Practical Founders Podcast

#37: Bootstrapped for 10 years and Sold ProfitWell for $200 million – Patrick Campbell

Patrick Campbell wasn’t expecting to be an entrepreneur when he grew up, but after his first few jobs, he struck out on his own in 2012 to create a software company to help SaaS businesses optimize their pricing. Price Intelligently quickly evolved into a tech-enabled service that allowed him to grow, build a team, and ultimately launch ProfitWell.

ProfitWell is a free and powerful SaaS metrics product that automatically calculates MRR, ARR, churn, and other import financial measures for SaaS and subscription companies from their payments data. It is now used by over 35,000 subscription businesses. ProfitWell now offers paid products for managing churn, credit card failure, revenue recognition, and price optimization.

Patrick bootstrapped ProfitWell with no outside funding, but they grew fast to 100 employees before being acquired by UK-based Paddle for $200 million in 2022. He openly shares the story of how they started, grew, survived, and eventually sold the company—and how the acquisition is going one year after the acquisition.

Best quote from Patrick:

“Our view of what is now called product-led growth is that a free software product needs to be better than the paid competition. You probably shouldn’t try freemium until you are confident you have product-market fit.

“If it’s not better than the paid competition, there’s not a lot that you can do. We wanted people to feel bad for how much they’re getting for free. 

“That’s very, very different than ten years ago when your free product could be bad because the expectations were so low. Now your freemium product needs great support, good design, and a product that really helps.”

Edited transcript of the Practical Founders Podcast interview with Patrick Campbell, founder and CEO of ProfitWell.

Greg Head: And we’re live with Patrick Campbell, the former CEO… How does that feel when I say that? And co-founder of ProfitWell, which you sold last year, in 2022. So, we’re going to revisit how that went and what’s going after that. Welcome to the Practical Founders Podcast, Patrick.  

Patrick Campbell: Thanks for having me, Greg. Excited to chat a year out and explain how terrible and great it is at the same time. So, yeah.

Greg: I’m sure there are pluses and minuses. Patrick, you’re pretty well known in the SaaS space, almost a media personality here. I’m serious; it wasn’t just content expert. You used the word media more than just content. And you’re pretty well known. You’ve been on the conference circuit for years and your software is generally well-known in the space.

Greg: But let’s start with the end in mind here. You sold ProfitWell, a bootstrapped company that had a little services in it that you grew with your team out of Boston in 2022 for your reported $200 million. You know, a little bit of stock, a little bit of earn out. It’s been documented on other podcasts where you’ve explained it. Why don’t we just start with where you are now? You’re now an employee and an executive in a venture-funded company a year after you sold your company. Let’s start with there and then we’ll go back to how you created ProfitWell.

Patrick: Got it. Yeah, I think it’s a great prompt because it’s been really interesting and there are a lot of threads. And I’ll give like a quick version and we can go deep on whatever you want. I think on one thread, from a personal standpoint and emotional standpoint, I built ProfitWell for about nine years with the team. And I got very kind of even-keeled in the last few years. In the early years, it was my first company ever. I was, like every other first-time founder, really up and down. And then all of a sudden, I matured as an executive and things like that, as an operator, I started getting very even-keeled.

Patrick: As soon as that kind of ending moment occurs… And it’s not necessarily looked at as the end, but there’s this very pivotal milestone when you close on a deal. I went back to being up and down emotionally. It was a very existentially type of up and down to the point that I was like, “All right, what’s the next thing? I got to do the next thing. What am I thinking about there? Oh, I got to do this side project too.”

Patrick: I’ve never, ever had this level of wealth. And I know it’s a champagne problem, but you’re like, “Do I get duplexes?” And I talked to people and they’re like, “You’re beyond duplex money right now,” like in terms of rental property and stuff. So, it’s like that type of thing. And that’s a skill to kind of learn. And the best advice I got was just to kind of sit on things for a year and just kind of relax. Or not relax, but just kind of like let yourself even out.

Patrick: And then there’s a bunch of existential of, you know, “Hey, what do I want to do in my life now? You know, I kind of caught the car. Like, what do I do?” So, there’s a lot of that. And then there’s a bunch of company stuff.

Greg: Patrick, let’s explain who bought your ProfitWell company. And now, what kind of things are you doing within that company now?

Patrick: Yeah, totally. ProfitWell, for those who don’t know, we are a bootstrapped company that did subscription revenue automation. Basically, you plugged in ProfitWell, you got free access to all of your metrics, and then we would help automatically grow your business through a pricing product and a retention product.

Patrick: We got bought by a company called Paddle. They run subscription companies automatically, so there’s this whole grow and run piece of us coming together. And they do billing payments so you can plug it in and not only is all of your tax remittance and all that kind of taken care of, but you can instantly sell in 100 plus countries and all kinds of fun stuff.

Patrick: They were about 200 people, we were about 100 people. Combined valuation is $1.4 billion. We were sold for over $200 million. And yeah, I’m the Chief Strategy Officer, which is kind of like a role to be defined.

Greg: Okay, you’re still “other” guy.

Patrick: Yeah, yeah. I mean, I have stuff now, but that was, I think, part of the problem too. And this is kind of the thing with integrating a company in the past year, you’re dealing with all those personal things I just described and then you’re kind of dealing with… We were very good about defining certain roles for like Facundo, my business partner. He’s the Chief Product Officer of the whole company. About Peter, who took on kind of this sub team.

Patrick: But for me, it was kind of open because I was getting the deal done, doing the diligence process, those types of things. And so, that was one thing that wasn’t great, how lack of definition around the role was. But yeah, that’s the overview in terms of those things.

Greg: And Paddle is based in London and ProfitWell based in Boston. And presumably you have remote employees all over the place.

Patrick: We have offices in different places, yeah.

Greg: You’re a British company. And how much venture capital investment has Paddle raised?

Patrick: I don’t know the exact number. I believe it’s near $300 plus million dollars total. So yeah, there was this round, recently. Then there was, I think a $60 to $70 million round before that. And then there were some earlier stage rounds there, yeah.

Greg: And is it primarily serving, let’s say, a vertical industry, the SaaS software, modern, you know, subscription industry, or is it broader for subscription and SaaS just a part of it, both for ProfitWell and Paddle?

Patrick: So, Paddle specifically serves, for the most part, SaaS or digital subscription products. I mean, it depends on like how we’re going to bike shed around the definition of SaaS.

Greg: But it’s about software and SaaS and digital and all that.

Patrick: Yeah, mostly digital subscription products, which is a little broader than SaaS, but for all intents and purposes, SaaS. ProfitWell, our products can plug into almost any billing system. So, Stripe, Zuora, Braintree, Recurly, et cetera. So, whoever their subscription… But it was all subscription. We can serve subscription, e-commerce, SaaS, digital products, et cetera.

Greg: But you built a reputation with your kind of benchmark data that you were getting and your deep insights about SaaS pricing, software pricing. You built a reputation in the software business. Did ProfitWell have much of a business outside the software business? Did it find its way and go sideways into anybody who was doing digital payments?

Patrick: We have over 35,000 different subscription companies on ProfitWell right now. Those are in B2B SaaS. Those are in consumer SaaS. Those are in digital media, like The Athletic, products like MasterClass, those types of products. And then there are subscription e-commerce companies like ButcherBox… I’m bad on my logos today, a whole host of other folks. So, if you were a subscription company or a recurring revenue company using one of the billing systems that we support, we basically had you covered.

Greg: It’s been about a year since May of last year. And I know the process started before that to combine the companies. What’s happening a year later? Is everything settled in? Is ProfitWell an integrated piece of the Paddle machine or is it off to the side? And is most of your team still there?

Patrick: For better or for worse, and there are some tradeoffs to make. Like in terms of some acquisitions, they kind of keep the company that’s coming on board kind of separate for a while. Others, they kind of combine right from the get go. We chose that path, which certainly had some tradeoffs. I think it was because we had really good team balance. So, a lot of the things we had, Paddle hadn’t had, like product leadership, those types of things. A lot of leadership that Paddle had, we didn’t have, in terms of like finance, operations, those types of things.

Patrick: And so, from presumably day one… Now, I don’t know how interesting this is, but like the actual tech getting integrated, Slack… You know, we just finished integrating Slack like a month ago. Those were already… Like, everyone was in each Slack, but it was one of those things where it took a little time to like, “All right, we shut down the other one,” kind of a thing. So, there’s stuff like that which took a while.

Patrick: And then I think, how it’s going, all the things you think are going to go wrong, at least for us, those things didn’t go wrong. And then all the things we thought were going to be kind of okay, did not go well. The advice that I’d give is if you are having an acquisition like we did, which was kind of not like a small acqui-hire, but like actually bringing two companies essentially together, or even if you’re going to be an important part and maybe you’re not as big as we were compared to like a Paddle, I would get the exec teams and the leadership teams in person together for as long as humanly possible, as quickly as possible and do that really, really frequently. Because I think what we ran into was, just building trust is something that you don’t really think about. You’ve built trust with your team, they’ve built trust with their team, and then you’re like, “Well, yeah, I trust this,” and everything.

Patrick: For example, Paddle had a CTO, we had a CPO. They get together. I think they had two conversations before we signed the dotted line. And they are like two peas in a pod. Like, just two peas in a pod. Like, long lost brothers, right? And then there are other relationships. Nothing was necessarily volatile, like on the other end of the spectrum, but it was a lot of communication. Oh, you know, you had the British element, like you mentioned, with the U.S. element. And we have a big office in Argentina, so there’s like another cultural element. And so, you start having a lot of just communication breakdowns or just very basic things where, “Okay, we need to make a decision about a direction.” “Well, we could do it the way that we did it over here, We could do it the way we did it over here, but probably we should rethink this.” And just the act of rethinking it doesn’t go two days. It’s like, “Oh, that’s going to be, now, three weeks for something that seems really, really small,” right?

Patrick: And all of a sudden, it’s like, well, what’s the direction, right? And what was kind of beautiful is the vision and the product thesis were so perfectly aligned. And so, we didn’t have that problem. We don’t have that piece. And the products are integrated and everything, and that’s great already. But I think it was just more of like basic stuff. “Well, what’s our strategy going to be?” And it’s like, “Well, it’s kind of a broad question,” right?

Patrick: And then, you have a group of people who aren’t used to making decisions as quickly with one another. It’s just literally like, “Oh, wait, we finally made this decision. It took us six weeks and everyone was trying to make a decision, everyone was really respectful, but it still took us six weeks.” And I think that’s the thing that you kind of underestimate when you’re excited about the thesis and bringing stuff together. And then that can get frustrating because all of a sudden, you’re like, “Oh, wow, we’re just not moving as quickly.” And you throw on top where the market is and having to figure out planning and all this other stuff in that context, and all of a sudden you have a good recipe for a tough year. Not like a non fulfilling year, but just a tough year of just all kinds of things.

Greg: You had some heavy lifting. And now you’re a bigger company. You went from this scrappy little team and then you grew up and all of a sudden you have a few hundred people and some big money behind it. So, it’s a little different animal.

Patrick: You were a bootstrap founder, right? You did it in Boston out of a little service company, Midwest guy and created something that grew. You put everything into it. Let’s go back. Let’s do the time machine here. Patrick, tell us about the beginnings of ProfitWell. How did you get that started?

Patrick: I never wanted to go into business. That was not the dream. I didn’t grow up… I didn’t go to like, entrepreneur class, like those types of things. You know, I come from a blue collar family, so the idea of getting into business wasn’t like the thing. It was, “Go be a lawyer. Go be a doctor.”

Patrick: I was working in tech and then ended up joining a startup. And my parents were a little terrified because I went from working for the government, which was my first job, to working at Google, which is obviously a great company to work for. And then, working at a venture-backed startup and not really being enamored with the culture and those types of things, which was more about me than, I think, the company. And then, starting a company without funding or without anything.

Patrick: And so, I was working on pricing at this company that I was working for and then wanted to kind of get out on my own. And I didn’t have a mortgage or kids or anything like that. And so, it was kind of like one of those moments of, “Well, if I’m not going to do it now, then I’m probably not going to do it. So, let’s jump in.” And it really took realizing that I can always find a job. And that’s a privileged thing to say, but…

Greg: What was it that made you want to start your own thing? You said you didn’t start off being this entrepreneurial teenager or business school person with all those dreams, but you got a trigger that said, “Maybe I’ll do this myself.” Was it tired of working for people you didn’t like? Or you kind of saw a brass ring you wanted to chase?

Patrick: I think for me, it was probably like two things. I think for the first one, it was I would bust my butt no matter what job or what I was doing. And so, when I would bust my butt, I always felt like I was working more or harder than my manager, which I don’t know if that was always true, but at least that’s what I thought. And it was just the agency of it. There are not a lot of roles then… And I didn’t consciously choose to do this, but I think I kind of reacted my way into it. There’s not a lot of roles or jobs you can do that give you that agency, right?

Patrick: And then I think the other element was kind of… When I was at Google, I’d worked on this pretty cool kind of internal product that I started as a side project. And then all of a sudden, it kind took a life of its own. It made Google a crap ton of money.

Greg: Ah, you got like a taste. I could do this and…

Patrick: What was interesting is it wasn’t as if… Like, I got this award and a $5,000 bonus. It wasn’t the money. It wasn’t that I made Google nine figures and was not getting a lot. It was, they were going to shut the project down. And it was only because it was an organic project that just so happened to work. And at Google, prioritizing a bunch of things is crazy, right? They’re looking for billion dollar things rather than… They shut down $100 million stuff all the time.

Patrick: And so I was kind of like, if I’m going to bust my butt, I want that agency. That was kind of the idea. And there was probably a little bit of “I want some of the upside,” as well. But that was the big thing.

Greg: You kind of were in the software business. Did you see an opportunity to help people with pricing? I know you’re kind of a math and econometrics guy. Did you see an opportunity and then you just started trying to do services around that and see what you could create?

Patrick: I was working on pricing, as I was saying before, at this company that I was working at. I just saw that there was a high impact there. It’s not like I loved the idea or was like, “Ah, pricing. I want to do that forever.” It was very much like, “Here’s this idea. I don’t have, necessarily, a better idea. It’s time to do this,” given what I was just saying before about not having kids, a mortgage, those types of things, and just kind of jump out.

Patrick: What was interesting is, it actually wasn’t a service at the beginning. It was software. We had a software product that you could send out a survey and then that survey would get data back and then we’d crunch these numbers. And we just kind of discovered that people didn’t want to do the work to get the data. And then even if they did, they wanted someone to kind of tell them what to do or tell them what they should be going after. And so, we weren’t going to do services because VCs hate services, and this was the whole idea of like, “Oh, we’ll go raise money…”

Greg: Product ties to pricing recommendations, yeah.

Patrick: And it was one of those things where you’re like, “Well, I don’t know.” And then, when we were talking to some folks, they were like, “Well, we’ll pay you this much money.” And it was significant, you know, five figures of money. And so I was like, “Okay, might as well.”

Patrick: So, that’s what started this kind of tech-enabled service. The tech slowly became more and more back end. There was an interface previously and now there’s no more interface kind of a thing. But that’s just because our customers, for the most part, they don’t… There probably is an interface we should build at some point, but that’s not something they really think about. They think about the output and implementation and those types of things. And there’s some cool stuff we have in the works with Paddle.

Greg: What year was that?

Patrick: 2012.

Greg: Okay, so SaaS was starting to take off. And actually, at Infusionsoft we hired a Price Intelligently, whatever, advisor. Ran a little of that. I know there was software behind it, and a process, a structured process, but it wasn’t just somebody coming in and my whiteboard against your whiteboard kind of thing. There was, “We’re going to go get some data. We’re going to give you a recommendation,” but more of a services enlightened recommendation than a product thing. So, you kind of had the product idea first and people said, “No, I want somebody to explain it to me,” and a little bit more high-touch. And then you got revenues from that and kept on going.

Patrick: We never wanted… And at this point, it was we, within the first nine to twelve months. So, the first six months I sold… I used to know the exact number, but it was over… It was like $100,000 to $130,000 of kind of deals. And so, it was just me in a room 18 hours a day doing all that kind of fun stuff. Brought on Peter, who’s still with the company. And the whole idea was to get to pure software. We were like, “All right, this isn’t great. We understand why we can’t necessarily create software that does exactly what we do right now, but we can use this margin,” because we pretty good at our pricing, we were getting better at our own personal pricing, to basically fund software development.

Patrick: I think within that year we were starting to work on software. Then there was kind of this, “All right, we’ll keep the business going.” Brought on Facundo within a year or year and a half. He was first a contractor, then came on full time as our CPO. He was kind of on an island starting to create software. And we originally were going after a couple of ideas, but then we kind of settled on this metrics product, which I kind of described before. But yeah, so the short answer is just under a year.

Greg: So you had Price Intelligently, this tech-enabled pricing service for, presumably, subscription or SaaS companies. And then you had ProfitWell, this metrics, as digital payments were starting to happen and you could get data from Stripe and other platforms. Back then, people had crazy spreadsheets. They’d download their payments and then try to imagine what their MRR was. And churn was almost an impossible math problem for most until your platform came around and automated that. But did you think there was a business behind the “press a button and see your perfect SaaS metrics?” Because it turned out to be a freemium thing, almost a marketing…

Patrick: What ended up happening is we were doing the pricing for a company that was about to go public within the next six months after us working with them. And they were calculating churn and MRR incorrectly for the way that they were looking to calculate them. And so, that kind of exposed the problem. I think the other thing is, we were still going after this pricing problem. Like, how can we just tell you what to do, but in a very automated way. We hook into your billing system, etc.

Patrick: What ended up happening is we started kind of putting two and two together. Like, “Oh, we need this data. And there’s this need because people tend to have this problem of finding out their metrics.” And so, we originally were going to try to sell that product. I don’t know if we really had an idea of, “Hey, we’re going to keep doing the pricing stuff if this goes well,” or, “We are going to do both.”

Patrick: Eventually we ended up doing both around this revenue automation thesis. But what was kind of interesting is we ended up finding out that analytics are a terrible business. Like, just terrible. It’s very rare that an analytics company does well unless they go up market and or go full BI, which is a little bit different than analytics. Or, they go super niche, then it can work.

Patrick: But even in the world of SaaS, we had a number of competitors pop up very, very quickly, kind of all at the same time. I don’t think any of us reacted to one another, it was just one of those things that happened in the market. And so, we had a choice of having to go up market to get decent unit economics, or we give up and work on something else. Or, this freemium play, because it’s not just the network effect you get from more users inviting other users or referring to sign up, it’s more of the network effect when it comes to the data.

Patrick: So, every additional user that signs up for ProfitWell metrics, today, all of our algorithms get better. You know, sometimes very incrementally, sometimes significantly, depending on the size of the person who signs up. But that was the big thing that, when we were thinking about how do we… What’s our moat? That’s our moat. You know, if we have more data than anyone else, which we do, presumably our algorithm should be better than anyone else. So, that’s kind of the concept.

Greg: It’s a moat for the business. Was this a metrics-oriented revenue management business or was this a moat for productized pricing recommendations? What did you think the business would be, where it was going to go back then?

Greg: This is a very common problem for practical founders. They start one thing, they find an opportunity, it gets them up to here. They get something going. They turn it into something else and then they parlay it.

Patrick: There were a couple of themes that we knew kind of sucked in the world, particularly in the world of business. For one, there’s all this stuff that when you’re building a business, SaaS business, subscription business, this is kind of where we chose to play, but I would just argue a business in general. There’s all this stuff that is not your team, not your customer, not your product, but you need to do in order to ultimately grow or make sure that you don’t have so much operational inefficiency that you run into a bunch of these problems.

Greg: Just plumbing stuff that doesn’t really add value but it’s necessary, yeah.

Patrick: And some of these things are really simple. Well, they’re presumably simple, but some of these things are a lot simpler than, “Oh my gosh, what are the features that are going to keep our customers around,” and value props and stuff like that. Some of these are like, “Hey, credit card failures.” Big issue. Something that’s mechanical, though. So, it’s not like we have to have an existential crisis to figure it out. We can implement mechanical things, study the data, all those types of things, right?

Patrick: And then, the other theme was software kept getting better and better at actual automation. So what I mean by actual automation is not marketing automation where it’s like, “Okay, you can set up a workflow and write the email and add the email to this flow when this happens.” That’s automation that I have to do. Like, I have to be the brain. We were getting to the world, and this was before even the AI craze, which probably brings another level to this, where, no, you can plug it in and the software just does the job. You don’t have to do anything. And that’s the point.

Patrick: And so, we kind of started seeing that. And so, this is where this thesis of, “What if you could plug in ProfitWell, you get all these metrics, which is great because you want to do your reporting and see what’s happening.” And that’s also a gateway for us because we can show you where you’re not doing well in your business. “What if we plugged things in so that you just grew automatically, or we solve these problems automatically?” And so, that’s kind of what became our thesis of what are these kind of anti-active usage products you don’t have to use, you just plug it in and it makes you money. That was the idea.

Greg: So, you would sell those. You’d give away the SaaS metrics and people would do that. All of a sudden, everybody woke up every year and one year, I forget what year it was, maybe 2015 or ’14 and they say, “We have good metrics now.” The little startup guys that couldn’t tell you their MRR… They’d kind of give you a vague MRR, but now they would give you the 12.2% growth in MRR from last month, and, “It’s actually a 2%, 0.4% churn,” because the metrics came out of there. But then you would sell these other… I don’t know, you come for the metrics and stay for the revenue automation, I guess you’d say.

Patrick: And that’s the funny thing about freemium that I think a lot of companies get wrong. Freemium, and kind of Version 1 of freemium, kind of early 2000s up until like 2015, it was very much you give a taste so that your first 30 days, you’re fixated on first 30 day kind of trial or almost like, trial conversion. Freemium should be a cohort. You know, when did they sign up for freemium? And then over time, we look at six month cohorts, three month cohorts, twelve month cohorts, depending on the life cycle of our product. That’s how you determine if freemium is working or not, because not everyone wants to convert in those first 30 days. That’s the point. The point is, is I earn the right to nurture that lead over time.

Patrick: And so, we would have folks who, they’re doing a bunch of stuff in their business and all of a sudden they’re like, “Oh, we’ve got to fix our pricing.” Well, we’ve been top of mind, not only sending the marketing emails, but we’ve been top of mind this entire time because they use us, not necessarily every day, because analytics products don’t get used every day, but at least once a month. And all of a sudden they’re like, “Oh, I don’t know what they do, but I know they do something with this. We should go talk to them.” And that’s the deal.

Greg: Did you play this like a scientist experimenting? Pricing is a little bit like that. You actually have to go to the real world and try this versus that and look at the data and try it again and see that. I mean, is that the way you kind of iterated through this? You ran experiments and something worked and you tried something else? Even on pricing and I guess the freemium model, you don’t know the answer, but let’s test it out and see what the data says?

Patrick: The short answer is yes, but it’s still messy because you don’t have this perfect environment where you can kind of put something in motion. It’s like, you have to build stuff. And what level do you build it to test it? I think we were very fastidious about customer research. We were very focused on analyzing and having a thesis of this anti-active usage piece, having a thesis that we make you money automatically. And those things helped us filter a lot of the ideas so that the concepts we had to struggle with were not like everything. It was this much more narrow focus that we had to struggle with, which was, “All right, well, we have a bunch of options we can do to help you make money automatically as a subscription business. We could go build this. We could go build that. Is it something that we think makes sense? Okay, let’s go test it out.”

Patrick: And there were plenty of things that we would test out. “Oh, this just doesn’t work. This just doesn’t actually… You can’t really automate this. And also, it doesn’t appear that the yield is going to be that high.” Not for our revenue, but just in terms of our customers or our users. So, just lots of things, lots of things on that particular front, if that makes sense.

Greg: Yeah, that normal get in the field and start trying things and testing and throw some things away that don’t work and run experiments and everything. A lot of bootstrappers say, “I’m constrained because I’m surviving here. I don’t have a ton of money. I don’t have a big team and so forth. I wish I had big funding to run more experiments.” So then, all the funding guys say, “I don’t get to run a lot of experiments because I have funding,” and it’s pretty a much go that direction as fast as you can kind of thing. Do you have a view on bootstrapping experiments?

Patrick: I don’t think the money matters. It’s a mindset. I think that’s the thing. I’ve seen plenty of companies that are, regardless of their funding status, just complete crap shows on how they think about the market. Like, there are plenty of people that we would go help, at least to our POC and maybe like talking to some key people. Like, “Guys, you don’t have a pricing problem, you have a company problem.” And that company problem may be who you’re targeting, the mission, sales enablement. It could be a whole host of things. But I think when it comes to experimentation, it’s a mindset of developing, one, taste, following the data without your own narrative as much as humanly possible.

Patrick: Because, I think in building and operating a company, it doesn’t matter if you’re funded or not, you’re always on this precipice of like, “I think this makes sense. Or no, I could be completely wrong.” And then, leadership is making a direction, monitoring it. And then, when it appears that’s not working, as quickly as humanly possible, stopping and then taking ownership, like, “Hey, that didn’t work. But that’s why we kind of dare to fail gloriously, right?” So, I think that’s the thing that I think a lot of people misconstrue with kind of the funding piece.

Patrick: Now, where funding comes in that’s really interesting is… I don’t want to say fight multiple fronts because I think the interpretation of that is not necessarily what I mean. But what you can do is you can do more bets at the same time, but I find a lot of companies that have funding don’t have the fastidiousness to really monitor those bets. They just kind of throw the money, right? So theoretically, with money you should be able to test more and go faster with those tests.

Greg: More cycles, yeah.

Patrick: Or, add more. You know, you can replace the margin of error with some money. But I don’t think a lot of people have that discipline because they never… Not saying never. They didn’t really need to have that discipline. So, I don’t know, for us, we should have raised money. We definitely should have raised money. I mean, it all worked out, don’t get me wrong. But like, we should have raised money probably when we knew ProfitWell was going to be free. That’s when we should have raised.

Greg: Then it was kind of taking off. The race was on and you could see some traction.

Patrick: Because there were so many things in the year or so before. We had COVID in there, so that kind of messed things up. I mean, we did great with COVID from a business perspective. But we had a lot of these ten thousand dollar arguments. Now, they weren’t all ten thousand dollars. Some of them were five thousand, some of them were a hundred thousand, but we had all these ten thousand dollar arguments where the team was really, really good at being disciplined about experimentation, all these types of things. So, we should have funded all of them. But in terms of cash flow, we were like, “I don’t know,” and it was clouding our judgment. And that was the hard thing. And if we had funding, it would have been a lot easier. So, we were actually going to go out and raise our first round.

Greg: So, you had the discipline and you could have had a little funding support now that you look at it in hindsight. So how come you didn’t? You had Price Intelligently, this tech-enabled service that was one side of the business. Then ProfitWell started taking off and you could see some upsell revenue there, the software business. A lot of practical founders would start to shut down their services business as fast as possible, race over to the software, raise money on the traction and so forth, but you didn’t. What was under?

Patrick: I think for us, our thesis was… It was never like, “Oh, VCs suck. Oh, bootstrappers are great,” or, “Bootstrapping sucks.” Anyone who goes that realm, it’s just the complete wrong argument. For us, it was really thinking through, “Okay, do we know what we would spend the money on? No.” Like, there was a whole period where, no, we just didn’t know. You know, nine women can’t make a baby in a month, right? So, there’s just some stuff that takes time, like developing a product, developing a market, these types of things.

Patrick: We didn’t need a bunch of money on top of things to complicate that, nor to really understand. Because even when you go out in the pitch… I’d like to think we’re a little more honorable sometimes than some of these pitches out there. And we’re like, “No, we’re going to want to tell you this actual plan and this plan has some actual thought behind it,” rather than we’re just trying to get over the line.

Patrick: So, we didn’t know what we’d do with the money. And then when we started realizing what we would do with the money, we were like, “Well, let’s wait until we’re held back with the money. When we’re held back with the money, that’s when we should raise.” And I think that is where the mistake was. I think the mistake was, if you know what you’re going to do with the money, and, and this is a really important and, you want to be a very, very large company. Like, you’re trying to go be an anchor company in your space or whatever it is, you need to raise money.

Patrick: We had this realization and we didn’t act on it. But we had a realization a number of years ago when we had crossed $10 million and we were like, “Oh, there’s no company with an inside sales model selling an LTV-type product that we have that goes from $10 to $100 million without raising money. And what we should have said at that moment was, “We’re not going to be the first.” We didn’t think we were going to be the first, but we were sitting there and we’re like, “Oh, that’s a really good observation. Well, let’s wait until we’re held back by the money.”

Patrick: It was one of those things that… I don’t know, it wasn’t like it was too late. I think ultimately, if we had not gotten purchased and we had gone and raised money, we probably would have gone through and been doing well, but we would have said, “Oh, we should have done this two years earlier.” Like, that’s probably where our mindset should have been, if not 4 or 5 years later, with perfect hindsight, which, you know, obviously we didn’t have.

Patrick: So, that was our mental model and I think our mental model was wrong. And I think if you know what you’d do with the money, you’re being held back by the money. And you don’t want to create a giant “enterprisey” type company, you should not raise money. You should just go slow and have a nice bootstrapped cash flowing company, basically.

Greg: You know, you were trying to grow fast. Like, you weren’t taking profits out of the business and buying fancy cars. You’re a frugal guy who put every penny back. You guys were living on the edge and getting bigger and doubling, and the team went from the two of you and then Facundo and then the rest. And then, like dot, dot, dot, 100 employees, probably more than $10 million revenue. But the SaaS business was taking off, recurring revenue, the Holy Grail of recurring revenue was taking off. Did you accelerate your marketing in some way? How did you grow faster?

Patrick: At the root, we got to a level of operational efficiency when it came to growth and product that I think really set us apart. I think our operations as a company were an absolute crap show. We had one person in sales and finance for a hundred person company. And I’m not saying you should do that; that’s a terrible idea. I mean, we had two people at the end, I should say, but that was to take some of the load off. And yeah, that was a mistake.

Patrick: You know, I was talking to Facundo about the next company and we were trying to get aligned on what makes… What are we going to take from the previous company, how are we going to think? And the one thing was just operational efficiency from day one. Pay the lawyers; don’t try to save money there, just like bake it into the model.

Patrick: But I think from a growth and product perspective, we got really, really good at tempo, which is shipping or experimenting really, really quickly. And the one piece that I think you’re kind of referencing is around… We basically took this media model. We were the first company to do this concept of inbound media. The difference between inbound media and inbound marketing is inbound marketing is very much focused on having middle of the funnel content, essentially, with top of the funnel being fed through SEO, social, these types of things. But really driving someone to an offer and that offer being a signal to get someone from the top of the funnel to the bottom of the funnel.

Patrick: And what you’re doing with inbound media is you’re doing that, you should be doing that, all of the things I just described. But inbound media throws a layer on top of it, which is, “Okay, what we’re going to do is we’re going to do episodic content. Shows, video series, podcasts, et cetera, because we want to create this pool of people in the middle of the funnel in order to have them hang out there until, very similar to freemium, they’re ready to raise their hand.”

Patrick: And I think what happens with inbound marketing too much is it’s all about how do we quickly get someone from the top to the bottom of the funnel? Inbound media is like, “We’re okay if you chill there. We’re okay if you chill in the middle of the funnel because there’s only so many e-books from us you’re going to read, but you’ll tune in to a podcast like this once a week.”

Patrick: And so, we discovered the data behind this and we kind of went all in on it. We had eight video and podcast series at the end or at the acquisition. That was a huge differentiator. And that not only filtered from content in the media all the way down to our event strategy. We started incorporating this into the product. We had mockups of creating this… I guess the best way to look at it is like this Hulu or Netflix-type experience inside our software product. So, all that type of stuff really, really contributed to things.

Greg: Well, you were speaking on the SaaS circuit. The SaaS conferences really started picking up. And you were well-known and had a growing following. You were maybe the business co-founder, Facundo, the technical founder, and Peter, maybe the sales guy or something like that. I mean, how did it mix? I know you had a couple, say, board partners in the beginning and that was a little bit of a messy transition.

Patrick: Peter ran sales, Facundo ran product and engineering and then I did everything else. And that was basically running marketing and building that team out. Customer success was run under product. You know, that was an experiment we did that actually worked out really well. I don’t know if that works out at scale, but it was good for us. And then operations, finance, making sure we don’t go out of business, those types of things.

Patrick: In terms of the face, so I have a debate and speech background from college and high school. And so, what it allowed me to do is rather easily be upper quartile in terms of speaking and things like that. I’m not saying I’m the best speaker. I’m not saying I’m like the most interesting speaker, but it allowed me to be very consistently great. And I think that in this market, when we’re talking about a lot of SaaS founders who don’t have a lot of speaking experience, I think everyone should get this tool in their tool kit. But it was really easy to stand out. So, it was just like a leverage thing.

Patrick: But it was to the point where I was like, “Well, we can’t have every show with me in it because it just doesn’t… This isn’t the Patrick show, right?” And so, we started adding in… And I would script everything on the back end for some of these next shows. And then we would have other people with teleprompters be, basically, the hosts of those particular shows. Then we started developing shows with other folks. We didn’t really get to the full vision there, but that’s the basic idea, if that makes sense.

Greg: Yeah. Did you call it product-led growth back then with a free product that people could use? That stuff has been around forever and now PLG is more documented. We finally have an acronym for it. Not everybody was doing it like that. Like you said, inbound content was to get to a trial and then the sales people would jump them. It was all about the forward fast motion, and you kind of had a different, more patient approach to it. Bigger pools at the right time. Did you feel like you ended up as a product-led growth SaaS example?

Patrick: Yeah, so product-led growth is less… I don’t know. The definition is kind of changing. Yeah, we were product-led growth because of our freemium play. That’s where product-led growth really came from. I think OpenView Ventures was one of the first people to start to codify product-led growth. You know, this is self-serve and kind of self-serve into an upgrade. Like, this has been around for decades. But when something becomes… We can laugh at it and be like, “Oh, product-led growth.” Or account based marketing, “You mean sales of 10 years ago,” right? And I make those jokes all the time.

Patrick: But it’s really important because all of a sudden it becomes like a function. And when it’s a function, you start building stuff around it, you start having conversations about it. And so, yeah. I know OpenView when they started, really started talking about product-led growth, it was like us and Appcues were the two companies they kept talking about and bringing up. I wasn’t sitting there like, “Oh, we are the product-led growth company,” but you know, that was kind of the concept that was kind of coming to be. But yeah, I would consider us kind of in that place, if that makes sense.

Greg: Well, because your other SaaS metric peers, competitors, weren’t giving away a functional first-tier product, right? They were trials and paid, and so it was a competitive advantage.

Patrick: That’s what’s really interesting about this whole product-led growth kind of world. Our whole concept was it needs to be better than the paid competition. Like, if it’s not better than the paid competition, there’s not a lot that you can do. I think that’s the thing that is very, very different than 10 years ago. 10 years ago, your free product could be kind of bad, and it was kind of fine because the expectations were so low.

Patrick: Now it’s like, “I need great support. I need good design. I need the thing that helps.” And what we always kind of went after was we need people to feel bad for how much they’re getting for free. Those were the best conversations. I mean, there were always a little bit of like, “Oh man, maybe we should charge them something for this.” Because we had people who only used the free product, would raise their rounds of funding using ProfitWell as the main thing that they used, and they would be like, “Hey, can we pay you something?”

Patrick: One of those things that I think a lot of people misconstrue about free… And this is why freemium, you shouldn’t have freemium probably until you understand kind of your product-market fit, because you want to think about it almost like that premium e-book, to kind of continue the conversation we’re having about the middle of the funnel, and then people kind of come in when it comes to that particular top of the funnel, kind of is opening, your middle funnel is expanding. That’s the big thing to kind of think about.

Greg: Did that large customer base of the ProfitWell product and the growing software business, upsell software business coming out of that… Was that the major part of what Paddle acquired or did they buy a little bit of Patrick as a spokesperson and all these customers to upsell Paddle and a little bit of the pricing, Price Intelligently services business? It was, you know, kind of a multi-headed monster when it was acquired. It wasn’t just this simple product and they could slide it into their suite. Or was it? What was valued the most for the acquisition?

Patrick: I think the thing to think about is if you’re not doing, let’s say, $80 to $100 million plus in revenue, which we weren’t, you’re a strategic acquisition. And that strategic acquisition… You know, the revenue is great. Like, we had really high-margin revenue. You know, everyone loves EBITDA, right? At least now, right?

Greg: Did you have EBITDA? Starting to?

Patrick: Well, yeah, because we were a bootstrapped company. So, we would try to run it closer to the rails because we would reinvest everything. It’s not like we had a ton of cash flow we were trying to take out. But from a gross margin perspective we had plenty of profit.

Patrick: The biggest thing that we ended up doing was focusing in on growing our business as quickly as possible and also making sure that brand was being built. And I think the brand piece, at the end of the day was a really big piece of the acquisition. For example, Paddle has an amazing product, this whole like merchant of record concept. It’s the future of how software is going to be built.

Greg: Not just simple payments like Stripe, but a one-up umbrella that handles taxes and everything else.

Patrick: Yeah, and that’s the biggest thing. It’s like, people compare Stripe and Paddle all the time, and I understand why they do it, but it’s kind of like, “Well, hold on a second.” To get what Paddle’s offering off the shelf… And this is not a competitor thing, because we actually are one of the largest customers of Stripe. We actually use Stripe on our back end. But what we’re doing is we’re basically taking all of the things around billing and payments, making sure you have the right payment type. If you have a customer coming in through Bulgaria, we’re going to run that through because the payment acceptance rate is higher than Stripe there. If you have a customer in the U.S., we’re going to use Stripe.

Patrick: So, we do that hot swapping out. Currencies, the tax piece, all of these different things. These are the things that we kind of do on top of things. So, Paddle’s got an amazing product. We have an amazing product. And so, what’s kind of interesting about that is all of a sudden, they had a pretty good brand in Europe, but they didn’t have that big of a brand in the U.S.

Greg: Ah, I see.

Patrick: We had a big brand just in SaaS in general, right? And we have all these users, these 35,000 different companies using our product, right? So, there’s an element of obviously we can sell Paddle into that user base. Obviously, people have heard of ProfitWell and then all of a sudden they’re going to see Paddle and there’s an association factor with that. So, there are a bunch of these different things that essentially contribute to that acquisition on top of the revenue, on top of figuring out a model, on top of figuring out all these different things that ultimately makes this work and made this acquisition make sense.

Patrick: And then I think on top of that, we ended up having really strong skills in media and product. All of a sudden you’re looking at their team. And it’s not that they were bad or anything, it’s just that they they were strong in these other pieces. When you’re trying to do an acquisition, you’re thinking about it and you want to kind of stay on… There’s this one plus one equals more than two concept that a lot of people talk about. But when we were looking at this, I was looking to raise money. I wasn’t looking to sell. But then all of a sudden, when I started seeing a lot of these pieces and there were some check marks of things I wanted to clear in terms of just kind of the business in general, it was like, why wouldn’t we combine forces, right?

Patrick: That was the strategic piece. And the suggestion I would give to anybody listening who’s looking to get acquired one day if they don’t want to hold their business forever, make sure you are talking to those people who could potentially acquire you, either through partnerships or other things. One of the things that made this work really well is Christian and I have known each other for six, seven years. We’ve been conference friends, hanging out a bunch, these types of things. And, you know, we genuinely like each other. So, it made it easier.

Patrick: When we were going through the process, there were some other companies that made a lot of sense that I just didn’t have relationships with. It wasn’t like a slam dunk to them, so it wasn’t like we could have the conversation further. It was kind of like, “Ah, it’s kind of a quick no.” Which is not a bad thing, but it’s just one of those things to kind of think about.

Greg: So, when you were considering acquisitions, you mentioned like this is a strategic acquisition. It’s a complementary, same customer base, one plus one equals more than two result. Did you have a different price in your mind, you and the other founders? Maybe it was just you when you considered other, perhaps, offers or funding that wasn’t so strategic. Like, “My number is higher for me to go work with them.” Or, “I would take a lower number if I could go work with them.”

Patrick: We did have some higher offers. It’s an expected value analysis, right? There’s a number of factors like the longevity. There was a company that we could have sold to that was very interested, but based on what we perceived as the culture based on the future outlook, the number that they were going to have to buy us for was very large. Definitely larger than we deserved. But that was the number, right? And I think when you’re in a position where you don’t have to sell, that’s kind of the thing that is most helpful.

Patrick: Yeah, I think for us, we did that expected value analysis. We had a number of horses in the race, got a number of LOIs. We got to be choosy at the end, which was great, which was definitely a position to be in. And I think we made the right choice. I don’t regret it. And, I don’t regret it from multiple levels. One, I got what we needed as a minimum of how we were thinking about cash and how we were thinking about equity and these types of things. But also, it was a good market, but that wasn’t the reason. I think it was like, “This is the right place for our users. It’s the right place for our customers.”

Patrick: I know some people think that’s like a talking point, but that’s actual reality.

Greg: A good home for everybody?

Patrick: Yeah, because one of the things is we fundamentally believe that metrics should be free for so many reasons. Well, if we had sold to certain other companies, they might have just turned it into a paid product. And Christian and the team at Paddle was like… Like, it wasn’t a discussion. There were so many things that just weren’t a discussion because we were just so well aligned, if that makes sense. So that was a really, really big thing.

Greg: So looking back, you learned some things about working inside a bigger company and the integrations, and that’s always, always tricky and challenging there. But would you say the strategy of why you sold and why Christian at Paddle acquired ProfitWell and your team, would you say that strategy is still holding out? Usually, it takes about a year for somebody to say, “Oh, this cross sell thing won’t work. The signs of this acquisition won’t work.” And most acquisitions don’t work. They have a big strategy, the big synergy strategy, and it’s not really a synergy kind of thing. Would you say the strategy is holding up for what you guys thought and what it is now?

Patrick: Yeah, for the most part, yes. So, that’s what’s interesting. I think there’s a lot of stuff we just haven’t figured out because this stuff takes so much more time than you want it to. Both coming together, but figuring out motions and stuff like that.

Patrick: You know what’s funny? Whenever it’s gotten hard to plan or, “Oh, we’re not going fast enough,” all those things I talked about at the beginning of our conversation, the thing that saves everyone is realizing, “This makes sense. This still makes sense.” You’re seeing the natural organic crossover happen. We’re not putting any hard pressure on it yet. But yeah, lots and lots of things kind of going on.

Greg: There’s another exit process for successful bootstrap founders and that is to sell the company and give the keys and that money gets to the bank account and all of a sudden you’re on the beach or fretting, usually. It’s usually a challenging mental process for somebody to sell their baby and change their identity and all that in a few days. But you’re going through a transition here. Do you like the process that you’ve chosen? Can you work there forever or are you thinking about your transition? Would you have rather just taken the money and run? How can you help founders think about some of the possibilities here?

Patrick: I think it just really depends on… It’s so dependent on who the acquirer is. I’ve got plenty of friends who have had three exits, four exits, et cetera. They’re like, “I’m not gonna stay.” Like, if they get bought again. They’re like, “I’m going to go.” And I think that’s less about the toughness of it, it’s more about they’re just in a different… They’re like, “I want to get on the next thing. I don’t want to combine with something, I just want to get onto the next thing.”

Patrick: I think for me, in this case, yeah, Paddle is a place that I could theoretically stay forever. I mean, forever, it’s impossible, all that kind of stuff. Is there stuff I want to work on that doesn’t have to do with B2B SaaS? Probably at some point in my life, right? And so, forever is a hard one. But I think, the thing that I discovered in talking to different founders before the acquisition who had sold companies is… There was a group of 30 of them that I talked to. Half of them didn’t go on with the company, they just handed over the keys. The other half stayed on.

Patrick: Of the half that just kind of handed over the keys, about eight of them ended up regretting it pretty considerably. And of those eight, three of them became drug addicts and alcoholics. And so, they’re all fine now, but that was a big signal for me that my job is so much a part of my identity. I love my job, I love what I do. I was like, “I don’t want to really risk that.” And also, we weren’t like done. We wanted to kind of keep going. It wasn’t like we were trying to sell the question.

Patrick: You know, how long I’m here? Like, let’s see. Let’s see. Like, I don’t know. I think it’s like as long as I feel like we can 10X the company, I’m going to stay. Because I think that’s the thing that is really important to me is that overall growth, if that makes sense.

Greg: Well, what an exciting journey and congratulations on your growth and overcoming all the demons and dragons that slay startups that are growing and getting to an exit and keeping some money in the game and being part of the transition. A bigger vision, bigger funded vision now, and the rest. Patrick, do you have any last thoughts for practical founders who are in the journey? Maybe they’ve got something over $5 million and they have optionality, including all the things we talked about today. Do you have any thoughts for them?

Patrick: I think the biggest thing is understand what you want. Understand what you want. And I think that’s a lot harder of a question than you think. Understand what you want, and then make sure you’re aligned with the people who are going to be on the journey with you the most, like your business partners, co-founders, et cetera, and maybe the core team around them. Because, you don’t want one outcome and then your co-founder or business partner wanting another outcome. That doesn’t work. That doesn’t work in the end. I think that’s the thing that is really, really important.

Patrick: And it also guides your decisions. Like, we wanted to be a big company. So, with the exception of the raising of the money, which we made a mistake on, we acted like we wanted to build a big company. So, I think that’s the thing to kind of focus on.

Greg: Well, Patrick, thanks for sharing your story and some of the background and inside story of ProfitWell and acquisition by Paddle. And we’ll see you at SaaSOpen this week in New York City. So, I’ll see you on the circuit and look forward to meeting you in person.

Patrick: Thanks, brother.

In this episode, Patrick explains:

  • How it grew in the early day as Price Intelligently, a tech-enabled pricing strategy service for SaaS companies
  • How they bootstrapped for 10 years with efficient growth and savvy pricing
  • Why Patrick thinks now that he should have raised some funding and why they didn’t at the time
  • How they created ProfitWell and gave it away for free, then created upsell products to monetize their large and loyal user base
  • How they grew fast with an extensive inbound media model with episodic content on top of their inbound middle-of-funnel content
  • Why he chose to stay with Paddle and contribute to achieving the big vision instead of selling for cash and moving on
  • What it’s like now for him and his team a year after their acquisition by Paddle, a UK company

ProfitWell Company Facts

  • Founded: 2012
  • Description:  ProfitWell provides a suite of revenue automation products for subscription and SaaS businesses, including automated metrics, churn reduction, revenue recognition, and pricing optimization.
  • Number of Employees:  100
  • Funding: Bootstrapped with services at first then customer sales for 10 years
  • Acquisition: ProfitWell was acquired by Paddle in May 2022 for $200 million in cash and stock
  • HQ: Boston, Massachusetts 



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Greg Head recorded this on episode on March 16, 2023 for the Practical Founders Podcast see all of the episodes.

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