.png)
Speaker: Andrew Gazdecki
In the dynamic world of business, the ability to identify key sellable items is essential for ensuring growth and success. Andrew Gazdecki, a seasoned entrepreneur with a track record of building and selling companies, shares his insights on this crucial topic. In this article, we will delve into the highlights of Andrew's presentation, discussing how to identify the most valuable aspects of your business and make it attractive for potential buyers.
Micro Fires
Andrew Gazdecki kicks off his presentation by introducing the concept of "micro fires." He explains that this idea stemmed from his desire to help businesses sell through a marketplace effectively. He focuses on a specific marketplace known as Century Mark McGuire, a private, anonymous SaaS M&A marketplace that allows companies to list themselves discreetly. This privacy is particularly valuable for businesses with employees, customers, or stakeholders who might not be aware of the sale. Gazdecki's background and experience add credibility to his insights. Having built and sold companies, including a business called "business apps," which he took from zero to over 10 million in recurring revenue, Gazdecki provides valuable firsthand knowledge.
Challenges Startups Face
Gazdecki recognizes the common challenges startups face. While many startups have great potential, not all of them reach the acquisition stage. Startups, especially those in niche markets, often bootstrap their way to success and avoid the traditional venture capital route. However, many of them run out of money or never reach a stage where they can exit. One key problem Gazdecki highlights is the difficulty these startups face in finding suitable buyers. They might not be growing fast enough for venture capital, which limits their exit options.
Introducing Microcar
In response to these challenges, Gazdecki created an online marketplace, Microcar, designed to facilitate the buying and selling of different types of startups. The platform is aimed at helping startups with the option to exit when they choose to do so.
Why Don't Startups Get Acquired?
Gazdecki outlines the typical acquisition scenarios for startups. He distinguishes between strategic acquisitions, often associated with major tech giants like Google and Facebook, and traditional private equity acquisitions. The former requires a strong product-market fit, usually achieved at around 5 million in annual recurring revenue, while the latter necessitates at least 10 million in revenue. Gazdecki also mentions that aggregators, although rare, tend to lock founders in for several years.
The Microcar Solution
Microcar offers an alternative solution for SaaS businesses seeking acquisition opportunities. Gazdecki's platform, with over 25,000 users and more than 15 million total deals at the time of his presentation, helps startups to find buyers discreetly. He provides a testimonial about a startup that quickly found a buyer through Microcar, demonstrating the platform's effectiveness.
Valuation of Micro SaaS Businesses
To shed light on the range of Micro SaaS businesses, Gazdecki shares his observations from approximately 100 acquisitions. Companies with less than 100,000 in annual recurring revenue are valued at an average multiple of 3.21. Gazdecki emphasizes that profit margins play a significant role in these valuations, and businesses with 100% ownership can achieve life-changing outcomes by selling for a few million dollars.
Common Mistakes When Selling a Business
Gazdecki identifies several common mistakes founders make when selling their businesses. These include presenting messy financials, setting unrealistic expectations, and having too many complications. A key lesson here is to prepare your business for acquisition and create a clear path to a return on investment for potential buyers.
The Acquisition Process
In the final section, Gazdecki provides a simplified overview of the acquisition process. It involves preparation, determining terms and timelines, starting conversations, negotiations, due diligence, and, if everything goes well, closing the deal. He also emphasizes the importance of structured processes to keep potential buyers engaged.
Conclusion
Andrew Gazdecki's presentation offers valuable insights into the world of buying and selling startups, particularly in the context of Micro SaaS businesses. His experience and the success of Microcar highlight the opportunities for startups to find the right buyers discreetly and effectively. Understanding the common mistakes and the acquisition process can empower entrepreneurs to take the necessary steps to prepare their businesses for sale. In a landscape where startups often struggle to exit, the knowledge shared by Gazdecki provides a roadmap for those looking to identify and market their key sellable items.
Q&A
Q1: Are people setting out to build smaller-sized SaaS companies with the intention of selling them, or is there a strategy behind it?
It depends on the individual's goals. Building a smaller SaaS company and selling it can be a successful strategy, especially when considering the high failure rate of startups. Many entrepreneurs see selling a company for a few million dollars as a significant success. Some entrepreneurs may choose to bootstrap their businesses and, if they sell for a few million dollars, consider it a win. However, others aim to build larger companies but may pivot to selling when growth levels off or other factors come into play. Success can vary depending on one's perspective, whether aiming for grand slams or being content with singles and doubles.
Q2: What is the common profile or attribute of successful buyers in the SaaS acquisition market?
Successful buyers in the SaaS acquisition market vary widely. They can be micro-PE firms, private equity investors, successful entrepreneurs, and even strategic buyers (such as CEOs of established companies). The common thread is that they are interested in acquiring smaller SaaS businesses, typically those with annual recurring revenue less than a million dollars. This range of buyers demonstrates the diversity of individuals and entities looking to invest in or acquire SaaS companies.
Q3: What ROI or IRR (Internal Rate of Return) should a company aim for to be attractive as a buyer?
In the context of SaaS acquisitions, buyers often look for an IRR (Internal Rate of Return) of around 40%. This IRR takes into account factors such as the potential to grow the acquired company or increase its profitability. It's important to note that this is a target figure, and the actual IRR can vary based on the specifics of the deal and the buyer's strategy.
Q4: How much weight is given to data and data quality when evaluating an acquisition target that may not have had their records in perfect order?
While data quality is essential in due diligence, it's also recognized that early-stage startups may not have perfect records. The most critical figures during the evaluation of an acquisition target are often the trailing 12 months' revenue and profit. Buyers typically focus on these financial metrics and may not place too much emphasis on historical data quality, as they understand the challenges that early-stage companies may face in record-keeping.
Q5: Have the acquisitions you've facilitated mainly been in the FinTech sector in the U.S.?
SaaS acquisitions facilitated by Andrew's platform have spanned various industries, including CRM, WordPress-related tools, server infrastructure monitoring, push notification platforms, and Shopify apps. While FinTech is one of the sectors, it's not the exclusive focus. Notably, many of the acquisitions have been of companies outside the United States, reflecting the global nature of the SaaS acquisition market.
Q6: What are the top two industries you've encountered in your experience?
In Andrew's experience, there isn't a single dominant industry when it comes to SaaS acquisitions. The types of companies he has dealt with include a wide range, such as CRMs, WordPress-related tools, server infrastructure monitoring tools, push notification platforms, and Shopify apps, to name a few. The diversity in industries is reflective of the varied opportunities within the SaaS acquisition space.
Q7: Do you have shared templates of due diligence documents or checklists for SaaS acquisitions?
Andrew does provide templates and checklists for due diligence documents and offers them to founders who are considering selling their companies. These resources can help founders understand what buyers typically look for during the acquisition process and help them prepare for a smoother transaction.
Q8: Are you planning to sell MicroAcquire in the future?
As of now, Andrew doesn't have immediate plans to sell MicroAcquire. However, he has received acquisition offers in the past. If you are interested in reaching out to Andrew, you can contact him at his email address: andrew@microacquire.com.
Q9: Are you licensed as a broker for these acquisitions?
Andrew is not licensed as a broker for SaaS acquisitions. He does not take commissions on the deals facilitated through MicroAcquire. His focus is on helping founders and connecting them with potential buyers. Andrew's mission is to assist startups in getting acquired and celebrating these smaller, life-changing acquisitions that are often under the radar.
Q10: What's your revenue model for MicroAcquire?
Andrew's current revenue model for MicroAcquire includes a premium subscription plan. For $290 per year, subscribers gain early access to deals listed on the platform. The premium subscription is aimed at helping serious buyers distinguish themselves from non-serious inquiries, but the core service of connecting founders with buyers is provided for free.
Q11: Who are your subscribers?
MicroAcquire subscribers come from a wide range of backgrounds and can include private equity firms, CEOs of companies, and successful entrepreneurs. The platform attracts diverse subscribers interested in acquiring smaller SaaS businesses.
Q12: Can you give a sense of the distribution of deal sizes for startups on MicroAcquire?
The majority of startups on MicroAcquire have annual recurring revenues of under a million dollars. Specifically, the distribution of deal sizes shows that 56 startups were acquired with less than 100,000 dollars in annual recurring revenue, totaling 3.8 million dollars. Additionally, 41 startups were acquired with annual recurring revenues ranging from 100,000 to a million dollars, with a total deal volume of 30.1 million dollars. There have been six startups with more than 1 million dollars in annual recurring revenue acquired. These figures reflect the prevalence of smaller-sized SaaS companies on the platform.
Kommentare