My failure, and why we are selling

In early 2022 a great opportunity came my way to acquire a distressed software company with a majority of the team based in Ukraine. We had very little time to raise the capital, and my network was thin.

I was able to put together enough capital to close the deal, with private investors, and SBA. We started with less than 1 month of working capital. Our biggest error. We should have waited to close the deal until we had more working capital, but we were worried the deal would have gone to someone else.

Our plan was to turn the business around, then go out to the market with a less risky story, and a better valuation.

We got to work turning around the business. We diversified the team away from Ukraine, we leaned into our partner program, and we went after low hanging fruit like price increase, and one off projects.

We grew revenue 35% in 2023, partially through new clients, but mostly through growing existing clients. We did a lot of one off projects which had great margins, and allowed us to reinvest.

I set out to raise capital in September 2023 with this growth story. I've spent the past 9 months banging my head against the wall, with no after no.

We never escaped our original sin of lacking capital. We were always going after one off projects, prioritizing short term solutions for long term vision. The daily knife fight to keep cash in the business was constant.

Every time we had some cushion to invest in marketing or sales, we ended up cutting them 1-2 months later out of fear of overspending.

The company is now profitable, and we are growing bottom line every month. However, recruited new people to join a growth project, now we are stuck in neutral. So my partners and I have decided to find a more well funded acquirer before our team loses interest hearing about our failed funding news.

I doubt my story is relevant to the whole community. However there are some key lessons I wanted to share after 2 years in the trenches.

1. Don't just pitch investors on the deal valuation. Make sure to bake in and raise the full amount you need from day 1. You never know when the market will turn, and acquisition capital seems easier than growth capital.

2. I would not raise with SBA again for a software growth deal unless we had the full capital committed. We did 50% LTV, but the SBA loan has definitely eaten into our margin of error. I would recommend an SBA to cover working capital, or some margin but not over 30%.

3. I would have been more clear with our team up front about the strategy. We came in touting growth, and when we had to switch it created a lot of confusion.

4. I would have focused more on reducing dependency from certain team members on day 1. I put this off due to cash needs, and we ended up keeping on team members that were long term detriments to the company. It would have been better to cut them the first month, than try to keep the relationship going.

5.