From Cash Flow to Exit: How Sharon Nouh Bootstrapped ProSpend to a Successful Acquisition

Melissa: We are here to celebrate Sharon Neu,

Co-host: the founder and CEO of Prospend.

Melissa: Sharon built and scaled Prospend into a successful SaaS company which was recently acquired by UK company ISH. Welcome to Bootstrapped the Lighter side, the podcast for B2B startup founders wanting to achieve success without giving up ownership or control. This podcast is brought to you by Lighter Capital, the leader in founder friendly financing for B2B SaaS companies. Learn more at, uh, lighter capital.com

Co-host: Sharon, congratulations. I've known you for a long time.

Melissa: What an incredible journey.

Sharon Nouh: Thank you Melissa. And thank you so much for the recognition. I'm so humbled by that.

Melissa: Let's start at the beginning. What inspired you to start prospend and

Co-host: what problem were you trying to solve when you launched the company?

Sharon Nouh: I was in travel and I was the owner of a couple of corporate travel agencies at the time. Corporate travel agencies were a relatively new sort of concept. I recognised the, as most people do, there's a pain point. The pain point was reconciling expenses directly in travel. I saw that pain point and I decided that I wanted to get out of travel and sold those businesses to a travel tech company called travel.com in the height of the dot com era, a very exciting time I have to say. Then got an exposure to what you could do with tech and very fortunately had the opportunity to uh, use a couple of their developers and built the original expense, uh, sort of management app while I was there. Uh, so it was your usual story. There was a problem, there was a market, should we build it? Uh, and that was sort of the

Melissa: reason for building a company without major

Co-host: funding outside, especially getting one to the stage that you brought prospend to, which is hundreds of customers, millions in revenue,

Melissa: and you did it without outside funding.

Co-host: And that takes a lot of courage and creativity.

Melissa: What were some of the toughest challenges

Co-host: you faced as a bootstrapper and how did you push through them?

Sharon Nouh: Obviously cash flow was obviously the lack thereof.

Co-host: Yeah.

Sharon Nouh: And just not having the ability to fund, you know, the ultimate dream. Like uh, everybody has a dream of where they want to take the business and not having the cash flow and the funding to do that. But then it was just get more customers. So that was sort of uh, the main challenge, cash flow. Fortunately the market was there. So, you know, I didn't have to dream up a market. The mid market was there. I didn't have to worry about would it fit within the market. There was a definite need for it. So that was really fortunate. So that product market fit wasn't a challenge I guess, uh, I did it very, very much by myself. So the challenge a lot was, you know, am I doing the right next best steps? And that's always, you know, should I now be hiring this person next? You know, what does the next iteration of the product look like? Those were your typical challenges.

Co-host: There was a point that you had an opportunity to take VC funding or to go down that path and you chose instead to take non dilutive funding. Can you walk us through that thought process?

Sharon Nouh: Yep. I did look to the VC market quite early on and uh, created a lovely little deck and went and knocked on lots of doors. Lots of doors, some very major VC firms and always got my foot in the door. So obviously it was not that the uh, that there wasn't interest in it but, but I never got offered funding and I often look back on why didn't I get the funding at the time.

Co-host: And this was in the early days.

Sharon Nouh: This was in the early days. I think also the VC market in those early days was quite immature themselves. Uh, in Australia they didn't have a lot of risk appetite because when I look back it did not make sense not to fund me.

Co-host: Well and now we know that, right?

Sharon Nouh: Yeah. So I do look back and I question why I didn't get the funding. Probably two reasons was that I was a female founder and there was very few female founders at the time. I don't think I pitched it well enough and I do look back and I think I don't know whether I pitched it with enough confidence but then there was a definite need in the market so I wish they had have been able to see past that but we did have one global competitor that we were up against and they just could not see why we could beat a global player. So that was disappointing. Now that I look back that they didn't have enough confidence themselves in the Australian startup landscape that they didn't bother. So on the back of that it was, I'm not going to go back there again.

Co-host: Right.

Sharon Nouh: So what else do I do for funding? Um, and uh, you know, so there has been um, times that we wanted to take some funding, did not want to go down the VC market again, did not want to be then having to be consumed, constrained by their agenda. And so that was where you know I got introduced to LiDAR Capital and, and it just made sense to be able to take non dilutive funding um, because the banks certainly in Australia don't offer it for startups.

Co-host: Yeah. And I know that we I think did five rounds of financing.

Sharon Nouh: Gosh. Was it five rounds?

Co-host: Yeah, I think so, yeah. In terms of the refinancing and. Yeah. Ah, and buying out some early.

Sharon Nouh: Yeah. And that's what I loved about that opportunity was that I could go back and ask for more. Uh, so as I was growing, you could see that we were growing and we were able to take more as we went through our journey. It was uh, a shared vision, really. Yeah.

Co-host: You know, talk more about your decision, you know, to take non dilutive funding instead of going down a traditional VC path.

Sharon Nouh: Yeah, there's so few options for startups with funding. It's either VC because the banks won't engage with you, or there is organizations like Lidar Capital where you do non dilutive funding. Which when you first broached me about this optionality, it was amazing. It was really, you're going to do this for me. And it's quite well known in the us but it's not as well known in Australia. So it was sort of a new concept. And what I liked about it was that there was somebody that would back me on my vision but give me the independence to still be able to do what I wanted to do instead of having to uh, be constrained by what the, what a VC might have wanted, you know, where they would want the milestones to be. So it gave me the funds, but still the ability to make my own decisions about how I thought I could grow the business. But then to be able to go back in a year's time and say that was great, we've done that. How about. And uh, now, you know, you've seen how that has grown the company. How about we do another lot because that's the next vision. So it was really collaborative that somebody would buy into the vision.

Co-host: We don't really get involved in setting the vision. We are more interested in just helping the entrepreneur execute.

Sharon Nouh: That's right. And like you said, you know, now at the exit, you know, I have almost all that equity still on the table and you know, obviously when I, when I talk to other founders who have gone down the VC path, you know, by the time they're exiting, 10, 15% really is what they're left with. Which is actually quite sad because they're the ones that have put the sacrifice in m. The uh, hard yards, the blood, sweat and tears, and they've got such little equity left to realize at the end of that journey.

Co-host: And oftentimes a lot of liquidation preferences declare, which I think isn't really always understood. I mean, as you know, I was A VC for almost two decades and liquidation preferences are debt. You've got to pay those off before the common shares or the ordinary shares are worth anything. So. And just that said, you know, if you're, if you need to raise tens of millions of dollars to execute on your vision, you have to go down that path.

Sharon Nouh: That's right. Look, I'm not saying it's a bad path, but there's caveats around that path. Uh, and you know, is that right for you? Um, but I think also being able to be in position like I was, that I could make the decision I can sell on a VC path. Sometimes you actually don't have that decision anymore. That's not your decision.

Co-host: Right. Almost always they would have a veto right over selling.

Sharon Nouh: That's right. Yeah, exactly.

Melissa: Okay, so pivotal moments. So was there a key turning point, a decision or product shift or a

Co-host: breakthrough that really changed the trajectory of prospend? I think when I first met you, not when we first funded you, but when I first met you, um, you had 100,000 in revenue and when you sold, you had millions in revenue. So was there something that really shifted?

Sharon Nouh: There was. I had the opportunity to be introduced to apropella, the women's networking community, and I was accepted as a portfolio CEO. Uh, that was a major shift for me because I had done it all by myself up until then and I realised that I just couldn't solo it anymore. I needed to have a network of people to be able to go that next step. And so that was a breakthrough. At around the same time, I had decided that I wanted to do our first API integration to an ERP. Because we sit alongside the ERPs and the first natural fit was going to be, um, myob. They were the mid market player in the Australian landscape. At the same time as being introduced to Appella and having the opportunity to pitch to their connectors, my ask was, can I be introduced to myob? That was a very key shift for me. One because a propeller.

Co-host: And you got that introduction.

Sharon Nouh: And we got that introduction. But just before we got the introduction, one of the things that Apropella gave me was the confidence that I was on the right path. Because when you're solo and you have nobody as your cheer squad, you are constantly thinking, am I, you know, is this ever going to go anywhere? Am I doing the right thing? Does this have legs? You know, will it be successful? And that was a pivotal moment M for me that I had then a group of people saying, you're doing really well, Sharon. And you there is an opportunity. There is, you know, you have got the ability, uh, so it gave me the confidence, one to keep going. But then it was at the first presentation I did, you know, you get to present your, your product and who you are, and then you have your ask. My ask was I wanted an introduction to nyob. And I can remember the first introduction or the first contact that was given to me was from Naomi Simpson. And she said to me in the first huddle, I will introduce you to Tim Reid at nyob. Tim Reid being at that time the CEO of nyib. And it was game changing because that introduction meant that I was quickly introduced to the right people at nyib, who then tucked me under their wing and introduced me to their reseller network. And we became the first expense solution to be on their ISV marketplace. And that gave us credibility and traction with new clients. So our sales quickly, quickly increased as a result of that. So that was a very pivotal moment, not just in terms of, wow, I can do this, and I have got this sort of cheer squad behind me, but then the ability to get clients on board very quickly through that introduction.

Co-host: I love that story.

Sharon Nouh: Yeah.

Melissa: Okay, let's talk now about the exit journey.

Co-host: Uh, we talk about this a lot with entrepreneurs, but really very, very few actually make it to the point you make it. Very few people who start a company actually end up with a successful exit. It's a risky proposition to start a company.

Sharon Nouh: But you did.

Co-host: I know selling a company is a

Melissa: huge milestone for any founder. What was going through your mind as you prepared for and finalized the acquisition by Ish?

Co-host: Were you bought or sold? And what I mean by that is, did you decide we're going to be acquired and go try and find an

Sharon Nouh: acquirer, or were you approached cold? Both.

Co-host: Okay.

Sharon Nouh: Both. So last year I decided that I wanted to take prospend into the uk. The next best step for us was to have some, you know, a global strategy again. I did think about funding for that, but I realized that I would rather align with a UK partner that could give us that ability quickly and with their expertise. So, in part, it was an expansion plan, but at the same time, I had an outreach from ISH for the last couple of years who were keen to buy prospend. It was almost the same weekend that I decided that, no, I wasn't going to look for funding, I will look for a partner. They came back and said, you know, we're still very interested and, you know, we'd like to discuss this more. So for me, so you're saying it

Co-host: was really easy, so you just decided to sell and you were acquired and it was an easy process.

Sharon Nouh: Gosh, it sounds like it, doesn't it?

Co-host: It does. You make it sound easy. But what was that like? Cause this had been your baby for a long time.

Sharon Nouh: Yeah, it was absolutely the right step for most. I knew it was time. And I think most founders do want to have an exit. You know, that is sort of the ultimate goal. You do want to get a return on your investment. But I was very fortunate in that I had the opportunity to exit. But exit with a partner that had the same shared values and vision, which was really important because you are handing your baby over. So uh, that was really important to m me. It was almost like the universe just did align for me. I'm forever grateful for that. Forever grateful. But also, I guess, you know, for any uh, founder that is looking to exit, you've got to be in a position where you can take advantage of that opportunity as well. You've got to say, I'm now going to do it and just not expect that it's just going to happen. Right. Yeah.

Co-host: Tell us a little bit about that process, how long it took. Are there any learnings that you would pass on to others that are maybe about to embark upon a, uh, upon selling their company?

Sharon Nouh: Definitely one of the learnings that I had learned from the previous year when I was looking for funding was be absolutely prepared and ready, have the business squeaky clean, in its best position with all the right people in place and a really good strategy that you can sell to the acquirer so that they are going to believe that they are buying a really valuable, you know, forward growing business. So we, we had SPEN 6M months prior to that, really getting our um, business looking squeaky clean with all the right processes, all the right people. All of our financials were in absolutely tip top shape. So there was a lot of groundwork. I think founders have to spend at least six months to get their business. Like when you're selling a house, you scrub it up and you renovate it and you make it look the best. You've got to do exactly the same thing. When you're trying to sell the business. It's gotta be looking its best and it's gotta be growing, otherwise it's a fire sale. So you know, you've gotta pick your moment where the business is doing well, it's got traction. Um, otherwise you're going to, you know, it's going to be devalued. So we did spend A good amount of time getting it ready. But then the process, of course, I don't think I was prepared for how long the process would take and there was uh, an enormous amount of effort. So I guess for any founder you've got to be able to say I'm going to be able to, or have to be able to dedicate five months, six months just to that.

Co-host: Yeah.

Sharon Nouh: So if you don't have the capacity, if you're still very much, you know, in the business to try and then manage an acquisition at the same time, it's very, very difficult.

Co-host: Yeah. We almost always have a panel on this subject at uh, lighter Capital CEO summits and the one we just had in Park City, we had a lot of exited, a lot of our exited founders on the panel talking about the process and they said, just prepare for a year, prepare for a year and it's going to be a hard year. And I was thinking about you at the time because you really. And I was right there with you

Melissa: a lot of the times and it's

Co-host: not for the faint hearted, that's for sure. And you did this without an advisor, without a broker. Tell us how and why you made that decision.

Sharon Nouh: I did make that decision despite a certain individual saying into my ear, why haven't you got an advisor, Sharon? I do remember, I wonder who that was. I, um, did decide not to take on an advisor mainly because the company that were looking to acquire us knew the space and were an inspired buyer. So. And I think we had done a lot of groundwork to allow us to present the business well. So I look back and I think it could have gone one or two ways. Yeah, it could have gone against me and I think for some people using Advisor is definitely worthwhile. I just have always done everything myself. So I think it was in my nature to say I can do this myself, but I had a very good legal team as well. Obviously I did have people that I could lean on like yourself. We had a couple of other people that we could lean on who did have advice to be able to give to me on what that process looked like. So I wouldn't say it's the right or wrong, it's just the way that I did it. And of course it saves, it does save ultimately a lot of money. But I think if, if you are looking to put the business out onto the market, then a broker is probably worthwhile because they will then put it out for sale, filter and then, you know, bring back two or three, you know, key buyers. But I had been Fortunate that I'd already had two very keen buyers already. So then it was really just a matter of working through the process.

Co-host: Words of wisdom.

Melissa: Looking back on your journey, what advice would you give to other SaaS founders who are bootstrapping and hoping to follow in your footsteps?

Sharon Nouh: Gee, that's a really hard question.

Co-host: It is. There's probably so many things.

Sharon Nouh: Yeah, I think, yeah, that is hard. Um, I think I wished I had joined an organization like Arapala earlier than I did because I did try to do what's too solo, too long. That was one area that I think, you know, founders can get into a network and bounce off other founders I think is really important. I didn't do that. Probably made quite a few mistakes that probably shouldn't have made if I'd had, you know, sort of a sounding board. I think also I took too long to pull together a senior leadership team that really changed my life. But then there's the chicken and the egg. I couldn't afford a senior leadership team. I was still having to do much myself. Uh, when you're funded that, that is easier because you've got the funding to be able to bring on a senior leadership team. But that did really help with having other people helping me make decisions. But otherwise it's just hard grind. There's no way around it, there's no shortcut. It's not a short journey. So anybody that thinks that, you know, you can get funding and you can exit within five years, I think, you know, that's just so unrealistic.

Melissa: Sharon, what is next?

Co-host: You have two successfully exited companies but this was really, you know, a life changer, we could say. So you can choose what to do next. So what's next?

Sharon Nouh: So what's next? I sold because obviously it gave me a return on my investment and it was also the right thing for the business. I also sold to a company that has an opportunity for me to stay within the organization. Uh, so that was also important because I don't want to retire. This for me was not about retiring. This was what could be my next step in the fintech space because I'm still very passionate about working in fintech. So we're the beachhead for their new fintech track. I'd like to think that in the next 12 months there's uh, an opportunity for me to still stay with the group and stay involved. So working without the ridiculous hours and obviously without the stress. But the next step is for me, I'd like to give back and spend more time, particularly with female founders. And where can I give back? And that's where I'm hoping I can lend my experience with the group Apprapella. I'm hoping that I can give back in that respect.

Melissa: We hope you enjoyed this episode of Bootstrapped. The Lighter side to receive future episodes, subscribe using your favorite podcast platform. And if you enjoy this show, please share it with other fellow founders and entrepreneurs. For more insights, helpful tips, and to learn more about founder friendly financing options, visit us@, uh, lighter capital.com that's L I G H T R C A P I T A L dot com.