From Company Founder to Serial Software Acquirer: Meet Portfolio Manager, Adam Zimmer

Meet Adam Zimmer, a seasoned entrepreneur who transformed from company founder to serial software acquirer, now serving as Portfolio Manager at Perseus. Adam's journey began founding Arius Software in 1999. After over a decade of growth, Adam faced a pivotal decision: to raise additional capital or seek a strategic partner. This decision ultimately led him to explore potential partners and navigate the complexities of selling Arius Software. Join us as we uncover Adam's insights and lessons learned from his entrepreneurial journey, to now being on the other side of the deal table where he manages and acquires software companies, offering valuable guidance for founders contemplating similar paths.

Part 1: Selling a Company

Can you tell us about the company you founded, Arius Software?

I started Arius in 1999, to help investors open brokerage accounts. The process typically involved lots of questions and paperwork which was very time consuming. Also, all the information had to be transcribed off the paper applications which led to lots of errors. To help automate this process we developed Open Advantage which allowed firms to have control via configuration as to what data was gathered as well as what business rules were required.

Before deciding to sell the company, what were the range of potential partners you explored leading up to your decision?

We were at a bit of an inflection point in the company after 13 years. We had raised some funds from angel investors and had a number of high-profile clients. However, to continue to grow the company we would need to scale up. This would have required us to raise additional capital or find a strategic partner. It was a difficult decision however I feel we made the right one by finding a strategic partner.  

What factors did you focus on when deciding who the best partner was for the business?

We grew Arius to around 30 employees over 12 years. Given our company size we had an informal sales process with a couple interested parties. It was not an easy decision and throughout the process we debated back and forth the merits of each potential acquirer. In the end selling to a partner who valued the product and the work we had put in was a key deciding factor.

What learnings from the sale process could you share with other founders who are now in your shoes? What, if anything, would you have done differently?  

If I were to do it again, I would have more appreciation for the paperwork involved. One of the challenges seems simple but was anything but. Over the years a number of employees had received shares in the business. As part of the sales process we needed to get signatures from all the shareholders. This was made more difficult as until the deal was certain to close we had to keep it under wraps. It was a big lift and required a lot of work chasing down signatures at the last minute. In the end we even had one or two signatures we had to get signatures from employees on vacation to close the deal.  

Part 2: Managing and Acquiring a Portfolio of Companies  

You spent over a decade building Arius Software, how has that experience been transferrable to what you do now, as a Portfolio President?  

At Arius we really appreciated the value of relationships. Customers deal with vendors they like and trust. That is something that is transferrable to almost any business context and something I focus on today.

Selling a business involves both strategic decision-making and yet still requires some grappling with emotional considerations. How do you try to empathize with the seller's perspective now that you're in the buyer's position?

It is a huge decision for sellers that can’t really be rushed. As an acquirer, in most cases I don’t think that we can really accelerate the sales process until the point an owner is ready to sell. Once they have made that decision we have a lot of expertise buying software companies as well as experts we can use to streamline the process but until that point we just provide information that can help sellers make an informed decision.

In preparing to sell a company, what steps do you recommend owners take to ready themselves for the process, and what are some common obstacles that sellers often encounter?  

One of the biggest challenges I faced when selling my business was managing to keep the business going during the sales process. It is almost like having two jobs: one running the business, the other selling it. This involved lots of long hours to meet the expectations of my day-to-day job as well as keeping the sales process going. Perhaps the most difficult part was not being able to share this load with other employees aside from our inner circle. It required a constant juggling of priorities. Some of the key paperwork for the deal came together over the Christmas holidays even though the deal did not close until months later.

What advice do you have for entrepreneurs who are contemplating a sale in the coming years?

I think sellers need to understand what they are looking for. Sellers have typically spent many years building a successful business.  Sellers need to consider a huge variety of factors including employees, customers as well as their own goals. Once they have a view as to what they are looking for they can make the decision on what acquirer would be the best fit.

What characteristics are consistent with a business that would be a good fit within your portfolio?  

Constellation has long specialized in vertical market software or software for a particular business niche. Mission critical software is ideal with a larger number of customers reducing dependence on a single customer. Finally having more of the revenue contracted on a recurring basis is preferable to having one-time professional services revenue which you need to sell each quarter.

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