I turned down $16M for my startup. Here’s why...

It was a tempting offer, but when it came down to signing on the dotted line, there were five reasons that convinced me to decline an acquisition offer and bet on growth for Groove.

Alex Turnbull

“I can’t tell you how much I appreciate the offer, but it’s not the right move for us right now.”

After a torturous week of weighing up all my options, I managed to spit those words out. It took every ounce of bravado I could find inside myself. I was backing out of an acquisition deal after three months of negotiations and due diligence and I knew the partner at the acquisition firm was going to be pissed.

I was also turning down $16 million.

And sure, that would never hit the headlines as the latest mega-acquisition, but for a bootstrapped startup founder like me, it was a very tempting offer.

Even after taxes, I’d take home close to $7 million — a life-changing amount of money for me and my family. I thought of the stress-free life I could be living without the issues of being a CEO and founder. One of those issues was growth, and I wondered if it was a good time for me to bow out and leave the challenge of growing Groove to someone else.

But at the end of the day, I just couldn’t do it.

I saw so much potential in Groove, too many opportunities we hadn’t fully capitalized on, and several mistakes we needed to make right. I thought about all the things I still had to prove before I could even think of calling it a day.

Here are my reasons for turning down $16 million.

#1 It didn’t make long-term financial sense

Yes, my large stake in Groove would mean that I’d stand to gain a lot from the sale of the company.

But equally, Groove is an excellent financial annuity for me. I make a great living from this company.

And despite the inevitable stressful periods, I am very happy at my “job” at Groove. I work when I want to and still love what I do every day — 10 years in.

I didn’t feel I could give that all up for a lump sum.

#2 We clearly had growth potential

To give you some context, here’s an actual snapshot of our 4-year financials during the period just after we’d signed a Letter of Intent (LOI) with the private equity firm.

networks llc

Even with the growth plateau we were experiencing, Groove presented a very attractive acquisition opportunity. We were very profitable with an EBITDA of 47% and a retention rate of 102%, among other positive metrics.

The PE firm also had a big upside for cross-selling and partnerships within its portfolio of SaaS companies.

Additionally, they knew through due diligence that we had never done anything for growth at Groove and that there was plenty of untapped opportunity if they implemented a structured growth strategy.

The firm had plans to 5X Groove’s valuation. They had such confidence in my company that they were willing to take a 16-million-dollar bet that they could make $80 million in a few years' time.

If they could do that, why couldn’t I do it with my team?

#3 We’d never been serious about growth

We’d grown Groove over ten years slowly and organically and never used any typical growth levers with any intention — no true SaaS funnel analysis, buyers journey mapping, testing new channels, or 101 growth experiments. We never even looked at our core metrics on a regular basis.

Embarrassing. But also a relief — because we could fix that.

We just needed to do the basics and do them right.

And when I say “the basics,” I’m talking about having a growth mindset, being data-driven, adopting a growth experiment framework, and hiring the right people.

I felt that if we could get those right, then growth would be inevitable.

#4 There was real value in Groove

The other factor that came into play as we decided whether or not to sell Groove was value — the value of the company itself, but more importantly the value that Groove provided.

After the rebuild, our Net Promoter Score was climbing — we were inching our way to a score of 30. I felt that if we continued to move fast and prioritize customer value, we could bring our NPS up to a world-class score of 40 — or even up to 50.

30 day nps

We were also getting more and more positive G2 ratings . We were starting to see that we had a great base to work from.

g2 comment

#5 Nominal growth should be doable

We’ve always been very clear on what success looks like for us at Groove.

Success for us is building a growing, profitable SaaS for the long haul. Not a unicorn exit. Not a VC-driven feet-to-the-fire sprint to the finish. Just sustainable growth.

If we could grow Groove by just 1% month-over-month, we could launch ourselves out of the growth plateau. If we could ramp that up to 2% each month, then we’d really be flying.

When we put it that way, we realized that this kind of growth was doable.

So I turned down the all-cash offer for Groove, believing the company could be so much more, and believing that I had so much more to prove.

A new era of growth for Groove

After turning down the offer, I was fired up.

But I knew that if we wanted to realize Groove’s potential, things had to change. Specifically, our approach to growth had to change.

We couldn’t simply rely on organic acquisition and word-of-mouth marketing, as we had been doing up to that point. We had become complacent about growth, thinking it would just happen.

We had to enter into a new era. These are the 5 pillars of growth for us today…

  1. The whole company now has a growth mindset. We’re constantly learning, iterating and improving. Making smart rational decisions.
  2. Those smart rational decisions that we’re making now come from being 100% metrics-driven — gone are the days of coming up with an idea off the cuff. Everything has to be tied back to our goals and metrics.
  3. We’ve created a growth experiment framework and we’re executing on 101 B2B SaaS growth experiments that are tied to key growth metrics.
  4. We’re committing to product-led growth.
  5. We’re going to start to build out a growth team to help us crush our growth goals and experiments.
  6. And to keep us honest, we’re sharing the ups and downs of our growth journey with radical transparency right here on The Imperfect Startup.

That last point is possibly the one we’re most excited about. Working in the open and sharing the journey has always been a part of how we do things here at Groove and we are pumped to have you along for the ride.

Whether you’re at $10K, $100K, or $500K MRR — or even if you’re starting from zero, we’re here for you.

So go ahead and sign up to become a member of The Imperfect Startup. You’ll be joining so much more than just another newsletter — it’s a community, a movement, a joint mission to grow each of our startups, imperfectly.

Alex Turnbull
Founder & CEO, Groove
Alex Turnbull
Founder & CEO, Groove

Alex is the CEO & Founder of Groove. He loves to help other entrepreneurs build startups by sharing his own experiences from the trenches.