Kazi Ahmed (00:00:00):
And essentially, you know, through 2023, you know, we more than doubled organically. And then 2024, we doubled again organically. Yeah, I think the earliest stage is really about getting going. I see too many founders, or, you know, want to become founders. It's like, I'm waiting for this perfect idea, or I had this idea. I'm perfecting it. I'm going and talking to, you know, a hundred people and doing a survey and all of that. Most of what you will learn doing that will end up being wrong. Usually these things come together when rubber hits the road. Go out, build something really small, like around what you want to do, and go sell it. The acquirer was looking at, sort of, you know, the inventory and the store as the asset. And sometimes the owner has the liability when it's actually completely flipped. Is this same owner, you know, after selling their sort of water bottle brand, would go out and start a yoga mat company. And that would also be incredibly successful.

Previous Guests (00:01:05):
That's product market fit. Product market fit. Product market fit. I called it the product market fit question. Product market fit. Product market fit. Product market fit. Product market fit. I mean, the name of the show is product market fit.

Pablo Srugo (00:01:17):
Do you think the product market fit show has product market fit? Because if you do, then there's something you just have to do. You have to take out your phone. You have to leave the show five stars. It lets us reach more founders, and it lets us get better guests. Thank you. Kazi, welcome to the show, man.

Kazi Ahmed (00:01:32):
Yeah, thanks for having me.

Pablo Srugo (00:01:33):
Dude, I'm excited to have you here because your story is actually. Like, it's so different. We were chatting, you know. We always do these kind of pre-calls first when you get a sense of what the overall story is. And I mean the headline is, you know, you start a company in 2021 and you sell it like three years later. So, for $210 million, which is. It's absurd no matter how you do it. But the details of it were different because it was kind of like a bit of a roll-up play. So, anyways, curious to kind of dive into all that, I frankly like not a world that I spend a lot of time in, all the start-ups we back, are typically like, I have an idea. And I go out and build it. So I know very little about this, but it's another way to build start-ups. Find product that would fit, and hit a huge home run. So I'm excited to learn more about it.

Kazi Ahmed (00:02:16):
Yeah, absolutely. And you're right. We started off as a roll-up and then kind of pivoted midway through, which I think makes this story kind of interesting. I can tell you a little bit about how we got started, right?

Pablo Srugo (00:02:27):
Yeah, give me just maybe some context, like before 2021, like what was happening, and then we'll jump into maybe how the idea came about and all these sort of things.

Kazi Ahmed (00:02:35):
So obviously during COVID times, the world shut down in 2020. And while the rest of the world shut down, the digital world took off, especially the world of e-commerce. Broadly speaking, e-commerce was going up and up and up. And in the specific industry we sort of got into, there were some interesting things happening. And this was in the Amazon marketplace. And if you think about, you know, you buy something on Amazon. More than half the time, you know, it's not actually sold by Amazon. It's actually sold by, you know, a different company that's using Amazon as a storefront, like think of it like a shopping mall. So the Amazon marketplace was growing really, really rapidly. And the brands inside it were growing really rapidly. And what started happening in sort of 2019/2020 timeframe was there were all these brand aggregators. A couple of names stand out, you know, Thrasio, Perch, SellerX, et cetera. And they were buying sort of these individual brands and sort of starting to aggregate them together.

Pablo Srugo (00:03:38):
They would get a bunch of people who made a similar product and just try to roll them up into one big player and get economies of scale on the back office. Is that kind of the play?

Kazi Ahmed (00:03:46):
That was the general play, the marketed play, let's say. But there wasn't really. It wasn't necessarily folks selling the same kinds of things. They would buy a water bottle seller, and a yoga seller, and sunglasses. It's sort of different businesses. Ultimately, a lot of the economies of scale didn't materialize. Fast forward to today, a lot of the aggregators have sort of gone through a lot of restructuring and so on.

Pablo Srugo (00:04:13):
Is this what inspires you? Like you're seeing, let's say, Thrasio and these other players, and that's what brings you into this Amazon world? Or was there any reason you were looking at it already?

Kazi Ahmed (00:04:23):
Yeah. So it was actually my co-founder, Justin, who sort of ran into it because a number of his neighbors and friends were Amazon sellers who had sold their brands to these aggregators. And then actually we're starting up new brands and then with the idea of selling them again to aggregators. So that was sort of what was going on. And, you know, he talked to a lot of them and, just being curious, you know, like, how did you build your brand?

Pablo Srugo (00:04:48):
By the way, I'm just curious as a tangent, but what was their. Were they like, Oh my God, these guys overpaid, like, they're so crazy, like this is free money? Or what was their perspective of the situation?

Kazi Ahmed (00:04:58):
A little bit of that. And, you know, a little bit of, you know, we would sell the brand, and then performance would stagnate or actually go down shortly after acquisition. And we kept hearing these stories. And what was interesting is, as we heard those stories, our thesis was this brand aggregation model didn't probably make too much sense because it was all about the operators of the brands. But what we learned was all of these successful sellers, who are building these brands, and having successful exits. We're running their businesses really efficiently, and they're running them efficiently by the use of software. You know, if you think about Amazon, like having a brand on the Amazon marketplace, there's like Seller Central, which is the portal, and you can go in and do things. But if you have lots of product, if you have lots of volume, if you're growing really fast, it's really hard to do it all manually. So they were using a software for managing their Ads. Another software for forecasting inventory. Another software for recovering revenue that Amazon owed them. Another software for their management of their finances.

Pablo Srugo (00:06:07):
And how did you find this out? Just naturally talking to these, or did you do kind of a more concerted effort to do like customer discovery with these sellers?

Kazi Ahmed (00:06:14):
It's really just natural conversations. Just, you know, if you think about. In our backgrounds, we've been both, Justin and I were entrepreneurs by background. And so always curious about, you know, kind of similar to you. How do other businesses get built? And just talking to them, it's exactly a conversation like this. How did you build your business? What did you use to build your business? How did you grow so fast when your competitors didn't? Why do you think you got the exit multiple that others didn't? It was a lot of this kind of conversation, actually.

Pablo Srugo (00:06:46):
What was your background, actually, you and your co-founder. Before this is, happening in 2020/2021?

Kazi Ahmed (00:06:51):
Yeah, so both of us were entrepreneurs. His was on, you know. He had built a big sort of direct sales business over the past sort of 15-20 years all around the world. My background, you know. Also a serial entrepreneur. I started my first business in 2015, which was in the clean tech space. Then after some time, you know, I actually started a business that was a roll-up of mental health clinics where we were buying clinics and sort of putting them together. And Justin, who I knew through a mutual friend, was an investor in that business. And so that's how he and I know each other. And as I was selling that business, he was having these conversations. He pulled me into a few of them.

Pablo Srugo (00:07:32):
So the first business was tech. The second one was more kind of B roll-up, you know, small business, mid-market sort of thing. And now you're starting to see these things happening.

Kazi Ahmed (00:07:41):
These things happening, I just done. You know, tech, then roll-up. And he's like, and, you know, going to the punchline of sort of, you know, as we had a lot of these conversations, a common theme was the software and the tools that they were using. And so our insight was, you know, aggregating the brands did not make sense to us as a business model. We did kind of look at that first. But there's all these software's and there's these folks that are using, like, 10/15 different software's, to run their business. There is value to be created by putting a number of them together, whether it's technical value, you know, now these software's are connected and passing data between each other, et cetera. But even outside of that value around creating a common brand, going to market together, and cross-selling across multiple tools.

Pablo Srugo (00:08:32):
And what did you see, by the way, on the brand side? Because it's just as important what you didn't do. Than what you did. That made you feel like that model. Because, you know, it was working for a lot of big players. What did you see that made you pause a bit on that side?

Kazi Ahmed (00:08:46):
I think we got an inside view on sort of the performance of some of these brands. I'm sure a number of the brands did really well, even after getting acquired. But in most of the situations where we were talking to founders like this. They sold the business, and, you know, five months, six months later, or four months later, performance was down.

Pablo Srugo (00:09:08):
I see.

Kazi Ahmed (00:09:09):
And what really, you know, made us understand is, you know, selling on Amazon, selling on marketplaces, and being successful is difficult. And. Unless you have the operators really deeply in the business, you get some negative reviews, or you lose some rankings such that you're no longer on the first page when someone searches something on Amazon. Those things have a huge impact on the business. And so if you don't have seasoned operators running these brands and businesses, performance declines.

Pablo Srugo (00:09:42):
That's interesting. So it's almost like as you sell to these big, you know, and obviously there's exceptions. But it's almost like as you sell these businesses to bigger players, you lose the most valuable asset, which is actually the operators behind these small businesses many times.

Kazi Ahmed (00:09:55):
And interestingly enough, like, you know, Justin and I have this sort of inner jug that we talk about, you know, in acquisition of these brands. The acquirer was looking at, sort of, you know, the inventory and the store as the asset and sometimes the owner as the liability when it's actually completely flipped.

Pablo Srugo (00:10:14):
That's right.

Kazi Ahmed (00:10:15):
This same owner, you know, after selling their sort of water bottle brand, would go out and start a yoga mat company. And that would also be incredibly successful.

Pablo Srugo (00:10:26):
Crazy.

Kazi Ahmed (00:10:27):
Nothing to do with the inventories, their sort of ability to build that business.

Pablo Srugo (00:10:30):
And so on the software side. So, you just said, Okay, let's stitch some softwares together. Were there some that you particularly honed in, like, these ones are must-haves? I mean, it's just such a different world. What do you do with your first step? How do you approach this?

Kazi Ahmed (00:10:46):
Yeah, so we looked at, you know, what are sort of all the different softwares being used? What are all the different use cases and jobs to be done? And there are some big, sort of, let's say, verticals. There's Ads side. There's inventory forecasting. There's sort, of financials. There's keyword research, which is, you know, there's product research. And as we sort of looked into it, some of these already had pretty large companies that were winning, and some were sort of more fragmented and were more open space. That's sort of how we thought about where to go in first. We didn't want to go in. If we had a ton of capital, maybe we would have gone and sort of bought one of the large winning companies in one of the large segments. which another company in the space did. There's a company named Assembly that started, I think, a couple of years before us. They went and bought Helium 10 and so on. We didn't have as much capital and so on, so we actually started to go into the white spaces and start building from the sort of smaller tools.

Pablo Srugo (00:11:52):
How do you structure this in the first place? Because it's not typical VC money that's going to go after this. How much money do you raise at first, and from who? Is it debt? Is it equity? Is it a mix? What's the whole structure of it?

Kazi Ahmed (00:12:04):
Yeah. So, interestingly enough, we were basically raising and buying in parallel in the beginning. We'd raise some money by one or two companies. Raise a little bit more by a couple of companies. And most of our initial funding actually came from individual investors, lots of friends and family. Like lots of friends and some family from sort of just.

Pablo Srugo (00:12:25):
But what kind of numbers are like, you know, even let's say your first company, like you're buying it for what? Like half a million, $5 million, like what kind of.

Kazi Ahmed (00:12:34):
Yeah, half a million, million, $2 million. And so essentially the first of $10, $12 million, we raised from friends and family over the period of the first sort of six to eight months.

Pablo Srugo (00:12:41):
Tell me maybe about the first. One of the first companies that you bought, either the first one or the most interesting one of the first few.

Kazi Ahmed (00:12:47):
Yeah, there were quite a few that we bought in the beginning. So one of the ones that we'll talk about later, a lot of them we ended up not growing much and not doing much with. But one of the ones that we still have, for example, is a company called Ends Alert. It was among the first three or four businesses that we bought. It was pretty small, but what it did was, let's say you were selling USB keys or something like that on Amazon. You need to keep track of it. And you want to see if someone's written a negative review. You want to see if it's out of stock. You want to see if someone else is selling the same thing and has the buy box. It's essentially setting up alerts all throughout your listing so that you can understand if anything is going wrong with your business or anything that you need to make any decisions on.

Pablo Srugo (00:13:36):
Alerts just within your listing or just across the internet as well so you can see if it's selling. You could do it on your competitors, etc. If you wanted to as well, so if your competitor had a similar product. You could see, hey, when did they lower their prices? So that I know immediately. So tell me about this company. How did you find this company, for example?

Kazi Ahmed (00:13:53):
Yeah, so this one specifically was through actually a broker that was selling it. So they were looking to sell it. But I should talk a little bit about our evolution of how we've bought it.

Pablo Srugo (00:14:03):
Yeah, please.

Kazi Ahmed (00:14:05):
Obviously, Justin and I had very. Other than knowing. Talking to a bunch of sort, of sellers, we didn't know much about the industry. So the first few businesses, we actually bought through brokers, folks who were looking to sell their business. So what we then quickly were able to do is, you know, we kept a lot of the founders on as part of the team.

Pablo Srugo (00:14:25):
And just even to go deeper on that, the brokers. So you go out and you literally find like brokers in e-commerce and start talking to them and seeing what inventory they have and who's selling.

Kazi Ahmed (00:14:34):
Exactly. So there's a number of them out there, like Latona's and Econ Brokers and a whole bunch of others. Essentially, we network our way into sort of talking to the most active folks there. And they introduced us to the first several, and we bought a couple of those companies. Then, as we had more of these sort of founders working with us. That we built our network into this community. And one of the things about, you know, this may be sort of specific here but probably applies to other industries as well. There's a strong community focus in Amazon, where a lot of the sellers know each other a lot of the sellers know the founders of the softwares. A lot of the software founders know each other just because, you know, if you think about this entire marketplace business, it really sort of grew up starting in, 2014/2015 with not much external support. It's sort of people figuring it out themselves and a lot of, think of a lot of Reddit boards and so on. So just learning from each other. And so, as we know these founders, they're like, Hey, I know this other person that's built this business that's going well. You should think about looking at buying them. And then we would get an intro to them, and we would go and pitch them sort of the vision of what we were building. And, you know, if they're interested, sort of acquire them and so on. So that's sort of the first few were through these brokers. And after that, it was entirely through the network that we had built in that community.

Pablo Srugo (00:16:00):
And how, tell me a bit more, maybe this one example or just in general, but like, how do you structure the exits? Because for something like this, the strategy can be sound, but I mean, it can live and die on. If you overpay, you know, then all the value is to the person selling, and so on and so forth. So, like, how do you structure that?

Kazi Ahmed (00:16:18):
Yeah, typically we would structure it as a certain amount up front, a certain amount usually in a year or two years based on whatever we negotiated with the seller. And usually there was an earn-out component or a shares in Carbon6 component. So to tie the success of the seller, a large part of the success of the seller, to the success of. 

Pablo Srugo (00:16:44):
You typically kept the management team?

Kazi Ahmed (00:16:46):
In many cases, yeah.

Pablo Srugo (00:16:47):
And you're talking, like, is it usually, like, 20% up front or, like, 50% up front or 80% up front? You know, like, what was the typical formula?

Kazi Ahmed (00:16:53):
So typical would be around, like, 40, 40, 20. Like, 40 up front, 40 in another couple of years or so, and then 20% as the earnout.

Pablo Srugo (00:17:03):
And then what about just, like, pricing and valuation? Like, how, I mean, you know, was that a challenge? Like, getting to something that made sense? How do you price these things out?

Kazi Ahmed (00:17:12):
Yeah. So I think, you know, we were buying pretty small businesses. And so the multiples were on the lower side, right between 2 and 4x of revenue. And again, going back to, you know, I said in the beginning that we started as a roll-up model and sort of pivoted. In 2021 and early 2022, you were raising money at significantly higher multiples if you were sort of getting bigger and sort of had a vision of doing something bigger. And so there was a sort of this arbitrage between what we were raising at and what we were buying these businesses for.

Pablo Srugo (00:17:48):
But on the seller side, in terms of buying them, they were pretty receptive. That wasn't necessarily a challenge to get these people to sell it for 2 to 4x revenue.

Kazi Ahmed (00:17:57):
Not really. I think in many of these cases, the folks we were brought on, if you think about the software we were buying. They were doing very specific things. And I think a lot of the founders were recognizing, you know, doing this specific thing, how much bigger can I make it? So they had a decision point. Either, you know, raise money and take on risk, and let's do more things and sort of build it from that umbrella. Or now they had this option of sort of partnering with us and being part of a bigger vision that we were building together rather than them trying to go out on their own. Didn't work with everybody, but, you know, there were a lot of folks that sort of came on with us on this journey.

Pablo Srugo (00:18:39):
And then was debt a part of the fundraising formula, or was it all just equity?

Kazi Ahmed (00:18:43):
It was later, after we had sort of proven the model out a little bit. So we, I think I mentioned, sort of the first 10 million or so we raised sort of from friends and family. We did a Series A. Beginning of 2022. And then we did a debt round, mid- or late 2022.

Pablo Srugo (00:19:02):
How big was the Series A?

Kazi Ahmed (00:19:05):
So the series A in equity was $16 million. And then we got a debt facility later, which was $50.

Pablo Srugo (00:19:13):
And what kind of players back like that $16 million? Is that a PE shop or who kind of backs these sort of players?

Kazi Ahmed (00:19:18):
It was a VC fund, White Star Capital. So they're actually kind of Canadian, but we actually work more with the New York office.

Pablo Srugo (00:19:26):
I'll say this, like, just being upfront. Like, a lot of this sounds too easy. You know what I mean? Like the way you're describing it, like, I'm just curious, like, what parts? Because you find out that, like, you know, there's a role of play. Yeah. Obviously you have credibility. So fundraising would typically be a lot harder than it was. Maybe for a first-line founder than it was for you, like in terms of you had, credibility and all those sort of things and a network. So that's fine. But fundraising is really like the hardest part of making something work. You know, getting the assets was not necessarily that hard. You leveraged brokers. There was actually, like, a system that you can put in place to find a lot of these players. What about after, like post-acquisition? Which part of actually making this all work would you say is the hard part?

Kazi Ahmed (00:20:11):
I think part of it is we were working, like, crazy hours. That's for sure. Justin and I joked, like, there was a time when he and I got off the phone at, like, 02:00 a.m. at night and then got back on a call again at, like, 05:30 a.m. in the morning.

Pablo Srugo (00:20:27):
Oh, shit.

Kazi Ahmed (00:20:27):
So it was some pretty crazy times.

Pablo Srugo (00:20:29):
Were you dealing with a lot of overseas?

Kazi Ahmed (00:20:31):
Some overseas and just so much to do. Like if you think about, you know, the number of fundraising calls you have to have, then you also have to have calls sort of like sourcing new deals and then meetings and work to do due diligence on these companies. And then after the acquisition, sort of putting it all together, all the while building a team to be able to do all of this. So it was pretty intense in the beginning. I think, though, what we initially really heavily focused on. Obviously, is the raising money and acquiring the companies. One of the things we didn't do well in the beginning was some of the integration and some of the figuring out the financials and all of that together. Because we just wanted to go, and we wanted to build pretty fast. Because we did feel there was a specific window of opportunity to make our mark, which was, you know, it's the ZERP era. Money is easier to raise. There's this arbitrage. You know, if we took too long and sort of didn't build up critical mass, we wouldn't be able to reach escape velocity.

Pablo Srugo (00:21:35):
So at first you're almost, like, just building a portfolio of companies. So you're just literally buying companies, and then they're just still operating like they used to?

Kazi Ahmed (00:21:43):
Pretty much. Pretty much, yeah.

Pablo Srugo (00:21:45):
And then what do you do when you decide it's time to stitch together? Like, what are some of the first things that you start to build?

Kazi Ahmed (00:21:50):
Yeah, so they said necessity is a master, of all innovation. So, mid- to late 2022, it became pretty much impossible to raise money, regardless of credibility and so on. And suddenly this arbitrage that we were using to sort of buy these companies also disappeared.

Pablo Srugo (00:22:10):
And how big were you at that point? How many companies did you already have? What kind of revenue?

Kazi Ahmed (00:22:14):
We had bought a number. I think we had bought over 12 or 13. And we were about $10 million in ARR, maybe just under. And, you know, we kind of knew that there was going to be some sort of correction. The level of it and the timing of it, we obviously, like, no one knew. But essentially, you know, we realized you can't just keep buying more businesses. And we realized that, hey, because we haven't integrated any of it, the financial situation of the company was not great. Because, you know, we were buying and keeping everything while building a team, as I was saying, to do the acquisitions.

Pablo Srugo (00:22:55):
So you're burning, like you're not profitable.

Kazi Ahmed (00:22:57):
Burning like crazy. Yeah, yeah, burning like crazy.

Pablo Srugo (00:22:59):
What were you burning? Do you remember, more or less?

Kazi Ahmed (00:23:01):
I think, like, the November 2022. We burned, like, a million dollars.

Pablo Srugo (00:23:05):
Okay. A month.

Kazi Ahmed (00:23:06):
And so I remember we had this exact offsite in November where we got together, and first time we had really sort of pulled together consolidated financials and seeing what revenue is like, what cost is like, what additional money we owe on these earn-up payments, and so on. And we were like, holy shit, this is not a good situation.

Pablo Srugo (00:23:30):
And what kind of runway, like what kind of cash balance do you guys have?

Kazi Ahmed (00:23:33):
I think we had like a six-month runway or something at that time.

Pablo Srugo (00:23:35):
That's fast.

Kazi Ahmed (00:23:35):
Yeah. Because we were raising and buying, and raising and buying, like we had raised a big pool of money and then slowly buying.

Pablo Srugo (00:23:42):
We have tens of thousands of people who have followed the show. Are you one of those people? You want to be a part of the group. You want to be a part of those tens of thousands of followers. So hit the follow button. Well, it was, you know, like it was par for the course sort of thing. Like everybody that was doing well was just pressing on the accelerator. And, you know, a lot of people got caught too late. You know, obviously you didn't. But like running, operating the business that way, that tightly, was what everybody was doing. And it's almost what you had to do because that was the game on the field.

Kazi Ahmed (00:24:10):
There's a game on the field. And growth at all costs, right, was the amount of the day. So obviously in a year, right, mid- of 2021 to like. With 2022, we had gone from zero to $10 million ARR. You know, we bought it, but versus burning it on operations. But, you know, we had deployed, you know, I want to say $16, $18 million dollars or something like that. I mean, my numbers might be wrong.

Pablo Srugo (00:24:34):
And what's the organic growth rate of that revenue?

Kazi Ahmed (00:24:37):
Pretty flat at that point.

Pablo Srugo (00:24:38):
Okay.

Kazi Ahmed (00:24:38):
Pretty flat at that point. But, you know, we were looking at it, and investors were looking at it, like, think about how much money most start-ups burn to get to $10 million.

Pablo Srugo (00:24:48):
That's right. Yeah. If you look at it that way. I mean, one-to-one is like insane. If you raise 10 and you get to 10, you're insane, right? Even two to one is actually pretty serious. 16 to get to 10, pretty solid.

Kazi Ahmed (00:24:58):
Right. Right. So that was the viewpoint and what we were raising against, right? And sort of that's the model. And that's broadly the Constellation software model, right? Like you can burn money or invest. You have cash, and you could invest that cash in growing what you have or buying more. And it's the same. Depends on sort of that ratio. That was the thinking, right? But at that point, you remember. Impossible to raise money, generally flat business and burning cash, was not a good situation.

Pablo Srugo (00:25:29):
That's right. I always said back then, you have to do two things. Either you're a fast grower or you're lean and profitable. But if you're not a fast grower and you're burning, not good.

Kazi Ahmed (00:25:40):
Not a good situation. That's when we essentially decided, because we had to, to pivot to actually building a business. We were starting to see some organic growth in certain specific parts of our business. We doubled down on those. And essentially, you know, through 2023, you know, we more than doubled organically. We became profitable because we had much tighter controls around costs. And then, 2024, we doubled again organically. And then, you know, we were going on to do a raise, and, you know, SPS Commerce sort of came to us through the raise as sort of an interest in sort of buying out the whole company. And, you know, we saw that as an interesting option, and that's sort of what we ended up going with.

Pablo Srugo (00:26:27):
And that transaction closed. Late 24' or early this year?

Kazi Ahmed (00:26:30):
No, early this year. So, February, early February.

Pablo Srugo (00:26:34):
Tell me about the cost cutting.

Kazi Ahmed (00:26:35):
We had to do it very aggressively, and we did it sort of in two axes, let's say. One was around, you know, what functions did we need versus not need, and how big certain functions needed to be. How big did engineering need to be? How big did marketing need to be, and so on, and sort of right-size the organization, as they say, based on sort of where we were at and where we needed to be and where we need to put our resources.

Pablo Srugo (00:27:02):
But specifically, take marketing, right? You look at 12 businesses. You have, like, three marketing people here. Two here, you sum it all up. You've got 20 people in marketing. And you're like, "We need five, or We need 10." Then what do you do? How do you figure it out? Do you even know these people well enough? You know what I mean? Like, how do you do that?

Kazi Ahmed (00:27:16):
Yeah, we knew most of these folks. And, you know, part of it is what type of marketing do we need? Do we need email marketing, or performing marketing, or content? Do we actually want to be more sales-led versus marketing-led? So actually cut down marketing. Increase sales. There's a lot of these decisions. And then after that, there was also just a looking at how did we want to build and who did we want to build with? That's actually the beginning of our Toronto office. Before that, we were fully remote with acquisitions everywhere. And what we realized was to do what we needed to do from where we were. We needed to build a very certain, specific type of company. In that same offsite, interestingly enough, we defined what our leadership principles were going to be. And we really leaned them to those in terms of. 

Pablo Srugo (00:28:09):
What were some of the key ones?

Kazi Ahmed (00:28:10):
You know, we all own Carbon6 in terms of everyone's an owner. You guys, you go and figure out, you know, what you got to do. We went relentlessly, which is around, you know, we want people who are sort of incredibly relentless and pursue whatever they need to do to, you know, get to the final outcome. There's a whole bunch of these that sort of we leaned in on, sort of the profile of people we wanted to build a company with. And that's, and I want to be clear, like we weren't just cutting like crazy. We were cutting and hiring at the same time.

Pablo Srugo (00:28:43):
Interesting.

Kazi Ahmed (00:28:44):
And this is where sort of the little bit of the gamblers in us. Come out. At which all entrepreneurs are. It wasn't about, okay, let's cut costs so that, you know, at $10 million in revenue, we could be profitable, et cetera. We were like, we need to take that 10 to 20 or higher. And we need to be profitable at that point or somewhere midpoint. And that's sort of the plan we put in place.

Pablo Srugo (00:29:08):
And so just on people though, you went from how many people to how many people after that decision?

Kazi Ahmed (00:29:12):
So I don't have the numbers at the top of my head.

Pablo Srugo (00:29:15):
Roughly.

Kazi Ahmed (00:29:16):
Just to give you a sense, though, I think, end of 2022. We were probably between 80 to 100 people. End of 2023, we were similar.

Pablo Srugo (00:29:26):
Okay. So you probably went down 30% or something and then brought it back up. Brought it back up.

Kazi Ahmed (00:29:30):
Yeah.

Kazi Ahmed (00:29:30):
I don't remember exactly what happened, but it's- 

Kazi Ahmed (00:29:33):
So let's talk then about the growth. How do you decide what initiatives to go after? And then I'm sure you did a bunch of different things. Maybe tell me about one that worked especially well.

Kazi Ahmed (00:29:43):
Yeah. So I think our biggest pivot was actually shifting from being more marketing-driven to more sales-driven and moving upmarket. And those two sort of come together. If you think about Amazon sellers, we were sort of working with all sizes and types of Amazon sellers. We had a couple of products that were better geared towards sort of larger sellers, folks who were selling, you know, $1 million, $2 million, $20 million, $50 million a year on Amazon. We were starting to see a pretty good amount of traction there. Like Justin, you know, my co-founder, we brought on other folks over time, like Naseem joined as a COO. Mumin joined as our CEO. All of them had sort of like a sales and sort of sales-led growth background, and you know. Initially it was Justin and Naseem and others just selling some of these products, and we started selling some of the larger seller. Larger and, largest sellers on Amazon onto that product, and then that was sort of the initial, okay, there's something here. And so you know, we didn't want to then go out and hire 20 people. But okay, let's see and let's test what happens. And I still remember we then hired our first two salespeople. I want to say I think, October, or November, or December of, like, 2022. Neither of them had sales experience. It was just who could we get in immediately that someone knew. One was a school teacher. 

Pablo Srugo (00:31:16):
No way.

Kazi Ahmed (00:31:19):
And I think between the two of them, they closed 50, or 60, or 80 deals in sort of the first month. And that's when we saw, okay, there's something here. There's a demand for this product in this kind of market segment. Let's lean in. And so then we started building up our sales team, focusing our marketing instead of doing sort of across broad-based. Everything really focused on that ICP and these specific products. And through that off-site, we said, hey, we see some traction here. We see all these issues. We need to get here. Let's do a lot of experiments around here and sort of build and see. And as we invested more, we started seeing more traction.

Pablo Srugo (00:32:01):
And that ability to move towards sales and move upmarket, was that just a kind of change in go-to-market, or was that driven by the fact that your product was more all-encompassing now? because you'd stitched all these kind of point solutions together?

Kazi Ahmed (00:32:18):
It was a little bit of both. It was more of a go-to-market pivot than a product pivot. But what I'll say is, you know, we had more things to sell to the larger seller. It also then focused our engineering efforts going forward in terms of how we stitch them together and sort of what things we prioritize. But really, the pivot initially was around on, the go-to-market side.

Pablo Srugo (00:32:43):
And so what kind of synergies would you say you truly realized by stitching these products together?

Kazi Ahmed (00:32:49):
I think. The synergies were much more on the revenue side. I think there were some on the cost side, right? It's like, you know, a much smaller marketing team could go across all of them, and, you know, a smaller engineering team could sort of handle all of them, reduce costs on AWS on scale, et cetera. But that is actually. Minimal and not the big driver of value. What was interesting was we had a product, let's say, that was a small product, a small functionality that was $19.99 a month. I'm making up this number, but let's say 1,000 customers. We had another product. Which was geared towards sort of these larger sellers, which could do, let's say it's $1,000 a month. There were a number of customers of that $19.99 product that were large sellers, and we could see. And we were able to go after them directly, being like, hey, you use this. You should use this. and actually significantly increase our revenue.

Pablo Srugo (00:33:59):
So pay more. But get, you actually need way more. This thing's better suited. Yeah, you're going to pay more, but your ROI is going to be high. And then you, as a result, just, you know, you just kind of a hundred extra or whatever, 500 extra ACV.

Kazi Ahmed (00:34:10):
And then there are different products, right? One does alerts. The other does the revenue recovery. And so then we had this customer base. We had this network that we've had built up from, you know, all these founders that we brought on that were connected in the community. We had built a brand because we'd always been out of these conferences because we wanted to find softwares and so on. So now that we had a couple of products that were geared towards larger sellers with high ACVs that we could actually put a sales team behind, the network that we had built because of how we built the company, as well as the customer list that we had, became incredibly valuable instead of growing really fast.

Pablo Srugo (00:34:50):
And then this is a bit, of, a different. Maybe I should have asked earlier, but it just came to my mind. How did you decide which businesses to buy? More specifically, what's a good business versus a bad business? Which one's actually worth buying or not?

Kazi Ahmed (00:35:03):
That's one of the things I wish we had known better. Because I think we were looking at businesses. On its own traditional diligence. It's like, okay, what's the revenue? What's its cost? What's its charge rate? Et cetera. And we had bought a lot of different types of businesses and, just based on the merits. Because when we started, if you remember, we didn't have a grand vision of, like, we are going to serve this type of ICP with this type of ACV that will do sales base, et cetera. Ours was, does it serve an Amazon seller in some way? And does it have underlying, okay, decent metrics? Okay, let's buy. And, you know, is the multiple we can buy that? Does it give us an arbitrage to where we can raise that? And that's sort of how we made the decisions. And so the ones that we rejected, you know, either maybe had too much tech debt, or the metrics were bad, or, the founders wanted too much money. Like that sort of was the differentiation. A lot of the companies that we bought, they provided value in the sense that they have the customer list, and they had, you know, allowed us to be more entrenched in the network. It's impossible to know when you're starting a business, like, exactly where you will be four years from now. And so often the most important thing is to get going and just doing it. We could have spent all of 2021 doing deep analysis and conversations.

Pablo Srugo (00:36:30):
You would have missed the window. Yeah. Totally.

Kazi Ahmed (00:36:32):
It's just, like, just getting going.

Pablo Srugo (00:36:34):
By the way, in that year, 2023, when you focused on cost cutting plus growing. Did you buy more businesses, or did you stop that part of the business?

Kazi Ahmed (00:36:41):
We pretty much stopped. We bought one more.

Pablo Srugo (00:36:43):
Okay. So you really kind of did the roll-up. Got the goods, and then optimized was really kind of the two sides of the equation.

Kazi Ahmed (00:36:50):
Yeah, totally.

Pablo Srugo (00:36:51):
Let's dive into maybe. Spend a few minutes just on the acquisition. Like you mentioned a really high level, but how did that kind of, you know, I'm sure at some point you thought for a business like this that you would exit, but how did it happen this time?

Kazi Ahmed (00:37:04):
Really what we were going out to market for was to raise more money for acquisitions because we felt we were ready to do under the set of acquisitions. And there were sort of a couple of big niches that we wanted to potentially go after. We wanted to go omni-channel. So, we were in Amazon, but there's Walmart and Target and so on. We saw we could build all of that over the next 10 years. Or we could actually, similar to what we did when we got started, short-circuit that by sort of buying and getting some of that in.

Pablo Srugo (00:37:34):
And growth in that meantime, was it still on that kind of doubling type of ramp?

Kazi Ahmed (00:37:37):
Yeah, we were growing pretty rapidly that whole time. So when we went out for the race. It was more, actually less VC. More sort of PE type players because it's some acquisitions and so on. What was interesting about SPS Commerce when they came for it is. So, SPS Commerce is actually historically more an EDI company, connecting suppliers. To the retailers that they do business with.

Pablo Srugo (00:38:04):
What's EDI? What does that stand for?

Kazi Ahmed (00:38:05):
Electronic Data Interchange. It's purchase orders, invoices, all of that data moving between retailers and suppliers. That is powered by SPS Commerce's software. What was interesting was they are one of the largest players in this in North America and in other geographies as well. If we think about all those suppliers, most of them sell on Amazon, most of them sell on Walmart, most of them sell on others. And there was this incredible sort of cross-sell opportunity that we saw that would accelerate our growth and journey far beyond anything we could do sort of ourselves if executed correctly. And what was interesting was while our business is very complementary in terms of, like, it serves the same customers. It does something different than what FBS Commerce does. And that was actually their thesis. You know, we have this big network that we have. How do we sort of add on additional software and services that we can provide to our customer base? And that, if you think about the original thesis of Carbon6, like why we got started, that was our original thesis in 2021. There's a customer. What are more things you can provide them? And that's why we were buying it. So we saw this alignment of vision. And when you put that with sort of the opportunity of the customer base that they already have and sort of the overlap and so on, we saw that as a massive opportunity to go out and capture.

Pablo Srugo (00:39:37):
How long did it take from first chatting with them to closing the transaction in February?

Kazi Ahmed (00:39:42):
I think we would have first chatted with them maybe in October/September, October.

Pablo Srugo (00:39:45):
Okay, so it's pretty quick, like four months.

Kazi Ahmed (00:39:46):
Yeah, yeah.

Pablo Srugo (00:39:47):
And what did they buy? Was it all stock? Was it, sorry, all cash? All stocks, a mix?

Kazi Ahmed (00:39:51):
A mix of cash and stock.

Pablo Srugo (00:39:55):
And I always ask this question with the transaction. I mean, you had other exits before this one?

Kazi Ahmed (00:39:59):
Yeah, I did.

Pablo Srugo (00:40:00):
So it might be different for you. I typically ask it when it's the first big exit. But in any case, like, you know, I'm always curious on the emotional front of it. Like, what does it feel like? I know it's not the end line. Like, I know the business is still going. I know you're still growing it. But there is, like, it is the end of a journey, you know. And it's a big momentous, much bigger than just, like, raising around. What does that feel like? Like to actually get that signed, the money moves over, you know what I mean? Like that day.

Kazi Ahmed (00:40:26):
It's a huge milestone, as you said. Like, it is a validation of what we've built to date. At the same time, it's a validation of the vision that we started out with, specifically in the case of SPS Commerce. Because, like, you know, you could have an exit that is, you know, we see sort of what you've built, and, you know, you just want to dismantle it and just take your customers. Or we just want to take your tech. Or we just want, like, whatever it is. The way sort of the acquisition work was sort of, you know, bringing in Carbon6 and sort of being part of a new product line within SPS Commerce with an expectation to grow really rapidly. That was a validation of sort of the vision that we had started out with. And the fact that we get to continue going alongside FBS Commerce now to grow as fast, if not faster, than we were before is super exciting.

Pablo Srugo (00:41:17):
But that's the logical side. But emotionally, is it relief? Is it happiness? Is it like actually it falls flat and it's not nearly as exciting as you think it might be?

Kazi Ahmed (00:41:26):
I think with all things in life, like when something big happens. There's emotions related to that event. And it was happy. At this point, if you think about running the process, you're working crazy hours. I remember leading up to signing, I was actually visiting home in Bangladesh, which has a 12-hour difference. So I would start work at 8 p.m.

Kazi Ahmed (00:41:50):
Oh my God.

Kazi Ahmed (00:41:51):
at night and work in the morning. And then hang out with my parents during the day and repeat. So you're so in it. The, you know, signing and closing feels like, you know, partially relief, partially happiness. Everything you'd been working on for six months straight. And, you know, even before that, as you're growing the company. Comes to a conclusion. But then, like all things in life. A week passes, and sort of then you're back to reality. And I think what I'm glad about is the reality is what I was doing before and what I was enjoying in terms of building Carbon6 gets to continue. Working with the same people I'm working with, working on the same problems I was working on before, but now with sort of a bigger vision and bigger overall partner.

Pablo Srugo (00:42:37):
Perfect. Well, let's stop it there. And I'll ask, typically I ask a handful of questions, but we talked actually about a moment where you thought you would fail, which was, you know, near the end of November. And obviously product market fit here is a bit different. So let me ask this one question, which is when you talk. I'm sure you talk to a lot of founders. What is some of the most common pieces of advice that you tend to give early-stage founders specifically?

Kazi Ahmed (00:42:58):
Yeah, I think the earliest stage is really about getting going. I see too many founders, or, you know. Want to become founders. It's like, I'm waiting for this perfect idea, or I had this idea. I'm perfecting it. I'm going and talking to a hundred people and doing a survey and all of that. Most of what you will learn doing that will end up being wrong. Usually these things come together when, like, rubber hits the road. Go out. Build something really small, like around what you want to do, and go sell it. People will say a lot of things in surveys. Let them vote with their wallet. What people are buying, build that. And you may have a vision of sort of going here, but. And people will tell you, Yeah, that's what I really need. You build the first few features of that. You'll see they don't want to pay for it. They'll pay for this. And that actually sets you on a different direction. So getting started and then being very flexible in terms of where you might end up is probably the most important advice I've ever gotten. And I give to every single sort of founder or entrepreneur starting out. That I give is the most important thing you can do is get started and be very, very flexible in pivoting in whichever direction. Because what you don't want is you're going on this direction and then things not working, things not working. And then there's the word pivot. It's like, oh, you pivot the whole company. You hear the stories of the big pivots. And you sometimes hear the stories of the ones that did the big pivot and succeeded. Many don't. It's much better to do lots of small pivots than a big, big massive one.

Pablo Srugo (00:44:39):
Perfect. Well, Kazi, thanks so much for spending time, man. It's been great.

Kazi Ahmed (00:44:42):
Awesome. Well, thank you for having me.

Pablo Srugo (00:44:45):
So guess what? I met this founder who listened to every single episode of the Product Market Fit Show. He just called me, and he sold his company for over a billion dollars. That's right. If you listen to every episode of the Product Market Fit Show, that's what's going to happen. That's just it's, you know, I can't say it's guaranteed, but it's what I've seen. It's just, it's what I've seen in the past. But you won't know for sure unless you, you know, try it out for yourself. So go back because there's over 100 episodes of the Product Market Fit show and you haven't listened to most of them. Check them out.