Micro Private Equity: Alternative Assets, Tax Efficiency, Trust By Proxy

“Time is not money.”

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💎 Why It Matters

You can make more money. 

You can’t make more time. 

🔍 Problem

Starting a business from scratch takes time. 

💡 Solution

Buy a business. Fast-forward to product-market fit. Then scale. 

​​🏁 Players

Micro Private Equity Funds

• Calm Capital • Profitable technology businesses
• SureSwift Capital • SaaS
• XOXO Capital • SaaS
• The Website Flip • Content-based websites
• Calm + Capital • SaaS
• Concrete Capital • Small internet companies
• MicroAngel • Micro-SaaS
• Thrasio • FBA businesses
• Karta Ventures • eCommerce
• Verne • SaaS

Marketplaces

• MicroAcquire • SaaS
• IndieMaker • SaaS, domains and social media accounts
• Flippa • Content-based websites, apps and domains
• Fameswap • Social media accounts

Brokers

• FE International • SaaS, eCommerce, content-based websites
• Quiet Light • eCommerce and content-based websites
• PrivSource • Lower middle market businesses
• Empire Flippers • eCommerce, content-based websites and digital products

🔮 Predictions

• Financing options will increase. Online businesses are becoming more understood. 3rd-party tools such as Stripe, Google Analytics and Jungle Scout bring transparency and trust to transactions.
• Multiples will increase. Transparency reduces risk. Online businesses are becoming easier to value, model and finance. Premiums earned from navigating uncertainty are fading. Technological progress will remain. Even as credit dries up.
• Deal velocity will increase. Especially for platform players like FBA and Shopify stores. Operations are standardized and 3rd-party tools help buyers trust by proxy. 

☁️ Opportunities

• Use a playbook to force appreciation. SureSwift works through a checklist to add value post-acquisition. How will you boost revenue? How will you cut costs? 
  • Raise prices
  • Use paid ads
  • Improve SEO
  • Automate workflows
  • Negotiate vendor fees
  • Optimize conversion rates
  • Negotiate affiliate commissions
  • Consolidate non-core competencies like accounting
• Find off-market deals. David cold emailed the Wavve team long before acquisition talks began. Yaro bought Playgroup off of Twitter. You can browse Product Hunt for popular, inactive projects. Contact the makers to make offers.
• Build a data as a service company to help others find deals. See Deal Feed. 
• Build a productized service to help others find deals. See Deal Flow as a Service. 
• Buy businesses with a similar customer base. Spread your CAC and boost LTV. See Conversion Bear (Shopify), Awesome Motive (WordPress) and Elfsight (Webflow).

🔑 Key Lessons

• Buy instead of building to save time. Practice acquisition entrepreneurship. 
• Start small and level up. Prioritize learning over earning at first. Avoid the risk of ruin.
• Know your risks:
  • Competitor Risk • How much competition do you have?
  • Execution Risk • How hard is it to operate this business? 
  • Platform Risk • How easy is it for a platform to harm your company? 
  • Key-Person Risk • How much does the business depend on one person? 
  • Market Risk • Does the business have revenue? Or are you buying distribution?
  • Customer Concentration Risk • Are a few customers responsible for most of your revenue?

😠 Haters

“Multiples are only high because credit is widely available.”
Credit ebbs and flows. Transparency and friction reduction from technological progress is here to stay. This lowers risk and returns. 

“More sellers will enter the market. Lowering multiples.”
The skillset to go 0 to 1 is scarcer than capital. More sellers will enter the market. This will not keep pace with capital.

“Multiples are not increasing. Prices are becoming more accurate.”
Both can be true. Accurate prices can mean higher prices. In fact, that’s what’s happening. Inefficiencies are evaporating. All arbitrages eventually fade. 

🔗 Links

• 6 Months In – A Few Lessons Learned • The ups and downs of micro private equity. 
• Buying Not Boring Businesses • On post-acquisition playbooks. 
• The Rise of the Aggregator • The power of niches. Buying assets with similar KPIs and operations. 

📁 Related Reports

• Micro-SaaS • A popular asset class among micro private equity funds.
• Alternative Assets • Overlooked asset classes such as music royalties. 
• Lead Generation • Lessons that transfer to generating deal flow.
• Competitor Risk • Micro private equity funds opt for competitor risk over market risk. 
• Micro Private Equity (v1) • Our first look at this topic. 16 months ago. 
• Micro Private Equity (v2) • Our second look at this topic. 9 months ago.

🙏 Thanks

Thanks to David Horne (Calm Capital), Ross Kinkade (Curators), Stefan Von Imhof (Alternative Assets), Rick Segal (CRAAG Angel Group), Nile Frater (Concrete Capital), Natwar Maheshwari (Engineering Brew), Mushfiq Sarker (The Website Flipping Newsletter), Jeremy Abraham (Spiffy), Ray Deck (Sustained Ventures), Lu Doan (OSBundle), Abhishek Verma (Samkhya) and Thomas Smale (FE International). We had a great time jamming on this report.

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📈 What else?

Trends PRO #0068 — Micro Private Equity has more insights.

What you’ll get:

• 35 Micro Private Equity Funds (250% more)
• 14 Marketplaces (250% more)
• 11 Brokers (175% More)
• 7 Predictions (133% More)
• 9 Opportunities (80% More)
• 8 Key Lessons (166% More)
• 10 Links (233% More)
• 13-minute audio episode with exclusive Micro Private Equity stories, insights and opportunities

With Trends Pro you’ll learn:

• (📈 Pro) What are the benefits of niching?
• (📈 Pro)  What are search funds?
• (📈 Pro) How to avoid key-person risk?
• (📈 Pro)  How to sell your business?
• (📈 Pro) How to build habits as an investor?
• (📈 Pro) Why do relationships matter?
• (📈 Pro) How to use 3rd-party tools for due diligence?