John Moore:

But interestingly, because we were available in the App Store, we would sell a lot of our applications to students, and the younger generation were much more open to using new technology. So that was our way of infiltrating. So eventually there came that mass that were using the application, and it was easier then to go to university and say, “Hey, half your students are already using this, so let’s do a business-to-business deal.” But really our business-to-consumer was the one that brought it up to the business to business.

John Warrillow:

Wow, that’s fantastic. So it’s really students who are learning anatomy and didn’t want the four-inch-thick textbook. They wanted to just have an interactive app.

John Moore:

Yeah, and [crosstalk 00:04:15]-

John Warrillow:

So what did it… Go ahead.

John Moore:

Let me explain that, because you see, the other thing too is that there’s a whole new breed of people that have come through, the millennials, but also the Z generation that don’t necessarily like to read anymore. They don’t learn necessarily by reading. They’re used to looking at YouTube; they’re used to looking at something visual. So for them to be able to learn by doing and seeing something visual, it was just a natural way for them to get their exams or whatever.

John Warrillow:

Gosh, this sounds fantastic. So what did you charge for the app? How much did people pay?

John Moore:

It depends on what you were doing. We had different licensing at the end. Towards the end we went for a subscription-base model, which really took us to a completely different level. And I’ll get into that in a couple minutes if you want.

John Warrillow:

Yeah, please.

John Moore:

But we had three different types of licenses. There was one for a student, and there was one for an educator, which would be professor. And then there was one as a medical professional. And to answer your question, it was $50, I believe, for the student license. And it was $100 for the medical professional and the educator.

John Warrillow:

Got it. Got it.

John Moore:

Per year. Sorry, per year.

John Warrillow:

Okay. And so you’re getting people to download it. I mean it sounds incredibly expensive to get this thing off the ground. You’ve got to build the 3D models, you’ve got to fund all of the acquisition costs. How did you finance this business?

John Moore:

Organic growth.

John Warrillow:

Really?

John Moore:

Yeah. That’s why it took us so long. It was one of those overnight successes that took us 14 years. We weren’t always an app company or a medical app company. So we started off originally making medical images and selling and licensing medical images. But we did it with a difference. We used 3D medical, how would I put it, CAD models.

John Moore:

Let me just explain what that is for for the listeners so they understand what that actually means. If you think about how you would make, let’s say, a clay model of the heart, what you’d do is you’d mold it and you’d get it right. You’d keep on looking at all the books, textbooks, and you’d get it right until it was medically accurate.

John Moore:

It’s pretty much the same thing that you would do with a CAD model. So you have this mesh, and you pull it out and you pull… Some parts you turn around, and you put other parts in or whatever and you get it into the shape that looks roughly like, let’s say a heart. Then you manipulate it and you get it absolutely perfect and medically accurate and you make sure that you get doctors to approve it. And then you put on textures, and then you put on lighting and then you render it.

John Moore:

So that’s what we were doing, first of all, for the first six, seven years of our business, and we were distributing through Getty Images and Corbis and 51 other distributors. So you’d pick up, let’s say, the front of National Geographic, and our images would be there. Or we were on the front of Time Magazine. Not us, but one of our images is on the front of Time Magazine twice and American Scientific, and just loads and loads of books and advertising.

John Moore:

That went really well for us until about 2010. 2009, 2010 the recession really started to hit us then and also the advent of cheap photography, and there was a lot of competition. That business started to go down, and we had to reinvent ourselves. But we had all these three models that we’d spent a fortune making medically accurate, and we said, “What can we do now?” So we decided to start making applications to teach students about parts of the body and how they work.

John Warrillow:

I love it, I love it. What is that? Necessity is the mother of invention.

John Moore:

That’s it. That’s exactly it.

John Warrillow:

So who’s the “we”? What’s the ownership structure look like?

John Moore:

So at the end, all the way up, it was me until for the first couple of years I was 100%, obviously. And then I had a really good partner, salesperson. He got a 10%, so it was a 90/10%. And then in 2015, I mean, we were growing organically, but we decided we’d get a nice input of cash. I took some money off the table in 2015, and we brought in an external investor for… They put in 16 million. Or they put in 10 million to the company and bought out some of the shareholders for 6 million in 2015. Dollars, this is.

John Warrillow:

Yep. Yeah.

John Moore:

To answer your question, at the end I had 54%.

John Warrillow:

And the other shareholders, what was that process like about raising money for… The business was growing, it sounds like, quite nicely.

John Moore:

Yeah. I mean, we have great technology, but we weren’t really sure, even though we were profitable, we weren’t really quite sure exactly where the market was. I had thought at that stage that it was about making as many applications as possible. The more applications you actually have, then the more we could sell, rather than actually looking at… It wasn’t quantity; it was quality.

John Moore:

And we had over a hundred applications, by far the biggest medical app producer on any of the app stores. In fact, at one stage, we who got called by… Some of the App Store people said, “Listen, you’re just crowding up the whole medical thing, medical category. Can you combine them?”

John Moore:

So we did. And really we went to the Essential Anatomy, first of all. And then we went to Complete Anatomy, which was a platform, and we asked people to register so we could find out more about them and specifically started to make content for them. And that was really different. And that allowed us to go to a subscription base as well.

John Warrillow:

Right. So tell us about that because I’m curious. I guess as I understand in particular, the App Store and Apple’s App Store, they’re pretty cagey about letting app owners get data from the user.

John Moore:

Yeah.

John Warrillow:

So how did you end up getting people to subscribe?

John Moore:

Yeah, it’s such a great question. First of all, it was always going to be difficulty trying to get people to subscribe because what you’re replacing is a book, and if you think about a book, it’s a once-off cost. And in fact we were probably at least 10 books into one, but there’s still just a once-off cost. So trying to get people to subscribe on a yearly basis was quite difficult.

John Moore:

But what we did was we looked at it and said, “Well, we’re progressing greatly.” We were adding all sorts of different features from courses for being able to do your own dissections and being able to share them across a classroom or other colleagues or your classmates, whatever. We were adding in more and more stuff. So we stopped and said, “Well, if you want all those things and these new tools for cutting and doing dissections or whatever it may be, well then you’re going to have to subscribe.”

John Moore:

And we also started making courses, which was a game changer for us. So specifically if you’re a physiotherapist, we started making courses for physiotherapists. If you were an eye surgeon or you were interested in the eye, we were doing courses on the eye, or for an orthopedic surgeon. Whatever it is, we were making courses specifically for what you were studying, whether you were a nurse or whatever it may be. So that allowed people to want to subscribe the next year.

John Moore:

Also, what we found was that if people invested time into the product, they were much more likely to continue using it. So if you got them to participate in a dissection or make their own content, put their own notes up there, then that was their place for learning. So they didn’t want to just forget about, “All my notes are up there. I have to keep on subscribing.” So it was kind of connecting them in, if that makes sense.

John Warrillow:

So the billing was done through Apple? Is that how people would pay?

John Moore:

Yes.

John Warrillow:

Or did you get their credit card number?

John Moore:

Well, first of all, we were on every platform. So Android, Windows, Mac, Apple, iOS. So it depends. What we had in the end was you could buy on any of those platforms, and that was another reason to subscribe, is that once you bought it on any one of those platforms or from our website, you could access it on any of the platforms for a year.

John Warrillow:

Mm-hmm (affirmative).

John Moore:

So it was cross-platform. That was another reason, that if you wanted, you’d use it on your phone, then you’d go home and use it on your Windows or your Mac or whatever it is, or in your school [inaudible 00:13:24] you just log in, and that was it.

John Warrillow:

Mm-hmm (affirmative).

John Moore:

Everything was in the cloud.

John Warrillow:

Got it. That’s helpful. So at what point did you think about selling the business? Was there a trigger that made you think, “Okay, now’s the time”? Where were you at revenue wise, and what made you want to sell?

John Moore:

I think I was always trying to sell the business, before I even started the company, trying to sell the business. But it was interesting because towards the end or before I actually sold out, the company was really, really starting to shoot, and the SaaS space model, which is a recurring revenue, was really kicking off our first year. Everything was aligning. So I really wasn’t that pushed. I was at that position, and then of course, that puts you in a great position. I really wasn’t that pushed, or we weren’t that pushed to sell.

John Moore:

We knew that this was really, really growing. We were in 300 of the top universities worldwide. I don’t mean just like normal universities. These are the Stanfords, the Cambridges, all the… not all, but most of the Ivy League colleges. These were… And there were big deals, and they were just getting bigger, and we were growing, and the B to C on the App Stores was fantastic. That recurring revenue was coming in, which was just building up.

John Moore:

So it wasn’t pushed. It was just the offer came in, and you never know what’s going to happen in the next couple of years. Could we have stayed for another couple of years and got more money? Yeah, maybe. But when there’s something on the table and it’s right in front of you… I think it was time.

John Warrillow:

Yeah. Yeah. Someone said the best time to sell is when someone’s buying.

John Moore:

Yeah, yeah. Exactly. And the other saying goes that you don’t sell a company. People buy it.

John Warrillow:

Interesting. Yeah. Yeah. Yeah. I want to get into that. I want to first though, just go a little bit deeper on your comment, and you said it sort of tongue in cheek, but I got the sense that there might’ve been a modicum of sincerity to it, which was that you’ve always been trying to sell the company. So you started the company to sell it. Would that be fair to say?

John Moore:

I think there’s always the… Yeah, I mean I think my motivation, if I can be really honest, was probably up my ass. And excuse me if that offends your listeners. But it was. It was about money. I was becoming… I wanted to be an entrepreneur to make money, and that was it. Now, did that change over the years? It probably did, but I was always open for the right buyer, always, I think.

John Warrillow:

What changed? How did it change? What caused it to change, your motivation?

John Moore:

I think when we saw what was really happening. We used to have a… We had a very, very strong management team, and we’d have these team meetings every month with everybody in the company. They’d show what they’re doing from the tech, from, from the design, but also the customer service.

John Moore:

And they would read out how it had changed people’s lives, people that maybe had dyslexia or even in impoverished countries or whatever, where they were able to use our application, and the difference that it made. And it wasn’t just people that were studying; it was also people that had problems, physical problems themselves and were able to work out what was wrong with them using the application. So these were kind of heartfelt, and we really felt that we were changing the world.

John Moore:

And I think that became a bigger motivation than the money itself. That’s why I wasn’t really that pushed to sell, because I felt that we were eventually going to be taken out anyway, I mean. And also I think if you look at it… I’m not saying anything against any confidentiality here. When you look at the big book publishers, readership or people selling books has been difficult for them over the last couple of years. It’s been going down, and of course something like ours, which is more visual, was really eating into that market. So it was only a matter of time, we felt, before somebody was going to come in and take us out.

John Warrillow:

Yeah. I appreciate your candor on the comment around in the early days is probably you want to be an entrepreneur? Why? To make some money. Did you attempt to disguise that fact from your early employees that, “Hey, I’m looking to make some cash here. I’m a 100% shareholder.” Did you disguise that? Was that something you held quite close to the vest. Or because I guess, in part, as an employee it may become demotivating to think that, “Oh, it’s all about John and making money.” Did you sort of hold that close to your vest? Or what was the way you handled that?

John Moore:

That’s a really, really good question. I suppose I did. I think it was in the back of my head, but I mean, there was also… In the early days, you’re absolutely right, I did. But towards the end, no, it really wasn’t. It was more about what we could do and how we were changing. So that was the motivation. But certainly I don’t think my motivation was in the right place when I started.

John Warrillow:

Mm-hmm (affirmative). Was there something that triggered you? You mentioned all these management meetings and seeing what was happening. Was there a quiet conversation with a mentor or someone that sort of pulled you aside and said, “Hey, this has got to be about more than just you”? Do you recall anything that triggered you to think more broadly about what was possible?

John Moore:

Yeah, there was [inaudible 00:19:08], who as I said earlier, was a 10% holder. We had conversations. The management team were very close. We looked at it when the offer came in, and I felt that, “Yeah, sure I’m going to get a lot of money,” but I also made it clear that they would be getting some money as well. And so when we did sell, there was a pool of money that was put in that anybody that was in the company for more than a year got a nice bonus.

John Warrillow:

Fantastic. Let’s talk about- [crosstalk 00:19:46]

John Moore:

Sorry, [crosstalk 00:19:48].

John Warrillow:

What’s that, John?

John Moore:

Sorry, I didn’t mean to interrupt you. So people were aligned to get this over the line.

John Warrillow:

Yeah, yeah. In particular the management team?

John Moore:

Yeah.

John Warrillow:

In particular.

John Moore:

Yeah.

John Warrillow:

Let’s talk about the actual acquisition itself. So the acquirer was a company called Elsevier, which is the largest medical publisher or one of the largest medical publishers in the world.

John Moore:

Yeah.

John Warrillow:

They came to you with an unsolicited offer? Did they approach you out of the blue? Or how did that actually take place?

John Moore:

Yeah, very good question. In fact we had a relationship with Elsevier going back a very, very long time. I was talking about that we were making images, licensing… Elsevier were actually a big licenser of our images. So we were on the front of a lot of their books and book chapters and illustrations. We had a relationship going back a good 10 years. We kept involved, and we made a lot of connections in there, and we had a very good relationship to them.

John Moore:

So much so in the last couple of years that they loved our technology. They really loved what we were doing. And then I think it just kind of clicked with them somewhere along the line that these guys have something that they’re getting into places, into universities, that we were taking a share of the market.

John Moore:

They looked at it and said, “Well, we want that.” But also they looked at what they already had. And remember these guys have got great content, the best content in the world. They were looking at, well, how can they use our technology and spruce up that content? So it was one plus one equals five. It was just a natural progression. It wasn’t so much that we found them or they found us. They’ve always been in touch. We always had a good relationship, and it was just a natural progression from-

John Warrillow:

So how did it go from a friendly relationship to, “We want to buy you”? I’d love to know, was it a dinner? Was it a lunch? Was it an email?

John Moore:

I think we were always fighting with the idea of them buying us. And then it just… He says, “Well yeah, let me…” We were dealing with one of their top guys, and he said, “Let me bring your team over to Dublin and look at your offices, look at your technology and see what you have coming out and where you’re going over the next year, and let’s find out more about you.”

John Warrillow:

But you recall the conversation? Did you kind of flippantly say, “Yeah, you guys should buy us”? Or did they say, “We’d like…” I’d love to know who made the first move, the actual…

John Moore:

I think it was us that said, “Yeah, you guys should buy us.”

John Warrillow:

And they said, “Actually, you’re probably right.”

John Moore:

Yeah, it was one of those conversations. It’s probably a flippant conversation, but it was something along those lines. Yeah.

John Warrillow:

Yep, yep. And so that triggered their investigation? They flew a team over?

John Moore:

Yeah.

John Warrillow:

How was that experience?

John Moore:

It was good. It was longer than we had anticipated because they’re a big public company and they wanted to make sure that everything was aligned and there was no holes. Very strong management team. So we presented very well, did a little bit of pre due diligence, but at the time we thought that it was actually the due diligence. But as a public company, as I said, they don’t leave any stone unturned.

John Warrillow:

Yeah. Yeah. So pre diligence was a fairly superficial look at the business?

John Moore:

Well, it was quite in depth. It really was. I thought it was the full due diligence, as I said, but no, it turns out that it was only… Yeah, it was only a small part of the whole.

John Warrillow:

So what did they see in you? Because I mean I understand you had this technology, and one plus one equals five. I get that. But part of me is thinking, “These guys are a big public company. They could hire some artists and render some 3D images pretty quickly.” Was it the library of images that you’d created? Was it the relationships with the bookstores and the professors? What was strategic for them?

John Moore:

I think it was was a number of things. I think it was definitely the technology was… and also the models themselves. As I said earlier on, we had 20,000 structures that were medically accurate. To try to get structures medically accurate takes a long time. I mean, we built these things from scratch over about 10 years, so they were our crown jewels. They weren’t easy to get. There’s nobody else out there. And they’re photorealistic. We put a lot of work into that rendering engine, which was also ours. We weren’t using any games engine. We had proprietary technology that allowed us to use those models.

John Moore:

But also I think the way we were developing and how fast we were developing, it was starting to shoot. We were using the cloud to be able… for a professor to do a virtual dissection and record that virtual dissection and then send it out to all his students or her students. They could see it themselves and then take a test on it, and it would all come back. So we were very advanced, and we were getting more advanced. Every single time they looked at us, we were pushing the boundaries. We were in 50 universities, and they’d come over, and we were in 150, and then we were in 300 universities. It was just starting to take…

John Warrillow:

Mm-hmm (affirmative).

John Moore:

And then the recurring revenue came in. So everything started to align at the same time. And it was also their time to say, “Hey look, it’s time for us have a look at it a bit more seriously.”

John Warrillow:

Did Elsevier report in the acquisition revenue and EBIDTA that you guys had at the time? Or is that public? Can you talk about sort of how [crosstalk 00:25:37]?

John Moore:

No, I can’t, but what I can say is that it really started to shoot in the year. We ended in November. They bought us in November. Our fiscal year is the end of December. It was a good year. I don’t know if they’re going to be reporting or how they do things now. But it was a tremendous year, and I can say that 80% of our revenue was recurring. Sorry, every sale that we made was actually a recurring revenue. We’d completely flipped everything from being a once-off sale to recurring revenue. So it was really starting to take off.

John Warrillow:

Mm-hmm (affirmative). Got it. Got it. And so what was your reaction to the offer when they first made the letter of intent? When they first produced a letter of intent?

John Moore:

Yeah. I wasn’t punching the air, because I thought it was a fair offer. I thought it was what we were worth. And I thought that, “Maybe if we stay another couple of years, we could do a lot better.” But the money was there on the table. It was an offer and yeah, it was something I just couldn’t turn down.

John Warrillow:

What did you think a company like that, yours, would have been worth? When you think about… You’ve obviously been around the Web for a while, and SaaS companies, software as a service companies, I’m sure you’d seen some metrics. What were the sort of metrics that were floating around in your head from seeing other SaaS companies?

John Moore:

Yes, again, another great question. The value of a company is not just based on the recurring revenue, but how quickly it’s growing as well. So I mean, if you’ve got recurring revenue, but you’re going from five million to six million, still, that’s great. But if you’re doubling your income in a year, you’re worth a lot more. So it’s the speed of which you’re growing as well, which people usually take into account. We were growing very, very quickly toward the end.

John Moore:

I can’t give you numbers or anything like that because it’s just confidentiality. I just can’t. But I think you get the idea that it was really taking off for us. And I think Elsevier got a great deal and did very well. But I think it was fair. I think we got a good deal too.

John Warrillow:

Yeah. So what would you in your mind think a SaaS, a fast-growing SaaS company would’ve been trading at around that time? It doesn’t have to be in the medical space, but other SaaS companies you’d heard about?

John Moore:

I think anywhere between five and 20 times, five-

John Warrillow:

Top line revenue?

John Moore:

Yeah. I think if you’re a unicorn, you’re probably up to the 20 mark. I think normally it would be somewhere around… if you’re going fast, somewhere around seven. Six or seven.

John Warrillow:

Time’s top line revenue?

John Moore:

Sorry, yeah.

John Warrillow:

Yep, yep, yep. Yeah, when people hear that they’re going to fall off their chair because it’s such a huge multiple, right? I mean, for most business owners, they’re going to trade at a relatively modest multiple of EBITDA or SDE, seller’s discretionary earnings. So to hear multiples of revenue, it’s a shocking number.

John Moore:

Yeah. But first of all, again, I got to say that that’s not… I’m not saying that that’s what we did. I’m just saying that-

John Warrillow:

No, no, that just that’s what you’ve seen other SaaS companies trade at.

John Moore:

Yeah. And I think just from 3D4Medical’s point of view was that we were certainly starting to see traction that was really starting to shoot. It was pretty evident that next year was going to be tremendous as well, and really tremendous.

John Warrillow:

Did you shop the deal to other acquirers?

John Moore:

No, we didn’t. We didn’t. We just kept going the way it was, we just decided to see where this would go, half thinking that if it didn’t fall, if it didn’t come through, we weren’t really that pushed. We weren’t that worried. So we weren’t actively looking for a seller. As I said, towards the end it was more that they came to us and… Although I won’t say they came to us, it was kind of mutual.

John Warrillow:

Mm-hmm (affirmative).

John Moore:

But we weren’t looking for anybody else.

John Warrillow:

Yeah.

John Moore:

I should add too that part of the deal, which was really, really important to us, was first of all, that Elsevier are very honorable. They were a great company to deal with. But also they wanted to grow the company. They weren’t going to… It was part of the deal that nobody was going to be let go, and that they were going to expand it. And that was important as well, not just to me, but to the management team.

John Warrillow:

Mm-hmm (affirmative). Mm-hmm (affirmative). How did you ensure it? Did you take their word for it, or did you paper that commitment?

John Moore:

Actually, we took their word for it.

John Warrillow:

Mm-hmm (affirmative).

John Moore:

So far we’re three months in, and they’re expanding, fast.

John Warrillow:

What’s life like now that you’ve sold your company?

John Moore:

It’s not much different. I’d love to be able to tell you that it’s massively changed. I think it’s changed because I can really… I have the freedom to do what I want when I want to do it. But I’ve kind of always led that life anyway, just even being an entrepreneur. They say that actually entrepreneurs are inherently lazy. What they do is they try to find an easier way of doing stuff, and in finding the way to do stuff, they work their butt off to find that easy way to do stuff.

John Moore:

I think that would be probably me. I’ve had a couple of months off now. I’m really starting to get itchy feet again and go again, and I am going again. So it’s not really the money. It’s just the buzz and having good people around you that you can discuss great ideas with. Does that make sense?

John Warrillow:

Mm-hmm (affirmative). It does indeed. And the business, are you staying on for some sort of earn-out or transition period at all?

John Moore:

There was no earn-out at all. That was part of the deal, and they agreed. My management team was incredibly strong. I was… I am available, I think, for another month as a consultant if they need any help in anything. But so far they’ve only needed me for a couple of hours just on the innovation side of things. They’ve been, I mean, really very honorable and have treated me very, very well.

John Warrillow:

How did you think through how to share the proceeds with your team? Take me through that thought process of deciding how much to share, what are the conditions around sharing it?

John Moore:

It was based on their salary. We looked at their salary. Again, I can’t get into it, but, well, it’s a balance that you want to give them something to show them that, “Well, you’ve done a brilliant job,” but also not enough that they can retire and not want to work for Elsevier anymore, because Elsevier had to know about this too. So they didn’t want shareholders to give them enough that they could go off and retire.

John Warrillow:

Mm-hmm (affirmative).

John Moore:

But it was a big, nice… For of them, it was a nice chunk of money that it certainly would’ve made a difference in their lives.

John Warrillow:

What was the reaction that people gave you to receiving that money?

John Moore:

From different people? It’s just like the way people are motivated by different things. Some people are motivated by title, some people are motivated by money. Some people are motivated by just telling them what a great job they did. It was the same thing with the money, that some of the lower-paid individuals, you give them their bonus, which will be on the lower side, and they’d be crying. It was just amazing. And then some of the bigger chunks of money that you give to some of the more well-paid people, they’re like, “Thanks.” So it was across the board.

John Warrillow:

Mm-hmm (affirmative).

John Moore:

It was really good. It was interesting from a psychological point of view.

John Warrillow:

Yeah. Yeah. How did you stickhandle the dynamic with the senior team? Because on one day you guys are partners.

John Moore:

Mm-hmm (affirmative).

John Warrillow:

You’re comrades and you’re friends. You’re building the company together. You defer to them, and even in this interview, you clearly have deferred to them and give credit where credit is due. And then all of a sudden there’s this elephant in the room, that they’re not necessarily huge shareholders in the company.

John Moore:

Yeah.

John Warrillow:

How did you reconcile that with them in your own mind, these friends that brought you to the dance?

John Moore:

Yeah. Yeah, it was difficult. It was difficult. It was difficult for me because also I felt a little bit naked after not having them around, these great people around that I could run things by. But also I think we were at a stage where we could see what Elsevier could bring to the table. Even though we were doing really, really well, Elsevier, a billion-dollar company, and they’ve got all this distribution and have all this content, and it was exciting. I think that they bought into the idea.

John Moore:

And Elsevier made it a prerequisite that a number of… well, all the management team and a number of other people renewed their contracts. So I gave them offers that were very enticing packages going forward.

John Warrillow:

That’s great.

John Moore:

So they’d already bought into the idea that Elsevier were going to take this to another level, and it wasn’t going to go south.

John Warrillow:

Was there resentment that you got to ride off into the sunset and they were left holding the…?

John Moore:

Well, I really didn’t see that. I had a very, very good relationship and still do with most of the people in there. So I really didn’t see that. Look, money is a funny thing. There’s always going to be people that are going to go, “Well, why should he do it?” But I think everybody knew that I’ve been there for a long time, and I’d worked really hard to get it to that level. So I don’t think anybody gave me any sort of bad vibes or anything like that.

John Warrillow:

Yeah, yeah. Did you choose to reward yourself at all? Did you buy yourself a treat? A trophy?

John Moore:

I’m still looking for that, John. I’m still thinking about that. It’s actually three months today that I’ve sold the company.

John Warrillow:

Dude, it’s about time to get off the hop. Get out your checkbook. Let me help you spend it. What’s on your list?

John Moore:

You see, look, it sounds a bit pathetic, but I really have everything. I have it all. So I’m just interested in business. I’ve got some great ideas, and I want to go back in there. That’s my truth.

John Warrillow:

Love it. Love it. What’s next for you? Well, have you got anything you want to talk about that that’s next? Or you’re keeping it close to your vest?

John Moore:

Well, no. My background is in 3D. I’m fascinated by it. I think that it’s just amazing things that are coming down the line. Most people are talking about glasses and all these wearables. I’m talking about being able to see things that actually aren’t there in your room, but something that’s tracking your eyes is able to project it. So we’re doing some experiments on that. That is really cool, and I think that that could really go to another level, so we’ll see where that goes.

John Warrillow:

That’s awesome. That’s awesome. If people want to reach out, are you a Twitter guy and LinkedIn guy? What’s the best way to reach out?

John Moore:

I think LinkedIn’s probably the best. I’m John F. Moore on LinkedIn, if you look up John F. Moore and then 3D4Medical, you’d probably get me right away. Also I have a blog. It’s called therebelentrepreneurseries.com.

John Warrillow:

Yeah.

John Moore:

It’s also available on most of the social media platforms.

John Warrillow:

Fantastic. It’s called The Rebel Entrepreneur…?

John Moore:

Series.

John Warrillow:

Series. Excellent. We’ll put a link to that in the show notes. I am so grateful for you sharing the time today, John. It’s been great to hear the story.

John Moore:

Been an absolute pleasure. Thank you very much.

John Warrillow:

Thanks for doing it.

John Moore:

Thanks, John. Nice.

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