Legion Founder Ryan Bettencourt Talks Tech Investments

Legion buys, builds and scales Software as a Service (SaaS) companies in market verticals we know well. We operate the businesses we buy and build and have been described as a cross between a venture studio and micro Private Equity. For investors, we offer them the chance to make one single investment and own stakes in multiple high growth ventures.

My co-founders and I have been building tech companies for many years — some have been bootstrapped and some have been backed by venture capital. Over many years we have been discussing and refining a model that fills a hole in the typical way that tech companies are built and how investors invest in those companies. The venture capital model of chasing unicorns is necessary given the economics of the model, and it works very well when it does. But we have seen many times how good companies can be suffocated by this model — by raising too much money or chasing unsustainable growth, they not only don’t become unicorns but they also ruin their chances of being great, very profitable and valuable companies (maybe not unicorns, but still incredibly valuable and meaningful). At the same time, bootstrapping is hard because it often leads to not having the resources or knowledge to scale. After many years of refining the model, we decided it was a good time to bring Legion to life. We also believe that Legion is a better way to invest for investors — unlike most other investment opportunities, the way Legion is structured reduces the binary nature of many investments and also gives investors multiple bites at the apple with one single investment. 

We have started speaking more about our philosophy and approach on our blog: https://medium.com/legionworks

We have been building tech companies for many years and have learned a lot both from our high points and low points. We have scaled companies from nothing to many millions in revenues and from no employees to hundreds of employees. We have started companies from scratch and have bought small companies and scaled them. We have enjoyed exits (selling our companies) and have also had opportunities to sell companies for great outcomes that were blocked by investors. We have bootstrapped ventures and also run companies with significant venture capital. In addition to being operators of ventures we have started, we have been advisors and investors in other companies.

A few highlights of the companies we have helped scale and lead include: 

• Neil Patel Digital (an SEO and content agency that surpassed $20M in revenue run rate in under 3 years); 
• KidZui (an award winning consumer software product backed by blue chip venture capital and sold to leading private equity company Saban Brands – and then resold to Leapfrog); 
• digital-telepathy (a highly regarded web design and development company that worked with leading startups and was eventually sold to Service Now); 
• Spoutable (an ad platform launched as part our past venture studio – Sputable was acquired by Proper Media); 
• Hello Bar (a well known and successful SaaS platform in the marketing technology space).   

All of these experiences have led to the model that we have created at Legion and how we look at building, acquiring and scaling ventures. These experiences have also led to a broad network we can tap into for each of our ventures.

Our team has four co-founders. I’m the co-founder and CEO, and I focus on the overall vision and leadership of our efforts. Mike Kamo is co-founder and Chairman. Mike has extensive experience in scaling sales and marketing efforts and will focus his energies on helping our companies to scale through sales, marketing and business development. Grant Bostrom is co-founder and Head of Ventures. Grant has extensive experience in leading business development efforts, starting companies and leading product efforts. He heads up our efforts to source businesses to acquire and is responsible for launching internal ideas. I often call Grant our “Swiss Army Knife” because he has a very broad skill set. Keiran Flanigan is a co-founder and our Chief Product Officer. Keiran leads the teach and product efforts for each of our businesses. Keiran is a developer by trade and has designed/built/led products that have won numerous awards. He has developed products for many startups as well as for GoDaddy, Hyundai, 24 Hour Fitness and the NFL. Keiran, Grant and I have built many businesses in the past together so have been working together for over a decade. Mike and I have been working closely for the last few years as part of Hello Bar and other ventures. 

In addition to our founding team, we are in the process of hiring an internal team to centralize common functions across all of our companies (finance, operations, human resources, etc…). This is key to our model because it lowers the financial burden for each company, thus increasing profits while professionalizing their operations.

We focus our efforts on Software as a Service Companies, and we only take majority interests in any company we buy or start. We know the Software as a Service model very well and having a common business and revenue model across all of our companies allows us to share knowledge and lessons so all benefit. The model of Legion is to build these companies, centralize core common functions to reduce those costs for each business, and be sure that each venture stands well on its own. We look for companies that are in marketing tech, sales tech, or foundational tech. The sweet spot for the companies we look to acquire is a company doing roughly $1M in revenue, bootstrapped by tech-centric entrepreneurs (engineers), and lacking access or knowledge to scale. We look at a broad range of geographies for these companies with Eastern Europe and Asia being two key parts of the world for us. 

One of the great things about our model is that we can have multiple exit opportunities. We could go public or be acquired as a total company — or our individual companies could go public or be acquired as individual entities.

There are very few opportunities for investors to access great tech deals. Most require you to have a strong network or ask for very high minimums. When you can invest in good tech deals, you usually invest in a single deal that will likely become binary — in 7-10 years you will either have something or nothing, but you usually don’t know for that period of time. We created Legion not just because it’s the kind of company/model we believe in running but also because we think this model is better for a broader group of investors. We intend to offer dividends early and often, we believe in issuing warrants to our early investors, and we are advocates of investors spreading their investments across multiple ventures. 

Also — given that we have a strong bias towards acquiring companies — investing in Legion means that investors are investing in proven companies.

A) There are limitations through the platforms around what terms we can offer as part of the investment — some don’t like warrants and we thought that was important; 

B) We have a lot of experience building and optimizing marketing funnels and wanted to be able to have all of that data so that we can optimize our flows accordingly… This has proven to be very helpful in the first 3 weeks as we have been able to really optimize things; 

C) Cost of capital — some of the platforms were asking for a very large percentage of money raised plus equity in the company. We knew we could build the tech ourselves and also knew that we had access to audiences that we could tap into at scale. That enables us to retain more money within the company to be used for operations and acquiring and starting companies; 

D) We followed the model of a number of companies we know that raised large amounts outside of the platforms, and they steered us in this direction. So you know, we are having conversations again with the platforms to see if it is worth working with one or two of them.

We are raising as a corporation: Each company we acquire or build is/will be an individual entity, meaning that Legion Works, Inc. will then own each of the other entities (all will be majority — some will be 100%, whereas others will be less but still majority). We do this because this allows us to raise capital into these individual entities, ensure that they can stand on their own, and also to be sure that each individual entity could be sold (or go public) on its own (but also could be sold as part of our total portfolio during a sale or public event). Therefore, we are careful to say that we are not, technically, a holding company nor a roll up.