Between balancing strategic interests and hammering out the tiniest of details, merging two companies is a delicate dance that, even in the best of cases, can take its toll. Even when all is said and done, a nagging question remains: what next?
The process of an acquisition is, more often than not, a black box. Behind closed doors, negotiations are dragged on for months while founders and executives figure out ways to eliminate friction and create a synergy that can drive the most value of their shared cultures, processes, and systems. It’s precisely the success of that integration that often dictates the success of the overall acquisition. And today’s guest knows just how much it takes to make it work.
With a background in econometrics and math, Patrick Campbell started his career as an Intelligence Analyst Fellow in the United States Department of Defense. In the following years, he served as the Executive Director at BridgeBright Inc., worked as a strategist at Google, and led strategic initiatives for Gemvara. In 2012, looking to build something of his own, Patrick founded ProfitWell, a suite of products to help SaaS companies grow by optimizing pricing, reducing churn, and getting accurate revenue reporting. For the next decade, he ran ProfitWell as a bootstrapped startup, slowly growing its reach until earlier this year, he sold the company to Paddle, a billing and payments company, in a $200 million deal.
“He doesn’t regret the decision to sell, but to put it nicely, merging the companies wasn’t exactly a walk in the park”
Patrick had no intention of giving up the keys and walking away, so the work didn’t stop after striking the deal. Then, came integration. Everyone shared the same vision for the future, but what at first seemed like a match made in heaven brought its fair share of headaches – revisiting the integration plan over and over, dealing with curveballs and constantly putting out fires, managing expectations and frustration, aligning different ways of working. Looking back, he doesn’t regret the decision to sell, but to put it nicely, merging the companies wasn’t exactly a walk in the park.
Now, this isn’t the first we’ve heard of Patrick. Back in 2018, in what seems like another lifetime, we interviewed him to talk about the art and science of pricing – from raising prices to the pros and cons of freemium products. This time around, we’ve sat down to chat about the good, the bad and the ugly of selling your company, applying first principles to subscription growth, and creating content for your audience, not search engines.
If you’re short on time, here are a few quick takeaways:
- During an acquisition, it’s easy to lose sight of the sense of purpose you have as a founder, especially if you’re getting bought out. Hold on to it – it’s what keeps you going.
- Take advantage of conferences and events to network and build trust with your peers. You never know when those relationships are going to come in handy.
- Choosing between bootstrapping and raising money is always a personal choice. But for Patrick, the ideal time to bring in investors is when you start gaining real traction.
- By identifying the core levers through which you can grow your business – acquisition, monetization, and retention – you can look at the data and prioritize which to pull to scale.
- Instead of doing traditional content marketing in a crowded market with much more affluent players, ProfitWell focused on producing different, audience-based content to drive traffic.
If you enjoy our discussion, check out more episodes of our podcast. You can follow on iTunes, Spotify, YouTube or grab the RSS feed in your player of choice. What follows is a lightly edited transcript of the episode.
The decision to sell
Liam Geraghty: Patrick, welcome back to the show. I think you were first on back in 2018.
Patrick Campbell: My, has the world not changed at all since then. Yeah, happy to be here. I mean, nothing’s changed.
Liam: Nothing’s changed. Yeah.
Patrick: Everything is amazing.
Liam: Not even slightly. To start off, for people who may have missed your first appearance with us, could you give us a little bit of background on yourself and your career so far?
Patrick: Yeah, totally. I’m Patrick Campbell, and I’m now what’s called the Chief Strategy Officer here at Paddle. I started my career in U.S. Intelligence in DC for the intel community, and then I worked at Google with a background in econometrics and math. Then, I started a company called ProfitWell and ran that as a bootstrapped company for about a decade, growing and growing and growing in the subscription and SaaS space, and we recently sold it to Paddle earlier this year. So, I’ve had an adventurous year – an adventurous couple of years – that everyone has had since I last appeared on the pod.
“Selling your company is one of the most surreal experiences, from an emotional standpoint and even a physical standpoint”
Liam: Yeah, for sure. Obviously, something pretty major happened since you were last with us. As you said, you sold ProfitWell to Paddle. What was that experience like?
Patrick: I don’t know where to start. It’s a 20, 30-minute podcast. We’d have to go for an hour on that. The way I would maybe summarize it for folks is that selling your company is one of the most surreal experiences, from an emotional standpoint and even a physical standpoint. We were not intending to sell. We were going to raise money for the first time because we were having what I like to call a lot of $10,000 arguments, meaning we had a bunch of initiatives that we all knew were good and tested and that we should be investing in, but we were trying to figure out how to allocate capital. And the arguments were more than $10,000, typically, but we shouldn’t be arguing about it.
So, we were going to raise capital. The markets were pretty okay, if not great, towards the end of 2021. And then, in talking to Christian, the CEO and founder of Paddle, he kind of approached, “Well, what if we joined forces?” And all of a sudden, it rolled from there, where the first reaction was, “Absolutely not,” to, “Well, if these checkboxes all get checked,” and then going and dating, for the lack of a better metaphor, a bunch of other people. Then, we went through diligence for a couple of months, and while we were going through diligence, Russia was on the border of Ukraine, Russia invaded Ukraine, the markets tanked – all those things were happening. And so, yeah, very surreal. If you ever sell a company, find someone who has sold a company before and have them give you advice as you go through the process. I was helped by a number of founders who were just fantastic with that.
Behind the acquisition
Liam: How did you find integrating? I think that’s something we don’t really hear that often about.
Patrick: The reason you don’t hear a lot about it is that it’s not fun. It’s terrible. And the reason you don’t hear about it is because I don’t think anyone wants to admit that publicly. And there’s no horror story. There is no “this person’s clearly bad,” “this person is clearly ill-intentioned,” or “this was not promised in this way and then this.” There’s no horror story. The problem, and it’s not really a problem, is just the facts of life. You have a number of different types of people who are all coming together, and you’re kind of like, “Well, the product vision and the thesis of why these two things should come together obviously makes sense. It should be easy.”
And well, no. None of these people have built up trust, none of these people have ever worked together, and all of these people have different ways of working. Even if you’re almost exactly the same, you still have to build trust, and you still have to be very patient. And there’s a lot of frustration and resentment that builds from, “Well, why is this thing that should take three days taking two weeks?” “Well, it’s taking two weeks because we kind of have to talk about it.” On top of that, Paddle’s a British company and we’re a U.S. and Argentinian company. And so, there’s just cultural dynamics. You’re like, “We both speak the same language, therefore everything should be easy.” “No, this is a little bit more of a British way of handling confrontation,” or “This is a little bit more of a U.S. way.”
“I don’t regret the decision but there are definitely things where I didn’t know that I would lose some part or I would have to deal with some other part”
Again, everyone is well-intentioned, and you’re working through it, right? It’s so much better than it was. You kind of had this honeymoon phase, then it got like, “Oh my gosh, this is going to be tough.” And then, all of a sudden, it starts to normalize. The team kind of follows the exec team as the exec team gets better, or when they were getting worse, the team followed basically a couple weeks after. That’s just a tactical thing to keep in mind. And then, I think, just keeping open communication, constantly revisiting the integration plan, realizing there’s going to be fires and putting out some fires, and constantly asking the team for patience. Both of our teams – I mean, it’s all one team, but I call them pre-Paddlers and the Paddlers – have been fantastically patient, which is great.
But yeah, it’s hard. It’s really hard. We were about a hundred people, Paddle was about 250 people, and we were coming together as 350. I asked people who were acqui-hires of 10-person teams who were much larger, and every single one said, “It’s hard. It’s really hard.” There are different trade-offs and no one talks about it because you get through it and then think it’s fine. Which it is, eventually. But yeah, it’s been tough.
Liam: When you asked other founder friends about what they would do, was it a split response of people saying, “Don’t do this,” or “Yeah, definitely do this.”
“This is what led me to choose to go to Paddle because I wanted to keep going. I wanted to be a part of a team, to help grow something in this space”
Patrick: Oh my gosh. For those who know me, I tend to be pretty analytical, even if it’s qualitative. So, I went out and talked to 30 or 32 people who had sold their companies. About half said they wouldn’t have done it if they had a chance to do it again. All of them had some sort of upside. It’s hard, and there’s always probably some regret. To be honest, even I have a little regret. I don’t regret the decision – I don’t think I would make a different one. But there are definitely things where I didn’t know that I would lose some part or I would have to deal with some other part. There are just things that happen because you can’t have full visibility. The other half said, “Of course, I would’ve sold.”
Of the group that said they wouldn’t have sold if they did it again, half – about seven, eight people – just kind of handed over the keys and left. And that was the hardest thing because they thought it was fine. They would get this money in their bank account and everything, but it was like they lost all of their purpose. When you’re a founder, and even if you’re an executive or a hard-charging person early in your career, purpose is a really big thing for you. You might not think it, but it is. That’s why you’re choosing to do this versus digging ditches or being an office worker. The biggest thing they said was, “Make sure you have that purpose.” We had a couple of options, but this is what led me to choose to go to Paddle because I wanted to keep going. I wanted to be a part of a team, to help grow something in this space.
The dramatic note that I’ll leave you on: Of those seven or eight, three of them, and I don’t want to give causation here, but likely because of some of that loss of purpose, became drug addicts or alcoholics. They’re all safe now. They’re all good now. But all three of them, when I talked to them, basically said, “Yeah, it was really hard. I didn’t have that energy and I went and chased it in the wrong places.” So yeah, it’s tough. It’s the things you don’t think about. Everyone fixates on the money, the focus, and all other stuff. But at the end of the day, we’re people, our teams are people, and those dynamics are a lot harder to manage.
Liam: Well, that kind of puts a different spin on it. And if you do decide to sell and integrate, it obviously must be so important to have trust during the process.
Patrick: Yeah. I think what really helped is that Christian Owens, the CEO and founder of Paddle, and I had known each other for a number of years, so there was already some trust that had been built because we were conference friends. As we were building the relationship with other suitors, essentially other strategic buyers, when those strategic buyers wanted or were thinking of pursuing this but we were pursuing it not as a, “Here are the keys, see you later” kind of play, that was a bit of a blocker for them and hard to get over because obviously, if you think about it, they don’t know us, and we’re trying to make hundreds of million-dollar decisions within a short amount of time, right? The recommendation, and I’m taking over Corp Dev here at Paddle as part of my role, is to make sure you’re building those relationships early and often. It doesn’t take much work, especially if you do a lot of conference stuff like I do. Those relationships really matter, and you don’t know when they’re going to matter. Just build them anyways.
Liam: Can we jump back to the very beginning and the experience of bootstrapping ProfitWell? I’d love to know what that looked like.
“If you’re a bootstrapper trying to swing for the fences, you end up paying a much higher price than if you’re a venture-backed founder. Now, both are paying a price, don’t get me wrong”
Patrick: Yeah, bootstrapping. It’s weird, we have all these terms now – customer-funded, indie hacker. Basically, I never raised money. I was in my early mid-twenties, and this is all hindsight thinking, but I had no mortgage and no kids… I come from a very blue-collar family, so it was a little terrifying. My parents were like, “What in God’s name are you doing? You left the government job, you left Google, and now you’re going to leave and go to zero, literally?” I cashed out, I had a small 401k, $8,000 to $10,000, and I was like, “I think I can stretch this to live on it for nine or so months.” And I could always find a job.
I always like to say, both jokingly and true, my payment was the hundred pounds I gained throughout the experience. I basically sacrificed the body. I don’t suggest you do that, but I think there’s a payment that all entrepreneurs and founders face. If you’re a bootstrapper trying to swing for the fences, you end up paying a much higher price than if you’re a venture-backed founder. Now, both are paying a price, don’t get me wrong, but there are layers to that journey. And I think we made a mistake not raising money earlier. We were past eight figures in revenue when we were about to raise our first round and then got bought. I think starting out bootstrapping is very smart, at least for a little while, as much as you can afford to do it. But once you start getting some traction, that’s the point where you should be raising money if you’re swinging for the fences.
Going back to first principles
Liam: I know one of the things you’re fascinated by is solving problems and going after bigger problems. As a community, what are we getting wrong in our thinking in this area?
Patrick: Problem-solving in general or?
Liam: Yeah, I suppose. For example, how we think about a subscription business’s growth.
Patrick: That’s a really interesting way to ask that question because I think it actually gets to some of the core. I can get specific to subscription growth, but we – and this is the collective we and even myself, and it’s taken a lot of work to not do what I’m about to say – are creatures of a path of least resistance. That’s how we think about things. We learn or do via metaphors. Back, I don’t know, hundreds or thousands of years ago, we would see someone eat a berry, they would get sick or die, and we would be like, “Oh, we shouldn’t eat those berries.” That’s how we thought of things.
In the world of tech and business, a lot of us go, “That company’s successful. I see what they’re doing on that landing page. I’m just going to copy it.” And the issue is multifold. For one, at best, you will get the exact same results as that company, which is not necessarily what you should be shooting for. But the problem is you’re not the same company. You have no idea how much time they spent on their landing page. I had someone be like, “Oh, I’m super proud, and I’m a little embarrassed, but I straight up copied this landing page and used it.” And yeah, we spent five minutes on that. We did not think about it, go through it, or anything like that.
“Subscription businesses are spending 55% to 65% of their budgets on sales and marketing. They’re spending next to nothing on monetization and retention”
To make this more practical, the big thing that I always talk to people about is not just critical thinking, but this concept of first principles thinking, which is identifying the thing we’re trying to go for. Sometimes it’s a number, but sometimes it’s like we have two paths – one optimizes for X and one for Y. What are we trying to figure out? And then from there, creating a framework, which is just a fancy or jargony way of identifying the things that affect that path, finding the data, looking at the data, and then, based on that data, choosing to prioritize how you’re going to get to that thing you’re trying to go for.
Take subscription growth. If you think about subscription growth, probably 85% of blog posts and content have to do with sales and marketing. It’s all about how to get more leads and customers and how to talk to customers or prospects. If you look at the numbers, we want subscription growth, and there are three areas where we can grow. You have acquisition, monetization – charging those customers either more initially, more over time, or both –, and retaining those customers. What’s fascinating is that when we look at those three levers, subscription businesses are spending 55% to 65% of their budgets on sales and marketing. They’re spending next to nothing on monetization and retention. They might have a product team, but that product team’s very focused on strategic retention, not really tactical retention.
“You don’t get outsized results by copying strategies that aren’t there”
That’s where we’re spending our effort. But when we look at the numbers, you’ll notice your conversion in sales numbers is going somewhat in the right direction because you’re putting so much effort into it. But your revenue per customer, which is a measure of your monetization, is flat, and your retentions may be okay but are not improving. And if you go even further and look at the numbers, you start to realize that if you just increased revenue per customer by 10% or 20%, everything would get easier and you would grow faster. But we never spend any time looking at that lever. The same thing with retention, “If I just improved this by 10% on a relative basis, everything gets better. It compounds.”
This is the first principles thinking – I’ve identified the levers. There’s a bunch of levers under each of those levers. I look at the data and realize, “Oh, we’re really bad at credit card failures. We have a bunch of people churning because of credit cards. Let’s fix that.” “Oh, we haven’t had a price increase in three years. We’ve added so much value – let’s increase our prices.”
Long story short, instead of going through the exercise of identifying problems and causes, we end up looking at, “Oh, this person tweeted about this thing,” “Oh, this blog post was published,” “Oh, the CMO I talked to at this conference said this is what they did,” and we just copy it. And you don’t get outsized results by copying strategies that aren’t there. Now, I want to fill my thought processes with these different ideas, but then I do my analysis, prioritize, figure out what I’m going to do, and go get what other people did to solve that problem… So yeah, a little bit of a diatribe on critical thinking, and hopefully that’s helpful to folks there.
Investing on audience-based content
Liam: Yeah, no, absolutely. Something I would selfishly love to hear you talk about is your approach to content and how you married software and content to very scalable things. What was your approach to setting up shows, and why?
Patrick: Yeah, I can take you through that thinking. For folks who don’t know ProfitWell, we went really deep on content marketing and were the first B2B company to do what HubSpot’s calling inbound media. In traditional content marketing, you have an offer like an ebook or something like that, and then you have blog posts and social posts and stuff to drive people to download an offer. And when you download that offer, you know get scored and maybe get emails from a salesperson. Instead of that loop, we started creating episodic or audience-based content.
“This came from the constraints of being bootstrapped. We were not going to beat people who were spending so much money on content, right?”
At close, we had eight different podcasts and video series, from a show called Pricing Page Tear Down, where we would tear down pricing pages and get positive and critical feedback, all the way to a show called Verticals, where we would look at, for example, video conference software and do almost a Johnny Harris overview of that space and why someone was winning and someone was losing.
This came from the constraints of being bootstrapped. We were not going to beat people who were spending so much money on content, right? Well, how could we win? Let’s look at it. It turns out, and I’m skipping a lot of analysis and data, that the best people in the world at driving traffic are media companies, but they are the worst at monetizing that traffic. And the best folks in the world at monetizing traffic are software companies. So, how do we combine those things? This was a struggle, and it wasn’t quite a linear thing, but it was a month of research and talking to people and trying to build a model, a framework. Once we did it, we started going all in and started thinking and using the same first principles on a bunch of things.
“In order to scale the heck out of it, you have to understand the levers you have. This is what led us to have a four-person team running eight different shows plus SEO”
For example, for the first season of a show, each episode was pretty expensive. It cost us $1,000 to $1,500. That’s a lot per episode. How did we reduce the cost? Our video producer, Ben, literally took a spreadsheet and looked at every single step and how long each step took. Then, we scrutinized that and went, “Interesting. It takes you one hour to set up, one hour to tear down, and we’re doing that every week. What if we filmed everything in a couple days and that goes from 26 hours – if you’re talking about setup and tear down – over the course of a quarter to two, right?” Holy cow, we just reduced it and made it leaner. We did all this research to really hammer it.
Everyone’s capable of this thinking. We had constraints because we were bootstrap, but being like, “Hey, we’re going to explore, spend money. And once we find a kernel of what works, we’re going to scale the heck out of it.” In order to scale the heck out of it, you have to understand the levers you have. This is what led us to have a four-person team running eight different shows plus SEO. And we were dominating SEO in our particular space. You get these outsized impacts if you understand what levers you have and go after them.
Now that I’m at a larger company, our thresholds for going after it, for the lack of a better phrase, have to come down. We’re okay that it costs $1,500 per episode. We’re probably not okay with having to set this up every week because it’s wasting a creative person’s time, but we don’t have to get it down to a hundred dollars an episode, which is what we ended up doing. We can spend some money. We don’t have to put all our eggs in two event baskets per year. We can go to five events and run the same playbook. That’s kind of the difference between when you have some venture backing and bootstrapping.
Liam: What are you excited about working on at the moment or in the future?
Patrick: Yeah, right now, my chief strategy officer role is… Someone called it the Amex black card of roles, which is a very positive delineation, and another person called it purgatory of roles, and the reason is because it’s so flexible. I have Paddle excitement and then my life excitement. We were at a certain size where it was basically going to be three to four years of doing the exact same thing every quarter because in every SaaS company, the road from 10 to a hundred million is just doing a lot of the same – scaling things up, putting out fires. It’s not like, “Oh my God, let’s create this innovative new product suite and buy this company.” It’s not boring, but it’s kind of boring, for lack of a better phrase.
“You get very, “Okay, what’s the next thing?” And I think I’ve learned, in the past six months, to not be so certain”
So I was like, “Cool, I skipped that boring phase, I skipped doing it over and over again phase.” And now I’m kind of excited. We’re a pre-IPO company, we raised money at the perfect time… and it’s not through skill, trust us. It was definitely a little bit of luck and good timing. And now, what does that look like in my role? How can I have as big of a lever as I can to 10X this thing? That’s what gets me out of bed in the morning and excited.
If you’re a founder or an exec at a company that gets bought, depending on how long your journey was, if you were there at the beginning or close to the beginning and then went through an exit, a weird feeling happens. You go through this really existential period where you get very certain of things you shouldn’t be certain of, “Okay, I’m going to go build this next thing, I’ve got to start this side project, I’ve got to start the website, I got to start a blog.” You get very, “Okay, what’s the next thing?” And I think I’ve learned, in the past six months, to not be so certain.
I have a lot of things I’m interested in exploring. I’m hiring a bunch of researchers on the side who can help do some of the time-based work, and then I can collaborate with them on the thought work of doing that research. Those spaces are very non SaaS, which is interesting. They probably would be SaaS software, but they’re not serving the SaaS and subscription market. Then, I was talking to a buddy of mine, and he was saying, “You feel like that chapter’s sort of done. It’s not, but you feel like it. Don’t underestimate how deep your knowledge, your brand, and all these things are in this space and don’t pooh-pooh that,” if that makes sense. I don’t know, that’s a little bit of a wishy-washy answer because I’m learning to be a little more wishy-washy with these types of things.
Liam: No, that’s great. Before we wrap up, I was at SaaStock recently in Dublin, Ireland, and you were there giving a talk. Part of the talk you gave was you talking for 15 minutes, but using the word churn. And I personally found this hilarious, but I was wondering how you thought it went down. I just love when people take creative risks.
“The reason I did this was almost exactly why you asked me about it. It’s weird, it’s different. It shattered an expectation”
Patrick: Totally. So, long story short, again, I do a lot of public speaking. I went to school on a debate scholarship, so I feel very comfortable on stage. But I still get nervous. Everyone who’s good or likes to do public speaking is still nervous, but they still go up there. So, I’ve been speaking a lot, and I’ve spoken at every SaaStock. This is the conference in Dublin that I’ve been at since the beginning. I’m saying this because I had some credibility before I did this thing. I did a talk where the only word I said was the word churn. It was kind of like I was Groot from Guardians of the Galaxy. And it wasn’t just churn, churn, churn… it was me speaking as if I was saying sentences with the word churn. And just so people don’t think I’m completely crazy, the slides had a story and data and a bunch of other things. The reason I did this was almost exactly why you asked me about it. It’s weird, it’s different. It shattered an expectation – you’re expecting a talk on something where I go deep, and all of a sudden, I do something a little more fun.
I’m really excited for the fifth iteration of this talk. I can’t go in front of a room again and just say the word churn for 20 minutes. I have to iterate. And the biggest learning I found was that people like the novelty of it. People enjoyed the novelty because they’re seeing a bunch of talks, and this kind of broke the mold and gave them something to talk about at dinner. The other thing is that because I wasn’t speaking, they couldn’t look at their phones and computers – they had to look at the slides.
I don’t know what I’m going to do with that learning. Like all things, I had overwhelmingly positive responses, but I fixated on the four or five people who didn’t like it. Four or five people were like, “Yeah, it wasn’t my cup of tea.” And I tried to convince them of why it was good, and that’s just how I am, but life’s very short. We got the whole conference talking about us the next day and coming up to us and asking us questions about it.
“I recorded a video where I said the word churn a hundred thousand times in one sitting. No bathroom breaks, no food, whatever. Nine hours, three minutes, 20 some seconds”
From a branding perspective, one thing I didn’t appreciate until the last couple years is you need to do things that are purely audience-focused. We’re not going to go out and buy a Super Bowl ad because it doesn’t make sense for our audience – we’re not trying to go for the mass audience. We have a very specific audience. But I need to do something that gets their attention. And we, as a marketing team, every single quarter, have one thing that we don’t know how much revenue is going to bring. We’re not fixated on the attribution. What we’re fixated on is how many views it gets from our target audience. This was one of those things.
I did a video where we had asked our marketing team, “what would Mr. Beast do if he ran marketing in a software company?” Mr. Beast is a very popular YouTuber, for those who don’t know. And essentially, I recorded a video where I said the word churn a hundred thousand times in one sitting. No bathroom breaks, no food, whatever. Nine hours, three minutes, 20 some seconds. And that went viral for the SaaS community. We have over a million views on our different videos at this point.
Another quarter, we created a pack of three hot sauces. They were named acquire, monetize, retain, obviously. And the ingredients were things that had to do with retention and stuff like that. And as part of that, there was a challenge where, based on the number of shares or retweets, I would eat increasingly hotter peppers. And I’m basically Irish when it comes to my palate. I don’t really like spicy things. Long story short, when you pair it with data, it makes it a little more fun. The thing we want people to see when they see that is a WTF moment. That’s what we call it. We want them to be like, “What are they doing?” But not so far that it’s too weird, and it hurts our brand. That talk at SaaStock was probably right on the border.
Liam: Okay, cool. Patrick, thank you so much for talking to me today. And one final thing is churn, churn, churn, churn.
Patrick: I love it.