Some background on venture orphans and the opportunity in distressed startups here.
What company did you buy and what is the background of it?
We bought Prolifiq, an enterprise sales enablement/account planning company with millions in recurring revenue and many Fortune 500 customers.
The company started in 1999 as a services business, then pivoted to pure software in 2016. Prolifiq is essentially a Salesforce plugin / native app today.
It peaked around $3 million in ARR and had been growing 20%+ year-over-year, with 85% gross margins.
Why did it end up in distress?
You’d think a growing high-margin software business with millions in recurring revenue and low churn should be infinitely sustainable.
But raising too much can easily mess up a great business.
They raised about $10M in equity across rounds (including a Series A) and took on about $2 million in venture debt in 2022.
This put the pressure on to grow and grow fast. They built a team expecting to triple, triple, double, double every year.
Big teams and big spending are fine when growth enables future raises, but that growth didn’t materialize here. They couldn’t raise more funding, and their cost structure was too great for the revenue.
The incentives are also messed up. Based on their financials and the preference stack, it's clear that the team and common equity holders will never see a dollar, so they are better off just moving on.
With venture debt service and bloated expenses, the company was set up to run out of money.
The team peaked at around 30 people, shrunk to about 10 in distress, and hit zero once bankruptcy hit on July 31st.
How did we find and win the deal?
A mutual friend connected me with the venture debt provider. I’ve written operating manuals (like my Brian Johnson and Mark Leonard pieces) that got shared around, and they were aware of South, my Latin America recruiting firm.
The company was quickly heading toward bankruptcy. They'd already told their insurer that July 31st was the date, so coverage dropped, and the board wasn’t going to stick around without insurance.
I got introduced at the end of July and made a quick pre-bankruptcy offer. We'd take over immediately with our existing team. But the board was worried about liability if it appeared to be an insider deal and pushed for a clean bankruptcy sale. The senior creditor doesn’t technically have any control until bankruptcy.
In bankruptcy, we were able to come to a deal with the senior debt holder to get them paid back and give them upside in the business.
We won because of our track record of publicly running other software companies for years and of being good stewards of them over the long term. This was important to reassure jittery enterprise customers and partners.
Plus, our ability to rebuild teams overnight with my dozen recruiters at South, made us the steady hand they needed.
What did we get with the purchase?
We bought all the assets: customer contracts (which survive bankruptcy), software code, IP, domains, and accounts receivable. No cash came with it and we didn't inherit any liabilities or debt.
What did we actually receive? A list of passwords where nothing worked. They stopped paying all bills on the day of bankruptcy, so accounts were shut down across the board. The AWS account (tied to the domain and emails) got locked, then deleted. We couldn't reset passwords because emails were down.
In the chaos, the domain (Prolifiq.com) somehow ended up for sale for $20,000. I spotted it while rebuilding the site from Wayback Machine archives and immediately bought it on my Amex (knowing they'd refund me if I somehow didn’t get the domain).
We waited a week, then got it and were able to unlock everything: restored emails, reset passwords, and got us operational. Without it, we'd planned to sue AWS for access (litigators quoted $25k) and it would've been for nothing since the account was deleted by then anyway.
We lost some marketing materials, but the software ran uninterrupted on customers' Salesforce instances throughout. No customer data was lost, but uncertainty during bankruptcy caused some churn.
Many former employees found new jobs due to the delays, but we brought back the key tech folks, and the others are helping part-time.
What do we do after a sale? How do we operate?
Our playbook for these distressed software turnarounds: stabilize fast, rebuild the team, dive deep with customers and original employees, then plot growth. No crazy experiments. Just listen and execute.
Reassure Customers
First move: Blast a reassuring message as soon as we are identified as the buyer and often pre-close saying, "You're in good hands long-term. Your service continues uninterrupted and your data is safe.”
Post-close, we introduce ourselves and outline the plan. Then meet every customer possible and work to understand their needs.
We also recorded this podcast about the acquisition and sent it around to customers. The long-form format of a podcast builds trust.
At this point, we've done calls with most customers. The feedback's been understanding, and not the beatdown I braced for. Many rely on Prolifiq's unique features and are relieved it's alive. We’ve been transparent about the financials and our plans for the future so they can be confident we’ll be around and improving things for years to come.
Learning Phase
We interview former team members with basic questions:
- "What do you do here?
- Why do customers buy?
- What needs fixing?
- How would you grow with more resources?"
They know the business best. We've uncovered low-hanging fruit like bug fixes, AI tweaks to streamline workflows, and styling glitches in views/presentations.
Basic questions we always ask customers post-acquisition:
- What's the most annoying thing about Prolifiq? (Playful way to get quick wins.)
- What features would you add? (AI automation tops the list here to decrease work.)
- How likely to recommend to a friend? (Net Promoter Score baseline. I expect ours to always jump post-acquisition from fresh eyes and execution.)
Rebuild Team
Stability first is the goal. We brought back as many former employees for the transition as we could. The tech team was key to keeping everything running.
We brought in an experienced enterprise software CEO and are rebuilding the team with South (check us out for Latin America talent—specialists in tech, finance, marketing, ops at 50-70% US costs).
It's a "mullet business" model: US-based for customer-facing roles (e.g., sales leads), Latin America for most everything else.
Customer Success Focus
Shift from growth-mode with a focus on new logos to installed-base love. Retention is the goal first and then upsells only if they solve real problems like selective AI add-ons.
Call every customer on day one and set quarterly reviews with shared metrics. The mantra is "What do we have to do to make you successful?"
Fix value gaps, halt migrations, and invest in R&D based on customer asks. Nothing speculative.
Future Plans: Back to Growth
It took a long time to get access to everything, but we're finally ready now.
We've got a CEO in place, the tech team is up and running, are cash-flow positive, and are rebuilding the rest of the team. We're now able to plot a roadmap and add features that customers have long been asking for.
90 days out plan: First updates released, customer advisory board set up (top 12 aligned clients steering roadmap quarterly). Win back trust via action. Fix annoyances, add value-driven features.
Longer-term: Restore 20-50% organic growth (compounds fast). We have a competitor doing $20M+ ARR and growing so that’s a goal.
Exciting times. Stay tuned for updates!
Please reach out if you have a venture orphan situation or a company heading towards bankruptcy. We'd love to do more of these. colin@colinkeeley.com
If you're hiring, book a free consultation with South to learn how other companies are building teams in Latin America for 50-70% less. We have 20+ amazing employees down there across development, finance, marketing, and more. Free to interview!