Lessons from an SMB focused software exit
We caught up with Sasha Poljak, the Executive Chairman of Ximble, about Ximble’s successful exit to Paycor. Ximble is a staff scheduling and time tracking platform used by SMB’s to organize their workforce. Learnings from Sasha’s story are below.
Ximble was born from an observed problem. The founder’s sister in laws was a nurse. He observed her trying to call her boss to change her schedule and it was archaic. The founder decided to create a scheduling app. Sasha joined on as an early investor and subsequently as the initial CEO and together, they started building a company.
Strategic over traditional venture. Ximble had the choice to go the VC route or raise from a strategic. They chose the strategic route. The Series A was closed in 2016 with a publicly traded Australian job board called Seek which beyond the investment, provided a co-marketing partnership.
Product over market share. A decision had to be made early on as to whether to go after market share or build a best of breed product. They were not the same path – doing both would have required a lot more capital. Ultimately, the company chose to build a best of breed product instead of raising lots of capital to take market share. This meant they focused on building the best product possible instead of pouring investment funds into sales and marketing. Their strategy was to be acquired as a feature of a larger platform. Sasha and his partner were realistic about this route – they weren’t going to be unicorns but rather would likely sell the business quickly and early. At the same time, they wouldn’t find themselves on a multi-year fundraising treadmill, building a bonfire with cash to grow the top line. It was a trade-off.
They sold before the Series B. The company sold out before getting to the Series B. They got to a fork in the road: they could either sell out or go on to raise more capital to scale and go after market share. At the same time, they were approached by three companies looking to fill a technology void that Ximble fit. They weren’t the biggest or the fastest growing product but they were the best fit and represented the best overall value in the space. They went down a parallel diligence path with two of the acquirers, did not hire a banker, and ultimately shepherded the deal to close. The deal took 7 months from LOI to closure.
Tech platform is key. If you go down the route of building a product to be acquired quickly, then selecting a technology platform compatible with acquirers is critical as it allows for efficient integration. Ximble made the right choices as far as the technology platform. They did some research on tech stacks in the space, but also took some educated guesses.
Venture isn’t the only route to happiness. The company never took on too much capital because they wanted to preserve as much existing investor equity as possible and decided to operate efficiently in each stage of development. This resulted in a smaller, yet safer exit. The company didn’t grow as fast or as far had they gone the traditional route, but they also got a nice exit much sooner.
If you’re SMB, stay SMB. Sasha mentioned there are two things the founders should have been more disciplined about: i) they grossly underestimated what it would take to rebuild the platform (all startups seem to have a rebuild at some point). They should have given themselves more time and allowed for more resources in the rebuild; ii) Ximble experimented moving upmarket but shouldn’t have. They were doing well in the SMB environment but were lulled into chasing the upper end of SMB/lower end of the middle market – they shouldn’t have allowed themselves to get pulled towards those larger customers as they required higher touch, more features, and longer sales cycles. This sale was very different from their core SMB customers.
The sales cycle was the biggest issue. Selling to SMB required only a great free-trial period experience followed by conversion to paid. The conversion to paid was an effort lead by an inside sales reps and sometimes a customer success rep. The upper SMB and mid-market required RFP’s, longer development cycles, outside sales rep touch, and a more complex product. The SMB model needed only an internal sales rep available for live demos, or competitive battles when it was even needed – 65% of SMB sales were closed with no rep.
The product was sophisticated enough yet not overly complex so for SMB’s, self-close was a great model when combined with a free trial. For the mid-market though, you need outbound reps which means the complexity of the sales cycle increases dramatically as does the cost of the go-to-market model. At Ximble, because their sales force wasn’t built for the middle market, when a mid-market or enterprise opportunity came along, the already small executive team would have to get involved. It was a distraction for the product and dev teams equally and time would have been better spent focusing on improving the SMB experience where they were already successful.
Big thanks to Sasha Poljak for sharing his insights with us.
Visit us at blossomstreetventures.com. Cold email us directly at firstname.lastname@example.org – send over your Series A/B opportunity or ask to be added to our monthly email of most read blogs.