Lemlist Revenue Hits $40M: CEO Charles Breaks Down $25M Claap Acquisition Deal

Lemlist revenue has passed $40M revenue with strong profit margins as CEO Charles Tenot breaks down their $25M Claap acquisition and Lemlist's path to $100M revenue by 2028. He explains how Claap reached $2M ARR with a 7-person team and why Lemlist used a mix of cash, vendor loans, and convertible bonds to structure the deal.

• 0:00Speaker 00

  He just signed a $25 million deal at Lemlist to acquire a company called Clap. What I love about what he did is it wasn't your traditional deal structure. If you don't dig into the 25 million, you'll never know how creative you can get to buy other smaller companies to drive what's called your inorganic growth. Lemlist is now doing over 40 million bucks of revenue. I bet you they break 100 million by the end of 2028 with Charles as leadership and Guillaume, the original part of the co-founding crew and his product-led growth is just founder stories on LinkedIn. But the way they did the deal is it was a basically 10 million bucks plus some convertible bonds for the founders at close of that, you know, 10, 15 million. 5 million was cash. 5 million was basically Clap saying, okay, Lemlist, we'll give you a $5 million loan. You can pay us back over time at a 3.5% interest rate, but we'll defer it for two years, right?

• 0:45Speaker 00

  So that's a cool way for the founders to get more money over time. And then the second part of the of the $25 million deal structure, the last 15 million is earn out for the Clap founders. If they stick with Lemlist and they grow it from 2 million bucks to 10 million bucks of ARR over the next three years. So before December of 2028, it'll earn that extra 15 million to get to that total deal headline rate of 25 million bucks. Really creative deal structure. This one's a really good episode. Let's jump in.

• 1:10Speaker 01

  All right, folks, special guest today. I'm here with Charles to know he's the CEO of Lemlist and Lempyre. As you know, we've had the CEO, Guillaume, the founder and other product experience folks from Lemlist speak at our events and on the podcast. Charles is leading the business into a new era. That's the post $40 million ARR era. And that starts with a big acquisition that they're doing today. We're recording this here Monday, October 20th. I think the acquisition also happened today. Charles, tell us what's going on. And maybe for those that don't know what Lemlist is, tell us what the business is first and then why this acquisition made sense.

• 1:41Speaker 02

  Yeah, first of all, thanks a lot, Nathan, for having me. It's a pleasure. And yeah, so we are having a very exciting journey at Lemlist because we are growing very fast and reached 40 million ARR, as you mentioned. So Lemlist is a sales engagement platform. Basically, we help salespeople to do outbound. So we help them like to find leads, to find their phone numbers and emails and then to engage on multi-channel. So we support many different channels. So you cannot reach on email, you cannot reach on LinkedIn, through WhatsApp, through phone. So we try to be the platform that has the most capabilities in terms of engagement. And yeah, Lemlist, hopefully it's not done with the AWS outage today.

• 2:26Speaker 01

  You're good, we're already checked, we're good.

• 2:28Speaker 02

  But Clap, Clap is actually done, so that's, that's for the fun part, because, because of AWS, I guess. And, and yeah, we, we just acquired Clap, which is a call intelligence platform. So Clap is basically a very, an AI product that allows every sales rep to record their call and to generate high-quality transcripts in any language. And the idea of this transcript is to do multiple things, such as automatically get coaching and insight on the call, so help sales improve, but it can help to auto-fill the CRM, so avoiding to, to manually fill the CRM. It prepares a notes that you can integrate in the CRM or directly use the different fields that you wanna fill in.

• 3:10Speaker 02

  And it helps for, of course, yeah, sales coaching, sales enablement, and many different use cases that you can decide. So that's a very, yeah, very, let's say, use case extensive product, where you can have a lot of fun building like multi-use case around, around the transcripts. And we're seeing like many people use it for that.

• 3:33Speaker 01

  And, and so this is, just to be clear, this is really officially moving Lemlist from sort of maybe email marketing, outreach automation, to you're really moving into the sort of the granola, Fathom, you know, call recording, you know, Cluley, whatever's left of Cluley, right, space. Is this, how did you decide that Clap was the right company to go after? Did you use Lemlist, say, you know what, we know we wanna get into this space? And then it was, do we build it or buy, here's a list of who we could acquire? Or was this something where like, you're buddy-buddy with the founder, you go back thirty, you know, twenty years, you're not that old, and you say, let's just do a deal together?

• 4:03Speaker 02

  Yeah, so it's, it's a little bit a mix of things. The, the general idea is that, so we were user of Clap, and we love the product. We've been using many different products. And one day I tried Clap and I really fell in love with the product. And naturally, all the team adopted Clap, and the sales are using Clap every day. And so that was kind of like, let's say, the, the starting point, where we started to realize that the product was very good. And beside this, we're profit-making at Lemlist, we, we, we do. Around 10 million profit every year. So we we always want to invest in more growth and better product for users. So that was another driver. And the last part is really that we saw very good combination. Because Claap is selling to exactly the same people as we target.

• 4:48Speaker 02

  So sales team from three to 50 reps, sometimes a bit more. And they have the same kind of ACV. They have the same like champions, which are rev ops, business ops, or our sales managers. And we saw a very strong potential in what they get from the conversation. So the conversation is like unused in many companies. So it's a lost asset. But if you use the conversation, you find lots of valuable thing for sales. And one of the thing is what I called internal signal, internal intent. And at Lemis, we're really trying to make outreach better and smarter. And doing it to make it smarter, you need to have good intent to reach out to the right person at the right time.

• 5:31Speaker 02

  And in the conversation, actually, you have a lot of very interesting insights that you can use to outreach. I give you an example, which I gave on my post, but at my previous company, I was CRO. And basically, like my sales were calling all day and they were not taking any notes. So basically, the serum was was empty. And because the sales turnover is high, so you replace your sales rep all the time. And because you have no notes, three months after, six months after, when you give the account to another rep, which happens when you are kind of mature, the the rep calls with absolutely no information, nothing on the account. But if you have something like Claap, you have all the history of the of the discussion that you had with the account and you have intelligence and you can use this intelligence to prepare your next call. So instead of calling out of the blue with no idea on the previous calls,

• 6:17Speaker 02

  you will call and for instance, you will know that the the manager is called Eric, that they have three point of sales and they are opening a force one and they have this type of seasonality. And so you start the conversation with much more intelligence than if you start from nothing, you know. And that for me, all of that is just an example, but in the conversation that are not used in most company, you have a lot of intelligence that you can use to improve prospection and outreach. And this is the idea of combining Claap and Lemis.

• 6:46Speaker 01

  Yeah, this makes tons of sense. So start off as you guys are a power user. It makes a lot of sense with your audience. You go out, you get the deal done. What was or what is Claap's revenue?

• 6:55Speaker 02

  It's roughly 2 million AR.

• 6:57Speaker 01

  Okay, got it. And were they bootstrapped or had they raised a bunch?

• 7:00Speaker 02

  No, they raised the seed a few years ago, initially to do async work. And they were not able to build the category because it was like, yeah, doing clip video for async work. And they pivoted to conversation intelligence a year and a half ago. And they grew this product to 2 million AR and kind of very fast growing, like recently about 10% month over month. And so they had raised the seed, but now they were like almost breakeven. They were breakeven in terms of cash right now.

• 7:34Speaker 01

  And how many folks were on their team full time?

• 7:37Speaker 02

  Seven.

• 7:38Speaker 01

  Okay, that's amazing. That's great.

• 7:39Speaker 02

  Yeah. If you try the product, you'll... Yeah, you'll be shocked if you try the product. If you try the product, tell me and tell me honestly. But to be honest, everyone who has tried the product was shocked when they knew that it was only seven people. And it's one of the reasons why we bought Clap is because they have a very strong tech and product DNA. And they lack a bit of distribution, which we are good at at Lemlist. So for us, it's a product that was under distributed in terms of potential. It's a product that is much better than the 2 million AR product. It's certainly at the level of a 20 million AR product. And the idea is that we can catch up on that and help and use like our Lemlist customer base and audience to grow Clap. And so we're very bullish.

• 8:21Speaker 01

  Yeah, yeah. And what... So the distribution, by the way, it looks like most of their traffic organic comes from the blog. You guys obviously run really good playbooks. We had Kevin, actually, from your team come teach us at one of our events. And obviously, we go through, you know, how you guys run your founder playbooks. You obviously have your all kinds of gold community courses. I mean, you guys name it, you guys do it. Product Hunt launches. You've also done a bunch of these deals before. You know, you build many free tools, right, as Lead Gen? Can you tell me more about how the deal went done? When did you guys first reach out to the Clap team to actually talk about, hey, we would love to buy you guys?

• 8:55Speaker 02

  Yeah, I reached out to Robin, the CEO, in May, just randomly, and I didn't know him. I just said, hey, I love your product, I've been using it for one year, would you be open to sell? He told me that it was not on his plate, it was not the project right now, but he will think of it. And then we had a few follow-up meetings where I explained to him like the vision of like building a world-class sales platform that is like very product and tech-driven, that we have the same DNA, that there would be a lot of synergies by integrating their intelligence and their conversation insight in Lemlist. And so, yeah, slowly he bought the vision, I guess, and he wanted to do a competitive deal. So he tried to find other buyers to see what type of price he could get.

• 9:40Speaker 02

  So we've been facing like two players, including one leading AI platform in France, like much bigger than us. And ultimately, what made the difference, it's not really the price, because we bid slightly less, it's more the fit with the product and the team. So they were convinced that we have very good synergies and that we can build something great together. So that's my learning, that M&A is more about relationship and people than really strategy, to be honest.

• 10:07Speaker 01

  And Charles, what did you guys end up bidding?

• 10:10Speaker 02

  So the price is between 15 and 25 million, but there are some components that are like earn-out parts, so depends on future growth. But basically, we paid around 15 million right now and with an add-on price if they reach revenue targets.

• 10:29Speaker 01

  And the 15 million sort of deal value at close today, you're announcing this today, basically, how much of that was like immediate cash versus an escrow for, you know, two years?

• 10:38Speaker 02

  Yeah, it's a mix, it's 50/50, but it's not an escrow, it's vendor loan. So it's basically like different cash. Yeah, it's just basically it's a debt, but instead of getting the debt from a financial institution, you get the debt from the vendor. So basically, they get different cash. But they get, they will get the cash just for it.

• 10:56Speaker 01

  They're effectively, they're effectively giving Lemlist an eight and a half million or a seven and a half million dollar loan, and you pay them back over time?

• 11:04Speaker 02

  Yeah, exactly.

• 11:06Speaker 01

  Yep, okay. So the all-in cash consideration for Lemlist, like here at close, is basically around seven, eight million cash, which is equal to three or four x their current ARR, is that accurate?

• 11:16Speaker 02

  Yeah, it's slightly lower because there is a small part that is in convertible bonds for the founders. So the deal structure is slightly more complex because we wanted the founders to be incentivized in future Lempire value or Lempis value. And so they have they have some part of the price which is like convertible bond. So basically, they have like bonds that gives a fee and again converts this bond into shares into some scenarios.

• 11:45Speaker 01

  Charles, this is interesting. You know, people don't get in the weeds in very few companies that build in public quite like you do. So thank you first for your transparency. It's educating like the entire audience. But let's like act like I was one of the co-founders of Clap, just to understand here. You're saying, okay, Nathan, handshake, we've got a deal. It's 15 million, 7.5 million will be on this sort of loan, right? We'll pay you back, you know, Lempis will pay Clap that 7.5 million dollar loan over time. And then additional, Nathan, founder, we really want you to stay at Lempis and build together. Here's a bond. What does that sound like? Does it say, Nathan, here's a $2 million bond with a 3% interest rate, and you can convert it to Lempis equity at a $200 million valuation whenever you want? Or how does it actually work?

• 12:21Speaker 02

  Yeah, so the precise number, I don't think that's always helpful, but it's like, let's say, let's give you an overall idea. It's like, I give you 5 million in cash. I give you 5 million. It's not the exact amount, but that's close to the exact amount.

• 12:36Speaker 01

  Example.

• 12:36Speaker 02

  I give you, I've give you 5 million in vendor loan. So meaning I give you 5 million cash now that you can split between investors and your team. Then I give you 5 million in loan, meaning that I will give you the 5 million for sure, but I will just give it through time. So it gives me time to generate more cash myself to pay you back. And then I will give you convertible bonds. So that's worth like that's, let's say that 2 million of like worth of Lempire share. So let's say anything happened, any liquidity event happen, you can buy 2 millions of share, you can, you will have 2 millions of share on this deal with a discount. So the discount is like 20 to 30%. So let's say that you have 20% discount.

• 13:19Speaker 02

  So it means that you will get the 2 million share, but you will buy them at 20% discount. So if there is a sale or partial sale of the asset, then you get an upside, you get your 2 million plus 20% of upside naturally, plus the eventual capital gain that there was from the time you purchased to know.

• 13:37Speaker 01

  And Charles, just to clarify the capital gain, though, what are you setting the valuation at of Lempis today?

• 13:43Speaker 02

  We don't set evaluation. We don't need to set evaluation. We don't know, to be honest. Like, you don't need to set evaluation because you convert the bond at the time that there is an operation, you know, the 2 million worth with the discount. It's 20%.

• 13:58Speaker 01

  Okay, got it.

• 13:58Speaker 02

  Yeah, sorry. I was not really clear, maybe.

• 14:00Speaker 01

  500 million dollars, like, a year from today, for 500 million bucks. You're basically saying, okay, times 0.8, right? That's the 20% discount, right? So that takes it down to 400 million, and then they can basically buy 2 million worth of shares at that discount. So the gain is basically the extra 100 million, right? On a pro rata basis, based off the shares they bought?

• 14:17Speaker 02

  Yeah, exactly. It's 20%. It's always 20%.

• 14:19Speaker 01

  I see.

• 14:20Speaker 02

  Or 25% or 30% depend. And the last part that I didn't mention that can be helpful is the earn-out part. So the earn-out structure is, there is some earn-out presence, so you have to stay to just be here in the company to touch that, and it's a rather small amount, and it's shared between the founders. And you have performance earn-outs that depends on AR milestone. For the last deal, we combined with EBITDA margin criteria. In this case, we didn't. But yeah, basically, just you reach a milestone of AR, you get some money, and the more, and it can go up to 10 million AR. So times five.

• 14:57Speaker 01

  To get that full 25 million dollar deal value, what does Clap's revenue have to grow to inside of Lemlist?

• 15:04Speaker 02

  10 million AR.

• 15:05Speaker 01

  Oh, I see. In what period of time?

• 15:08Speaker 02

  Three years.

• 15:09Speaker 01

  Three years. Super.

• 15:10Speaker 02

  But we'll do in one.

• 15:13Speaker 01

  Interesting. Hey, this is really interesting. So is there anything else I should ask you about how you guys are considering and thinking about additional growth? We know the bootstrap story. We know the secondary with Gian. We know the book. We know you come in, you're now leading. Revenue's grown from, I think, when you took over, you took over right around, like, 20 million of revenue, right? So you've almost already doubled revenue, right?

• 15:31Speaker 02

  Yeah, exactly. When I joined, Lemlist was at 15 million precisely, and now Lemlist is at 36. And the other Lempire products are at 4, so almost 5, so we are around 40. Yeah, so yeah, now we are exactly that's accurate. We are at forty million, a bit more now. And and we are, yeah, we're profitable. We we try to remain around twenty five to thirty five percent of profit margin. Just because we always try to invest in in the team. So we we hire more developers, product managers, sales to grow the company. But we always try to remain highly profitable.

• 16:13Speaker 02

  So or let's say threshold is like we always want to be above twenty percent EBITDA. While we always invest in growth. So we we we just adapt. Let's say that the growth is slowing down. So we'll we'll reduce hiring. And when the growth is is faster, we'll accelerate hiring. And we we keep managing the companies this way. So we do just a monthly EBITDA check. And and with the profit we generate, the IDs, the cash we generate. Yeah, so basically, as we try to remain above twenty to thirty percent EBITDA margin, most of the time around thirty percent, we have then a positive cash flow. And with the positive cash flow, we try to invest in in M and A deals.

• 16:54Speaker 02

  Yeah, because it's it's it's creates more value for our end users ultimately. And we try to build the best platform.

• 17:00Speaker 01

  Yep, now this makes a ton of sense, and I appreciate you taking time with us. I told you I'd be here for fifteen minutes, so we're at time today. But to summarize again, you guys are acquiring Clap, you know, all in deal value of twenty five million bucks if they can grow their revenue from two million, where it is, say, ten million over time over the next three years. But cash consideration upfront, you've got five million sort of cash, five million vendor, right? So you're basically, they loaned you money, you pay it back to them over time. You have some convertible bonds at a twenty percent discount to whatever the valuation is if a transaction happens that the founders are incentivized with to stick around longer. And then you've got that earn out chunk, where if they grow the revenue, then get up twenty five million bucks. Lemlist continues to grow past forty million bucks of revenue. Charles, if people want to jump into the product experience and test you guys out with this new announcement, where can they find more about you online?

• 17:42Speaker 02

  So you can follow me on LinkedIn, they can try Clap on clap.io. So unfortunately, the website is done. People say it's because of AWS and I say it's because of the announcement that was so big that everything crashed at Webflow. So the website is unfortunately done, but we have the stat and we already have an all-time high, like maybe 50 times the normal creation of workspace. So we already see a big boom in the workspace creation of Clap accounts. So I hope that you guys can try it and give me feedback. If you like it, tell me that you liked it. If you don't like it, tell me what we can improve. Always good to get feedback and make a better product for you guys.

• 18:20Speaker 01

  All right, Charles, CEO of Loomis, thanks for taking us to the top, man. Congratulations on the deal.

• 18:24Speaker 02

  Thanks so much for having me, Latan. Take care.

• 18:27Speaker 00

  I'm only telling you this because you watched until the end. Deal or bust is coming back. The first season got millions of views. I go into small towns in the US, I find the owners of SMBs, I ask about their revenue and I make an investment offer on the spot. Episode one of season two launches next week here on YouTube. We've got 16 episodes coming out very quickly. Don't miss any of them. Click subscribe here on YouTube right now and click like on this video. Then leave a quick comment and just say deal or bust. That way I'll know you watched to the end and you'll be one of my insiders here as we do more episodes, maybe the last few, where we cast next, what kind of investment deals we'll do. Maybe we'll co-invest together one day, but excited to show you that next week. All right, see you, guys.