From Bootstrapped to $90 Million: The Spector Software Success Story

The Origin of Spector Software

In 2016, Kevin Wagstaff and his brother decided to start a SaaS company in the home inspection software space. They were inspired by the essays of Paul Graham and wanted to target a niche market with a small total addressable market (TAM). The home inspection industry, with about 30,000-40,000 companies in the US and Canada, fit the bill perfectly.

Initially, they had two other co-founders, but those individuals dropped out early in the process before the company was formally established. Kevin and his brother were left to pursue the vision on their own, putting in $2,500 each to get started.

The Market Opportunity

When they began researching the home inspection software market, they were surprised to find it relatively underserved:

• There were dozens of existing solutions, but many were outdated "zombie" companies
• Most offerings were desktop-based or even CD-installable software
• Only 1-2 true SaaS players existed, but they lacked key features
• No company had dominant market share (e.g. 50%+)

This fragmented landscape presented an opportunity to build a modern, feature-rich SaaS platform for home inspectors.

Building the Product

Spector's initial product focused on several key areas:

• Digitizing the inspection process and reports (replacing physical binders)
• Improving the user experience for inspectors in the field
• Creating a mobile app to capture data and photos on-site
• Generating structured data and web-based reports

Their goal was to have 90% of an inspection report completed on a mobile device before the inspector left the property. This would save inspectors significant time compared to manual processes.

Early Customer Acquisition

To acquire initial customers, Kevin leveraged his background in SEO and real estate:

• Created daily blog content and YouTube videos about home inspection
• Focused on ranking for key terms like "home inspection software"
• Offered free SEO audits to home inspectors to generate leads
• Provided extensive 1-on-1 support to early adopters

This strategy paid off, with Spector reaching 200 paying users by the end of their first year.

Product and Pricing Evolution

Spector's initial pricing was $79/month per user, later increased to $99/month. They also added website hosting services for an additional revenue stream.

As they grew, they introduced add-on products:

• Lower-priced accounts for additional inspectors ($49/month initially)
• Website hosting packages
• An advanced suite of tools for experienced inspectors ($3 per inspection)

These expansions helped increase their net revenue retention to around 110%.

Growth and Scaling Challenges

Despite strong growth, Spector faced some challenges:

• High churn rate of ~3% monthly (36% annually) due to industry dynamics
• Need for constant new customer acquisition to offset churn
• Balancing product development with customer support

To combat these issues, they focused heavily on customer acquisition through SEO, conferences, and community engagement in online forums.

Considering an Exit

In 2019, with about 2,000 customers and $2 million in revenue, Spector began receiving interest from private equity firms. This kicked off a long and complex journey toward an eventual exit:

1. Initial offer from Mainsail Partners valuing the company at $60 million (2020)
2. Formal sale process with multiple interested parties (2022)
3. Letter of Intent signed for $80 million, but deal fell through at the last minute
4. Unexpected connection at a conference led to new discussions (2023)
5. Closed deal with Radian Capital for $90 million valuation, selling 49.9% stake
6. Follow-on transaction selling additional 20% stake at $110 million valuation (2024)

Key Lessons from the Exit Process

Kevin shared several important takeaways from their experience:

• Be prepared for emotional rollercoasters and last-minute changes
• Understand private equity terminology and negotiation tactics
• Don't be afraid to walk away from unfavorable deals
• Having a profitable, growing business provides leverage in negotiations
• Consider the impact on employees and company culture
• Educate yourself through books, podcasts, and online communities

Post-Exit Reflections

After the initial transaction, Kevin and his brother realized that operating a PE-backed company required different skills:

• More formal processes for board meetings and reporting
• Focus on metrics, KPIs, and organizational communication
• Recognition that professional management might better serve the company's growth

This led to their decision to sell additional equity and step back from day-to-day operations, while remaining involved as advisors.

Celebrating Success

To commemorate their success, Kevin and his wife recreated a scene from the TV show Billions, enjoying caviar on pizza at the beach. He also treated himself to a Tesla Model Y wrapped in a unique Miami Blue color.

Advice for Entrepreneurs

Kevin emphasized several points for other founders considering an exit:

• Start having conversations with potential acquirers early to understand their perspective
• Don't be afraid to ask direct questions about valuation multiples and expectations
• Consider hiring an experienced M&A banker to guide you through the process
• Be prepared for the emotional highs and lows of deal-making
• Remember that you can always walk away if a deal doesn't feel right

The Spector Software story demonstrates how a bootstrapped SaaS company in a niche market can achieve significant success through focused execution, customer-centric product development, and strategic decision-making during the exit process.

Article created from: https://www.youtube.com/watch?v=lv4aphdnHp0