Practical Founders Podcast

Jesse Welch runs Midcap Global, a boutique investment bank advising companies with $1 million to over $10 million in profits. He came from film production, AI startups, a real estate private equity firm and a crypto hedge fund sold in 2021, and he now teaches founders on his Capital Love Letters YouTube channel. His core point: the headline exit price is a vanity metric; it's the other terms that decide who gets paid, how much and when. He walks through earnouts, rollover equity, escrows, consent rights, preferred equity, PIK interest and ratchets, and shows how each one can be turned against a founder who signs without understanding it. He also covers newer traps for software sellers, including annual prepay contracts that trigger working capital demands, plus quality of earnings reports and family office buyers. His advice: build a three-person team with a CPA, lawyer and M&A advisor, stay patient and flexible, and assume every clause gets used against you. Key Takeaways Earnout Odds - About 25% of lower middle market deals include one, and the market pays around 21 cents on the dollar. Consent Rights - Assume every clause gets weaponized against you; Jesse puts the odds at forty to fifty percent. Preferred Equity - Liquidation preferences, participation and PIK interest put investors first in line, and time works against the founder. Prepay Contracts - Buyers may demand part of the annual cash you collected stay behind; negotiate to the real cost of service. Advisor Team - Hire a CPA, a lawyer and an M&A advisor, because lawyers make deals legal, not strategic. Quote from Jesse Welch, Founder and CEO of Midcap Global "Earnouts are tools that can be used to trap you. About 25% of lower middle market deals have one, and they're sold as a second bite at the apple, but they don't tell you if that apple's rotten or if there's a worm in it. When I'm representing a buyer I always push for an earnout, but for a founder it's an extremely dangerous tool. "Say you want to sell at $200 million and the buyer wants to pay $190 million. To bridge that ten-million gap, they'll ask you to work for them for two years, with five million for each year if the company hits certain metrics, usually a profit number. It sounds great because you know your business and you can grow it to that number, but you're betting on the same horse with a different jockey. "The buyer can reduce your marketing spend, add a monitoring fee and throw overhead onto your business, so a ten-million profit target lands at $9.9 million. You don't get 90 percent of your earnout for getting 90 percent of the way there; you might work for two years and walk away with zero. About half of earnouts pay out nothing, and across the entire market they pay around 21 cents on the dollar." Links Jesse Welch on LinkedIn Midcap Global website Capital Love Letters (YouTube) Podcast Sponsor – DevHawk Every founder I know is trying to move their roadmap faster with AI, but most admit it isn't working. DevHawk is an AI software factory from former practical founder Praveen Ghanta.   DevHawk plugs in a full crew of customized AI agents that handle the whole development job, end-to-end. Not just writing code, but requirements, testing, shipping, and maintenance.   Add their AI agents to your org chart and run them yourself--or have the DevHawk team manage the software factory for you. Either way, you get a team that works while you sleep, and a roadmap that can move 5-10x faster within a month.   Head to devhawk.ai/practical to book a conversation about how DevHawk can help.  The Practical Founders Podcast Tune into the Practical Founders Podcast for weekly in-depth interviews with founders who have built valuable software companies without big funding. Subscribe to the Practical Founders Podcast using your favorite podcast app or view on our YouTube channel. Get the weekly Practical Founders newsletter and podcast updates at practicalfounders.com. Practical Founders CEO Peer Groups Be part of a committed and confidential group of practical founders creating valuable software companies without big VC funding.  A Practical Founders Peer Group is a committed and confidential group of founders/CEOs who want to help you succeed on your terms. Each Practical Founders Peer Group is personally curated and moderated by Greg Head.

Jerry Nettuno started Schedulicity in Bozeman, Montana, in 2009 after struggling to book his own haircut as a single father. He recruited his first developers from Denver, paid for the build himself, and launched online scheduling for hairstylists, trainers and other small service businesses at $29 a month, starting with about a hundred customers around Bozeman. To fund a bigger team and faster growth, Nettuno raised millions from angels and one large private investor, never from venture capital. Schedulicity grew to 15,000 to 20,000 small businesses, almost 40 million consumers, $10 to $20 million in revenue and about 100 employees, but growth stalled after COVID. The company raised about $28 million in total private capital. Looking back, Jerry says he would raise less, since every round raises the sale price needed to deliver the same return, and today he could run the same company with a fraction of the people. He sold to Vagaro, closing in early 2025, and now co-founds Pulsara, which expects about $30 million in ARR. Key Takeaways Exit Math - Every round raises the bar: $200 million to match the return a $25 million sale once delivered. Cheaper Today - With today's tools, the same company could run with a fraction of the employees Schedulicity needed. Non-VC Capital - Angels and one large private investor funded Schedulicity after Sand Hill Road meetings left him unimpressed. Win The Owner - Fixing the stylist's business problems brought her 200-plus customers onto the platform without paying anything. Explain Fast - Many founders lose people explaining the product; be able to say it in one minute before building further. Quote from Jerry Nettuno, Founder and CEO of Schedulicity "I would have definitely not raised the money that we did when we did. It was only so much I could do on my own, but I think we could have bootstrapped a little bit longer and not had to raise as much money. Things were so different at that time it was hard to see, but it's very clear looking back, obviously. "Not to mention, in today's world we could have run the same company that we sold with probably a fraction of the employees. When seventy percent of founders say they'd raise less, a lot of it has to do with the fact that every time you raise money, the benchmark is raised. "The more money you raise, it exponentially increases the amount you'd have to sell the company for to get the same amount. I remember seeing an article early on that talked about that. Once you raise the bigger money, you'd have to sell the company at two hundred million to come away with the same kind of return as you could have sold it for twenty-five." Links Jerry Nettuno on LinkedIn Schedulicity on LinkedIn Schedulicity website Vagaro (acquirer) Podcast Sponsor – Full Scale This podcast is sponsored by Full Scale, one of the fastest-growing software development companies in any region. Full Scale vets, employs, and supports over 300 professional developers, designers, and testers in the Philippines who can augment and extend your core dev team. Learn more at fullscale.io. The Practical Founders Podcast Tune into the Practical Founders Podcast for weekly in-depth interviews with founders who have built valuable software companies without big funding. Subscribe to the Practical Founders Podcast using your favorite podcast app or view on our YouTube channel. Get the weekly Practical Founders newsletter and podcast updates at practicalfounders.com. Practical Founders CEO Peer Groups Be part of a committed and confidential group of practical founders creating valuable software companies without big VC funding.  A Practical Founders Peer Group is a committed and confidential group of founders/CEOs who want to help you succeed on your terms. Each Practical Founders Peer Group is personally curated and moderated by Greg Head.

Rob Walling has been publishing Startups for the Rest of Us every week since 2010 — he recorded episode 855 the morning of this interview — and has written five books on bootstrapped SaaS, with a sixth on the way. He started five companies before turning to investing, all of them bootstrapped, and sold Drip in 2016. In 2018 he and co-founder Einar Vollset launched TinySeed, the first accelerator built for SaaS bootstrappers. They aimed to raise $1-2 million for the first fund and closed almost $5 million. TinySeed now writes $150,000 to $250,000 checks into companies doing $2,000 to $40,000 MRR, funds one to two percent of applicants in batches of 10 to 20, and runs a year-long program instead of the standard 90 days. Rob is invested in 241 SaaS companies. This year TinySeed is skipping a batch for the first time since 2019 — not because the portfolio is struggling, but because Rob wants to do the work on which moats still hold in the age of AI before writing more checks. His aggregate revenue graphs are still climbing while the market has repriced the entire category, a gap he calls the widest he's ever seen between sentiment and reality. Rob has just revised his popular book, Idea to Traction, for the AI age. It's for founders to turn software product ideas into actual businesses with happy customers who pay you--for years. Building software products used to be hard and slow, now it's neither. The challenge has moved to validating with customers--before you start building. Key Takeaways Sentiment Gap — Portfolio revenue is still climbing while the market prices SaaS for a collapse. Ten to Twenty — Rob's estimate of the SaaS share facing real AI headwinds, not the whole category. Validation Still — Shipping fast is not validating; experienced founders still talk to customers first. Moats Shifting — Complexity and integrations stopped protecting anyone; permission to act still does. Average Is Terrible — AI tools needing constant supervision lose to one competent full-time hire. Quote from Rob Walling, Co-Founder of TinySeed "Just because people can build things now, they think they don't have to validate. When I turned Idea to Traction into a video course, someone bought it and asked for a refund, which we give. I wanted to know why, and they said the first third is about validating, having conversations with customers, and getting a landing page. They told me they don't have to do that anymore, because they can just build a product in a day and launch it. And I told him, No, you are wrong. "So I went back and revised my Idea to Traction book to address that exact objection. I have all these examples of second and third-time founders who are doing validation, because they're experienced and they know they need to. Steve Blank was saying the same thing: everyone was showing up with a vibe-coded prototype, and they hadn't talked to a single customer, to their detriment. That's the biggest myth I'm trying to fight." Links Rob Walling on LinkedIn Startups for the Rest of Us podcast TinySeed on LinkedIn TinySeed website Rob's new book, Idea to Traction: Stop Building SaaS Nobody Wants in the Age of AI Podcast Sponsor – Vista Point Advisors This podcast is sponsored by Vista Point Advisors, a leading investment bank for founder-led software, AI, and internet companies. Vista Point works exclusively on the sell side, providing unconflicted M&A and capital raising advice to help founders maximize business value, evaluate their options, and realize ideal outcomes.   The Practical Founders Podcast Tune into the Practical Founders Podcast for weekly in-depth interviews with founders who have built valuable software companies without big funding. Subscribe to the Practical Founders Podcast using your favorite podcast app or view on our YouTube channel. Get the weekly Practical Founders newsletter and podcast updates at practicalfounders.com. Practical Founders CEO Peer Groups Be part of a committed and confidential group of practical founders creating valuable software companies without big VC funding.  A Practical Founders Peer Group is a committed and confidential group of founders/CEOs who want to help you succeed on your terms. Each Practical Founders Peer Group is personally curated and moderated by Greg Head.

Josh Allen is founder and CEO of Tratta, software for debt collection agencies and creditor rights law firms that gives consumers self-service payment tools and gives agents modern back-office tools. He started in merchant services, hired contractors to build a payment portal, and found out the hard way that nobody was waiting for it. That first platform landed five clients in about three years while Josh took on well over a million dollars in personal debt for the business. Tratta grew out of one back-office feature a client loved. Today it has about $5 million ARR, just over 20 employees, and almost 100 clients on pricing tied to approved payments. Josh repaid every penny of that debt in late 2023 and has never taken outside funding. Revenue and headcount both doubled this past year, and he is now hiring his first VP of customer operations. His advice: keep validating with real clients, be willing to pivot, and let a strong CTO tell you no. Key Takeaways Build Backwards: Start with the critical tools for the critical users; if those teams aren't happy, nothing launches. Validate Small: One back-office feature a client loved became the product; the portal everyone doubted came second. Say No: A CTO who ignored founder ideas became the biggest unlock; hearing no is Josh's best lesson. Client Concentration: Josh's best day was when no client topped 10 percent of revenue, better than hitting $5 million. Narrow Market: Josh sizes his ideal market at about 1,600 clients and aims to win a quarter of them. Quote from Josh Allen, Founder and CEO of Tratta "In my first startups, we got five clients over three-ish years, and I appreciate every one of them to this day. The software did not scale, there were so many problems with it, and I didn't understand the code well enough to know what they were. I ended up hiring another firm to come look at it, and they took it over and stabilized it. "The realization came that this was not scalable. I had sunk so much money into it and was on the hook for well over a million dollars personally, which sounds crazy with only five clients, and yes, I did a lot wrong. I was facing software that was not going to work, but it was a good idea. "I had just had my first daughter and was about to have a second, which is always a great time to do this stuff. I could ride it out, go back to merchant services, cross my fingers, and pay this off over the next ten years of my life. Or I could just start over completely." Links Josh Allen on LinkedIn Tratta on LinkedIn Tratta website Podcast Sponsor – DevHawk Every founder I know is trying to move their roadmap faster with AI, but most admit it isn't working. DevHawk is an AI software factory from former practical founder Praveen Ghanta.   DevHawk plugs in a full crew of customized AI agents that handle the whole development job, end-to-end. Not just writing code, but requirements, testing, shipping, and maintenance.   Add their AI agents to your org chart and run them yourself--or have the DevHawk team manage the software factory for you. Either way, you get a team that works while you sleep, and a roadmap that can move 5-10x faster within a month.   Head to devhawk.ai/practical to book a conversation about how DevHawk can help.  The Practical Founders Podcast Tune into the Practical Founders Podcast for weekly in-depth interviews with founders who have built valuable software companies without big funding. Subscribe to the Practical Founders Podcast using your favorite podcast app or view on our YouTube channel. Get the weekly Practical Founders newsletter and podcast updates at practicalfounders.com. Practical Founders CEO Peer Groups Be part of a committed and confidential group of practical founders creating valuable software companies without big VC funding.  A Practical Founders Peer Group is a committed and confidential group of founders/CEOs who want to help you succeed on your terms. Each Practical Founders Peer Group is personally curated and moderated by Greg Head.

Shawn Boyer is founder and CEO of goHappy, a frontline employee communication and engagement platform for companies with a thousand or more hourly workers in restaurants, logistics, manufacturing, and retail. Before that he started Snagajob in 2000, a job marketplace for hourly workers, funding it with credit cards and family money until it reached profitability after four years. Then he raised three rounds of VC funding to grow the company much bigger. goHappy began as a mobile app, but customers kept asking to just text their people, so Shawn shifted the product to SMS communications during COVID. Today about 1.5 million frontline employees across 400-some customers use it. The team is under 40 people, revenue is well into eight figures, and the business is profitable with solid gross margins. Shawn has now been through bootstrapping, venture capital, minority growth equity, and majority private equity. At Snagajob, investors reaching 51 percent ownership ended with a new CEO in 2013. At goHappy, he chose Grove Street Partners in 2022 (minority) and Pamlico Capital (majority) in 2025 by matching their expectations to plans he had already proven. Key Takeaways Simple Wins: Frontline workers won't download another app, so texting beat the native app within seven months. Projection Trap: Aggressive projections used to win a higher valuation become your budget the day after closing. Prove Assumptions: Wait for twelve-month retention before doubling down; a 15-point gap undid Snagajob's small-business push. Small Team: Keep headcount low on purpose; under 40 people now produce well into eight figures in revenue. Pick Partners: Investors differ widely, so choose the person and the expectations, not just the check or the valuation. Quote from Shawn Boyer, Founder and CEO of goHappy "The biggest and hardest lesson is that there is just as much risk in going too fast as there is in going too slow. We have our assumptions that doing X is going to yield Y, but let's go prove that out, and I would rather be more methodical and risk going too slow than be too aggressive, blow through money too quickly, and in essence lose control.  "The waste on the people churn side is so darn expensive too, because when you've spent so much time getting somebody up to speed and it doesn't work, it just sets you back. It's all about the people, and that means going slow on hiring. "At Snagajob 15 years ago,  I felt a real sense of accomplishment when the team grew from 100 people to 150, and it sounds stupid, but I felt so good saying it. Now at GoHappy, it's the opposite, with pride in keeping the team small and seeing how much we can accomplish with fewer people, which has made us incredibly prudent and disciplined in our hiring, even though you're never going to get it 100 percent right." Links Shawn Boyer on LinkedIn goHappy on LinkedIn goHappy website Snagajob website Growth Street Partners website Podcast Sponsor – Full Scale This podcast is sponsored by Full Scale, one of the fastest-growing software development companies in any region. Full Scale vets, employs, and supports over 300 professional developers, designers, and testers in the Philippines who can augment and extend your core dev team. Learn more at fullscale.io. The Practical Founders Podcast Tune into the Practical Founders Podcast for weekly in-depth interviews with founders who have built valuable software companies without big funding. Subscribe to the Practical Founders Podcast using your favorite podcast app or view on our YouTube channel. Get the weekly Practical Founders newsletter and podcast updates at practicalfounders.com. Practical Founders CEO Peer Groups Be part of a committed and confidential group of practical founders creating valuable software companies without big VC funding.  A Practical Founders Peer Group is a committed and confidential group of founders/CEOs who want to help you succeed on your terms. Each Practical Founders Peer Group is personally curated and moderated by Greg Head.