Welcome to the Tech M&A Podcast. presented by The Corum Group. Welcome to the Tech M&A podcast. Here we dive into the strategies, challenges and candid stories of tech entrepreneurs who have successfully sold their companies. On today's episode, we speak to Ujwal Arkalgud who co-founded the research technology company MotivBase. Thank you so much for joining me today. Thanks for having me. Can you introduce yourself and tell us a bit about how you got started? Yeah, for sure. My name is Ujwal.
I'm a cultural anthropologist. I'm a first time entrepreneur, if you will. Sort of got started with an engineering degree and then, you know, grew up in India, immigrated to Canada for a master's and joint PhD program. Never ended up doing my PhD program, but or rather completing it. certainly in the process, got exposed to the field of cultural anthropology and fell in love.
That was really the beginning of, I would say, the passion for anthropology, but it still took me several years to muster up the courage to actually start my own company. Can you describe MotivBase and what makes you different? Yeah, MotivBase is a research technology company, but the only company that uses anthropology or anthropological models to interpret meaning or extract meaning from what people are talking about on the internet.
It's really powerful because, you what happens is the way we humans engage, you know, if you think about any topic like gut health, the most literal expressions of gut health are what typically social media, listening and analytics companies will gather. So for example, if you search the hashtag gut health on Twitter, let's say you'll get very literal expressions of it. What anthropology teaches us is that actually Contextually, the richest information is implied information. So it's a hop away.
So, you know, classic example, gut health leads to a conversation, let's say about immunity. Immunity leads to a conversation about chronic health conditions, which eventually leads to a conversation about toxins in the body. Realizing that this is a system of meaning in and of itself, and in fact is shaping the future of gut health. That's what we do, helping recognize and identify those implicit systems of meaning and then being able to quantify them.
And obviously this is extremely valuable for large corporations who all have innovation departments and they're tasked with understanding what's happening in culture, trends, how it's affecting their business and how they can not just react but proactively create new solutions that are going to enter the market anywhere between a two to five year window. So that's sort of our sweet spot and how we got really going as a business. Fascinating. And what drove you to enter the M&A process?
I mean, a couple of things as entrepreneurs, we were starting to get very tired. And in particular, by year six, we realized we were growing and just scaling organically. Our company for context was bootstrapped completely because in the early days, we just couldn't convince investors that this was something that was valuable enough for corporate clients. And we ended up bootstrapping it. Thankfully, when you bootstrap a company, think about profitability.
So we were pretty much profitable from day one. And by the time we got to year six, we were on a great trajectory, reinvesting our profits back, building our technology, really setting the stage for a couple of great years of growth. But we also realized that the stuff that was making us tired as entrepreneurs was the stuff that we liked to the least as part of our jobs. was, you know, people management processes, was finances and financial management.
There's a lot of the stuff that was just starting to bog us down because now we were coming up to 30 people. And right around that time, we started to realize this is not, you know, this is not a mom and pop shop anymore. we can't operate like we used to where we had personal relationships with every single employee. And, you know, people came over to our houses for dinner. All that started to change.
And that was the moment in time where my co-founder Jason and I started to realize, you know, we got to start thinking about what's next because we didn't want to be in a situation where we started to, you know, we didn't want to go from waking up and being excited to go to work to hating it. And so that was really the impetus. it sounds like it had grown so much that it just changed the company dynamic. Yeah, exactly.
And, you know, got to a point where we also realized we didn't have the skills needed in order to take it to the next stage. Every entrepreneur needs to recognize what their own limitations are and go get help. And this was a moment for us where we thought, okay, we've gotten it to this point. We feel like we need help. So either we go raise a bunch of funds and raise a bunch of money and go make some significant hires and sort of do it that way.
Or we think about an exit and and then work with our acquirer. What do you think made you so interesting to buyers? I mean, the big one was profitability. Yes. Especially in the B2B tech business, it's become so common to find companies that are scaling but struggling with profitability. And I think it was still, you know, we were still sort of unusual, I will say. Yeah. At least in the the conversations we had with a lot of potential buyers. they still felt we were unusual.
A, they hadn't come across a company that was bootstrapped, that had scaled to our level. B, they hadn't come across a company that was so profitable. And I think that is something that now is or has already become all the more important, especially since SVB's collapse and a lot of funds, especially on the venture side. think private equity probably always thinks about profitability, but I would say a lot of venture funds now are starting to reevaluate.
I'm actually having some very interesting conversations with just people in the industry about how they're re-evaluating the playbook. Was there anything in this process that you maybe weren't expecting? Yeah, mean, the diligence process overall was, know, people warn you, other entrepreneur friends tell you, you know, it's very hard. You got to be prepared. It's going to be a lot of late nights and a lot of emotional energy, I think more than anything else.
it is emotional energy because as a founder, you are deeply emotionally tied to your business. And, you know, you it's you're giving your baby away and in the process, you're getting scrutinized for doing that. And, you know, every single business decision is questioned. They want to understand every little intricate detail. It is exhausting.
And when, you know, you're only, you know, two founders and, you know, for example, I don't know how many calls I did where I felt like it was a deposition because, you know, I was staring down. 20 faces, everybody just firing questions at me. I think that whole process was just very, very surreal because people tell you, but until you're in the throes, you don't realize how difficult it actually is.
know you mentioned the two founders, but other than your partner, who else were you communicating with in your company during the process? Did anyone else know? In our case, just shareholders were basically a couple of advisors and employees and then us as founders. among the employees, we really only communicated with, basically our chief technology officer initially at least. And in pop culture, there's a lot of narrative around how, when an acquisition happens, people get fired.
And in our situation, obviously it was the opposite. We were getting, you know, acquired in order to grow and build the business further. But you know, when somebody is reacting emotionally, they don't hear the words you're telling them. So we didn't want to take that chance. So that was basically it. And then of course, you know, we have just friends, other entrepreneurs, friends who've been through exits. think that network was immensely helpful for us in just being able to bounce ideas.
And then I'll say, obviously, you know, working with our investment banker, you know, that was a big deal. You know, certainly, you know, I'll give a shout out to, to Corum and specifically to Martin because he was just incredibly available. And I think the biggest piece was he wasn't just a sounding board for me personally, in terms of you know, understanding deal mechanics, but he was an incredible sounding board just to think strategically through every little decision.
And that was extremely helpful. Did you have any regrets about the process? No real regrets. think, you know, overall, we went through it the way we wanted to. And I mean, I think we were also very lucky because the the team that bought us, they were extremely, extremely respectful of the process and just lovely people in general. And You know, I think I think we got a little lucky there in the sense that they had a lot of room and you know, they're here and there.
We did make some mistakes along the way and they gave us the wiggle room to correct them. And when I talk about mistakes, I mean, it's nothing grave. It's just, you know, when you're when you're the owner operator of the business, you don't think about valuation the way a buyer thinks about it, especially a buyer who's, let's say, in private equity. who are, know, private equities looking at very specific metrics. If you're, if it's a strategic buyer, they're likely looking at different metrics.
And to be able to, you know, get inside their heads and to be able to position things in the right way, think that's a, that's an important lesson. And, you we got a lot of help, but it was still, you know, there were some stumbling blocks along the way. And yeah, I mean, that kind of stuff is just, I think part of it is just par for the course, but you know, certainly I would do it differently next time. And do you have any advice for someone considering an exit?
I will say the one big lesson for me was if I have to do it again, I would have hired a, because we didn't have a CFO, I would have hired a CFO part time or even full time for three months before going through the pitching process just to basically tighten everything up and help us understand our own business through a CFO's perspective. I mean, I have a lot of conversations with other entrepreneurs. People reach out to me saying, hey, you went through an exit. What was it like?
I often tell people to keep an open mind. think most people are terrified about being undervalued. I think what they don't realize is an offer is an offer. know, there are ways in which you can manage that. We certainly chose to hire an investment banker because we felt having Corum on our side helped give us leverage and give us better negotiating power because then we weren't just talking to one buyer.
We were talking to a multitude of buyers and we could understand how we were valued in the market because I think, ultimately, you you try to sell something that you have on Kijiji, you think it's worth 200 bucks and then Kijiji tells you it's worth 60 bucks. What are you going to do? You know, if you still want to get rid of it, you want to get rid of it for 60 bucks. So I think part of it is you got to learn what the market will afford for what you've built. So that helps you.
helps you figure out whether it's worth it for you to go through the exercise. And I think that is important. The other piece of advice is I think you're lucky enough that you have a profitable business or a successful business that's scaling, you've got value in it. There is a I genuinely believe there's a sweet spot where you can extract maximum value out of what you've built. And if you miss that sweet spot, not only I mean, look at what's happening in the market right now, right?
Between war and inflation and potential recession and bank collapses. I mean, it's madness. And so I'm sure that valuations would be down now compared to a couple of years ago. I think a couple of years ago, people were saying valuations are down compared to a couple of years before then. So you never know what's going to happen next. And you don't always have control over those things. So what does life look like now? Does this new phase of your life have any challenges you weren't expecting?
It's different. But there's different challenges that come along the way. The first few months we were entirely focused on, I would say even the first year, our focus has really been on integration. But I think the hardest part of integration is integrating people. yeah, in a way, life isn't that much different in terms of, we're still very much energized and still dedicated to the business. It's just I focus on different challenges.
I'll tell you the best part for me is I don't have to think about finances and the financial management side of the business. absolutely detested that and I had to do it. At one point I was the bookkeeper and it was the worst thing you could do to a founder who's building product is bog them down in bookkeeping. So, know, stuff like that that you'll be thankful for post exit. But one thing I will say is, you I think the world values and exit differently as an entrepreneur.
know, so whether it's right or wrong, I'm not going to debate that. But, you know, it does open doors when you tell people you went through an exit, it opens doors. People want to talk to you. So I think it really helps your career as an entrepreneur. And I of course, you know, in the future, if you want to start another business or figure out what comes next, it always opens doors.
Plus, I will say, you know, I've now learned or have been learning about the private equity business as a result of this. I'm getting exposed to the venture side. So, you know, my own worldview and my own knowledge base is expanding, which has been great because, you know, that's what you want out of a career, right? You want to be learning new things and, you know, you want to be challenged in the right way.
So from that perspective, absolutely, it's an enhancement because, you know, your aperture just widens. Any final thoughts? The issue of ego is the most difficult one, right, as an entrepreneur because your ego either prevents you from scaling a business or it prevents you from selling it at the right time. It prevents you from going and asking for help, all of those things.
So I would say that's one thing that I always, I was very lucky because my business partner and I, kept each other honest all the time. And it helped that we were very good friends before. So, you know, we could have a really intense conversation, walk away and wake up next morning and be back to our usual selves. I don't think everybody has that luxury. So we were certainly lucky in that sense, but it is important. I honestly, cannot imagine entrepreneurs who do it on their own.
I don't know how they do it because I was so lucky to have somebody that I could vent to, you know. Yeah. And your partner doesn't understand that. You my partner is not in this space at all. So she doesn't understand the trials and tribulations in the same way that your co-founder will. So I think that's the only maybe parting thoughts is, you know, it's more valuable than maybe you think. Thank you so much. Thank you. Thank you for tuning in to the Tech M&A Podcast.
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