The Sale of Leap: Choosing a Bank That Stood Apart From All Others

The Sale of Leap

Transaction Details

• Company: Leap
• Vertical: Field Services
• Founders: Patrick Fingles & Steve Stencil
• Transaction Type: Investment
• Investor: Nexa Equity
• Financial Advisor: Vista Point Advisors

We took our time when selecting an advisor for our majority transaction.

We ultimately chose Vista Point Advisors because they weren’t like other banks we were talking to. And the eventual outcome was twice what the other two banks had estimated.

Leap’s Origin

Leap's company evolved from a proprietary software we’d created for my contracting company.

At that company, we had a salesperson named Steve Stencil who approached me because he wanted to clean up the process for selling and buying home improvements.

We built the software over four years, and it was instantaneously successful because it was made FUBU (for us by us). Steve was literally going into people’s houses, using the app, and then going home and fixing everything that didn't work.

By the time the app was done in about 2016, we had a fantastic product. We knew it because as some of our sales team went to work at other places, those competing companies started calling and saying, "Hey, what are you guys using over there?"

When we told them we’d built our software, competitors started raising their hands to buy it.

At that point, we looked at the value of our software from a proprietary standpoint versus the value of what it was worth on the open market as a software solution.

In 2016, we decided to spin out the software as its own company, and Leap was born.

Leap’s Growth

In our minds, we had the perfect storm for accelerated growth.

First of all, we had some strong management chops because it wasn't my first rodeo—I had already built a $40M roofing company with 250 employees, complete with an executive team.

Also, the success of that company gave us the cash we could put into Leap. With a couple hundred thousand on the balance sheet, we could hire great people right out of the gate.

The combination of a fully birthed product, strong management experience, and a little capital put us in a great position to grow our new software company.

We always ran the business with an eye toward profitability, so we positively ran cash flow early. It wasn't a breadwinner, but it was close to breakeven.

We ran that way for the first couple of years with some good growth, but we were now running a more significant business, and it was getting harder to keep growing at an accelerated rate. We also didn’t feel comfortable with how we were running with only one or two months’ cash reserves.

Deciding to Pursue a Transaction with an Investment Bank

Given our goal to keep growing and the need for additional capital, we started considering pursuing a minority transaction.

The goal of that minority transaction was to bring in some cash, put it on the balance sheet, take a little bit of money to do some de-risking, then hold onto a majority.

That was the plan, and we worked with an advisor to build a process. As part of that process, we set March 1, 2020 as the deadline for investors to submit IOIs.

Of course, that was right around the time everything collapsed, so we decided to put the process on hold to focus on the business. We just went to work in 2020.

Even though it was a letdown to pull the plug on that process at the time, I considered that experience a gift. I learned a lot from the process, mainly things I would have liked my advisor to do differently that I would look for in my next advisor.

(Thankfully, we found an alternative form of short-term financing for our cash situation, which gave us time to consider our options and evaluate what we wanted to do next.)

Choosing a Better Bank

Once we got the business back on the rails and things were going well for us in 2020, I went back to the market for an advisor.

I interviewed firms over the course of 7-8 months. One of my favorite parts was speaking to founders on reference calls and learning from other SaaS leaders about their experience working with an advisor.

Over time, I narrowed the list of advisors to three finalists, one of whom was Vista Point Advisors.

Vista Point shined in many areas where I wanted more from my previous advisor.

For one, Vista Point wasn’t dodgy. They weren’t trying to overpromise and underdeliver or underpromise and overdeliver.

While most banks were wishy-washy, the VPA bankers were very matter-of-fact. When I told them what my goals were for the transaction, the team at Vista Point understood SaaS and the market well enough to come back and say, "Here’s what you’ll need to do in terms of revenue, retention, growth rate, and so on to reach that outcome."

When the market timing grew closer, I spoke to the three finalist banks to get their read on valuation. Two parties came back with estimates reasonably close to each other. Vista Point’s valuation was more bullish, a third higher than the others.

I wanted to believe Vista Point’s estimate, but these other two firms were very reputable banks, so it was hard to discount their opinion. When I shared with the bankers at Vista Point what the other banks estimated, they were shocked that these other firms weren’t giving enough credit to our company.

The Process with Vista Point Advisors

We ultimately chose Vista Point, and the eventual outcome was twice what the other two banks had estimated.

Maybe those other banks could have also realized an excellent outcome for us, but in the end, Vista Point’s bullishness and knowledge of SaaS won them the engagement.

Vista Point measured up to everything I had hoped. They had high energy and a matter-of-factness that I hadn’t seen in other firms.

The process went well and played out as the bankers at Vista Point predicted. In addition to preparing our book to share with buyers/investors, the bankers at Vista Point also prepped a shorter version for me and Walker, Leap’s COO, to use as part of our management presentations. That deck helped us present to potential buyers/investors like a well-oiled machine, and I think it was a difference maker in the tone of our management meetings.

I learned from running this process: If you're a founder, know that selling your business can be an emotional rollercoaster. When someone drops out of the process, you cannot help but feel down. But the team at VPA was great about reassuring us up until the end that we were on the right track towards closing a deal.

You’ll have ups and downs right up until the end when you join a closing call, when all of a sudden, you’ll have this life-changing experience.

The Outcome

Part of the reason we had a successful transaction was that I came into it with specific goals I wanted to meet.

The end result was amazing for me, not just because of the money, but because I could add it to my resume and speak intelligently about that process. I also got to remain involved in the company as CEO while working with a great partner through exciting developments like growth through acquisition.

I’m not an ex-founder—I still get to work towards realizing our vision of becoming the go-to software solution in professional remodeling. But now we have some new capital to go out and do great things and an excellent partner to do it with.