Building a Company That Gets a Buyer Excited: The Private Equity Playbook | David Czarny

What does it take to build a business that is truly acquirable?

This episode offers a special, candid look into the mind of a buyer. We're joined by David Czarny, an M&A specialist with deep experience in private equity at firms like Accel-KKR. Instead of a typical founder story, David provides a playbook for entrepreneurs on how to build a business that is truly acquirable.

David's journey led him to join the founding team of a software roll-up that successfully acquired 10 companies. His strategy was born from a key insight: there is a massive, underserved market of highly profitable software companies (in the $1-3M ARR range) that have strong fundamentals but are "too small" for traditional PE firms to buy.

This is an essential guide for any founder who wants to understand what buyers really look for during due diligence, the biggest red flags they see, and the #1 mistake founders make that can kill a deal.

Agenda:

• The PE vs. VC Mindset: David contrasts the venture capital "power law" model (where 1 in 100 deals must be a Facebook) with the private equity approach, where "10 out of 10 deals have to work well".

• The "Perfect" Acquisition Target: How to build a business that "can sell but does not have to sell"—a healthy, sustainable company that isn't forced into an exit by a high cash burn.

• The Buyer's "Must-Haves": A checklist of the key fundamentals a PE buyer looks for:

• Profitability: Buyers want to make money, not continue burning capital post-transaction.

• Gross Retention: Why a buyer cares more about your gross retention (showing downside risk) than your net retention (which can hide churn).

• Customer Concentration: The risk of having too few customers and why it's "the one thing which keeps killing good deals".

• Revenue Quality: The importance of showing growth in recurring revenue (ARR) versus "low-quality" consulting or one-off implementation fees.

• How a Buyer Really Analyzes Product & People:

• Product: Why a buyer can't form a "high-level opinion" and must go "really, really deep" with customer calls to understand if a product is truly great.

• People: The major red flag of a founder who can't delegate and doesn't trust their team, versus one who has built a true, independent organization.

• The #1 Mistake Founders Make in M&A:

• David explains the biggest founder slip-up: "trying to sell" instead of "working with the buyer".

• He provides real-world examples of what this looks like, such as trying to hide customer churn or inflating "adjusted EBITDA" with unrealistic add-backs (like developer salaries).

• The Banker's Paradox: David gives his candid, direct answer to the question: "Should a founder hire an M&A banker?".

Memorable Quotes

• "The venture capital mindset... is you shoot 100 times and one of them is hopefully Facebook... the private equity mindset is much more, hey, I will shoot 10 times and all of them have to work well."

• "Sometimes... [a company] can sell, they don't have to sell. This is always the position you want to be in if you have that flexibility behind the sale."

• "Gross retention to me as a buyer is almost more important [than net retention] because it shows your downside."

• "Where some founders trip up... is trying to sell... If you are trying to hide the issues, most buyers will find them and they will not trust you as a result."

• "I as a buyer always prefer no bankers. I as a seller should always have a banker."