Has anyone here bought a business on MicroAcquire?
I've been window shopping on MicroAcquire. To those that have bought a business there before: how did you do due diligence? I haven't yet paid a for premium subscription but AFAIK there is nothing built into the marketplace to perform diligence (if that's wrong, please correct me).
Did you just list all your questions on Excel or something and send them over for answers?
Thanks y'all!
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a few random thoughts:
I've bought one from micro acquire and 2 others not on micro acquire. I also just did an interview with Andrew from Micro Acquire where I touch on this. Maybe I'll do a longer post on diligence bc it's hard.
Obvs this isn't legal / tax advice... hire a lawyer, hire a cpa, blah blah blah, etc.
My company does B2B SaaS so everything in here is focused on that. This also is for smaller deals. let's say between $100k to $500k. Anything more and I'd probs get my CPA involved to sanity check my interpretation of their financials, and my lawyer involved to go over any contracts they've signed with customers to understand liabilities.
We do have a list of questions we took / tailored from the microacquisitions course which all 4 of the parters took before we bought our first one. I'd recommend the course if you're serious about doing this. It has some decent legal docs and walks you through the whole process.
High Level
Financials
People mostly ask for 2 years of Profit / Loss (P/L). P/L can be hard to read and hard to interpret if you're weak (like I am) on financial stuff. Don't worry about EBITDA (it's kind of a bullshit number, see Charlie Munger's quote on it). Don't worry about SDE (sellers discretionary earnings). Just get the important things:
An easy way to get some of this is to do a screenshare where they show you their stripe dashboard so you can verify all the revenue. Also ask for a bank statement to make sure what's coming in from stripe is actually making it into the bank. This may also be done via a screenshare.
Tech
This is so hard. If it's just you, and it's a SaaS business, just stick to languages you know really well. You're going to be buying a job. Looking at random files in a screenshare is super hard to say definitively whether or not the thing you're buying is a work of art or a piece of shit stitched together with duct tape. We've been burned here before
Others
All that being said, diligence is a balance. If you ask more questions than another party that puts a bid in, you might loose because you were 'asking too many questions'. We had one where we didn't do that much diligence because they were a Y-Combinator backed company. That was a big mistake
Also, cautionary note. You're going to be wrong, and you're buying a job. I'd partner up with some friends (or random people on indie hackers like I did :) and I'd start small. and dear god just buy one at a time. We did 3 at a time and it was foolish.
Which microacquisitions course did you do? Also, where did you buy the other two SaaS?
Thank you, your post was informative!
Do you ever use traditional data rooms for due diligence, or has all of it been through email and video calls?
Cheers!
Nope, no data room other than a simple google drive. Google drive + gsheets + google docs has worked just fine so far!
Just read this article this week and it is a really good concrete step through micro acquisition
https://notes.xoxo.capital/anatomy-of-a-micro-acquisition-screenshot-api/
By @andrewpierno
Enjoy!
An interesting read of course, though it looks like they did very little diligence. Is that a common thing on MicroAcquire?
No idea 🤷♂️
I would expect it to be micro diligences?
thanks @ben_cotte!
A lot of great comments here already.
I purchased a business on MA around November of last year. It's a great platform but as you pointed out, you're on your own for due diligence.
A couple of self-promotional things but also might be helpful for you...
I publish the free weekly newsletter The Business Inquirer where I highlight interesting acquisition opportunities. I offer my thoughts and questions on each business. It could be a good source of deal flow for you.
https://thebusinessinquirer.substack.com
I am the founder of DueDilio - a due diligence marketplace. We connect investors and business buyers with quality due diligence experts. You post your due diligence project. Review proposals. Hire due diligence expert. Simple as that. Plus, if you go to the resource section, you'll see some helpful articles and free document templates.
https://www.duedilio.com
Happy to answer any questions you may have.
Very interesting, thank you. Did you outsource your due diligence process when you purchased in November?
I purchased a service/digital product business which was a relatively small transaction size. The due diligence was pretty easy for that one so I did it all myself. The only thing I outsourced was preparing the asset purchase agreement.
How long did the process take from start to finish?
The whole thing took approximately 2 or 3 weeks. The reason it took so long is because I had a lot of conversations with the seller and there was a revenue share agreement that we had to negotiate. The seller had a lot of interest in the business so it took a bit of convincing to get them to agree to work with me.
I did a (very) small acquisition there last year. I believe they didn't have a premium membership yet back then. The proper level of due diligence would need to be in line with the potential acquisition cost. There's no point in paying a lawyer $10K for an acquisition of 20K. I believe nowadays as a seller you can link your Stripe / Chargebee / Google Analytics metrics, so you have some form of verification on the buyer side. Apart from that, I would always do a basic search on Linkedin to see if the potential seller worked at/for a legitimate business in the past and do some google searches to see if they don't appear in any shade articles. Depending on the deal size, you could go further and do 1-2 reference checks from previous investors, colleagues, managers, etc.. Or maybe you even have a connection in common? I also believe that someone who actively engages an audience on Linkedin/Twitter has a far bigger chance of being legit. Why would they take the risk of screwing someone over when they could lose all of their credibility? A serious and honest seller will also want to know a bit about you. Someone who doesn't ask any questions is a potential red flag.
Don't know if this can help you out in due diligence @Romulus123 but although I haven't bought any business from MicroAcquire, I've heard really good things about the platform. The founder is very active on LinkedIn too and keeps posting about new acquires. Maybe his posts might help you out in some way.
Have you bought from any other marketplace? If so, what was the experience like?
Sadly I haven't :(
There's a lot of guides to micro acquisition process if you dig around - I believe MicroAcquire website itself has some. Also https://www.xoxo.capital/ have some useful articles about their process and this blog from Eyal Toledano is pretty handy as well https://microangel.so/
I've gone through a majority of the resources on MicroAcquire's site and I have browsed xoxo.capital. The posts often discuss what needs to be covered, but not necessarily how to facilitate the process.
I've heard of instances where the process essentially involves sending and receiving questions and answers by emailing a spreadsheet back and forth. I also know that data rooms are common in traditional M&A, but the cost of those rooms relative the purchase price of these small companies suggests another method is likely used.
Righto. I don't think you need to overthink it. Generally I have:
In bigger / more organised deals I have used deal room software like ShareVault, but it's literally just a secure file storage, doesn't add a tonne of value.
I've heard Slack is good option to avoid the long email threads during the process.
I've never used a "real" data room. Are they literally just file storage, or do they facilitate the "Q&A" process?
Thanks for sharing your experience!
I guess they do Q&A as well, but it's mostly document centric. You upload docs and then can tag them with questions.
It all depends on the size of the transaction.
Typically, you want to have some basic due diligence questions available in a file that you can quickly send to the seller. This can all be done over e-mail or the messaging section of MicroAcquire. If you don't want to e-mail back and forth, then just create a shared doc that both of you can access. Usually, there's no need for any data room. You can use Dropbox or Google Drive if you really feel like you need one.
There's no need to overcomplicate the process.
I've got a friend who works in "traditional" private equity, and his stories have probably influenced my outlook on the process.
I guess for these small acquisitions it's a whole lot simpler.
100%. I think anything <$250k should be a relatively straightforward DD process unless there's a lot of complexity in the deal structure or technology.