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In The Big Exit Show by Peak and NP-Hard our hosts Johan van Mil and Anke Huiskes talk to tech entrepreneurs about scaling their companies and the route on making a successful exit.
It wasn't sort of, you know, seed, series a, series b, but it's like we always receive more money when we shouldn't have. And we were always kind of more, like, of a put down when I think we actually would have deserved praise. So it was a bit of an odd experience.
Speaker 2:Starting a company is easy. Selling your company? That's a different story.
Speaker 1:In the
Speaker 2:big exit show by peak, we lift the curtain of secrecy around selling businesses by speaking to ambitious and successful founders who have been on this roller coaster before. Our hosts, venture capital investor, Jan van Mill, and business journalist, Remi Gheeling.
Speaker 3:Alright, y'all. We're back with another This 1 with an interesting entrepreneur, Hannes Kloepper. He's the founder of Iversity and the current founder of Hello Better, a fast scaling German scale up.
Speaker 4:Indeed.
Speaker 3:Iversity was a and still is a Berlin found e learning platform that was eventually acquired by Springer Nature and it has a very interesting background story. Right? Because it isn't a happy story because, yeah, the the the company didn't do so well as the founder thought initially. Yeah.
Speaker 4:And that's, I think, interesting to learn also, to share also via the big exit podcast. Right? Because we often have entrepreneurs who really exit that company for big sums. And in this case, this company was filed for bankruptcy. I think Anders, of course, started the company with his cofounder.
Speaker 4:And then in the early days, he tried to make it it's a MOOC. It's a massive online course platform, right, to share content from universities, and he's tried to monetize it with students. On that end, he failed. He raised some money also. And then in a certain time, he tried to pivot it also to universities and also to corporates.
Speaker 4:And what he will do is he will share his learnings because I think they're massive learnings. And I think a lot of founders run into the issue that they have a great idea, but somehow they cannot convince companies and also customers on how to use and to buy this product. And he mentioned also, I think, a few great insights also that he raised money when he didn't need the money. But when he needed the money, he wasn't able to to raise the money. And I see that a lot of things happening with founders.
Speaker 4:We will mention also that he's selling the company, and he's selling the company the way the same way he does as he raised funding. And I think that's an interesting learning because I think that if you raise funding, that's a completely different pitch than if you sell your company. Because apart from from the amount that you're trying to get, but especially the way the value is added to that company, that's a completely different story. So I think, interesting to hear his learnings on that.
Speaker 3:Yeah. He might have been way ahead of his time because today, you know, with Coursera and the IPO, e learning platforms have been doing very well, at least in the last few years. And I think he also shares in his podcast that he was maybe a bit too focused on the technology side. He they weren't too focused on the marketing of the content, but he had a very good technology. He was a very good product,
Speaker 4:and he says, well, our competitors, they're doing
Speaker 3:very well marketing wise, but, for founders who want to sell their company even if the company isn't doing that well. So, I say let's listen to the story of, Hannes Klippe, founder of Iversity.
Speaker 4:So, Hannes, what's what's the heroic story of Iversity?
Speaker 1:Well, I guess the the heroic story, you you know, starting at the beginning is is that we founded the company basically straight out of university, not knowing what we're doing. And, I mean, I didn't I'd never really worked anywhere else before. I did a couple of internships and and, you know, but so did my cofounder for him, it was also, his first job. And we, managed to raise seed funding and, you know, build a team and kind of run with it. And and give looking back, given that, you know, how little we knew, I'm actually surprised that we managed to, you know, put it together a functioning team that built a functioning software product that was used by, you know, in in the end, a 1000000 people, from all around the world.
Speaker 1:And, you know, we we didn't go to jail. We didn't sort of, you know, we didn't sort of commit any major financial irregularities. So, you know, given that that's, everything was improvised and everything was, learning by doing, you know, you can look at that and think, hey, that's actually that's actually quite impressive.
Speaker 4:Okay. Hey. And and now, what's the real story behind diversity?
Speaker 1:Well, so I guess guess the flip side of of that is that, at some point, I I remember, looking at our team and we're 20 people. And there were 2 people that had had any other job before that. And everyone else was, you know, hired basically, you know, interns that we kept and and and everyone was self taught. And of course, we, you know, did a lot of things wrong. We for for many things in hindsight, I feel like we, you know, we didn't really know what we're doing.
Speaker 1:And, we, to some extent, got lucky when it comes to the timing. And and so roll that wave and and and roll it quite successfully. But I think more experienced team could have built something, you know, much bigger, much more sustainable. But I think, to cut us some slack, you also have to see it was early days for start up companies in Germany in general, but, also in the education space. It's not an easy space to earn money within any way.
Speaker 1:I mean, there there are a lot of education companies, a lot of them fail. And we we had a mixed record when it came to that. We tried out a lot of different things, you know, first, working with universities. We initially thought we'd we'd sell to universities and then quickly realized they they had no budget and no interest in changing anything. Then we transitioned to more of a b to c model, achieved some significant scale there, but also realized that it's a tough market to sell in education unless, you know, if it's not either test prep languages or something that immediately qualifies people for a job, There's no willingness to to pay.
Speaker 1:And then we kind of pivoted again towards b to b, and and saw some traction there also, revenue traction wise. But, yeah, never really managed to to manage to, make it fly if you will.
Speaker 2:The growth phase.
Speaker 3:So, Hannes, tell us what was the problem you were trying to solve?
Speaker 1:We really wanted to, realize the potential of technology in education. That was really what what drove us. And, I think, yeah, we didn't do enough research to sort of figure out, you know, what what kind of problem is it that we can solve with this for specific people. But we, yeah, build a product that allowed users to do a lot of interesting things, and and there were we saw some early adopters who who loved it and and, did a lot with it. But, yeah.
Speaker 1:When when it comes to willingness to pay of course, you do need to solve a problem for for for your customers and that's something that we only transition to later, I guess.
Speaker 4:Yeah. So your consumers didn't pay for the product. Right? So probably you needed some funding. Right?
Speaker 4:Also to to to build a product and to grow your company. Where did you get your funding from? Especially in that early phase of the company.
Speaker 1:At the very outset, my co founder got some money from a government grant and actually survived on that, solo for for a while before I joined him. We, so joined forces in in in 2011, and then raised seed funding, that was also partially government money, but administered by a private fund and the fund also invested some of their own money.
Speaker 3:You, of course, were building an e learning marketplace. How did you find your first customers?
Speaker 1:Well, first it was all about sort of getting users in scale. So we we, build a a free product that as I said initially we reached out to universities and they found that, yeah, they don't really have budgets, they're not really willing to, make any changes. Then we built a B2C product that was free to the user and later we experimented with commercialization, so adding courses that people had to pay for, that were more in the area of professional development. And we saw some some nice traction, you know, sold a few 100 at a at a decent price point, you know, but struggled to replicate that, with with other courses. And then later, yeah, we transitioned to professional development for corporates.
Speaker 1:They're also, you know, got a bunch of pilots, made some revenue, but then, yeah, transitioning to scale is is where it really turned out to be very difficult because the problem is in education, it's always difficult to prove that you have ROI.
Speaker 4:Yeah. Indeed. Yeah. And And there's always a constraint in budget, right, and also who's paying for it. Right?
Speaker 4:That's also what we learn a lot with Education Tech. Hey. And what were especially on in those early days, right, especially when you were attacking, let's say, the students directly, what were the the biggest challenges those days, if you take us back to that moment?
Speaker 1:I mean, first of all, the fact that, as I said, we needed to figure out how you build a company, and, you know, how you recruit people, and, like, how contracts work, and, you know, like, all these basic basic things. Everything was new, and everything had to be learned from scratch. So that, you know, was in and by itself a hurdle. And then when we, you know, had a functioning product and and we, offered that for free, we were the 1st player in this massive online course space in Europe at the time, and we had some some smart ideas that worked really well. So there Coursera and Udacity were sort of bursting onto the scene, and we thought, hey, we wanna do that here.
Speaker 1:But we don't have any, you know, we're not Sebastian Thrun, 1 of the leading AI researchers in the world that can offer his own course. So how do we get courses? And then I had this idea of creating an open call for applications, a contest, and we were partnered with a with a foundation here in Germany. We offer €250, 000, 10 times 25 €1, 000 to teams from professors around the world to create the first courses. And by that we could also sort of pull forward, our go to market a lot because running that contest in its by itself already made us a player in the space, you know, 10 months before the first courses would go live.
Speaker 1:So that was very successful. Over 300 professors around the world apply. We had over a 100000 people sign up early for these courses that were only gonna, you know, actually end up on the platform half a year later. So that was something that that worked out really well, but yeah for example when it came to online marketing and and, you know, we we knew very little and I think in hindsight a lot more could have, that that opportunity could have been milked, if you will, a lot better if we'd know more about it, how to do it.
Speaker 3:What is something you would have done differently looking backwards? You now have a new company, Hello Better. What is something, with with with with your current knowledge you would have done differently in the beginning of, adversity?
Speaker 1:I think I mean, given that this podcast doesn't have, like, 20 hours of recording time, I'd go for, like, what would I have not done differently, because that list is significantly shorter. And and, yeah. I mean, what didn't I do differently? I mean, that that's it's it's really, the the beauty of, you know, doing it all over again, that you can take advantage of all of these learnings from your your previous experience. And I think we have done a lot of things a lot better at Hello Better and I mean I think as our success attests to that also.
Speaker 3:Yeah. For 1 practical example maybe. Maybe maybe a costly example.
Speaker 1:Yeah. Just how to structure the team, how to run meetings, you know, and and so how to where you invest your time, what you consider a success. And there's so much that where in hindsight, I feel like we generate a lot of heat, but not, it didn't didn't lead to sort of the desired outcome. And I think, yeah, our focus, I it's endless.
Speaker 4:There are a lot of VCs, right, who only say I invest in 2nd time entrepreneurs and not first time. Right? And I think you confirm that's a pretty good choice also on that end. Right? Or is it Yeah.
Speaker 1:I mean, I guess you miss out on the Mark Zuckerbergs of this world that way, but
Speaker 4:A very valid point.
Speaker 2:The growth phase.
Speaker 4:When did you notice your the first sign that you had, let's say, a product market fit. Right? That you had some traction and that you had something really where where you could scale on?
Speaker 1:With diversity, it was really this this contest that I that idea that I mentioned. You know, before we we we had a decent product, it was being used at, you know, dozens of universities by 1, 000 or even tens of 1, 000 of people, but, when we ran this contest, I mean, there were there was there were there was a week where we had like 4, 000 people sign up to our product for per day without doing any marketing really. Or well, I mean, some marketing but almost none. So there was there was demand for online learning and, you know, we had a a cool portfolio of of, of content. So I think there we that we really nailed in in in putting ourselves on the map as a leading player in this space on the shoestring budget if you compare it to, what the other companies in this space had raised and and also required to to build something meaningful here.
Speaker 3:So a lot of SaaS startups and also marketplace startups, Once they get traction, they have a working growth model, a working, machine that keeps users adding to the platform but also keep people using the platform. What was your growth model behind, Iversity? What were some of the tricks that worked really well?
Speaker 1:I mean, at the the model in general was we had a platform. We partnered with institutions that could be universities, NGOs, government organizations, or companies that created courses on our platform that would then attract new users. The the issue with that is that you don't really control the experience. Working with partners is, you know, particularly this broad range of partners, many of which aren't necessarily entrepreneurial. Also, they lack experience in doing this.
Speaker 1:It was the first time for literally everyone that we worked with. So a lot of sort of education, coaching, quality issues, in terms of quality management issues, That's the drawback of it. But of course, they they, you know, all did their own marketing for each of their courses, and and that was the upside there that, you could work with established brands, which is very important in education because, yeah, it's very difficult to gauge the quality from outside of a product. So therefore, yeah, working with established brands is a good shortcut to establishing trust with with users. So, it's a bit of a double edged sword, you know, there are positive aspects to it, but in hindsight I think we would have done much better if we'd taken all of the knowledge and experience that we gained on how to create a great online course and also our creative ideas and turned those into amazing courses and maybe only 2 or 3 of them, but those that are the, you know, those would have been really good and so those rather than working with dozens of different institutions that created on the for the most part relatively, you know, standard courses, is of, you know, putting someone in front of a screen talking at the camera.
Speaker 4:Yeah. And what what, because in in that growth phase, what we see a lot with founders, entrepreneurs is that, you know, in the early phase, you try to get everybody in right, and you try to get everybody on board. And then the second phase is about more trying to get everybody happy and to keep the machine rolling. What kept you awake during this growth phase of adversity?
Speaker 1:We had some external internal struggles. My co founder was forced out by the investors, then, we had an angel investor who joined us as managing director then he left and I was all by myself with this very young team and Yeah. I think that was 1 of the issues is that, yeah, the whole founding team setup wasn't, very stable, let's say. And I was also caught in this perpetual fundraising trap, you know, looking for money all the time. I I barely I barely worked on building the company for the longest time, which which makes no sense in in hindsight.
Speaker 1:Yeah. I think it would have made much more sense to basically go to investors and say, you know, I need time for a year. And actually, those are company that others would like to invest in. Otherwise, I'm just running around trying to sell something that no 1 wants to buy.
Speaker 3:How did you fund the growth phase?
Speaker 1:Yeah. I mean, that was also something that's, wasn't so particularly, professionally handled in that We kinda lived on handouts. It wasn't sort of, you know, seed, series a, series b, but it's like, we always receive more money when we shouldn't have, and we were always kind of, like, more of, like, of a put down when I think we we actually would have deserved praise. So it was, it was a bit of an odd experience, in that. And and partially, you know, I have myself to blame because, yeah, maybe, as I said, should have put my foot down or now III wouldn't even sort of play along with that for such a long time.
Speaker 1:But I think, yeah, also our investors didn't themselves do themselves a favor in in either. I think they should have to just cut their losses much earlier or coached us and and and and said, okay. Look. I mean, there's no point in fundraising now. You're not there.
Speaker 1:This is what you need to do. Go do it. You know, and I think then we would have focused on doing this, but instead, kept us alive and at the same time told me the whole time that I need to raise more more money, which wasn't really possible, in that state. So then they brought in other investors and and so we had lots of little sort of bridge loans and and and so on.
Speaker 4:So it it kind of drip financing model then in the company, Hannes? Yeah. In fairness? Yeah. Yeah.
Speaker 4:Okay. Okay. At a certain moment, Hannes, there was also a question of, let's say, bankruptcy, right
Speaker 1:Mhmm.
Speaker 4:In the company. Can you take us, let's say, a little bit of, back to that moment. Right? What what happened there and and then how did you deal with it?
Speaker 1:Yeah. We, that was the time when we were beginning to develop some, good traction on the b to b side, and or so we thought in hindsight. I think it was sort of a feeble a feeble plan. But, you know, for us, it was, more than we'd ever made in revenue. And we also got a lot of promises, if you will, from the pilot partners that we worked with that who all said this would be great.
Speaker 1:We wanna buy more, and so on. And, then, there was the restructuring of Tventure, the venture fund of Deutsche Telekom, who's 1 of our investors. And they had initially signaled that they were willing to put additional money in, but then couldn't, didn't want to, weren't able to. Anyway, the the the leadership changed and basically, Tventure was shut down. I mean, it doesn't exist anymore as an entity.
Speaker 1:And so when they couldn't invest anymore, then the others also said, well, then, you know, we we can't do this and we have to file for insolvency. I looked at this and said, okay, I mean, that's too bad. We need to let go of the team. But at the same time, you know, this is the moment where we currently we actually see some traction here. If we can, you know, get the assets out of insolvency, clear up the cap table, then it's actually a pretty attractive seed investment case.
Speaker 1:Because there's a lot there, there's a platform that's been, you know, built over years where we invested a lot of money, built a lot of relationship, we had a 1000000 users. You know, we had for a seed company decent revenues, you know. Why wouldn't someone invest, in this as a seed case? So, basically, like 8 o'clock in the morning after the day we started 4 17 solvency, I came back to the office and was like, okay, let's, you know, let's just go out and and raise the funding for this with, like, our CTO and 2 others from the team from the core team. You know, a team of 4 is not that expensive.
Speaker 1:And and then then that's we did. And within 6 weeks, I raised, another €750, 000. And, yeah, then we rebuilt the company with that small team. However, then we we realized that a lot of those promises by the pilot customers that we had were, I wanna say, empty promises. But, yeah, I mean, they just it it the scaling didn't sort of happen.
Speaker 1:They're like, oh, yeah, maybe we can do another pilot. And so revenues stayed, relatively low. And we had some bigger projects with some big corporate. Some of those could have been, you know, several €100, 000 worth. And then I think, you know, that would have sustained the company in the small state for a while.
Speaker 1:But, there again, you know, suddenly, like, it all looked great. They were super happy until, you know, somewhere at port level decided they were this wasn't gonna happen. So we worked with a big German car manufacturer at the time, and we were supposed to do use our platform for big internal leadership learning, project, that was, you know, about key learning, la la la. Well, then that car manufacturer ran into a bit of trouble with their technology, as you may have seen in the news. And, the yeah, then everything was shut down.
Speaker 1:They didn't, I mean, you know, they didn't wanna discuss their leadership culture anymore, in that context, of course. And so, that project, they pulled the plug on that project. And when that failed, we realized, okay, I mean, this is too much of an uphill battle. And at that point, I also was like, okay. I'm I'm fed up with this now.
Speaker 1:I kinda wanna do something else with my life. And we decided, to find a, a way to exit it That would, you know, allow us to, you know, sort of not I mean, we so we wouldn't have to shut everything down and and to tell all of our partners, yeah, sorry. You invested in all of these courses. It's all gone now. So that that would have been sort of my nightmare scenario.
Speaker 1:So I was looking for a way out to find a solution that that would allow them to continue, to use the platform.
Speaker 2:The exit.
Speaker 3:So, Hannes, you, at that point, decided you were ready for an exit. How how did the process go? How did you started to look for a potential buyer?
Speaker 1:Yeah. We well, we thought about, first of all, who we talked to. Because there are a number of companies in this in the education space. We're interested in what we're doing. We're interested in partnering with us because they wanted to build an education business themselves.
Speaker 1:So we had a lot of people that we could actually just go back to. So we didn't, start from 0 and and just, drew up a list of people to approach. But companies that we went back to companies that we previously talked to about potential partnerships or investment and entered into sort of, intensive conversations with 3 players, where we had like multiple meetings, visited them, pitched them, blah, blah, blah. And 2 of them ultimately declined, and Springer Nature then, in the end, ended up buying the company.
Speaker 4:How do you switch that conversation? Right? Because you were first talking to these parties as as a potential partner. Right? And then you switch your head also to, let's say, to a strategic partnerships, let's say, buyer of your company.
Speaker 4:How do you do that, let's say, practical also on your end?
Speaker 1:I mean, nothing, you know, nothing crazy or sophisticated. I just give them a call and said, look, we, together with our investors, decided, that we will, you know, look to sell the company. And since you was what you know, told us that you have ambitions of building an education business, but you don't have a tech platform. We have a tech platform. Let's have a conversation.
Speaker 1:And and they were they were open to open to it. Actually, I was just thinking about there were there were more there. Oh, no. There were, yeah. There are also some American players in the British company.
Speaker 1:Now, we probably talked to half a dozen, but yeah, I mean, 3 were more intensive.
Speaker 3:So did you bluff your way in? Did you did you tell them upfront what the situation was? Or were you still like, well, it's going incredibly well, and you have an amazing opportunity now to buy this great company.
Speaker 1:No. No. I mean, not only were we not profitable, but we we, yeah, struggled to generate, continuously generate revenue. You know, we had, like, oh, we had a sale here and then, you know, sale there. But it wasn't a working model.
Speaker 1:So that was very clear. And, I mean, I didn't I didn't tell them, you know, you're buying a functioning business, but, like, yeah, we have a we have a working tech platform. And I have to say, even to this day, I think the diversity tech product is 1 of the best in the market. To this day, I think, in terms of the feature set and what it allows you to do, in terms of the didactics, It's a sophisticated product because for the most part, the education platforms that are successful, unlike us, they focus mostly on sales and marketing, but the product is basically videos and multiple choice and that's it. And that's but that's not what Underlying Education is about.
Speaker 1:They didn't really even take advantage of the opportunities that that you have with technology and most education products really suck in my opinion still.
Speaker 4:And selling your company, right, is a decision which you take as a founder and then in this case also together with your investor. But it's also, let's say, a personal motivation on that end. Right? What what is your personal what was your personal reason at that time to sell Iversity?
Speaker 1:Well, as I said, I I wanted to secure a future for the company, the the idea, the platform, our partners, our users, so they wouldn't just crash into a wall. That was my first, like, most important motivation. And, yeah, also to find a a good end to this chapter of my life, if you will. You know, I think I would have been upset if it it it just sort of vanished into nothing.
Speaker 5:Mhmm.
Speaker 1:And I mean, the the website still exists, you know, the the the product still exists. And and I'm happy to be nostalgic about it when I go to the website. And, I know it's not what we had in mind when we started out and it's now yeah. I think the products that they sell are actually more of the nature of of what we've kind of set out to replace, they are more conventional, but I guess they sell better, you know, so very basic training, compliance, and so on. Fair enough, but, so, I think there's still a product to be built that that really delivers on the promise of of technology and education.
Speaker 1:And maybe I'll get, come back to that at some point in my life, but, yeah, I'm happy it's still around.
Speaker 3:Selling your company for the first time looking backwards, what surprised you most about the process? And, what did you learn if you ever are going to sell another company?
Speaker 1:Well, I hope it'd be very different circumstances. I'm not so sure many of the learnings here would apply in that case. I think, you know, if we ever go to is, Sal halloweena, it it will be as the French say. But, yeah. I mean, of course, we, we learned a lot about sort of what it actually means from a buyer's perspective.
Speaker 1:It's like you always have this idea. Oh, yeah. We built something, and it's super valuable, and they must see the value of it. And I think from a buyer's perspective, it's mostly, like, how can we even run and operate this? How much will this cost us?
Speaker 1:And, I mean, they just see first and foremost the the the cost of continuous operation, which is totally fair, but but I think that's not something that you sort of, yeah, necessarily have in mind when when you, just look at at it from from your perspective.
Speaker 4:Okay. And and and then because you dealt, of course, with your investor. Right? It was, you personally reached out to to place. Who did you get advice for, and who did you work with in this, let's say, crucial exit phase?
Speaker 1:Yeah. It's not like we got a ton of advice. No. I think we actually, not even from our investors. They, I mean, they just told us, yeah, talk to them, see what you can do.
Speaker 1:No. We we kind of winged it, I guess.
Speaker 4:But but how did you learn that? Right? Because you also had to deal with, let's say, a completely new situation also because you were forced
Speaker 1:to the case all those years. Every All
Speaker 4:those years?
Speaker 1:Indeed. This situation. So that was the 1 thing that wasn't new about it to me was that I was in the situation that I had no idea about. Because that was a that was a continuous sort of, theme that that ran throughout these years.
Speaker 4:But it's also about, let's say, valuation. It's also about terms. It's also about, let's say, the process and how to deal with that, etcetera. How did you, let's say, find that knowledge and how did you learn on that end? Or did you ask to friends or lot I mean, those days there weren't a lot of podcasts on this topic.
Speaker 4:So how how did you, let's say,
Speaker 1:No. It it wasn't I mean, it was first, it was about getting to that point that there was a commitment of willingness to buy. And and that was so the process wasn't much different for the most part than pitching to VC because I it was all about explaining what our product can do. And I mean, that I knew inside out. Right?
Speaker 1:So it was really about the product and why it's great and, you know, what potential, it holds and what it is that you they could do with it. And, I mean, this is something we've done all those years. Right? We worked with partners and told them and explained to them how they could use our platform to build a great course. So this was nothing where I didn't have to learn anything there.
Speaker 1:I mean, that this is something that we had been doing, for years explaining to, to people that knew relatively little about this, what the potential of this was. Then, you know, had, you know, multiple people said, okay, yeah, we wanna buy this then, you know, there would have been a competitive process and and and things would have been very different. But, it didn't end up that way and ultimately, you know, we we talked to Springer Nature and and there wasn't there were no lengthy negotiations because also from my end, you know, I just wanted to make sure that it lands there, and it lands softly.
Speaker 3:Yeah. Because of all the circumstances, did you celebrate the closing?
Speaker 1:Yeah. Sure. Because, you know, as I said, I mean, for me, it was still a success in that and I mean, most startups just disappear into the void. And and in that sense, I think it was still success. It's still around because people still use it.
Speaker 1:So all of that time and effort that went into building this wasn't for naught. I mean, there's still people that learn, something on diversity and that's great. And I'm happy about that.
Speaker 3:Did you buy anything for yourself as a present?
Speaker 1:We had a nice farewell champagne on the top of the Hotel de Rome in Berlin because the notary, the, yeah, the notary office where we closed the deal was really close by and then it was nice summer day. So, we Oh, it was actually was autumn, early autumn but it's still yeah.
Speaker 4:Yeah. And I think you also celebrate indeed because your product and your company lives by. Right? I mean, it's silver. But also, I think from the things that you personally learned, right, and makes you indeed a better entrepreneur now, a serial entrepreneur.
Speaker 4:So tell tell us something also about Hello Better because that's, of course, your new, let's say, your new path where you're walking on currently.
Speaker 1:Yeah. I mean it's very simple like I I couldn't have possibly done what I had done with Hello Better had it not been for everything that I did at adversity and everything, you know, all the good things and bad things that that happened over those years. So, I'm totally grateful for it. I'm also grateful for for our investors that they gave me the opportunity to dabble in this, you know, and and and some I think there were some strokes of genius and there was a lot of, stupid mistakes also, of course. Hello Better now is in a certain way related and that it's ultimately it's also an education company.
Speaker 1:I mean we're in healthcare, but what we do is we teach people, empower people to change their lives and, teach them how to live, you know, happier lives by, yeah, turning the process of cognitive behavioral therapy into an online course experience, where people go through a 3 step process. 1st they reflect on their current situation then they learn about their mental health condition and the vicious cycles that they're stuck in and then it's about breaking out of those vicious cycles by taking concrete steps. And the big difference here is that the business model is a lot clearer. These products have recently been listed by the Germans equivalent of the FDA and then, can now be prescribed by doctors and therapists. They're paid for by health insurance and yeah, I mean that's a very scalable business.
Speaker 1:I mean, we have other issues, but, you don't have the problems that you have in education because here you can do randomized controlled trials that really show the effectiveness of a product, you know, someone has a certain level of symptom severity going in and after they completed the course, the symptoms severity is significantly lower and therefore, that's that's the outcome, the effect of your product. In diversity, you know, we had a great course on Agile management, but if someone took that course, are there 25% more Agile manager? You know, how will you ever know? You know, that that that's really the that was really the challenge there.
Speaker 3:What would your dream exit be for Hello Better? Or aren't you even thinking about that at this point?
Speaker 1:I mean, right now we're focused on building business, but, I think everything's in the cards here. It's a it's a huge market. We are early, we have great USP in in terms of the product range that we have, a lot of research we've done, the market access, the listings that we've secured for for our products, an amazing team. So, yeah, I think the sky's the limit here.
Speaker 4:Last question. Yeah. Last question. What's your advice for for entrepreneurs who are thinking about selling, exiting their company in the, let's say, in the near future? What would be your advice for them?
Speaker 1:I'm not sure I'm the right person to give advice on that because, I mean, when it comes to, you know, selling the competitive process, I haven't been there. I mean, for people that's, you know, tried to exit the company because things aren't working out as as they may have hoped. It's don't give up, first of all. Right? I mean, resilience is key, and and don't get frustrated.
Speaker 1:And I think it's maybe what I said earlier is like, it's really important to think through from a bias perspective, you know, what is it that they get with this? What will it cost them to maintain this? And how can you kind of pitch it in a way to that, that it's that is really sort of as obvious as this to you that this is a great thing to buy? Because they don't wanna sort of if if it's not working great, they probably don't wanna continue on the path that you've been on. So you kinda really have to reframe, like, what is it that someone could do with this if they were doing it very, very differently from how you've done it up up to here?
Speaker 3:Wonderful. Great advice. Indeed. Very.
Speaker 2:The valuation.
Speaker 5:Alright. So now on to the the interesting bits. This is a really interesting 1 because Iversity had a pretty untraditional journey, to say the least. They started off back in 2011, and they quickly rose to become 1 of the most successful elearning platforms here in Europe. And then in 2014, they announced that they had successfully raised a €4, 400, 000 funding rounds to accelerate their growth.
Speaker 5:And 1 of the participants in that round was the VC arm of Deutsche Telekom alongside a few other parties. Assuming a standard dilution of around 20%, which is normal for, a company at that stage, that 4, 400, 000 round would imply a valuation at the time of around 18, 000, 000 pre or 22, 000, 000 post money. But then things got a bit tricky. According to an article by Business Insider, which announced the acquisition of Iversity by Spring and Nature in 2017, They, apparently, also filed for bankruptcy. So Iversity filed for bankruptcy in 2016, a year prior to the acquisition, but they were eventually saved by Holdsprink, the parent company of Spring in Nature.
Speaker 5:And part of that deal was essentially a formal cooperation between Iversity and Spring in Nature. The exact details of which aren't publicly available, but we could assume that basically it's a strategic alliance. Presumably, Adversity wasn't able to reach the growth that they wanted to. And given the circumstances, basically, the emergency cash influx a year before the acquisition and saving them from bankruptcy, I can assume that Sprague and Nature was rather opportunistic with this deal. So my guesstimate is that Helzberg would have invested around €1, 000, 000 ish in 2016 to account for the roughly 10 people that's, they had on board and 1 year's runway.
Speaker 5:And since it was a transaction in special circumstances, it wouldn't have followed a traditional VC deal. So I expect that dilution at the time of that 20 16 cash influx was be around 40%, which would imply a 1, 500, 000 pre money or a 2, 500, 000 post money valuation. While they probably did manage to grow in that last year, given how close that Spring in Nature was to Iversity, at the time and given that it would be a a strategic acquisition for Spring in Nature, I don't expect that there was much of a valuation premium on that transaction. So my estimates for the final acquisition price would be around 3 to 5, 000, 000.
Speaker 3:So, Hannes, is this guesstimation too low, too high, or exactly right?
Speaker 1:I take it.
Speaker 3:Thank you so much, Hannes. It has been amazing talking to you today.
Speaker 1:Cool. Yeah. No. Thanks so much.
Speaker 2:Thank you so much for listening to this episode of The Big Exit Show by Peak. We hope you enjoyed today's program. If so, please subscribe to our show on Spotify or on your podcast platform of choice. If you have feedback, let us know. Send us a message to podcast atpeak.capital.
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