Micro Private Equity: Buying Product-Market Fit, Digital Products, Deal Flows

Uncategorized 3 Minutes

This is the free version of Trends PRO #0038 — Micro Private Equity

Get Full Access to Trends Pro

🔍 Problem

Starting a business is risky. And takes time.

You may spend years seeking product-market fit, building systems and still fail.

💡 Solution

Buying businesses helps you save you time, skip years of costly mistakes, fast-forward to product-market fit and focus on scaling.

🏁 Players

Micro Private Equity Funds

Companies

Marketplaces

Brokers

🔮 Predictions

  • Third-party tools like Stripe, Google Analytics, Square and Shopify will make it easier to verify metrics. Buyers will trust by proxy. This makes cursory due diligence easier.
  • More marketplaces will integrate with third-party services and improve the buying experience. MicroAcquire integrates with Stripe. IndieMaker will add integrations.
  • Finding and buying alternative assets, like Spotify playlists and social media accounts, will become easier. Sites like Swapd make this possible.

☁️ Opportunities

  • Know your criteria. Will you buy digital products, B2B SaaS, Micro-SaaS, affiliate sites, FBA businesses, Shopify stores or something else?
  • Know your unique advantage. How will you add value? Build a playbook:
    • Raise revenue by raising prices
    • Raise revenue with conversion rate optimization
    • Raise revenue by negotiating better affiliate commissions
    • Raise revenue with profitable paid acquisition
    • Raise revenue by going from free to paid
    • Lower customer acquisition costs by improving SEO
    • Lower costs with tax-efficient business structures
    • Lower costs with tax credits
    • Lower costs with a remote team
    • Lower costs by automating workflows
  • Buy businesses with similar customers and cross-sell to boost LTV and lower customer acquisition costs. See Awesome Motive in the WordPress space.
  • Build a personal brand for proprietary deal flow. A few names consistently came up in this thread.
  • Find deals using tools like Traffic Opportunities and Product Explorer.
  • Help others find deal flow. Here are a few ideas:

🔑 Key Lessons

  • Start small and move up in deal size over time.
  • Forget 0 to 1. Go from 1 to N. Save time, reduce risk and “buy” product-market fit.
  • Build an “audience-first fund” for proprietary deal flow.
  • Assume every business has a price and do cold outreach.

😠 Haters

“What is micro?”
It’s relative. Let’s say businesses valued under $5 million.

“This assumes that I have money.”
Or that you can raise money or get seller-financing. You can reduce some market risk by copying successful businesses. Assuming that there are no strong moats. But execution risk remains.

“Small deals have high transaction costs relative to the deal size.”
Prioritize learning over earning at this stage.

“It’s against terms of service to sell social media accounts.”
Wrap them in an entity and sell the business. Not the account.

“Data provided by sellers can be faked.”
This is a cat-and-mouse game. And may never be solved. Live dashboards from third-parties like Stripe and tools like Phlanx make this easier to spot. Talk to customers and trust your gut.

🔗 Links

  1. Who should I talk to about buying businesses? • The tweet behind this report. 
  2. Hunting, Trapping, Farming + Trading • Ryan Begelman on getting deal flow.
  3. Tweet Photo Got Acquired • Marc’s story of building and selling Tweet Photo.

🙏 Thanks

Thanks to Thomas Smale (FE International), Rob Walling (TinySeed), Suthen Siva (Constellation Software), Andrew Gazdecki (MicroAcquire), Kevin McArdle (SureSwift Capital), Beverley (IndieMaker), Bilal Zaidi (Creator Lab), Jason Pancake (moveBuddha), Nicolás Cerdeira (Failory), Stuart Sim (FinLister), Logan Johnson, Stefan von Imhof (Flippa + Alternative Assets), Ben Church (Calm + Capital), Curtis Cummings (Share a Coffee), Ethan Jones (Tools for MGMT), Alex Bridgeman (Think Like an Owner) and Nile (Concrete Capital). We had a great time jamming on this report.

Access Trends Pro

To save 2,000+ hours of market research, access all Trends Pro Reports and join our Trends Pro Community.

Become a Trends Pro Member

What you’ll get:

  • 60 Alternative Asset Classes (500% More)
  • 7 Predictions (133% More)
  • 9 Opportunities (125% More)
  • 8 Key Lessons (166% More)
  • 12 Summarized Links (140% More)

With Trends Pro you’ll learn:

  • (📈 Pro) How to examine alternative assets?
  • (📈 Pro) Why are alternative assets being collateralized?
  • (📈 Pro) How to profit without access to capital?
  • (📈 Pro) What’s happening to liquidity premiums?
  • (📈 Pro) What are the benefits of running an alt fund?
  • (📈 Pro) How does digital art compare to physical art?
  • (📈 Pro) How to limit volatility?
  • (📈 Pro) How are mainstream assets becoming alts?
  • and a lot more…


Published by drurly

Published