Spending $280k on MicroAcquire
In December of 2020 I hashed out $280,000 and purchased my first company off a random website called MicroAcquire…
Right now you might be asking yourself…
- What did you buy?
- Why did you buy it?
- How did you get $280k?
- Have you ever bought a company before?
- What the F is MicroAcquire?
- Are you insane?
- Are you really 6'8" and don’t play in the NBA?
All solid questions!
You also might be thinking CONGRATS on the click bait title.
And to that I would like to say…. THANKS, I paid a lot for it.
In this post I am going to break down everything I learned along the way and what my experience was like. Here we go.
Quick shout out before we get started. An internet friend of mine named Guillaume started a company called Lemlist and grew it to $10 Million ARR in 3 years with ZERO funding. The best part, he documented the journey so others could follow in his legendary foot steps. Long story short, I loved it so much I am attempting to do the exactly the same here. Which is why I am writing this post. Its really for me to hopefully look back on, but I hope you enjoy it too. Plus, who doesn’t want a company valued at $150 Million dollars?
Guillaume you are hands down my favorite French friend!😜 Thanks for paving the way brother 🤜🏼🤛🏼
TL:DR
- How I found MicroAcquire on IndieHackers
- How I checked the engine of a SaaS company without being a mechanic
- How I drafted a LOI with a box of crayons 🖍️
- How I got shit on 💩 by Fortune 500 companies (Bonus: I Won)
- How I blindly wired my entire net worth to strangers
- How I am trying to stop the titanic from sinking
- How I plan on building a $100 Million dollar company
How did you hear about MicroAcquire?
I’ll keep this short because I am not really sure you care. I found MicroAcquire on IndieHackers.com. That was easy 🤷🏼♂️ haha
Here is how it went down
My guy noah kagan sent an email via OkDork.com promoting SendFox.com on ProductHunt.com
While on ProductHunt.com I noticed a Startup/Bootstrap community created by Courtland Allen call IndieHackers.com (Amazing site BTW)
After spending about a month on IndieHackers.com I saw a post that read something like this.
“Sold my No-Code startup for $20,000 on MicroAcquire”
As you may have noticed, I am a sucker for a good click bait title. After reading the article I signed up for MicroAcquire.
Back in the day, MicroAcquire was 100% free so it was a no brainer.
What the F is MicroAcquire?
Here is how I would describe MicroAcquire
MicroAcquire is the gateway to freedom for people who are tired of trading their time for money… Buy a company and start making money on the line.
Here is how Andrew (aka Gaz, aka the founder) describes MicroAcquire
Everything you need to buy and sell startups. No fees. No hassle. Total anonymity.
Think of MicroAcquire as Facebook Marketplace or Craigslist for buying internet businesses. It’s truly amazing!
Anyone can apply to list their business on MicroAcquire, then the team at MicroAcquire will do a little bit of due diligence and build a custom listing for your business.
Once the business is listed, MicroAcquire will add it to their newsletter that gets sent out to hundreds of thousands of potential buyers.
There are no middle men, no fees, no tricks, no gimmicks, no nothing.
BUT Spencer, how does MicroAcquire make money? EASY, they print it! Because there are soooo many people trying to escape the rat race. Me being one of them. More on that later.
Last I checked MA (MicroAcquire) was doing around $1.25 Million ARR in the first 20 months of business. 🤯
If wanna learn more follow Andrew on Twitter. He gives daily updates on how MA is doing. (HINT: It’s doing AMAZING!)
Have you ever done Heroin? 💉 (hear me out)
Yeah, me neither, but I am pretty sure I felt the same euphoria when I would receive an email from MicroAcquire.
The idea that I could buy a cash flowing business that would make money while I slept…. Well… That’s the kinda shit that keeps me up at night.
Something you should know about me. I have severe (self diagnosed) ADHD and I am confident that I am mildly dyslexic. I tell you this because I have learned that I love attempting to juggle multiple things at once.
For example, while I was dosed up on MicroAcquire’s newsletter Heroin, I was working as a sales consult at an MSP, I was buying single family rental properties, and trying to grow a small bootstrapped SaaS company called LookUpDatabase.com.
I don’t know why, but I love doing at lot at once… It makes me happy…
Or maybe I just have bad FOMO, who knows… (Buys an NFT)
(heads up, short story coming in HOT 🔥)
At one point, a wealthy man that I respected took me to dinner to tell me that I was doing too much and that I will NEVER be successful unless I focused on ONE thing….
or something like that…
I can’t remember because a squirrel was outside the window behind him…
On a serious note, don’t let anyone tell you shit!
At the time, his comments really bothered me and I felt like a failure that needed ADD medicine… Thank god I didn’t listen because I would still be in the same place making marginally better money wondering why I was not happier.
At the time of writing this, I am 31 years old, and depending on who you ask my wife and I have a net worth between $2 and $3 million dollars. 🤯
I am NOT telling you this to brag, and I understand if that comment makes you think… This douche… I feel douchey just writing it.
I am telling you this because it is confirmation to me that I am doing the right thing. Everyone has an opinion on what you should be doing and how you should be doing it. Please excuse my language…
but fuck’em…
If I had listened I would have stopped buying real estate, I would have stopped working on my startup, I would have missed out on MicroAcquire, and would be worth maybe $300k.
Or worse, I would have spent more of my life growing someone else’s dream.
Here are my 2 cents… Do everything in your power to make yourself happy.
If you are happy NOTHING else matters.
(short story exits stage left)
back to…
MicroAcquire and the Gazdecki meth lab
At this point, I am hooked. MicroAcquire is the greatest site ever invented (BuiltWith.com is a close 2nd) and I HAVE to buy a company.
A few weeks go by and I am not seeing anything I love on MicroAcquire.
Then one day I am scrolling through the site and see a new listing for a call center application.
Now you are talking dirty to me… I know almost everything there is to know about Telephony. I used to run sales for Vonage, I have built applications on Twilio and Nexmo, and my startup is tailored to a very niche market in the VoIP industry. Needless to say, I was excited. 😜
The asking price was $280,000 and the listing loosely said that was 4x revenue.
So I immediately requested more information and dropped a little sales pitch as to why the owners should meet with me.
At this point, I have NO CLUE what the company does… let alone the name…
What the hell is CoBrowsing?
24 hours later the CEO of a company called Median Cobrowse accepted my request for more information.
I can now see the listing on MicroAcquire and I have absolutely no clue what I am looking at… When I say no clue… I was wondering if a mistake happened…
The company was called Median Cobrowse and the landing page on the website just said Cobrowse in HUGE letters.
My first thought was…
What the hell is cobrowsing? — words of a super duper really smart guy
So I started scrolling through the website… yah know… doing a little digging…
Then…
My brain was ripped from my skull 🧠
I am not exaggerating! I am somewhat of a simpleton though, so what comes next might not be shocking to you.
A random stranger PUT THEIR MOUSE ON MY SCREEN and started drawing on the website like a dry erase board!!!
I am NOT kidding!!!!
This was like nothing I had ever seen before…
- There was NO request for permission
- There was NO downloads or installs
- There was NO prompt
- There was NO nothing!!
The dude just popped on and there were two mice on the screen at the same time…
Honestly, within the first 2 seconds, I knew I had to buy the company.
It was like Figma but 🔴LIVE on your website. Think Google Docs but with mouse tracking and other interactive capabilities.
It was clear that the person on the other end could SEE EVERYTHING I WAS SEEING.
I later learned that the guy on my screen was none other than Derek Homann and I was experiencing a LIVE demo.
What better way to show the functionality of your product than to demonstrate it live on your own website?
Derek I told you to your face and I will tell you again now. You are a genius!
How Cobrowsing works
For nontechnical people…
Median is a new type of screen share application that the internet world calls cobrowsing.
Cobrowsing, aka collaborative browsing, is the idea of 2 or more people browsing the same website at the same time. Not tooo crazy…
What makes Median SUPER interesting is the technology behind it.
When you add Median to your site, app, portal, ecommerce store, etc, you will be able to see EVERYONE on your site and WHAT THEY ARE DOING in real-time!!
NO DOWNLOADS, NO INVITES, NO INSTALLS, NOTHING!
It's literally the world's fastest screen share tool for web applications.
For my Techy nerds…
If Hotjar and Teamviewer got drunk and had a baby it would be Median.
Median is a JS application that streams HTML and CSS code over WebSockets and recreates the user experience in an iFrame style viewer for an agent to interact with.
By deploying as a JS application, Median can screen share on every browser on every operating system on almost any website.
Let’s talk numbers
At this point I had yet to talk to Derek, so using MicroAcquire we connected via email and scheduled a Zoom call.
So far my MicroAcquire experience has been profound. I couldn’t help but think if this works out I am buying 20 companies in the next 12 months! haha
Derek pops on to the Zoom call and I can tell right away, this is a great guy. It kinda felt like meeting an old friend that I hadn’t spoken with for a long time.
We were close in age, we had similar interests, similar experiences growing companies, it was kinda crazy.
During the call, Derek explained to me how Median worked but maybe more importantly the use case.
This is when things got SUPER interesting.
During this somewhat passive conversation where Derek is telling me a story about a popular use case for Median, he namedrops arguably one of the largest companies of 2021 as a customer.
(for reference this conversation happened in 2020)
I am talking about a publicly-traded company that you (the reader) not only know but have probably interacted with in the last 30 days.
Hey Spencer, this feels like valuable information in this story… why are you not telling us who it is? — reader
Well…
As it turns out, Derek and his co-founder Ben are 2 of the most prolific salesmen you have ever heard of.
Within the time frame of 12ish months, these dudes landed 2 MASSIVE publicly traded companies that paid them around…
$1,500,000 dollars!!!
of course, there's a catch…
These companies signed strict NDAs with no marketing clauses AND the deals were perpetual licensing deals. 😞
A perpetual licensing deal, for my non-SaaS people, means one-time payment.
You make ONE payment and you get access to the software for LIFE.
Generally speaking, perpetual licensing deals are a death sentence for small software companies because support and service expenses continue as cash flow dries up.
NOT in this case.
The deal with these whales 🐳 meant that Derek and Ben onboarded the code into a local server environment and once everything was up and running they are on their own. No support, No updates, No server expenses.
Basically, it's like they never signed up as a customer.
(Side Note: One of these whales loved Median so much that they tried to acquire the company! According to Derek, everything was going smoothly until they ask Derek and Ben to relocate. )
Live look at Derek and Ben thinking about leaving Omaha…
Anyways, this information was a…
GAME CHANGER!
An absolute game-changer for me. Here is what I learned while talking to Derek.
- I don’t have to spend 1 second reviewing the code.
- I have the opportunity to buy Median at a MASSIVE discount.
Let me tell you something you probably already know. When you are buying a Software company the code is the most valuable asset. It’s a pretty good idea to look under the hood to make sure you are NOT buying a box of rocks.
Let me tell you something else you probably already know. If a publicly-traded company is spending over $750,000 and asks people to move across the country… well… then… you can probably take your 6th-grade reading level and skip out on reviewing the code… haha…
Or at least that is how I felt.
(Side Note: I never once looked at the code and still haven’t to this day)
(Side Note 2: This is a dumb flex because I don’t know shit about coding so it wouldn’t help anyway)
Let’s talk discount.
An Asset is worth what someone is willing to pay for it. There is a lot that goes into any purchase, but perceived value for the buyer IMO is the main driving factor.
I am telling you this because Median sold licenses upwards of $750k a pop!
I bet the people who bought those licenses were thinking “this is a STEAL” compared to the amount of value it added to the company. Shit, $750k may have been an expense for them.
For me personally, I looked at Median exactly like I do with Rental properties.
It makes $70,000 ARR
It had $5,000 in expenses
Leaving $65,000 in profit ($5,400 MRR)
Asking $280,000
Loan for 10 years at 10% interest
Payment is $3,700.22 per month
[If purchased]
Profit per month would be $1,699.78
Profit per year would be $20,397.36
In the real estate business, we call this a Home Run!
If you can rent a house for 1% the asking price, then it’s a good deal. This house rented for almost 2X the asking price! On top of that I can raise the rents and increase occupancy with very little work!
Snagging an asset that is profitable on day 1 while picking up $20k free cash flow… as I mentioned before… This is the kind of shit that would keep me up at night…
So to be clear… Buying a company for $280k that did over $1.5 in TTM… I consider that a discount…
Now that my due diligence was done…
Let's get out the Crayons 🖍️
Up until this point, everything was going smoothly. The only thing left to do was to lock up the deal and move towards closing.
If you are new to buying companies like I was… Well, I guess you are supposed to send over an LOI…?
[Googles “What does LOI stand for?”]
[Googles “Examples of LOIs”] [Clicks Images]
I wish I was making this up…
I downloaded like 5 examples from Google and started banging out an LOI on Google Docs…
Honestly… I killed it!
I was hands down the BEST LOI I had ever written. 🤣
I converted the doc into a PDF, dropped it into HelloSign.com, and fired it over to Derek and Ben.
If I recall, Derek emailed me right away saying their lawyer was going to look at the doc overnight and I should have an answer in the morning.
Derek and Ben’s attorney trying to imagine who wrote the LOI…
Not 24 hours later I had a signed LOI and the deal was done.
I told you I KILLED it!!!
Not one single red line. Literally, EVERY term was accepted on the first attempt. Yep! I am that good.
Lawyers are overrated! 😂
Time to move on to the next step.
Let’s look under the hood
As I mentioned before, I have zero interest in seeing the code. For me, all I truly cared about was the economics of the business.
- Who is the money coming from?
- Where is the money coming from?
- When is the money coming?
- How is the money coming?
The above economics gave me insight into how stable the business is/was. Validating this information was SUPER easy thanks to Stripe.
Median had been running on Stripe since its inception in 2017. Being able to look at the growth patterns, churn, and historical data since the company was founded told me all I needed to know.
On top of that, I found a few more whales in the Stripe customer list. For example…
- ClickFunnels
- WP Engine
- Natures Sunshine (Publicly traded)
- Doxy.Me
- Builder Trend
- Articulate
just to name a few.
While looking at the Stripe account I also learned that a number of other Cobrowsing services out there are powered by Median’s APIs. 👀
Ummm what?!?!
Median is the back-end provider of some of its competitors?!?!
That’s when Derek explained to me that Median was designed as an API platform. Their business model was NOT to sell direct but to offer API-based cobrowsing to anyone who wanted to add cobrowsing to their existing offering.
Basically, anyone with a SaaS product who wants to add more revenue to their bottom line can snag the Median APIs, add co-browsing, and pick up revenue extremely quickly.
The API platform also made it easy to build integrations. In fact, I learned that Median was pre-integrated with 12 chat tools out of the box.
Those integrations included
- LiveChat
- Drift
- Intercom
- Tawk.to
- Olark
- Belco
- Chatra
- ChatBeacon
- Re:Amaze
- SnapEngage
- Slaask
- Zendesk
The more I spent time with Derek the more excited I got!
Derek and Ben are very smart! The product was not their issue.
The problem, like many other SaaS companies, was distribution.
Every time they engineered a new integration, they built a new distribution channel. Sales are the name of the game.
I gotta tell yah, this whole deal seemed too good to be true!!
Then I got a call from Derek that went something like this.
“Hey brother, I don’t know how to tell yah this but I have some bad news….
(I am thinking the app broke)
We accepted another offer from a company called UJet for almost double your offer…”
Me….
“Ummm…. Real quick, how is that possible?”
“I have a signed LOI right in from of me.”
Derek…
“Well our attorney reviewed your LOI and said it had no teeth (aka non-compete clause) and that we are free to continue to shop Median…”
“I am not saying you are 100% out of the deal, I am just saying as of right now we are going to pursue the deal with UJet…”
(Side Note: UJet had just finished their series C where they raised $100 million dollars in total)
Derek also mentioned that Genesys planned on making an offer…
(Side Note 2: Genesys is arguably the world's largest call center software company with $1.4 billion in revenue in 2018)
.
.
.
.
.
At this point, all I could do was to let the sadness set in…
So I took to my HUGE 300 person Twitter following to share some knowledge
Then followed up with this Gold!
Good thing my wife’s, dad’s, brother was there to console me. (aka uncle-in-law)
Danny, if you are reading this…. BIG THANKS BROTHER
And that is the end… You win some and you lose most…
Now I am a motivational speaker.
.
.
.
.
Just kidding…
It goes down in the DMs!
After I got done crying… I decided to DM Gaz on Twitter…
For context, I had been DMing Gaz the whole time, so in the screen shots below you get to experience my emotional roller coater ride.
Getting on the emotional roller coaster
[Let me take this moment to double down on my previous dyslexic comments 🤣]
“Andrew for what it’s worth… I am STILL a huge fan of ours! haha”
The seatbelts fall off while ridding the emotional roller coaster
It might not show it in the messages above, but I was down REAL bad while sending these messages.
(Side Note: MicroAcquire now has all of these features on the site 😁 I am not going to say it’s because of me, but I am not, not saying that. haha)
WAIT… If you remember… Derek said…
“I am not saying you are 100% out of the deal”
The emotional roller coaster comes to a screeching halt
After 3 months of due diligence with UJet with no end in sight I get an email from Derek saying something like…
“Hey are you still interested in Median? and can you still close in 30 days?”
I can’t express how happy I was to get this email.
Oh yeah, I forgot to tell you…
At some point during the emotional roller coaster ride, I turned to UpWork to start hiring a dev team to build my cobrowsing product.
(Side Note: It’s extremely hard to build a cobrowsing product.)
SOLD!!!!!! Well… Kinda…
My answer to Derek was a resounding yes! Now we had to structure the deal.
Even though my LOI had no 🦷 I never changed it and we decided to use the terms that I had originally drawn up.
The Deal
The deal looked like this
- Structured as an Asset Agreement
- $280,000 in cash (asking price with zero negotiations)
- 75% or $210,000 upfront
- 25% or $70,000 ninety days after closing (transition period)
- 30 day close
Then came the bloodsuckers (aka the attorneys). Probably 29 of the 30 days before closing was spent on the phone with our attorneys putting billable hours on the clock.
Yes, they are valuable, and yes they probably saved us money via protection… BUT good god does it feel like they are trying to rip you off and sell it to you that they are saving you…
(Pro Tip: If you ever talk to an attorney, get OFF the phone as fast as possible!)
The Loan
As I highlighted before I got a loan for this deal.
I did not have $280,000 in cash laying around so I took a loan for the full amount.
The loan looked like this.
- $280,000 cash
- 10 years
- 10% interest
- Personally guaranteed using my assets as collateral
This is NOT your typical loan. The interest rate is extremely high compared to an SBA Express loan (up to $350,000) as an example with an interest rate of 5%.
BUT… I needed the money FAST and the Median financials could carry the note with profits left over. Plus, if I was ever in a pinch I could refinance the loan into an SBA loan.
Blindly wiring my entire net worth to strangers
You know when you are at the top of a roller coaster and it drops… Imagine that feeling but instead of it lasting for 30 seconds… It lasts DAYS…
A million thoughts rush through your head..
- Did I get screwed?
- Should I have looked at the code?
- What if I fail?
- What if it fails?
- What did I just do?
- Am I excited or scared?
- I don’t know what to do with my hand…
The first payment was $210,000.00
I wired the money strait to Derek and Ben and waited for their response.
Not long later I got a call from Derek saying “We got the money”.
Side Note: If you are reading this and plan on buying or selling a company… You should probably use an escrow service…
We did NOT use an escrow service for our transaction. In fact, I didn’t even think about it until after the transaction.
Since I was the one sending the money I knew I was good for it, but Ben and Derek couldn’t see my bank account.
So if you think I am a risky guy… You should talk to them…
Let the 90-day window begin
What would you do after you sent someone $210,000?
My first thought… How can I get that money back? Haha
Instead of working on a “Transition plan”… I spent my time setting up demos…
If they could make 1.5 Million dollars across 2 deals… All I need is 1 deal to be paid in full…
In that 90 day window I set up some monster demos… Including…
- Vonage
- Capital One
- Genesys
- InContact
- and more
All of which seemed slightly interested, but no one bought… yet…
Anyways, thank god for Derek, because 60 of the 90 days were burned on sales.
The last 30 Days
The last 30 days were spent with Ben trying to wrap my little brain around what is actually happening.
Derek set up a transition plan, Ben did his best to train me on the infrastructure. I recorded every screen share and video conversation so I could play it back in case I needed to.
At the end of the 30 days, I wired the remaining $70,000 and I was on my own…
Honestly, I was a mixed bag of emotions. I was excited to be off on my own BUT scared shitless that I would break something.
In case I totally shit the bed, I did negotiate a rate of $150 per hour in the event I needed Ben and Derek in the following 3 months.
How to build a $100 million dollar company
It feels insane to even say “I am building a $100 million dollar company” BUT… I think it is possible… So let me break it down for you…
Note: The following statements are my opinions… feel free to shit on them…
A SaaS company doing $10 million in ARR can get $100 Million dollar evaluation. (I have 3 friends that have done exactly this)
Selling a profitable SaaS company doing $10 million in ARR for $100 million is not that crazy. In fact, I would argue that $100 million is a low number. Here is why…
- Asking $100,000,000
- Loan $80,000,000 (20% down, 5% rate)
- Annual Recurring Revenue $10,000,000
- Annual Loan Payment ($6,073,434.01)
- Annual Profit before expenses $3,926,565.99
With SaaS expenses being as low as 20%… That means a $100,000,000 dollar sales would profit $2,000,000 the first year offering a cash on cash return of 9.63%.
9.63% is NOT amazing BUT… Most acquisitions are strategic and have a clear path to 20% returns or more. Increase prices, cut expenses, cross sell to existing customer, etc.
PS: Would love to hear your thoughts on SaaS evaluations…
If that is the case, how do we get to $10 million?
Adding $10 million in ARR
So now that we know $10 million equals $100 million… How do we get to $10 million?
Lets break it down…
- $10 million ARR = $833,333.33 MRR
- $833,333.33 MRR / $100 per Customer = 8,333.33 Customers
- 8,333.33 Customers / 36 Months = 231.48 Customers per Month
If I have 8,333.33 customers billing $100 a month, that equals $833,333.33 ARR
If I can add 231.48 Customers a month for 3 years I will have a $100 Million dollar business. 🤯
Honestly, right now 231.48 customers a month feels impossible, BUT I know that with the right systems in place, we can make it happen!
Systems to get to $1 million ARR
Before we can hit $10 million we need to hit $1 million… Without breaking down the math… $1 million at $100 a customer is 70 new customers a month.
But Spencer… How are you going to get 70 new customer per month?
Well let me tell you…
I am going to go HARD on Twitter. HAHAHAHA
But on a serious note, I am working on this breakdown now and figured this post got too long 😬
If you made it this far… Shoot me a Tweet… Would love to hear your thoughts…
Cheers,
