The Exchanges

Q What would you say like a perfect acquisition target is for you? So size, category, if you could just describe like the perfect business that you would absolutely want to buy, what would that look like?

A Um, so we look at businesses that are between 208 hundred K of ARR. Uh, we look at businesses that are typically bootstrapped No team beyond the founders or maybe a few contractors here and there. Um, and with a lot of inbound free trial customers, um, like that alone is an amazing start. Like if you have that, uh, that's very interesting to me because, um, it's the right size, the right profitability. We look at businesses that are at least Profit margin, like beyond the salary of a founder. Um, and a lot of inbound means that there is a lot of levers we can pull, hopefully, to improve a business and grow a business. Um, and so then we have some playbooks that we know very well, like improving the user experience of a product sometimes, or the design, or improving Or making sure that the product is enterprise ready so that all the inbound enterprise customers can come. The last criteria that I didn't mention is that the business needs to be still growing. What is hard is when the business is not growing anymore or declining, despite having a lot of inbound or being very profitable, because you don't know why, what is broken and how, and you don't know how much time you'll have until the thing is immediately broken. So I'm, I'm, I'm more nervous about that personally.

AI assessment note: “we look at businesses that are between 208 hundred K of ARR”

Q What's, um, out of the five startups you've acquired, what would, what's your favorite one? If you had to pick, or just in terms of a story or whatever you're comfortable sharing, what's the best acquisition you made? Maybe, maybe it was a turnaround. Maybe you bought it at a certain size. It's grown the most. Maybe it's just, yeah,

A I mean, the, I would say that out of the five, I wouldn't say that we've been successful with five. First of all, we've had We've had one where we had to sell it. Actually two, we had, we, we sold some, we sold it, we sold first two. Um, um, so out of the ones that we keep operating, um, I would say my lap, the fourth one is probably our biggest success so far. It's a company called Centric. It's a, it's a very simple feature. I mean, it's simple in theory, but it's hard to do well. Uh, at scale. It's, uh, it allows people, uh, email marketers to add countdown timers to their emails, um, also to their website, but it's mostly used for emails, and, um, we bought it. It was one of the larger acquisitions we made, uh, both in terms of, it's actually our largest acquisition in terms of, um, enterprise value. Um, it was a good size. We've been able to grow it, grow MRR to X at least already in less than two years. Um, and, um, what I like about it is that one, we've been able to, to grow it really well. Two, we had a very good partnership with a seller, but even Anymore. He has helped us in numerous occasions and, and we have a good relationship, uh, like a trusting relationship where he's as bought in our success when, um, I would have hoped. Um, and so I think that's today's the best acquisition. Um, the last one we did, um, which was, uh, Company out of Chile is a promising one, …

AI assessment note: “the fourth one is probably our biggest success so far. It's a company called Centric”

Q there's clearly ones where maybe there's none at all, and that's probably the ones that you don't want to acquire. Moving over towards the founder side, I think this is a good segue. You look at a lot of businesses. You look at a lot of different SaaS startups. What are some common mistakes you think founders make when they go to sell their business? Could be evaluation, could be.

A Yeah, yeah, and I, and I think valuation is the biggest mistake. Um, in a sense, I think that, I think that the, It's an acquisition where the seller gets a fair price for their work, but where the buyer can make money without needing to be heroic about it. I saw recently a business where the founder wanted to sell. He had clearly mismanaged the business, like not really taking, he was not really taking care of the business, but he was asking for a very high multiple. Because he thought, oh, if, if, if you work on it, revenue will grow, but he hadn't really built any strong foundation, like, like a long-term foundation, and I was like, yeah, but if I do all that work, I'm taking the risk, I'm doing the work, and in a way, yeah, I, I need all that to work in order for me to be able to make any money, and I think that it's, for me, That's a problem because it means that my margin of safety is zero, and that's bad. You need to have, to allow for some margin of safety. I mean, if you have the best business in the world, sure, like if you have a, and I, you know, a business with super low retention, like super high MRR, and you have lots of private equity firms that are bidding for it, or you have a strategic that is knocking at your door. Sure, that business, sell it for as high as you can and go to a beach afterwards, but I would say for a regular bootstrap SaaS that has competiti…

AI assessment note: “valuation is the biggest mistake”

Q of everything that you've learned so far, you know, acquiring your first two startups, it sounds like those were some learning lessons. Um, and then as you got to the bigger ones, you've really seen success. If you had to give advice to anybody looking to acquire startups, or maybe they're interested in Acquiring startups. What's like three things that maybe you wish you knew before you started all this?

A The first startup we acquired was a startup that was a tool on top of WhatsApp. Um, and we bought it, it was a pretty small acquisition, small MRR. We grew it a lot, and then we got a seasoned digital letter by WhatsApp, and we had to shake it. Oh no. Um, And it sucked, and it sucked because obviously, um, it would have been our, if, had it not happened, I think it would have been our biggest success today, revenue wise. Like, I think we were ready to 10 X this business at least. Um, so I think that the first lesson is to be very careful with the companies that are relying on large Platforms. Uh, and when I say large platform, I'm talking about the meta apps, I'm talking about Twitter, LinkedIn, you know, things like that. Like when you're basically sleeping on, on the, when you were feasting on their back, at some point they can wake up and disrupt what you're building. Uh, and it can be pretty violent, and so that's one thing that, uh, I'm very nervous about. Um, I almost bought a business on top of OnlyFans that I also found on bar.com, and it was just after, at the moment, we had our season visit letter from WhatsApp, and I decided against it, and I frankly have no regret. It was like, I've learned a lesson, and I'm going to be very, very cautious when dealing, when being too close to these large platforms and doing things that are I would say a little bit borderline or on …

AI assessment note: “the first lesson is to be very careful with the companies that are relying on large Platforms”

Q It, it's such easy homework, and I can make the difference between selling your business and not, so I definitely agree with that. Um, tell me this, where do you see new syllabus going? Like in five years from now, maybe one year from now, are you going to acquire 10 more startups, 50 more startups? Where do you, where do you kind of see this, um, this firm going?

A Um, so, um, I want to acquire more, for sure. Um, I think that, first of all, I'm having fun doing what I'm doing, and so unless, um, something catastrophic happens or, like, I make really bad acquisitions and I'm terrible at it, um, I want to do that for the next 10 years, uh, so I'm really building something for the long run, and it's the first time in my career that I, that I feel that what I'm doing is something that I want to do in, like, um, 10 years. Um, the second thing I would say is that, so in five years, probably we will acquired, I don't know, 10 more businesses, uh, maybe more, I don't know, um, at least 10 core businesses, maybe some small add-ons here and there, if we make some add-on acquisitions, product acquisitions, but, uh, yeah, I will probably raise money between now and then to help me, like, so that I'm not the only one funding the acquisition, then we rely a little bit Unless on death. Um, but if in five years we make 10 more acquisitions, we, uh, we have had multiple successes in that we have built lasting franchises, um, but my team is happy and growing, not in terms of number of people, but in terms of their responsibility within the company. That would be exciting. If people know us, like when I say people, I mean, bootstrap founders know of us and and they know that we are a reliable, good partner for an acquisition. That would be awesome. I would…

AI assessment note: “in five years, probably we will acquired, I don't know, 10 more businesses”

Q really hard. And then as an investor, you're just investing. It's, I would like to assume a little bit easier. I don't have experience there, but as much as you do, but when you acquire startups, you're able to skip the first two years, you're able to acquire product market fit. Um, is there any, would you say it's easier acquiring startups and building them or investing or more enjoyable?

A I think it's a completely different framework, almost. When you're doing a startups, when you're doing a startup, whether, especially a startup where you want to raise money because it's a big opportunity, you're in it for a long run. It's, on the, on the one hand, the way has been paved by playbooks that have been written by founders and investors before you, and yet, Getting to product market fit is always hard, unless you're incredibly lucky, and a very, it's not a skill problem, it's a, there's also a luck aspect. Um, and I'm not the best personally at zero to one. I mean, I, I've, I've seen that. I'm not a, there are people that are amazing product people. I'm not an amazing product person, like Ivan Zhao from Notion. I mean, I can tell you Like, he's a thousand x better than me in products, uh, and I will never touch anything close to where he is. I mean, obviously it's an outlier, but my point is that very strong product people are, have an outsized advantage at going from zero to one, and I'm not that. Um, and on the other hand, investing is very exciting because there's a curiosity of discovering new cool ideas. But you have so few levers on the company, but for somebody like me who likes actually having shorter term milestones, it's very nerve wracking. Um, and when I was only doing that, and I did that for a year, I had FOMO all the time. I made the worst decisions. …

AI assessment note: “I think it's a completely different framework, almost. When you're doing a startups”