Thread by @DruRly, A thread: Trends #0012 — Micro Private Equityhttps://trends.vc/trends-0012-micro-private-equity/ 1. ProblemFounders [...]

A thread:

Trends #0012 — Micro Private Equity https://trends.vc/trends-0012-micro-private-equity/

Trends #0012 — Micro Private Equity

https://trends.vc/trends-0012-micro-private-equity/

1.

Problem

Founders want to cash out.

2.

Solution

Micro Private Equity buys businesses valued at or under $5 million.

These are not sexy, venture scale startups. Some are technology-focused. But they tend to be simple, cash flow positive companies with stable growth.

3.

Micro Private Equity Funds

Mudbrick Captial ( @MudbrickCap | @MikeBoyd)

Tera Holdings ( @SavneetS)

Little Engine Ventures ( @LEV_Capital)

Owl Mountain

101 Commerce ( @101Commerce)

4.

Micro Private Equity Funds (con't)

Chenmark Capital

Site Arrow ( @site_arrow)

Dura Software ( @dura_software)

Fork Equity ( @forkequity)

Traction Capital

5.

Companies

6Connex ( @6Connex)

Bulk Buy Hosting ( @BulkBuyHosting)

Fomo ( @usefomo)

LaunchCDN ( @LaunchCDN)

DomainNameSanity

6.

Companies (con't)

Moki ( @MokiMDM)

Lobiloo ( @LobilooDesign)

Nordic IT

Cross Sell

New Day Craft ( @NewDayCraft)

7.

Marketplaces

Quiet Light Brokerage ( @quietlightinc)

FE International ( @FEIntl)

BizBuySell ( @BizBuySell)

MicroAcquire ( @microacquire)

Empire Flippers ( @EmpireFlippers)

8.

Marketplaces (con't)

Exchange Marketplace ( @exchangeshopify)

Flippa ( @Flippa)

For Sale By Maker ( @mubashariqbal)

Human Proof Designs ( @Human_Proof)

IndieMaker ( @indiemakerco)

9.

Predictions

Deals will close faster and transaction costs will drop.

Services such as Stripe, Google Analytics, Square and Shopify help buyers verify earnings and growth.

10.

Predictions (con't)

Non-accredited investors will be able to easily invest in micro PE funds.

Look at these platforms:

· Otis ( @withotis)
· Fundrise ( @fundrise)
· MicroVentures ( @microventures)
· Republic ( @joinrepublic) https://www.startups.com/library/expert-advice/american-jobs-act-title-iii-crowdfunding

The SEC JOBS Act and Title III Crowdfunding

Emma McGowan, Startups.co columnist and startup veteran, provides and update on the American JOBS Act including Title II and Title III on crowdfunding.

https://www.startups.com/library/expert-advice/american-jobs-act-title-iii-crowdfunding

11.

Opportunities

Build a playbook to boost returns

· Raise revenue with price increases, conversion rate optimization, affiliate commission negotiation
· Lower costs with a remote team, automation, tax credits https://boastcapital.com/sred/

Scientific Research & Experimental Development (SR&ED) Tax Credits | Boast Capital

SR&ED helps Canadian businesses recover up to 64% of their R&D spend from the government. Qualified small businesses can get a cash refund. Learn more.

https://boastcapital.com/sred/

12.

Opportunities (con't)

Attract investment opportunities with content and events.

Examples:

· First Round Review ( @firstround)
· Jeff Morris Jr. ( @jmj)
· a16z ( @a16z)
· Founder Summit ( @FounderSummit)
· SaaStr ( @saastr)

13.

Opportunities (con't)

Make offers on abandoned projects found on

· Chrome Web Store
· Shopify App Store
· Product Hunt

Which projects haven't been updated?

14.

Opportunities (con't)

Build a playbook around similar assets.

· Plugins: Figma, Webflow, Slack, Trello, Shopify, WordPress and Chrome
· Templates: WordPress, Ghost, Webflow, Carrd and Bubble
· Content: eBooks, courses, newsletters and affiliate sites

15.

Opportunities (con't)

Buy businesses with similar customers, cross-sell and lower customer acquisition costs.

16.

Opportunities (con't)

Invest across platforms and verticals.

· Amazon recently slashed affiliate commissions
· Coronavirus took out travel-related businesses

You live on the edge by concentrating on one platform or vertical. https://druriley.com/platform-risk/

Platform Risk

https://druriley.com/platform-risk/

17.

Opportunities (con't)

Niche horizontally. Focus on a business characteristic instead of a vertical. Consider B2B SaaS, B2C SaaS or digital assets. https://www.investopedia.com/terms/v/verticalmarket.asp

Learn about Vertical Markets and Their Interconnections

A vertical market is a market encompassing a group of companies and customers that are all interconnected around a specific niche.

https://www.investopedia.com/terms/v/verticalmarket.asp

18.

Opportunities (con't)

Start low and stair step up in deal size.

Sure… Small deals have relatively high transaction costs. But fuck ups carry less risk at this level. Move up to bigger acquisitions as you learn. https://www.investopedia.com/terms/t/transactioncosts.asp

Transaction Costs

Transactions costs are the prices paid to trade a security, such as a broker's fee and spreads, or to make any trade in a market.

https://www.investopedia.com/terms/t/transactioncosts.asp

19.

Haters

“You didn’t include Tiny.”

Andrew distinguished between Tiny and PE on The Acquirer’s Podcast with @Greenbackd. I won’t contradict that.

20.

Haters (con't)

“You didn’t include SureSwitft Captial.”

Kevin said that he doesn’t like the term on The Effective Founder with @andybaldacci. Refer to Tiny.

https://www.stitcher.com/podcast/andy-baldacci/the-early-stage-founder/e/62159084?autoplay=true

21.

Haters (con't)

“Sometimes Micro PE buys majority stakes. Not whole companies.”

Nuance. That’s the purpose of this section.

22.

Haters (con't)

"Is this investment advice?"

No.

23.

Links

Vroom Vroom Vroom & Mudbrick Capital

Mike Boyd ( @MikeBoyd) is a great storyteller. Find out how he got started and why he loves digital assets. Interview w/ @aebridgeman https://www.listennotes.com/podcasts/think-like-an-owner/mike-boyd-vroom-vroom-vroom-yXQOAVDF2ea/

24.

Links (con't)

Buying cash-flowing internet companies, starting job boards and building no code projects

This was Andrew's first podcast interview in a while. Find out why he's bullish on no-code (#0006) and podcast memberships (#0002). https://www.listennotes.com/da/podcasts/my-first-million/63-with-andrew-wilkinson-XOqEWHYuiCJ/

25.

Links (con't)

Billionaire Stephen Schwarzman on Private Equity, His Life and Blackstone

Stephen shares childhood stories and how he built Blackstone.

26.

Links (con't)

Q&A with Andrew Wilkinson, Co-founder of Tiny

Andrew Wilkinson ( @awilkinson) came back for an AMA. He fills in the gaps that weren't covered in the interview. https://www.listennotes.com/da/podcasts/my-first-million/65-qa-with-andrew-wilkinson-gw5QaRJOyAk/

27.

Links (con't)

The Snag of Selling to Private Equity

Find out how Sherry Deutschmann ( @sherrystewartd) built a $40 million dollar company and why she insisted on profit-sharing. Interview w/ @JohnWarrillow https://www.builttosell.com/podcast/the-snag-of-selling-to-private-equity/

The Snag Of Selling To Private Equity - Built to Sell

Starting from humble beginnings, Sherry Deutschmann built LetterLogic into a $40 million juggernaut which she sold recently for more than seven times EBITDA.

https://www.builttosell.com/podcast/the-snag-of-selling-to-private-equity/

28.

Links (con't)

Trends #0005 — Bootstrap Funds

Micro PE and Bootstrap Funds have similar investment criteria.

Bootstrap Funds invest earlier, founders sell minority stakes and stay onboard. https://trends.vc/trends-0005-bootstrap-funds/

Trends #0005 — Bootstrap Funds

https://trends.vc/trends-0005-bootstrap-funds/

29.

Links (con't)

The Berkshire of Software

This is a wide-ranging interview. Savneet ( @SavneetS) and Patrick ( @patrick_oshag) cover Spanish real estate, software sales, gold, crypto and a lot more. https://www.listennotes.com/podcasts/invest-like-the-best/savneet-singh-the-berkshire-yXgfvo3x0IN/

30.

Links (con't)

How a Passion for Craft Spirits Turned into a Six-Figures-a-Month Subscription Box Startup

Mack McConnell ( @MACKATTAQ) shares how he built Taster's Club and why he sold to SureSwift Capital. https://www.sureswiftcapital.com/blog/subscription-box-entrepreneur-sells-business/

How a Passion for Craft Spirits Turned into a Six-Figures-a-Month Subscription Box Startup |...

Mack McConnell bootstrapped an idea into the subscription box startup, Taster's Club. Find out how he grew the business, and why he decided to sell it.

https://www.sureswiftcapital.com/blog/subscription-box-entrepreneur-sells-business/

If you're interested in trends such as