Sam Oliver founded his first company, a property advertising website for landlords, in 2010. In the UK, landlords can’t advertise directly on major marketplaces like Rightmove and Zoopla, which are exclusive to estate agents. To address this, he registered as an online estate agent, gaining access to Rightmove, Zoopla, and Gumtree—the three largest property marketplaces. Landlords would pay him a £50 fee, and the platform would post their adverts on these sites, redirecting all inquiries back to the landlords to help them rent their properties. The business did well, securing funding from Richard Branson through Virgin Media Pioneers and winning The Pitch UK competition, which awarded them £50k in funding and mentorship. However, after three years, a competitor raised £12 million and offered the same service for free, forcing them to shut down.

After that, he moved into consulting, but soon enough, in 2016, he launched another startup—a tool to help estate agents book viewings online. “This was an evolution from my first business, now targeting estate agents instead of landlords. Initially, we found that estate agents preferred to control bookings directly, so we pivoted to offering pre-qualification and lead generation software. This adjustment led to product-market fit, and we grew the company to over £1 million in annual recurring revenue, capturing 37% of the UK market,” says Oliver.

The startup received a £50k grant from the Scottish Government and £150k in hosting credits from IBM. Oliver also raised £300k in angel funding. The first acquisition offer came two years after he raised that capital, and ultimately sold the company to a private equity firm in 2021, staying on through January 2023.

Why go the private equity way

Oliver’s business thinking had evolved since his first startup. There was a progression in the sense of a more sophisticated approach to business models and dealmaking. When the earnout offer came his way, he faced a crucial decision. Why go into a private equity deal?

“The story behind this is quite interesting,” says Oliver. “After four years, the company was profitable and growing, and I was very satisfied with its progress. Then COVID hit, and all our customers stopped paying. Like many companies, we faced significant challenges and almost went bankrupt. We managed to recover and rebuild our revenue, but I had to remortgage my house and invest my own money to keep the company alive. The fear of failure was very high because I had seen how quickly things could turn,” he adds. 

After COVID-19, he received an offer from a Swedish competitor to buy them. He flew to Gothenburg, met with their founders, and negotiated what seemed like a good deal. However, they wanted to pay a large portion of the deal in equity, and their valuation of their company was vastly inflated compared to Oliver’s. It was clear that the deal wasn’t as good as it seemed.

He leveraged this offer to get a better one from one of their customers who had made a low offer during COVID-19. They came back with a slightly improved offer. “I spoke to their CEO, whose company was majority owned by a hedge fund, and asked to speak directly with the hedge fund representatives. Despite the CEO’s reluctance, he made the introduction,” says Oliver. “I met with the hedge fund guys and explained that our business was growing well and I wasn’t eager to sell. I shared our progress and future prospects, which increased their interest. Over dinner, after a few bottles of wine, they asked me what price I would sell the business for if I could name any amount. I had already considered this, so I gave them a number,” he recalls.

They came back with a proposal: they didn’t believe the business was worth his asking price but agreed to pay a substantial amount upfront. If Oliver could achieve the projected growth within a year, they would pay the full amount he wanted. This structure included an earnout with a growth multiple on revenue.

“I realized that continuing to run the business had its risks—COVID had nearly destroyed us, and the private equity guys warned that if we didn’t accept the deal, they would find a competitor,” mentions Oliver. “From my past experience, I knew a well-funded competitor could put us out of business. Additionally, if I didn’t sell now, it could take another five to seven years for another exit opportunity, and we weren’t large enough to list on the stock exchange. The deal offered a compelling opportunity to de-risk personally and pay myself back for the money I had invested. It felt like the right time to take the offer.”

To sell or not to sell

Here is a unique situation with several factors at play. Sam had various pressures—like the financial strain from COVID—but it wasn’t like he really wanted to sell. It was more about needing a solution to secure more capital. When this opportunity came his way, he did his due diligence and saw it as a viable option.

“Another key factor in my decision to sell was realizing the market limitations. In my first company, even with a high market share, the revenue potential was limited, given that we charged only £50 per property advert,” says Oliver. 

“In my second business, I questioned how much bigger the company could realistically get. Expanding internationally is challenging and risky, and shifting to a new vertical would be like starting a new company from scratch. While we might have grown four or five times bigger, I didn’t see the potential for a tenfold or hundredfold increase,” he adds. 

Ultimately, he was more interested in selling and then starting a new technology company, particularly with AI on the horizon. He saw much greater growth potential in that area—potentially 100 times bigger. 

The earnout lessons

The lessons learned through the earnout deal have been influential in his subsequent ventures. Maybe the biggest of all was shifting from a scarcity mindset.

In Sam’s first business, he and his team went through two rounds of angel funding, but they operated on a very tight budget. “I paid myself about half of what I could have earned in the market, always being cautious and conservative with cash flow,” he says. 

He maintained this frugal mindset during the earnout experience, remaining extremely careful with their finances. At the end of the deal, he had over £100k left in the marketing budget that went unspent. For him, this was a significant failure because the trade sale’s value was based on the company’s growth. He stresses the fact that he could have used that £100k on ads, salespeople, and other growth initiatives to increase the company’s revenue and ultimately made more money.

“The transition from an owner to an operator mindset was crucial. As an operator, you have to think financially and strategically. Spending £100k on marketing, even if it only increased the company’s value by £50k, would still have been beneficial for shareholders. This contrasts with the owner’s mindset, where the ROI on marketing must always be positive,” says Oliver.

The time it took to make this mindset shift, however, impacted everything from product decisions to time management. For example, he spent the first six months of the deal working hard on a product that wouldn’t be online for another year and wouldn’t contribute to the earnout. Essentially, he was creating value for future owners without benefiting his shareholders. 

“Aligning incentives and understanding these nuances sooner would have allowed me to focus on maximizing the earnout. It took me eight months to realize this, leaving only four months where I was truly focused on the right priorities,” he adds.

Looking back, Sams reflects on  the significant amount of integration work his team did that was extremely valuable for the company’s owners, particularly the private equity investors, but that did not benefit his shareholders at all. “This experience taught me that you have to adjust your mindset and align incentives differently from how you previously managed the company,” he concludes now in retrospect.

How to pick your ideas

Sam Oliver is not afraid to explain how he chooses his entrepreneurial ventures. His approach involves taking personal experiences and identifying problems that technology can solve. He then tests these assumptions in the market and learns from customer feedback. Two books significantly accelerated this process for him: The Lean Startup, which advocates for building a minimum viable product (MVP), and Sprint by Google, which offers a faster, more efficient method of prototyping and testing ideas. These frameworks helped him refine his approach, allowing him to find product-market fit more quickly without the extensive costs and time associated with developing full-scale prototypes.

Last year, he started a new company, Open-Fi, building on his previous success in automating lead management and conversion. This time, he is using conversational AI and integrating with WhatsApp, in addition to email and text, to enhance the customer experience. “Many large companies haven’t yet adopted WhatsApp, so we offer a significant value proposition: setting them up on WhatsApp and using AI to manage conversations, reducing the need for extensive staff training. We are soon to announce our pre-seed round of funding and have our first three pilot customers. We are currently developing the technology,” say Oliver.