Why We Turned Down a $35 Milllion Acquisition Offer With Russell Brunson of ClickFunnels

Explicit content warning

02/17/16 • 21 min

SaaS Interviews with CEOs, Startups, Founders

Ep 137 Russell Brunson joins Nathan.

Russell Brunson is a trail blazer in the world of internet marketing, becoming most famous for his sophisticated use of split testing. Russell started his first business while studying at University, selling over a million dollars’ worth of his own products and services from his own basement by the time he graduated. Since then, he has started and built diverse businesses including software company ClickFunnels and coaching company DotComSecrets.

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3 Key Points:

You can create an astoundingly profitable consulting business by providing a bridge between software and the concept behind the software
When you go the VC route, your board members become your customers and the REAL customers are the ones who lose out.
If the goose is laying the golden egg—don’t tinker.

Episode Notes:

01:00 – Nathan’s introduction to today’s show
01:35 – Russell joins the show
01:46 – Russell talks about what he was selling in college—POTATO GUNS
02:15 – Russell is 35 years old
02:35 – Dot Com Secrets is Russell’s coaching company—ClickFunnelsis the result
03:39 – Dot Com Secrets is also a book now
04:04 – The company (DCS not CF) will do between $6-7 million by the end of the year
04:20 – Most ClickFunnels members ultimately become consulting clients in one way or another
04:55 – Bridging the gap between the software and the concept
06:13 – The call-to-action in Russell’s book
07:20 – 18% of ClickFunnel customers pay $300 a month—everyone else pays $100
08:08 – Defying the venture capital route
09:13 – Defining the ultimate goal with ClickFunnels
11:16 – Ironing out the equity split
11:29 – Russell sank over $1,000,000 to get Click Funnels off the ground
13:10 – It’s not always about what your partner’s bring—it’s about how much you respect them
14:20 – Customer acquisition cost
15:05 – 80% of new clients are organic, 20% are from affiliates
18:30 – Click Funnels list is 1⁄2 million people
18:45 – Famous Five

Famous 5

Favorite Book?—Rework
What CEO do you follow?— None
What is your favorite online tool?—Tomorrow.do
Do you get 8 hours of sleep?— No
If you could let your 20 year old self know one thing, what would it be?—Understand the power of working for people for FREE

Resources Mentioned:

Growth Geeks – The way Nathan hires growth hackers on a per project basis for things like info graphics, blog posts, and other growth projects
ClickFunnels – Russell’s newest company
Dot Com Secrets – Russell’s consulting company
Dot Com Secrets – Russell’s book
Rework – Russell’s favorite business book
Tomorrow.do – THE digital tool Russell could not live without
Want to learn how to go from $0-$10k/mo in revenue fast? Join Nathan live on the Starter Tribe Beta free workshop.

Listen to The Top if you want to hear from the worlds TOP entrepreneurs on how much they sold last month, how they are selling it, and what they are selling - 7 days a week in 20 minute interviews! Join the Top Tribe at http://NathanLatka.com/TheTop

The Top is FOR YOU if you are:

A STUDENT who wants to become the CEO of a $10m company in under 24 months (episode #4)

STUCK in the CORPORATE grind and looking to create a $10k/mo side business so you ...

Ep 137 Russell Brunson joins Nathan.

Click here to join the top tribe and instantly learn how Nathan made his first $10k at 19 years old: http://nathanlatka.com/startertribelive

3 Key Points:

You can create an astoundingly profitable consulting business by providing a bridge between software and the concept behind the software
When you go the VC route, your board members become your customers and the REAL customers are the ones who lose out.
If the goose is laying the golden egg—don’t tinker.

Episode Notes:

01:00 – Nathan’s introduction to today’s show
01:35 – Russell joins the show
01:46 – Russell talks about what he was selling in college—POTATO GUNS
02:15 – Russell is 35 years old
02:35 – Dot Com Secrets is Russell’s coaching company—ClickFunnelsis the result
03:39 – Dot Com Secrets is also a book now
04:04 – The company (DCS not CF) will do between $6-7 million by the end of the year
04:20 – Most ClickFunnels members ultimately become consulting clients in one way or another
04:55 – Bridging the gap between the software and the concept
06:13 – The call-to-action in Russell’s book
07:20 – 18% of ClickFunnel customers pay $300 a month—everyone else pays $100
08:08 – Defying the venture capital route
09:13 – Defining the ultimate goal with ClickFunnels
11:16 – Ironing out the equity split
11:29 – Russell sank over $1,000,000 to get Click Funnels off the ground
13:10 – It’s not always about what your partner’s bring—it’s about how much you respect them
14:20 – Customer acquisition cost
15:05 – 80% of new clients are organic, 20% are from affiliates
18:30 – Click Funnels list is 1⁄2 million people
18:45 – Famous Five

Famous 5

Favorite Book?—Rework
What CEO do you follow?— None
What is your favorite online tool?—Tomorrow.do
Do you get 8 hours of sleep?— No
If you could let your 20 year old self know one thing, what would it be?—Understand the power of working for people for FREE

Resources Mentioned:

Growth Geeks – The way Nathan hires growth hackers on a per project basis for things like info graphics, blog posts, and other growth projects
ClickFunnels – Russell’s newest company
Dot Com Secrets – Russell’s consulting company
Dot Com Secrets – Russell’s book
Rework – Russell’s favorite business book
Tomorrow.do – THE digital tool Russell could not live without
Want to learn how to go from $0-$10k/mo in revenue fast? Join Nathan live on the Starter Tribe Beta free workshop.

The Top is FOR YOU if you are:

A STUDENT who wants to become the CEO of a $10m company in under 24 months (episode #4)

STUCK in the CORPORATE grind and looking to create a $10k/mo side business so you ...

Previous Episode

This is The Worlds Most Influential, Powerful Investor with Tim Draper of DFJ Venture (Timothy Draper)

Ep 129 Tim Draper of DFJ Venture (Timothy Draper) joins Nathan.

Tim Draper was a founding partner of Draper Associates and DFJ. He has raised ten core funds totaling more than $10 BILLION, hired and led a team of partners, invested in hundreds of earlystage private companies, including Baidu, Tesla, Hotmail, Skype, Parametric Technology, Digidesign, TwitchTV, Theranos and Overture. He has extended his reach through the building of the Draper Venture Network with 14 funds covering 30 cities around the world, through the creation of Draper University, a school and ecosystem dedicated to preparing entrepreneurs, and through building a high-profile brand to generate deal flow.

Click here to join the top tribe and instantly learn how Nathan made his first $10k at 19 years old: http://nathanlatka.com/startertribelive

3 Key Points:

Entrepreneurs need to be comfortable with changing rules
California is falling behind in business, education. Division of the state would improve results.
Viral marketing is a good thing.

Episode Notes:

00:58 – Nathan’s introduction to today’s show
01:43 – Skype investment – Tim was in the first Skype video call, his username is ‘Tim’
02:52 – Skype investment less than $10 million. Sold for $4 billion to ebay
04:08 – Size of funds usually around $400 million. Network is in 36 cities around the world
06:10 – ABC reality show Startup U
07:25 – Changing volleyball rules on Startup U / encouraging freedom at Draper University
10:18 – Invested in Tesla early prior to Elon Musk’s involvement
10:59 – Tim’s different processes for finding new investment opportunities
12:10 – Elon was an investor in Tesla prior to taking control
13:19 – Tim’s ties
13:43 – Six California’s – the rationale
16:50 – Doesn’t believe he would be a good political candidate
17:13 – ‘Get your free email at Hotmail’ – first viral marketing
19:37 – The Famous Five

Resources Mentioned:

Growth Geeks – The way Nathan hires growth hackers on a per project basis for things like info graphics, blog posts, and other growth projects.
Draper Associates
DFJ
Startup U
Draper University
Draper Venture Network

Famous 5

Favorite Book?— The Startup Game by William Draper
What CEO do you follow? — All of them. Elon Musk, Robin Li (Baidu), Elizabeth Holmes (Theranos).
Do you get 8 hours of ...

Next Episode

How do You Sell for $90m with NO REVENUE?! EP 167

Ep 167 Eran Eyal, the CEO and founder at Springleap, a marketplace of 180K advertising agency experts. Listen as Nathan and Eran talk about the latter’s extensive experiences as an entrepreneur and the valuation of SAAS businesses.

Click here to join the top tribe and instantly learn how Nathan made his first $10k at 19 years old: bit.ly/1SynoAg

Top Entrepreneurs join Nathan Latka daily inspired by, Art of Charm, Pat Flynn, John Dumas, Entrepreneur on Fire, Chalene Johnson, Lewis Howes, School of Greatness, HBR Podcast, the StartUp podcast, Mixergy, Andrew Warner, AskGaryVee, and the great hosts of BiggerPockets!

3 Key Points:

The valuation of a SAAS model business may not necessarily be only evaluated on a multiplier. There are a variety of factors that can influence its value.
It can be prudent to start small as an inexperienced entrepreneur – E-Squared, Eran’s clothing and coffee based retail business was a labor of love and learning.
By building and integrating a successful marketplace into his crowdsourcing drag-and-drop business, Eran was able to increase its value.

Time Stamped Show Notes:

01:00 – Nathan’s introduction to today’s show.
01:34 – Eran joins the show.
02:20 – Eran describes his time with E-Squared, an apparel and coffee based retail business.
03:51 – E-Squared started in 2006 and was sold in 2008.
04:34 – The business had two locations and didn’t produce a massive exit. 3-4X in topline revenue.
05:31 – Eran describes his second business which relied on crowdsourcing.
09:00 – Initially the drag-and-drop crowdsourcing software wasn’t SAAS based. But it quickly switched because clients preferred paying a SAAS model.
10:11 – At its peak, the crowdsourcing business had about 37 large customers and several small ones.
10:36 – The highest MR (marginal revenue) for the crowdsourcing business was about 250K a month.
11:45 – One of Eran’s strengths is building a successful marketplace, a skill that helped him strengthen his drag-and-drop crowdsourcing business.
12:29 – Nathan and Eran discuss tying the valuation of a SAAS business to annual recurring revenue.
13:37 – Eran gives an example of why a MRR SAAS based business shouldn’t be valuated with only a multiplier.
14:35 – 7X to 10X is a good multiplier on ARR (annual recurring revenue) for a SAAS based business being sold, but it hinges on a variety of factors.
15:43 – While Nathan believes that anything other than the multiplier is only speculation, Eran believes that the speculation affects valuation significantly.
16:01 – Eran explains/defends his stance on speculation’s impact on valuation.
18:05 – Eran will be back on the show to talk more about Springleap. No Famous Five for this episode.

Resources Mentioned:

Growth Geeks – The way Nathan hires growth hackers on a per project basis for things like info graphics, blog posts, and other growth projects
Edgar – A tool Nathan uses to add pieces of content to a library and automate content distribution on media platforms.
Springleap – Eran’s business
@EranEyal – Eran’s twitter
Clarity – Eran’s Clarity
[email protected] – Eran’s email
LinkedIn – Frank’s LinkedIn
Crunchbase – Springleap, Eran’s current business