Acquire.com: Buying & Selling Bootstrapped SaaS Startups – with Andrew Gazdecki [435]

This is a machine-generated transcript.

[00:00:00] Omer: Andrew, welcome to the show.

[00:00:01] Andrew: Thanks much for having me.

[00:00:02] Omer: My pleasure. Do you have a favorite quote, something that inspires or motivates you that you can share with us?

[00:00:09] Andrew: Yeah. Off the top of my head, there's a quote by, I believe Jim Rohn. It's, if you wanna make a living, get a formal education, if you wanna make a, a fortune something about self-taught education.

I'm mixing up the words, but I love that quote.

[00:00:22] Omer: I, I'll, I'll, I'll dig that up and we'll, we'll, we'll put that into the show notes or something. I think I know the one you're talking about, but

[00:00:28] Andrew: it's like self-education make a fortune formal education, make a living, something like that.

[00:00:33] Omer: Cool. . So tell us about acquire.com.

What does the business do? Who's it for and what's the main problem you're hoping to solve?

[00:00:40] Andrew: Yeah, definitely acquire.com, we're the largest marketplace to buy and sell SaaS startups. The problem we're solving is acquisitions are really confusing, really difficult, really slow. And so we're hoping to make that process just more transparent helping more startup founders get acquired in going after that problem.

Because I previously had a SaaS company that I built, I bootstrapped the company to about 10 million annual recurring revenue. And then when I went to go sell it, it was a huge headache. I spent years trying to find the buyer. I didn't know what the legal terms were. I didn't know what due diligence was.

Got through that luckily, but when I sold the business, I remember a bunch of my, you know, founder friends texted me, they're like, how'd you sell the business? How'd you find the buyer? All the things I just mentioned. So I thought, oh wow, I, this is interesting. No one knows about exits. Maybe there's an opportunity here.

'cause there's all these books on, you know, marketing and fundraising and sales, et cetera. But there's like one book on the exit, which is what I think is the most important part of the founder journey. So that's what we do. We help startups exit and we're specifically for mainly bootstraps SaaS startups.

[00:01:45] Omer: Cool. Why did you decide to focus on bootstraps startups?

[00:01:49] Andrew: Those are really good acquisition targets. That's what a lot of buyers were looking to acquire. That's what I previously built. He had some expertise in that area, but different from, let's say, a venture backed company. When you're venture backed, typically the sales process is gonna be different.

You're gonna typically need to sell to a strategic buyer to get the really high multiples. It doesn't always work out. And so the buyers that we mainly work with, acquired.com, are financial buyers. So thank private equity shops, high net worth, family offices, individuals, and they are always looking to acquire bootstrap startups.

And for somebody who's thinking about maybe buying or, or selling a startup, apart from the the bootstrapped piece of this, what would you say is, is different about acquired.com compared to maybe some of the other ? Services they might be looking at.

I think we take a, a much more data-driven approach when it comes to acquisitions.

So when we outline who potential buyers could be for a startup, we're able to access the, a much larger number than a traditional advisory firm or investment bank. And if you're able to get more interest from more buyers, that leads to more offers and then eventually a higher sale price at the end of the day, which is the most important aspect.

But then also just things like sourcing or creating offers. What do they mean? Being able to quickly review those. Being able to showcase your business through connecting live metrics so we're able to reach out to more buyers faster. And then when we do connect with those buyers, present your business in a way that's

Gonna be better than say, you know, the manual outdated approach.

[00:03:30] Omer: And then just in terms of some numbers I think on your website I read like. Over 2000 startups have been sold through acquire.com and the deal volume is like over 500 million now. Yeah.

[00:03:44] Andrew: So we've helped over, you're right, 2000 startups sell, and then over half a billion in close transactions.

[00:03:51] Omer: Cool. Impressive numbers. So what I wanted to do today with you and I, we've, we've got you here and you know, I, I, I talked to founders, as I mentioned to you earlier, . Been talking to a founder who recently acquired a, a business through acquired.com and it, it really, it for me, this was like a great opportunity to just think about those people who are either thinking about potentially selling their bootstrap SaaS startup this year or looking to, to buy something like, let's pick your brain, let's figure out

You know what they, they can learn what are some of the mistakes and pitfalls people make and, and walk away with maybe some, some additional advice from you that, you know, maybe they might not get from just reading stuff online.

[00:04:32] Andrew: Sounds good.

[00:04:34] Omer: Let, let's start with let's start with talking about selling a startup.

So. What would you say is the first thing that a founder should do if they are thinking about maybe selling their startup this year?

[00:04:47] Andrew: Definitely the first thing would be probably to get their house in order. So what that means is do you have your processes documented? Do you have SOPs in place? Do you have a clean p and l that buyers could go over?

And then asking yourself, why are you looking to sell? Getting really honest about that. But right at the top, just getting organized, you know, really trying to think in a buyer's shoes. If someone's gonna, you know, step into your business and take over your role. Are they able to do that really easily?

Is there a lot of things that . They're gonna have to figure out on their own, what are the main risks on your business? Are you able to mitigate those? But if you go through that and just start thinking, you know, how can I document everything? How can I start preparing materials that a buyer could benefit from?

That'll naturally just make your business operate more efficiently in my experience. But it starts there, just being able to . You know, have everything to a, a place where the business is sellable. 'cause a lot of times, most startups are not sellable. Meaning, you know, it's a piece of software. Everything's in the founder's head.

You know, you can't really assess the, like, you don't know how to value the company. 'cause there's no, I. Clean financials. So when you don't have those things, it's really, really hard to sell your business unless it's growing like gangbusters and you have 10 buyers trying to, you know, make you offers right there.

So most startups aren't in that bucket. So just getting organized is typically the first thing I recommend

[00:06:09] Omer: is, is there a certain type of bootstrap SaaS, maybe a, a vertical. Or a type of product that is more in demand, f you know, that, that, that people will be more like, you know, more successful with selling that type of product versus you know.

[00:06:29] Andrew: Yeah, good question. To answer your question directly. No, not necessarily. I think there are some industries where if it's really niche or really complicated, like extremely complicated, that can sometimes be harder to sell because the profile of the buyer is gonna be very, very specific. One example there would be it's a, if it's a crazy, you know, data related company, we've had examples like this.

The buyer is so specific that, you know, a normal financial buyer won't be able to wrap their head around how to operate the business without you. Those can be harder to find buyers for. But generally, if the business can be operated, it's by, you know, you can learn the ins and outs within a few months, it's profitable.

Those businesses tend to almost always get offers. So, I, to answer your question, I think looking at it reverse, the businesses that we struggle to help get acquired are the ones that are, you know, typically losing a ton of money. You know, again, really niche and interesting industry where it's extremely reliant on the founder or the founders. Those are tough.

[00:07:33] Omer: You, you, you know, we were talking about you on, on social media and Twitter and LinkedIn, and you, you've got a huge following. You're always sharing content, publishing daily. And, and often you talk about, you know, some of the, the mistakes that, that, you know, you'll see founders make.

So when it comes to selling, are there, you know, two or three mistakes that you, you regularly see that, that that founders make, and you know, can you, can you kinda offer any advice on how to, how to avoid making those?

[00:08:01] Andrew: Yeah, definitely. I'd say the first one is actually valuation. I see founders overvaluing their business almost actually every single day, multiple times a day.

And that's natural. Everyone thinks, you know, take your revenue, multiply it by 10 and that's what your business is worth. And it may be to a very specific strategic buyer is gonna pay a very high multiple. But when you take your business to market and you're actively trying to sell your business, it's a whole different process.

So right at the top being more in line with reality on valuation is gonna be huge. Because if you're overpriced, buyers are never gonna take the chance to learn anything additional about your business. They're immediately gonna, you know, not be interested, move past it and go right to other startups that are priced more aligned with their expectations.

So that's one. And you know, to get around that, you can look at some of the data that we put out or other, you know, firms put out. And just be aware of, you know, what your business is worth and don't have you know, crazy price expectations. I'd say the second one, and this kind of ties with what I just said, but having just high expectations on even who the buyer is or what the deal structure is gonna be like can definitely hurt founders that are looking to sell.

More specifically, I see a lot of founders not wanting anything to do with earnouts or any sort of delayed payments or creative deal structures. They wanted all cash at closing, so no stock or anything like that. And that can sometimes dissuade a lot of interested buyers because what they're hoping to do is de-risk the acquisition.

So on closing day, they're not paying for the whole purchase price and they're able to incentivize the founders to stay with the business or transition it over. And for some buyers, that's a complete deal breaker. So kind of to sum it all up, it just comes down to, you know, having the correct expectations with acquisitions.

And if I had to give another one, I'd go back to a plan made earlier, which is, is your business sellable at all? Is it profitable? Is it close to break even? Is it just burning a ton of diff ton of cash and you know, whoever buys it is gonna immediately start losing money. Because you gotta remember when you're selling your startup, whoever is looking to acquire it.

You know, they're thinking, how do I make my money back? How do I make a return on my investment? So no one is gonna wanna buy a company that's losing money unless they feel that they have a way to change that or take the product, sell it to their existing customers. And those situations are definitely rare, but it, it reduces the amount of buyers that could acquire your startup.

So those are a few, but I, I see a ton more as well.

[00:10:32] Omer: So, so basically I think it's, set realistic expectations, be open to different types of creative deals, and don't have a ultra, super niche product that you know, that will open up more opportunities, more potential buyers who, who may start, you know, to, to be, you know, be interested.

So if someone decides, okay, I wanna use acquire.com. What, just explain like the process that they would go through to get set up and, and sort of listed and you know, what, what advice could you offer for them to stand out to get noticed by potential buyers?

[00:11:10] Andrew: So the first thing we have you do is typically create a draft listing.

So that gives my team just basic information about your startup. So, trailing 12 months revenue. So how much revenue have you made in the last 12 months? What is the profitability? Do you have a P and L? What industry is it in? Date? Was it founded? How big is your team? Just very basic questions like that.

So we can wrap our head around your business. We can give you some sense of a ballpark valuation. And then from there we'll set up a call with you. So I require, we have a full team of hands-on advisors with m and a experience where. We'll walk you through everything from the day you create the listing, all the way to the final exit, and that's where we'll go over, you know, our roles and responsibility in the sale process.

What you can expect, things like initially meeting buyers, how to handle those conversations, typical questions they're gonna ask you. 'cause every buyer's gonna want to talk to you as the founder at some point. So it is sales, so we'll help you with that sale process. And then we finish the listing, we get you ready to go live on our marketplace.

So we'll schedule a date once you go live, and there's other things, you know, some of the details are, we'll create, you know, a presentation for you. We will recast your financials, which basically means cleaning up, you know, your p and l so it looks very clear to a potential buyer. Then you go live in our marketplace, we'll market your startup to our, you know, very large database of potential buyers.

We have over half a million registered buyers on Acquire. So we'll map them out based on your specific startup. As an example there, let's say it's a profitable SaaS company in the MarTech space, we'll pull down the data that we have on buyers that have specifically said that they're looking to buy startups of that type.

And we'll only advertise your startup to those specific buyers. And what that does is it increases the likelihood that buyers are gonna sign an NDA with you would be interested in learning more. And then from there you create this process and this momentum where a lot of buyers are interested in your startup.

And from there you'll start to ideally receive formal offers. So a letter of intent, you eventually sign one of those. I'm probably getting into like a lot of the nitty gritty here, but if we do our job correctly, you'll get multiple offers. You can negotiate against each other with those meaning maybe one offer has a higher price, but not so good terms.

You can negotiate better terms and the highest price because multiple buyers mean that you have the leverage. And so we'll help you select the winning buyer. You move into due diligence. We help with that as well. It's a huge headache, but we'll get you through that part too. And then you'll move into escrow and closing.

And then at that point, you've successfully sold your startup.

[00:13:50] Omer: So you, you, you described like how you, how you, your team helps founders. Kind of clean thing up, clean things up, and sort of present their business better. Is there anything a founder needs to do in, in terms of, you know, how, how they, they get attention?

Or is that something that your team helps with in, in terms of how it's listed, how it's promoted, all that stuff?

[00:14:13] Andrew: Yeah, we take care of all that. I think the best thing a founder could do if they're alive in the marketplace is just respond to buyers really fast, with questions that they may have. And we, you know, coach founders on all of this as well.

But again, it's like a sales process. So when buyer reaches out and you know, they have three questions on your business, don't let it sit there for, you know, two days. Try to answer it same day, just like you would a lead that's coming in your business and you're trying to sell to that person. So that's the number one thing, is just responding fast and being prompt and concise with any answers, or excuse me, any questions they have.

[00:14:46] Omer: So let's assume somebody lists their business. They go through this process, they get multiple, you know, potential buyers interested, and then they have to have a conversation with those buyers often founders. You know, I, it can vary, but I've met lots of founders who are great at building the product and, you know, doing a whole bunch of things.

But when it comes to actually talking to a potential investor, someone who wants to acquire the business it can be a completely new world and, and a completely, you know, different type of conversation they can have. One, it's like, what, what's, what's a, a common mistake that you see at this stage and, and how, how can they be better prepared.

[00:15:23] Andrew: Yeah. I think, you know, when I see founders go into negotiations, I think not moving things to the next step. I know that sounds very basic, but if you have a good call with the buyer, you could ask, you know, are you thinking about making making an offer? What would you like next steps to be?

I. You know, they might have a response, oh, I need to think about it. And this has been really helpful. Okay. Would you be interested in putting something on the calendar the next week? So just getting next steps. We're gonna talk again in a week to keep things moving forward. Creating, you know, a real sales process with momentum.

You know, 'cause if you let things just kind of go to the wayside, you aren't able to create that process and that essentially keeping buyers all on the same pace that you need them to.

[00:16:04] Omer: Do you have an example of maybe when you can share of, of somebody who, who went through this process and, you know, successfully sold their business.

[00:16:13] Andrew: One that I love to share is his name's Gabe. He founded a company called Revenue Accelerator. I personally worked with him on his acquisition and he was telling me when he went to go sell his business, he got valuations from two other brokerages or m and a firms. They valued his business at half of what we were able to help him get acquired for.

And the key to this process was creating momentum with a lot of different buyers all at the same time. More specifically, what I mean is we use something called a deal schedule. We're essentially our, what we're trying to do is we're trying to control the process and the timeline. So we start meeting with a lot of buyers all at one time.

And so Gabe is speaking with, you know, three dozen different interested buyers and moving them onto the next step, which is submitting a formal offer within four to six weeks of going live on our marketplace. And the purpose of that, why you want buyers to be on the same timeline as every other buyer is it creates a sense of, you know, this business isn't just going, it's not a matter of if this business is gonna be sold, it's to who.

And we're essentially selecting the winning buyer. And if we do that correctly, all the offers coming in at the same time allows us to negotiate against those offers.. So we're able to select the best price and the best terms for the acquisition. 'cause sometimes you'll be in an acquisition process where one, a one offer will come in, say, in January, and the second one comes in February, and the third one comes in March.

And when that happens, you aren't, you don't have any leverage. There's no momentum with the process. It's one offer. So you're just speaking to that one buyer and the second one in February. But if they all came and say March. Those three buyers are aware that there's multiple buyers involved in this acquisition process, and that allows you to negotiate upwards for the best terms and, and price.

It also increases the likelihood that the acquisition is gonna close as well. That means is when you've signed a letter of intent. That doesn't mean you've sold your business. That means you found a buyer interested enough to do that. So if something happens through due diligence or before even signing the letter of intent, you can ask buyers,

Questions to give you an indication of how serious they are moving forward. So basically it gives you the best price terms and reduces any chance that the acquisition is gonna fall through.

[00:18:32] Omer: So just in this particular example, when Gabe came to you and said, you know, I've had these valuations and they're at this point, did you already know at that point, having looked at the business that you know he'd be able to sell it for a lot more? Or was it more about you know, I think we can do more. This is how we work and as you sort of described getting multiple buyers in this deal schedule, we think we'll be able to, to get you a higher price.

Just curious about like how you valued it and what was the reality of actually what happened at the end?

[00:19:00] Andrew: You know, when we go two times above a valuation, we need other buyers to be involved in the process to bid up to that point, and that's by, you know, creating kind of a sense of, you know, fomo or, again, there's a lot of other parties involved in this.

So to win this acquisition, you're gonna have to bid up a certain amount. So there's definitely a, a process involved in that. But yeah, I mean, we looked at it and said, Hey, you have a great business. It's, you know, very profitable and this fits right within, you know, the buyers that we work with at acquire.

And then I'm able to, you know, look through our database of buyers and see that there's a high number of buyers that would be interested even before we go live with the business to give me a good indication that yeah, we'd be able to, you know, beat those offers or that valuation.

[00:19:45] Omer: Let's move on to the, the buying side of this. You described some of the, the typical buyers that may use acquire.com to, to find a business. Do you also have like a lot of, you know, solo founders who, who come to acquire.com just looking for something to just help them build some early momentum with, with a business that's already there and a small number of customers as opposed to building everything themselves from scratch?

[00:20:14] Andrew: I'd say that's probably my favorite part of acquire. 'cause we definitely have a side where, you know, we're helping people sell their businesses for, you know, life changing amounts and you know, you're gonna go lay on a beach or start like, that's awesome. But we also help much smaller businesses sell too.

So think task product with 10,000 in monthly recurring revenue, 5,000, 1000. And that's a great acquisition target for someone like you're describing. Maybe they own a startup already. Maybe they wanna build a small portfolio of SaaS products. One story I like to, to share about a buyer his name da, his name's Damon Chen.

He bought a company that was like a AI PDF reader. I think he bought it for like 25, $50,000 or something like that. Very small amount. Rebranded it to pdf.ai. So we got a killer domain for it. And the business has since generated, I think, 2 million in, in revenue. Yeah, so not bad off, you know, he's one person, he doesn't have a team, I believe he just has contractors and he is been able to scale it to seven figures, which I think is awesome.

But we see that multiple times per day, those types of acquisitions closing.

[00:21:20] Omer: So if, if someone is looking to, to buy a business. And I think we're gonna have more of those types of people, founders listening to this than someone from a private equity firm, like, you know, sort of listening into this and they are, they go into acquire.com.

What what are maybe some red flags that they may wanna look for when, when they see, you know, listings of businesses and potential, potential acquisitions.

[00:21:45] Andrew: I mean, for starters, I would always just do a, a Google search of the business, like business name or startup name, plus reviews. I. Are there any public reviews?

Is anybody saying anything bad about the product? If they're on G2 or Trustpilot or Capterra? There should be something. So it can go either way. If there's some bad reviews, it's a red flag. If there's nothing available, that might be red flag too, depending on how many customers they say they have.

Other easy ways to spot things is, you know, on a choir we can have them connect through. Their stripe metrics or their QuickBook metrics to show a, a real view into the financial health of the business. So asking them to share those numbers with you so you can see in real time, like what is their, in your current revenue, what is their churn?

What is their customer count? If you see anything odd in there, I think that could be a red flag as well. Such as is churn crazy high? Do they have a small number of customers, meaning customer concentration? Which means do they have just one really large customer and if they leave the business, you know, valuation might drop or something like that.

Using the product, does it work? You know, are you able to do what it says it does? Very just basic stuff can usually get you through, you know, 80% of the stuff that I see. So I would start there and then if you're still not confident, we have third party companies you can work with to help with due diligence.

To do what's called a quality of earnings, where you can get a deeper sense on if the stated revenue is correct. But those are the two main areas, is, is the product and the financials typically.

[00:23:17] Omer: So earlier you described the kind of the high level process that somebody would go through to sell a, a startup.

Can you, can you do a similar kind of walkthrough of what the buying experience looks like on acquire.com?

[00:23:31] Andrew: Yeah. Okay. So, square one, I'll, I'll do the same thing again when we go. And then, so you register on acquire.com. As a buyer, you can set up a profile in 60 seconds. It's really simple to do.

And then when you access the marketplace, just picture like a big store of every type of startup that you could possibly wanna acquire. We have SaaS businesses for 10, 20,000, all the way up to several million dollars or tens of millions of dollars. To access these you have to subscribe to our buyer subscription plans.

It's four oh bucks for the year, and that gives you access to see the private details of these listings. So if you don't subscribe to that, all you can see is profitable sash generating 500,000 a year. It's a MarTech company. It has this tech stack, it has these competitors. Then once you are what we call a premium buyer, that allows you to sign NDA and gain access to the private details, which include the company's name contact information for the founder, any materials they've uploaded, such as Pitch Deck or p and l allows you to contact the seller, ask more questions, learn what is this company, what do they actually do?

Once you're in contact with the seller, that's when you're gonna wanna ask questions about, you know, the business, why are they selling try out the product review financial information, do your due diligence on the business. And then from there you're gonna wanna submit what we call a, a letter of intent of formal offer.

On acquire, you can use our LOI builder, so within 60 seconds you can say, . I'm making a formal offer for 500,000. It's gonna be 80% cash on close, 20% is gonna be seller financing over 24 months at 8% interest rate. And the terms of that are, you know, the code needs to be in great standing or something like that.

Once that's accepted by the seller, that's when the startup goes under offer. So no other buyers can now speak to the seller or make offers on this startup 'cause it is locked on the platform. It is yours to . Essentially inspect to make sure that this is a business that everything they stated is, is true and accurate.

So once you're done with due diligence, that's when you're gonna wanna submit an asset purchase agreement. Essentially, that's the, the big document that's gonna finalize the sale. And we have an asset purchase agreement builder as well. So you can create that within a couple minutes. We also have attorneys that

We can introduce you to, in case you'd like more hands-on help than our automated builders. Once the asset purchase agreement is reviewed by both you and the seller, then you would move into escrow and closing on the acquisition. This is when you're gonna actually wire the money over to the third party, third party, either escrow.com, or use another firm called SRS Acqui, depending on the, the deal size, escrow.com for smaller transactions.

SRS Acqui for larger transactions. If they're gonna hold the funds in place until everybody gives a thumbs up, meaning you've executed the purchase agreements, everything is as stated. You've received the software access to accounts everything related to operating the business. Once everybody gives the thumbs up, then the funds are gonna be sent to the seller, you're gonna own the business and that's it.

Then after, typically there's almost always some sort of transition agreement where. The founder's gonna be available for three months or something like that to answer any questions. Or maybe they come on board in a larger transaction, but then after that, yeah, done and done.

[00:26:55] Omer: Happily ever after. Right.

[00:26:57] Andrew: Yeah, most of the time.

[00:26:59] Omer: What are some of the, the common mistakes you see people making when they're, they're trying to buy a business?

[00:27:06] Andrew: You know, I think not doing enough due diligence as a very broad one. But. You know, maybe they assume the code base is amazing. This is a very common one and it's not probably almost every acquisition you're gonna look at is gonna have some spaghetti code.

Things are duct taped together. It is a startup. So not having an understanding of what's truly working and what's not. Again, just doing, you know, good code analysis I think would be the way to get around that. And then the second one would be . Again, understanding the financial stated, you know, they can sometimes be, you know, inaccurate because it's a startup where the, it is just, it's messy.

So getting those two under control and due diligence will save you a ton of headache because. If you buy a startup and you're expecting one thing and then the code's bad, that churns extremely high 'cause you didn't catch that. Due diligence can go a long, long ways.

[00:28:04] Omer: Yeah, I, I think the code is an interesting one.

I, I spoke to a founder last week and I think there there're at about five or 6 million ARR, but when they started they didn't have anybody technical on the founding team, so they built the initial product with Bubble, right? The no-code platform. And they managed to get to like the first 2030 customers, but if they were sell, and then they eventually rebuilt it with like, you know, they got developers in and, and all of that stuff.

But if they were, they had that traction, they had revenue, they had customers with those, you know, those 20 or 30 there. And if they were selling it at that point, I can only imagine what a couple of non-technical guys who kind of taught themselves how to build a product and put this thing together, this, there's gonna be a lot of things under the hood that, you know, any, any kind of, anybody with any development experience might look at and just, you know, have a headache.

[00:29:05] Andrew: And that's okay. And that's okay. I should add, it's okay if everything's duct tape together, and it's spaghetti coat and there's bugs everywhere. It just needs to work. It just depends on what the plans are for the new buyer. Are they looking to really expand on the feature set and build on top of it? If so, they're gonna want to, you know, how everything works, how everything connected together.

But a lot of buyers, they'll just maintain the, they'll just let the code sit there and they're just looking to, you know, support the business as is. So it just depends on . Who the buyer is, and that's where just good communication can go so far during an acquisition, what are your plans when you buy this?

[00:29:40] Omer: What about financing? Is that something that you help with? Like somebody's coming along and saying, you know, I wanna, I wanna acquire a business. I've got some cash to put in if, if it's kind of beyond what I was expecting to spend, but I find this great opportunity. But I need to, you know, you know, borrow money.

What are the options available to them?

[00:30:07] Andrew: Financing is tough for this area of the market. Call it like the sub 10 million enterprise value market. You have SBA loans, which are government backed loans for traditionally small businesses. Those are very hard to secure for software companies for really two reasons.

One is working with banks is very, very slow. So if you are working with the SBA loan, you're looking at a four or five, six month timeline realistically to close the acquisition. Typically, there's gonna be more buyers involved. So if you're the only offer, maybe that can work but you're gonna have to really set expectations with the seller.

That this is going to, you know, be a four or five month timeline. We do work with SBA quite a bit but it's not ideal. We used to have a couple other third party lenders which we don't anymore. That's typically a very, very hard business to, to make work. They were two venture backed ones.

So if anyone's listening to this and you're looking at potentially going into this space please do and, and let me know. 'cause the financing options are pretty thin.

[00:31:13] Omer: So, so basically at this point, make sure you have the money to buy a business, essentially.

[00:31:19] Andrew: Yeah. That's the first question we ask on the sell side is how are you gonna finance this transaction?

And then we also verify funds for buyers on the other side as well. And we verified over 3 billion in, in funds on acquire. So if you don't have financing, the other options you could consider are offers with seller financing. That's where the seller is essentially backing the loan for you.

An example of that would be you know, 80% seller financing or 50% seller financing, and that's gonna be paid over 12 months. And what you're typically doing is taking revenue from the business. And paying that back to the original seller over a period of time with interest.

[00:31:58] Omer: I'd love to get your perspective on like just the coming year, so 2025.

How is the landscape evolving when it comes to buying and selling startups? What kind of trends are you seeing? You, you mentioned like Damon and in that example are you seeing a lot of like AI type, you know, startups kind of, you know, sprouting up?

[00:32:17] Andrew: Totally. Yeah. That's . That's been an interesting wave for us to, to see 'cause you know, two, three years ago it was nothing. And then probably three outta four businesses that we work with are ai first. So that's been a huge shift. Obviously. I think it's touching every part of tech. I think that's gonna be the big one. Just AI, AI and, and AI.

[00:32:39] Omer: Yeah, it's, it's also interesting because I, I wonder whether it's, so these days it's so easy to build a product.

So whether, you know, just, just in terms of like, we had these no-code solutions, but now you know, all of this stuff, like what Rept is doing and, you know, cursor and all of these tools and making it real easy. We talk about that. Yeah, we talk about that all the time.

[00:33:03] Andrew: Yeah. Just how easy it is to make, you know, these SaaS products and how I think the barrier to entry to building these types of businesses, specifically the Bootstrap SaaS, one to two people operating the business to get it to, you know, a few million annual recurring revenue.

I think that dream is just the barriers to entry are getting so, so, so low that we're gonna see just . A world of, you know, these, these very pointed vertical . So we'll have to wait and see. But that's something I, I'm starting to see a little bit and I think over the next year we'll see those businesses mature a bit more.

Right now, I think we're just starting to see, like, it's been around for like eight, nine months, so the wheels are just starting to get moving and then a year from now they're gonna be two, three years old. And so we're gonna see just more durable, healthier AI SaaS specific companies. And I also think we're gonna see, I hear a lot from buyers, really interested in the, I'm gonna buy this business and automate everything with AI and scale it with AI operators that make TikTok videos all day and stuff like that.

So I, I think we're in for an interesting few years.

[00:34:10] Omer: Yeah, there, there's one thing I I I've seen where like, it's so easy to build these products, but then you also see a lot of very similar products out there, right? And so what becomes your moat? What becomes your, your, your differentiator when anybody can kind of build this product?

And it kind of got me thinking that even when you're buying a, a, a product, you or a startup, you. I think it's, you need to understand like where your strengths are, whether you're like a zero to one type person or you like to take something that's already there and, and then figure out how to operationalize it and scale it and so on.

Because that's gonna, obviously, you're gonna be more successful if, if you know, you know, if you play to your, your strengths.

[00:34:53] Andrew: I think it's important to understand like the real value that a lot of buyers, you know, what they're looking to acquire on bar.com. It's really, you know, the, the customers and you know, the revenue.

That's the first thing. You know, the buyers I work with are looking at the code quality and the product quality is important, but it's not what really matters. So my point is . Yes, we're gonna see, you know, people making the same product really fast and maybe the overall value of what would be the cost if we were to just make this from scratch would go down.

But that's not the value. The value is the distribution and the brand and the customers and the revenue that the business is generating. So I think, you know, over the next few years, I think the mode is gonna be customer attention, who can get the product in front of customers and get them to pay.

[00:35:39] Omer: I think it's gonna be fascinating, like, just to see what kind of businesses you're selling like 12 months from now.

'cause that space is moving so fast. And I keep hearing about these, the, the idea of like a one person, you know, billion dollar business. Like, is that, is that around the corner? Who knows? You know? That'd be super interesting. . Great. Well, well, Andrew, thank you for joining me. It's been, it's been a pleasure. I appreciate you.

Just, you know, letting me ask these questions and, and just giving us some an an overview of the process, but also just some of the, the, the, kind of the mistakes that people might make and how they can navigate through this, this process better. If people want to check out acquire.com, guess what?

They can go to acquire.com and if folks wanna get in touch with you, what's the best way for them to do that?

[00:36:25] Andrew: Yeah you can just shoot me an email, andrew@acquire.com. You can find me on Twitter, LinkedIn, Andrew Gazdecki.

[00:36:30] Omer: Awesome. Thanks man. It's been a pleasure. Wish you and the team the business success.

[00:36:34] Andrew: Thanks. Thanks for having me.

[00:36:36] Omer: My pleasure. Cheers.