Founder Justin Klemm on his (Second) Ghost Inspector Acquisition

Ghost Inspector Founder Justin Klemm

Justin Klemm has a pretty unique story – I don’t know too many Founders who have sold their SaaS twice. Over the last eight years, he founded Ghost Inspector, got acquired, and bought it back. This spring, he sold it to SureSwift (and I don’t think he’s planning on buying it back this time). I had the chance to catch up with Justin recently, and we chatted about his Founder story, maintaining sustainable growth, and how he knew it was time to sell.

An Interview with Ghost Inspector Founder, Justin Klemm

Tell me how you got started with Ghost inspector.

I'm a software engineer by trade. I was, and I’m dating myself here, in sixth grade when we got the internet. I was hooked, I had to figure out how it worked. I was building websites in junior high, the whole thing. I went to college for computer science and worked for a number of different companies afterwards. I always did a lot of freelancing along the way, I was always a builder. I like tinkering.

Then in 2013, 2014, I left kind of a cushy gig that had become more management and started doing contract engineering for different startups. What I found was that a lot of them were really struggling with the quality of their products. Things where a customer couldn’t add a product to their cart, couldn’t log in – things like that. They had sharp engineering teams, there was just a disconnect, there wasn’t the level of testing that needed to be happening.

And you thought, oh, that’s something I could fix?

Well, at first I started looking at tools to do that testing, in an automated way. They were out there, but they’re very technical, and you have to tie a bunch together. Someone would have to spend a month or two getting it all to work. So then the question is, can I take all those pieces and package them up into a more approachable thing?

I started with a browser extension that would let an engineer or a QA person record a process. And instead of this really elaborate code and setting up all these pieces, it would just send it to our service, and our service would launch a browser and run through it. The whole premise was taking this testing that was around, but the technical hurdle was really high, and trying to package it into this all-in-one SAAS product.

And when did you realize you had something, that Ghost Inspector was maybe taking off?

The story is kind of interesting. I started Ghost Inspector just tinkering part time. I launched some pricing. I didn't raise money or anything, it was just a side project. I started to get a few customers, and felt like there was a little bit of traction. I was sitting around $1,000 a month in revenue.

Then a company in San Francisco called Runscope found me. (Their founder, John Sheehan, actually introduced me to SureSwift.) They were a little further along – they had raised a Series A, and they were focused on API testing. They were looking at what I was doing, and said hey, we’re doing something similar, what if we buy your product and you come on board and work on it with us. They offered me a nice chunk of cash, not life changing, but it came with a good job offer and it seemed like a cool team. So I said, yeah, let's do it! They acquired Ghost Inspector, and I worked for them for about 18 months.

Things were growing and Ghost Inspector was doing really well. Runscope was also doing well, but the burn was just really high. And when the time came to raise Series B, the markets had tightened, and then suddenly it became impossible, it became clear they weren't going to be able to raise more money. It was a really difficult time. Ultimately, the runway was gone, we had the meeting. Everyone’s laid off, totally out of money. So it's just the death of a startup – or seemed like it. It was really hard. And I was really bummed, but the story wasn’t over…

I was talking to one of the teammates, and they suggested that I should see if Runscope would sell Ghost Inspector back to me. At this point it had gone from making maybe 1,000 a month to around 20,000 a month, which is clearly enough to pay me and I was still really the only one working on it. I talked to John and the co-Founder, Frank, and they were very gracious and let me buy the product back. We more or less reversed the deal with a few changes. And I got Ghost Inspector back.

The way John tells it, I saved them – with the buyback price, they were able to pay their bills, rehire some people, and they had a successful exit. But I got Ghost Inspector back, and for me, it was great because I could pull a healthy salary from it.

At that point, I’m thinking I don't need to raise, I've got traction, let me just hire sustainably and see where it goes. That was in 2016. So for the past six years, I basically just focused on sustainable growth, and finding good team members along the way. It’s definitely hard running a business, but I was fortunate that things were pretty calm, a few bumps along the way but mostly up and to the right.

Ghost Inspector Founder Justin Klemm on copycats in SaaS

I love the way you gloss over the huge growth for Ghost Inspector in the last few years.

Ha! I think it's one of those things where when you're on the journey, you're kind of like climbing the mountain, and you're not really looking back that much. That’s not the mentality, to pat yourself on the back. You’re just going and going.

Tell me a little bit about that, I know Ghost Inspector had a price point that made it really hard for competitors to crack? How important was that?

Honestly, I was just really naïve about how businesses spend money when I started. Because I launched at $19 a month, right? And I slowly bumped it up. I know it’s really overstated, especially in B2B SaaS, that you should be charging more. I definitely should have been charging more. But at the same time, it was also really hard for businesses to compete with Ghost Inspector when they went the funding route. When you raise ten million, twenty million dollars, charging $99 a month isn’t going to cut it.

That’s interesting, yeah, did you see copycats pop up? I see that more and more, people follow what the bootstrappers are successfully doing, and just copy that.

Yeah, there’s a few. There were one or two that really blatantly copied me, and I did a Twitter thread calling them out. You could go to the website and see they had basically copied everything and just changed the color scheme.

So that was frustrating, but John Sheehan actually told me early on, don’t even think about it and just focus on the product. He was right. Because people can follow the successful bootstrapper and copy their idea, but at the end of the day, it’s an execution thing, isn’t it? I had to grind this out for eight years on my own. Are you someone who’s going to be working hard every day, or are you this copycat who’s going to get bored or give up?

So yeah, the copycats were annoying, but I can’t think of a single situation where the knock-off was more successful than the original.

I’ve never heard someone articulate that before, that’s a great point. If you have this copycat mentality, then you probably don’t have the Founder mentality that it actually takes to be successful and win.

Yeah. If you can't even think of your own idea, or at least put your own creativity into it, it probably isn’t going to work out. If step one is rely on somebody else, you know, that's not a good starting point for a Founder.

Circling back a little bit, I’m curious, because you have such a unique story– what did your days look like during the growth phase with Ghost Inspector, when you were with Runscope and then when you bought it back? Where was your focus?

In both cases, it was primarily engineering. But with Runscope, I didn't have to worry about the business ownership side of it, like running payroll, and business insurance and all those things. When I got it back, a large portion of my day was still engineering, but I had to take the back end back over, support and things like that. The bulk of the work on the product is engineering and technical support, those are the two things that occupy time.

Then as a business owner, there's this layer of things that sit on top of that, legal, or compliance or tax or payroll. That layer grows as you hire more people. But I knew for me, I consider myself a product engineer, and I knew if I lost that part of it I wouldn’t be happy. So I tried to devote at least half my day to the building, engineering side of it.

Ghost Inspector Founder on why he sold his SaaS business

So things are going well, Ghost Inspector is growing, when do you start to think about selling?

Well, I had a kid! But really, there are a couple of reasons that played into thinking maybe it's time for me to pass over the reins. One was having a kid and realizing, not necessarily that my whole day was taken up by the business, but my whole brain was taken up by the business. I think some Founders have the ability, which I really envy, to shut the laptop at 4 or 5 pm, and turn it off and it's just gone. Right? But unfortunately, I’m not like that. I’d find myself on the swing set pushing my daughter, and just staring off into the distance thinking about tax compliance or something.

I always knew at some point, I’m going to want to exit the business and get that value that I had built out of it. Things were still going smoothly, but there’s always that chance that things could go south in a year or two and I could be looking at a very different exit. That wasn’t a very strong fear, but it was at the back of my mind.

The other big piece was that I'm truly an engineer, builder - I'm really not a manager type. Things were at the point where the Founder would have to step back and hire the right person to manage this and the right person to manage that. And I'm not great at that. I like all the ground level stuff, I like having all my fingers in it. I couldn’t hand off things to smarter people who would probably do a better job. I realized, sooner or later, this is going to be to the business’ detriment. And I didn’t want to be an unhappy Founder either: someone who’s handed off all the pieces they enjoy and now they just hate their work.

That’s really impressive, that you were able to realize all that and kind of be self aware and looking ahead. I think it’s something a lot of successful builders share, that cycle, you build something great and it gets to the point where you need to hand it off to get back to building again.

Yeah, I can see that cycle in my career. Eventually you just need to reboot and clear the table. You want permission to let go of all that specific product knowledge that’s built up, and sometimes that means taking a break and sometimes it means leaving your job or selling your company.

So when you realized it was maybe time to hand things off, how did you start that process?

I started poking around to understand what it would take. I talked to a lot of Founders I knew who had had exits, asked them what it was like.

I reached out to a broker to see if that was the direction I wanted to go. I think maybe if it had been five, ten years ago then it would have been. But now with the existence of companies like SureSwift, there are other interested buyers for a company doing the kind of revenue Ghost Inspector does. I decided to do some reaching out on my own.

Then John Sheehan referred me to you. I checked SureSwift out, and liked everything I saw. I reached out, and my first conversation right off the bat with SureSwift was great.

What’s next, taking a break or do you have something new in the works?

I'm definitely taking a break. Everybody's always like, what's the plan? What's next? Will you be laying on the beach? I’m probably still going to be waking up at six, taking my kid to the playground, cooking dinner. But those things sound nice to me.

I’m trying to be intentional and take some time, because I know I have that builder mentality, right? I don't have any fear that I'm gonna sit around for the next 30 years and do nothing. It's more of the reverse. I have to fight the urge. I’d like to work out a little more, cook a little more, eat a little less take out.

That sounds like a great plan!

Want to keep up with Justin to see what he does next? Find him on Twitter or LinkedIn.

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