Elizabeth Shea chats with Hunter Jensen, founder and CEO of Barefoot Labs and author of The Killer Use Case. Hunter shares his journey from becoming a self-taught programmer to bootstrapping Barefoot Labs over two decades, funding early growth with little more than determination and a handful of zero-interest credit cards before building a thriving company. When growth plateaued, a chance introduction led to a strategic acquisition that allowed him to diversify his personal risk while remaining actively involved in the business. Hunter offers anecdotes about navigating an international transaction, the importance of having trusted advisors by your side, and the challenges that emerged after the deal closed as two organizations with different cultures learned how to work together. He also reflects on why maintaining equity proved valuable and how strategic buyers can exponentially accelerate growth. If you’re a founder considering a strategic partnership, partial exit, or international transaction, this episode is for you.
Connect with Hunter on LinkedIn or email him at Hunter@barefootlabs.ai
Elizabeth Shea (00:43)
Hello everybody and welcome to Branching Out. I am very excited to have Hunter Jensen in the studio, who is a relatively recent acquaintance from just a few months ago, right, Hunter?
Hunter Jensen (00:54)
Yeah, that sounds right.
Elizabeth Shea (00:55)
We're excited to have you on. Hunter comes to us as the founder and CEO of Barefoot Labs. He had a recent acquisition; he'll share his story about that. He's also an author of a book that recently came out called The Killer Use Case. So, there's probably some interesting anecdotes you can talk about with that book. Welcome to the program, Hunter.
Hunter Jensen (01:14)
Thanks so much, Elizabeth.
Elizabeth Shea (01:16)
Okay. Let's just start with the basics. Let's start at the beginning. Tell me how you got your start creating Barefoot Labs and what you did to help build that business up.
Hunter Jensen (01:25)
Yeah, so I'd say it started in fourth grade when I my dad brought home an IBM 386 computer and I learned QBasic programming when I was that age. So, I've been programming since then.
But where it really started was actually in college. I went to the University of Virginia, and my plan was to join the computer science department and learn that. I got there and I did a semester and I looked at the curriculum and I learned that they weren't teaching any of the new stuff yet. Like they weren't teaching web development because it was brand new. But that's all I really wanted to do. So, I dropped out of the computer science department. I ended up with a double major in philosophy and economics of all things. I taught myself web development by checking books out of the library, and I paid my tuition by picking up gigs on Craigslist, just writing code, building websites. My first like kind of professional gig was for a lingerie website. It was called Forever Hers.
So, I came out to California, and I started doing that full-time. I was just like a full-time freelance developer. And there was a moment where I realized, “well, okay, there's a real ceiling on this. Like I only have so many hours a day that I can bill. I should start hiring people and build a real business.” So, that's really when I got serious. I made my first hire. I started hiring subcontractors to do the things I didn't like or that I wasn't good at. And I very organically built this business the course of more than twenty years. But that's the origin story, is a lingerie website on Craigslist.
Elizabeth Shea (03:21)
Wow. So, you didn't set out to start a business, it sort of happened organically. You take a lot of risk in doing that and building a company that way. Did you ever feel like you were taking risks?
Hunter Jensen (03:33)
Well, I was young and dumb. I certainly took risks, but I didn't have all that much to lose. Like, worst case scenario, I'm going to sleep on my brother's couch for a month or two, get a real job, and get back on my feet. And the way that I did it was actually kind of funny. I got these credit cards with 0% interest rates on them for like the first nine, twelve months or whatever, like an introductory period with no interest rates. And then I would just transfer them to the new one to pay for the building of this business. So effectively, I took out like a zero percent interest loan by just hopping credit cards for the first nine months.
But I was able to get become profitable very, very quickly because it was just super lean and it was just it was just me or just me and one person. So yeah, I took risks by basically bootstrapping the company, but that had its benefits too. This meant for a very long time, I was a hundred percent owner. And that became a very helpful fact, when you fast forward to the transaction, right? And I'm glad that I did because it made it for a much more meaningful transaction than it would have been otherwise if I took a bunch of capital up front.
Elizabeth Shea (04:32)
Right. I think that bootstrapping can certainly be the way go, but it is risky and it does take a certain entrepreneurial spirit, I believe, to make that happen. So, you grew for how many years? Twenty some years?
Hunter Jensen (04:58)
Yeah, we were officially founded in 2005, so that puts us at year twenty-one right now.
Elizabeth Shea (05:04)
Wow, congratulations. So, you built up the company. How big did you get? How many people did you have?
Hunter Jensen (05:10)
I think when we were acquired, we were at like fourteen people. I want to say something like that. But something to keep in mind is that's not necessarily a great gauge because when we had that many people, we probably had another 30 or 40 subcontractors that were working full time on our projects. So, we were a bit bigger than our head count in terms of the amount of work output that we were putting through. And we had an onshore offshore model where we had folks in the States and then had folks doing a lot of the heavy lifting in Eastern Europe where we could get better rates.
Elizabeth Shea (05:37)
That's amazing. So, tell us about when you first started thinking about looking at a strategic acquisition or being acquired by a strategic entity. Or did you even think about it? Did it just happen? Tell us about that story.
Hunter Jensen (05:59)
Yeah, I mean every business owner thinks about it, but often it feels like some far off dream. One of the things that looking back, maybe I would have done differently is at the time I didn't really understand that I was building a services company. I didn't really understand what that meant for multiples. I was looking at software like SaaS startups getting their five to ten X multiples, thinking, “cool, that probably is for me too.”
And when I really got into it and started looking at it, I came to understand that it's not even in that ballpark, what a services company gets. It was the kind of thing that was always on my mind. It was also a time where I felt like we had plateaued. We had maybe two or three years where the revenue was like about the same. And it was kind of a lifestyle business to a certain extent, right? Like it I was making good money. but we weren't growing anymore.
And the reason we weren't growing was that the amount of capital that it required to grow past that inflection point was more than I was personally willing to risk. Because at that point, my bank account and the business bank account were basically the same thing. That's how much money I had, is what was in the business bank account, right? And I could no longer stomach the risk. I also got married around this time and, all the rest of it. And so, I had a little bit more on the line. I just couldn't risk all of that personal capital. And so, if we wanted to grow, we needed some outside investment. That was that was kind of the conclusion. And I started to gear up for, “okay, what does this look like? Do I need an investment banker? Do I need a consultant?” et cetera, et cetera.
And then at that time, a friend of mine who lived in Belarus and worked with very closely for many years . . . I mentioned that I was thinking about this and he said, “You know what? I actually have somebody for you. They're actively looking for a software development shop in the States, like right now.” And I said, “Whoa great. Yeah, tee it up.”
And the rest was history. They ended up being the buyers and they're now my parent company and the head of that organization is on my board of directors. So, I was thinking about it, and I was starting to get the gears going and then out of nowhere, just out of left field came this deal and it was a good one. And I went with it and haven't looked back.
Elizabeth Shea (08:49)
That's a great story. Some people on our show have that situation happen where it just comes out of nowhere and other people go through a process. So, did you take the time to educate yourself on any of the components of like the fact that multiples are different for a software company than for a development company, a services company than a software company? What did you do to get ready to go through that process? Did you hire any advisors in the end?
Hunter Jensen (09:15)
Yes, I did. I would say to any business owner, you'd be crazy not to bring in a professional for a transaction like this. There was so much I didn't know. I really leaned on three different professionals, which were an M&A consultant, my attorney, and my CPA. That was my squad. That was my M&A squad at the time.
And we had some real challenges because this was the first time that my parent company had bought a company in the States and their attorneys and my attorneys were not speaking the same language, both literally and metaphorically. And there was this massive disconnect. It took the professionals on my side to educate the other side of the table in a way that I never would have had the authority to do, right? They would have said, “No, son, that's incorrect. This is how we do things.” But when I had those professionals at my back, they had authority and they were they were listened to. And it created a more collaborative deal environment, as well as they were just protecting me from making bad choices.
Elizabeth Shea (10:28)
Right, right. most people don't go through this but once in their life, you know? And so that's an interesting perspective that it's from a different country too, to have a buyer that is that is buying it and probably yeah, literally different languages and then terms are probably also seen to be very different.
Hunter Jensen (10:32)
Yeah, deal structure, all of it. My attorneys we had to actually bring in another attorney that had more experience in doing deals in Eastern Europe to even explain what some of the sections of the purchase agreement were. Like, why is this even here? My attorney was like, “I've never seen anything like this before.” And I said, “I think it's an Eastern Europe thing. Can you look in your firm and see if there's anybody else that has experience working with these countries?” And sure enough it was a requirement for them, it was not something that we could take out, they needed it. We just had to learn that and so, I would say that one of the more unusual bits of the deal was having to deal with people that felt worlds apart geographically and culturally.
Elizabeth Shea (11:14)
Right. So, how long did the process take from the time that you first sat down to have a conversation til deal close because I think a lot of people don't anticipate how long it can actually take.
Hunter Jensen (11:41)
This one actually I would say probably went faster than average, in that I wasn't soliciting a bunch of different deals and trying to negotiate people against each other, which is often a part of this process. And it was strategic, not PE. So, there was not the level of diligence that you might go through if you're being inquired by a private equity company that has very dialed processes for all of these things. But that being said, I think it probably still took nine months from initial conversation to when the wire transfer landed.
Probably six to nine months, I want to say. It was a little while ago, so I'm not quite remembering, but it takes a while. This is a good story. So, the closing of the deal, okay. We're super close. And I say, “look, I'm going to fly out to Minsk,” where they were based, “and let's close this deal in person. Minsk is very far away, by the way. So, I get on a plane at LAX, which then lands in Warsaw, quick little puddle jumper over to Minsk and I've got the negotiation of my life happening first thing in the in the morning. And I'm standing at the turnstile waiting for my bags, which never come. Because they were still in Warsaw. They didn't make it onto the puddle jumper. So, I've got I've got the biggest negotiation of my life, and sweatpants and sneakers and a hoodie.
Elizabeth Shea (13:12)
Oh my gosh. So what'd you do?
Hunter Jensen (13:31)
So, I managed to find a store that was open, bought some pants that were way too long and a shirt whose sleeves were way too long. I'm not a tall guy so I normally have to have to like tailor my stuff. I didn't buy the shoes because they were like $400 and I was like “I'm not buying $400 shoes for this.” So I wore sneakers to this negotiation with clothes that just didn't fit at all.
Elizabeth Shea (13:55)
Okay. Hahaha. Did you tell them?
Hunter Jensen (14:01)
They knew. I had the opportunity to explain to the people at the table why I looked like a fool. The problem was all the other people that saw me, all the other people walking down the hallway are like, “that's the guy that we're like talking about buying this company from?” And I wonder if there are still people at the organization that are like, “why was he dressed like that that day?”
So the lesson is, give yourself a buffer, like a travel buffer for something to go wrong before the biggest meeting of your career.
Elizabeth Shea (14:37)
Right. Right. My gosh, that's a great story. So the transaction happened, it went through that morning. And you pop champagne, whatever you do, and then you move on. Now they didn't acquire the entire company, correct? They acquired a majority, but . . .
Hunter Jensen (14:54)
They acquired a majority stake but intentionally left me a lot of my minority stake. And the reason for them and for me was that one, for them, they were to a certain extent paying for my blonde hair and my blue eyes and my American accent. Without me, it would have been a struggle to keep the business alive after the acquisition. And that was that was clear from the beginning of the conversation. Like I was part of the deal, right? And that's typical, right? You have your earnouts. We had an earnout and ours was two years.
But then also for me, I didn't want to leave. I actually love my job. I love what I do. I love it today. I loved it then. I wanted to keep doing it. I just wanted to see the company keep growing and I wanted to take some of my own chips off the table, right? And everything in my name was in that business. Everything. And that just became too risky for me as I'm getting married and thinking about a family and stuff. I just couldn't do it anymore. And this allowed me to take my chips off the table, diversify, put them in places where they could grow, but also keep my skin in the game, such that if this business keeps growing, which it has, then I'm going to see another reward at the end of this tunnel. And, for those reasons, a majority acquisition where I still kept a nice chunk of equity made a lot of sense on both sides. So, this wasn't like a point of contention. This was actually something where we really came together and was like I was like, “wow, that works great for me.” And they were like, “well, this works perfectly for us.”
I still consider it like an exit of sorts, right? Where I cashed in on my equity, right? And it's just that now I have a new arrangement at the company. I still have plenty of equity. I'm still the founder CEO. I still have full operational control. Basically, what's different is I have a board of directors, and they can fire me if they want, right? So that's new. I previously wasn't able to be fired. Now I can be fired, but we're many years into this partnership. It's been extremely fruitful on both sides. I look forward to many more years with them as partners because they're a wonderful board of directors. The leadership there is fantastic and forward thinking. They let me take risks. They've seen me spectacularly fail and still support me. A lot of people can't say that about their board, but I'm proud to be able to say that about ours.
Elizabeth Shea (17:30)
Okay, so when you look at the fact that you're still part of the company, which is very rare, and you're going to continue to grow . . . what do you see in the future? What does that mean for the equity that you still have?
Hunter Jensen (17:42)
Yeah, it's actually pretty interesting. The equity that I still have today is actually worth more than the hundred percent of equity that I had prior to the deal. So, we were able to grow the company to such an extent that I have more value in my equity now than I than I did then when I owned the whole thing.
Elizabeth Shea (18:04)
Well, you are definitely on the fortunate side of the of the equation. There are some people that just maybe don't even know their leadership team that much or aren't able to really see eye to eye on how the company needs to grow. So, it's very fortunate. There used to be a lot of strategic acquirers out there and there are just less of them now. And the strategic acquirer is typically the way that a business owner would like to go if they want to a pursue an opportunity to really shape what their career looks like moving forward. My company sold to a strategic acquirer and that was the right decision at the time because we got to basically grow the business and for the same reasons that that you had . . . So I think the big thing we like to talk about on this show is that there are different options. You don't have to just sell to PE. You don't just have to sell to a strategic and give away the entire company. There are options and there are ways to take some chips off the table. So, bravo. I think you did a really nice job on that one. So, congratulations.
Hunter Jensen (18:57)
Thank you. Like it all happened pretty organically. There's no way I would have known that this was what I wanted it to look like until I saw it. Do you know what I mean? I didn't go into this being like “I want to maintain a large minority stake. I know I want X, Y, and Z. I want a strategic.” It's more in retrospect that I'm like, “yeah, this actually pencils.” The fact that I'm still here and I'm still happy means that yeah, this was a good structure based on what I need and what they needed.
And the benefit of a strategic is they understand your business deeply. They're in the same business. And in fact, they grew their business to be much bigger than your business! They very well might be better at this business than you are as the smaller owner, right? And so, if you embrace that and you let them in, they actually can be very, very helpful. It's like . . . tell me how you grew your company to be that big and help me build this one to be that big, right? Like that's a beautiful thing.
Elizabeth Shea (19:42)
Right, right. And then one plus one can be three.
Hunter Jensen (20:10)
Yeah, yeah, one plus one is three there. Like that's a that's a beautiful synergy that creates a lot of value.
Elizabeth Shea (20:16)
So what didn't go well? What might have been something that you would have done differently? Was there anything?
Hunter Jensen (20:23)
There was. There was. And it almost put me into full panic. I would have done one thing differently. So, part of the deal, without getting into too many details, is that this means that all of the development work that I had been subcontracting to various teams in Eastern Europe is all now going to go through my parent company, right? That was a deal term. And that made a lot of sense for us strategically. But we didn't actually work with them at all before the deal was done. We didn't do any projects with them. And the first project we did, which was a big one for us at the time, was a bit of a disaster. And we just had different processes, different communication styles, different expectations about work, all of it. And I thought, “if this is what it's going to be like, I don't see a future for us.” And I'm locked in now. I was really scared at the time that I had just made a horrible mistake and that we weren't going to be able to find a way to work together. So, if I had to do it all over again, I would have tested those waters more thoroughly and said, “hey, can I just hire you as a contractor to do a project with us so we can see what that feels like?” Because that was kind of a big leap.
Now we fixed it. They were great. They said, “we see why there are problems. Let's come together and find solutions.” And the second project was better. And the third one was even better. Everyone gets a little bit better, right? We have continuous improvement and now we are just smooth on our projects. Like they are just a thing of beauty.
Elizabeth Shea (22:15)
Well, that's great. It's a hard lesson because if you don't have that chance to test it out ahead of time, you can be surprised. And you are not alone. There are many people that have been on this show that have talked about the fact that the cultures didn't align and the processes weren't there in terms of managing things. Not that one was right or wrong, just different. And that's hard to get over.
Hunter Jensen (22:34)
It is and with the added challenge that my parent company was a hundred X my size. We're fast and nimble and we take risks and can move quickly. But they're a big aircraft carrier, slow-turning kind of organization. Right. So, it was like, we could change our process, but that has to go through nine approvals, and then we do the review, and then we do a test project. And it was like, okay, we'll change ours. Cause all I have to do is say that we're doing it differently, and that means we're doing it differently. And so, you know, that makes it challenging,
I think that if you want to abstract the lesson there, it's like don't be so distracted by the deal that you're not thinking about what work looks like after the deal. That needs to be part of how you're thinking about it.
Elizabeth Shea (23:23)
Yep, absolutely. That's a big lesson that you don't always think about because you are very focused on the deal and the transaction. Okay, so you just wrote a book called The Killer Use Case. Tell me about that. What inspired you to write a book in your spare time, it sounds like? What's it about?
Hunter Jensen (23:43)
Yeah, right. So, it's called The Killer Use Case, a framework for AI adoption at midmarket companies. I've spent the last year or two writing and speaking about AI. It's pretty much all anybody wants to talk about these days, but you know, I got started in probably 2023 or 2024, really getting deep in the space and seeing the kind of the same problems over and over again. You know, the big companies have figured AI out to a certain extent. Like they've successfully deployed it at their organizations and they're seeing value being driven and an ROI. But the mid-market companies are a mess. They're an absolute mess. They don't have the engineering talent, they don't have the strategic technical people that they need, and they're just like evaluating vendors as if like the AI strategy at your company is just picking one of the pieces of software and then they have misconceptions about how it works. Anyway, I'm having these conversations over and over and over again and seeing the same pattern.
And I built kind of a consulting practice around like how to actually get ROI from AI adoption at these companies. And it became such a kind of refined framework that I thought made sense to put it in a book. So, I set out and it took a while. It takes a lot of time to write a book. It's not even that long of a book, but it still takes quite a while.
But it was such a great experience. Something I'd kind of had on my bucket list since I was young. I kind of always knew I'd write a book at some point. And I'll probably write another one. We'll see how this one goes, but I've got more ideas as well. So, check us out on Amazon, The Killer Use Case. Please leave five-star reviews, we need them.
Elizabeth Shea (25:49)
I love it. Hunter Jensen. Okay well, thank you so much for your participation in this program. Are there any last thoughts you want to leave our audience with as they look to pursue their own journey for an exit eventually?
Hunter Jensen (26:02)
It's probably the most important thing you're going to do professionally in your entire career. Treat it that way. That would be my parting wisdom.
Elizabeth Shea (26:14)
That is a beautiful phrase. And I think it's very telling, very suitable. That's awesome. Excellent. Okay, so how can people get a hold of you, Hunter? On LinkedIn?
Hunter Jensen (26:24)
I'm on LinkedIn. You can get us at barefootlabs.ai. And Elizabeth, as a thank you for having me on the show, to all of your listeners, I encourage you to reach out to me at Hunter@barefootlabs.ai. In the subject line, please say “I heard you on Elizabeth's podcast.”
Elizabeth Shea (26:46)
Hahaha.
Hunter Jensen (26:47)
Because otherwise I won't respond. But if you do that, I promise that you'll get a personal, thoughtful response from me and we can chat about whatever it is you'd like to chat about. I don't need to be a potential customer. That's just as a thank you for having me on the show.
Elizabeth Shea (26:58)
Excellent. I appreciate that. All right. We'll check out your book. Thank you so much, Hunter. Have a good day.
Hunter Jensen (27:05)
All right, thanks.