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Long-Term Strategies in the Market for Buyers & Sellers in Current SaaS Exit Environment
It depends on the business. I mean, the ones that are getting tier one growth from COVID. That could be a great time to continue growing the business or potentially exiting the business because I think businesses that are able to survive or grow in this new reality are going to be really valuable businesses. When I was selling Bizness Apps, I was always told, a bird in the hand is worth more than two in the bush.
It’s that constant, sort of, tricky sell now or potentially take a risk and grow it. Like with Bizness Apps, I had offers to sell it and then I waited like two years until my tail with my investment bank ended, and then I sold the company. But in that two years, a lot of things could have gone wrong, like the market could have changed, it was a big risk. Looking back, I might have changed that.
I tell founders now is that I have no incentive, I’ll say: “Hey, I think you have a great business, you should just keep going, like you’re missing X, Y, and Z, happy to set up a couple of calls and walk you through how I’d think about growing the business.”
But also, I’m seeing there’s more activity, just the appetite for acquiring SaaS companies has never been higher from what I’m seeing on my end. I don’t know what to attribute it to. I think maybe the stock market is just so high, and everyone’s just dying to get their money out of it and into an asset like SaaS that they understand a little bit more. I’m not sure if you’re feeling that way too. But I’ve definitely have seen that when COVID started.
Then signups on MicroAcquire started going through like the absolute roof, I never want to benefit from a situation like we’re in but the way the world has kind of shifted and it’s been interesting to see, and I don’t know what’s really been causing it.
How Has Volume of Deals, Acquisitions and Trends Changed As Startups Emerge From 2020?
I think just more people were talking about it too, as well and that obviously increases market interest. Now with like this post kind of COVID world, where debt markets are reopening and it’s definitely a full-time job at this point.
I think it’s awesome. It’s just so interesting when you think about the path that most entrepreneurs have been told, which is a great idea. Go find investors, build idea or product, go find more investors, when it’s like, there’s so much risk along that when you can just skip over that and just buy products, apply your skill sets, maybe your the former VP sales, and you have a few technical chops to help.
It’s like this new form of entrepreneurship that I think is being democratized. I’d say it’s gonna continue, but I mean, time will tell.
What has Patterns of Acquisition on SaaS Valuations Have you seen Post-Pandemic?
Typically, I see even, you know, three to five multiple of ARR, sometimes as high as seven on the lower end of the company. So if it’s a smaller company, I think I have seen that once. And then top line there are 123 but then there are outliers. There’s like below and then higher. That’s kind of the range that I’ve been seeing for different SaaS valuations.
What Do You Consider Examples of High Quality SaaS companies for Your Acquisition? What Makes Them a Good Deal for You?
I look to acquire something doing between 100k to 500k as it’s my first SaaS acquisition using my own capital. I also like that size range, because I know what I don’t know. I’ve been on the sell side, way more times than the buy side. So I’m looking for a company that I can see myself 10x’ing, less as a financial buyer where the model is, “Hey, I’m gonna hold this anchor for years and pay five times profits, and then maybe optimize a little bit”.
I’m looking for something that I can really get passionate behind. That’s kind of my criteria is ideally: 1) B2B 2) something that has a clear ICP or customer database I can sell into, 3) built by maybe a group of technical founders that didn’t really build a good go to market strategy, or a revenue engine. That’s kind of what I’m looking for but I’m being super picky and super patient.
About Andrew Gazdecki
Andrew Gazdecki, is the current founder of MicroAcquire, where they help you optimize your perfect SaaS exit, with no middleman or fees. He’s a storyteller and has been an entrepreneur for a long time, he started his first company, Bizness Apps, while still in college where they made mobile app development affordable for small businesses. He initially, raised around $100,000 in funding. By the time Bizness Apps was acquired by private equity firm Think3, they had grown to $10 M in annual recurring revenue, operating in 40 countries, and employing over 100 people.
His second business, Altcoin.io, was a decentralized exchange (DEX) for trading digital assets, by trading on their decentralized, non-custodial platform, traders could protect their assets. Altcoin.io became a champion of security in a market dominated by custodial platforms that put users’ funds at risk. By challenging the status quo, they were defending the rights of traders everywhere – a story that their prospects loved. This eventually led the company to be acquired by global investment firm BnkToTheFuture.
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