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I analyzed >1,000 indie SaaS projects and bought 6 for over $15M in total! AMA

With our SaaS.group, we buy SaaS business between $500K-$5M ARR, ideally bootstrapped and ideally run by a very small (founder) team. We have analyzed over one thousand projects, talked to hundreds of founders, and acquired six projects so far: Juicer.io, DeployBot.com, Snip.ly, Prerender.io, GitTower.com and ScraperAPI.com.

  1. 6

    What are your key evaluation criteria's for the aqusisitions? Expecting a long list like

    1. MRR/ARR, Profit
    2. Market size
    3. Product positioning, differentiators
    4. No. of customers
    5. No. of founders
    6. Growth Rate - MoM, YoY
    1. 2

      You nailed it. Pretty much all of this. In the end, there's no right or wrong, just of course that all these 6 factors have an influence on the value of a business / the price we or another acquirer would be willing to pay.

  2. 6

    What is your end goal with buying more SaaS? Are you looking for a bigger exit yourself or keep it running till you die?

    And where did you get the money to buy SaaS? Your own exit or someone else's money?

    I know Git Tower & Scraper API from many years. They're quite famous ones.

    1. 3

      I don't have an end goal (and actually, I strongly believe that the best businesses aren't the ones where the founder is gunning towards en exit. The best businesses are always the ones with no end goals... so my mantra is "just run a good business, that gives you plenty of options").

      In regards to the money: some money indeed comes from a past exit (Sedo.com), in addition, we did a small friend & family round, and we're taking some bank loans to finance acquisitions. The mix works well for us.

      1. 4

        I've heard this phrase "The most increase in valuations happens after getting acquired" but yeah, some want big money & exits are the fastest way to get that. Have 1 exit that makes you financially independent & then take big swings.

        What's the fastest a company got acquired by you? From start to exit?

        What is the biggest multiplier you have seen an exit have?

        Recently, I saw a company getting acquired for 80x ARR. Source: https://twitter.com/robwalling/status/1400444901767233537?s=20

  3. 3

    What sort of valuation multiple should founder in this segment expect? Do you base it on Sellers Discretionary Earnings, or something else?

    1. 2

      Sellers Discretionary Earnings (SDE) is indeed a main factor. Then it's usually a multiple of 2-7x (mostly 4-5x) on SDE. The low end for high-risk and/or low-growth projects, the upper end for low-risk/high-growth projects.

  4. 3

    where & how did you buy them? can you talk about how you structured the deal?

    1. 2

      We work both with brokers, as well as direct (I simply email founders if I find their project interesting). If there's a general agreement on price and terms, there's usually some sort of handshake agreement (in the form of an LOI), followed by a deeper due diligence. After this, a contract is drafted and executed, usually in the forms of an asset deal (an asset deal is a deal where the buyer does not buy company shares, but the assets of the project, so e.g. the web site, the source code and the customers). Sometime we also do share deals, but that's more rare in this market segment.

      Here's a great article of the original founder of Juicer.io who sold their business (to us) and explains how things worked for him: https://www.goddamnyouryan.com/blog/selling-juicer/

    2. 2

      I'd be interested to know as well !

  5. 3

    What do you think are the biggest mistakes many bootstrapped startups make?

    1. 4

      Nobody has summarized this better than Paul Graham in this article http://paulgraham.com/startupmistakes.html, so I am going to quote it here. Everything except #11-#14 (which deal with VC money) applies to bootstrapped startups as well

      1. 1

        Funny quote - "Java applets were probably the most spectacular example. This was supposed to be the new way of delivering applications. Presumably it killed just about 100% of the startups who believed that."
        Made me lol, poor Java getting wrecked.

        1. 4

          Thanks for posting this AMA here, @TimSchu! As our company gets more serious about making strategic acquisition (we made our first in January), reading through this whole comment thread was super helpful :)

          It was especially helpful to spur some research and YouTube video watching around EBITDA and SDE! In the past we've just done a multiplier on yearly profit but I'm realizing we may be missing some nuance in our analysis. So...thanks for helping make a n00b investor better :)

          I read Paul Graham's article above and I'd argue that 1-4 may be right in some circumstances, but that they also apply much more to funded startups, not indie hackers.

          1. Single Founder. Tons of successful ihers are solo founders, at the start of their journey for many forever! Also, I'm a solo founder and we're doing just fine. So...in your face, Paul haha.
          2. Bad Location. This seems like a very old-school mentality. Again, it may be true for 10-figure, unicorn businesses but not at all for ihers. We start successful businesses from everywhere and anywhere.
          3. Marginal Niche. I remember going to MicroConf for the first time (in 2017, I think) and being in awe of how many ihers we're building successful businesses in niches I never would have imagined as big enough to sustain one. But if your goal isn't to IPO or become the next tech billionaire, almost any industry, no matter how small, is big enough to sustain a $1M+/yr business.
          4. Derivative Idea. I'm sure many huge businesses do need to solve a new problem in a newer market to to reach take-over-the-world scale. But tons of small, iher businesses are started because folks see a competitor not solving a problem correctly and build a similar product/service themselves that targets this specific challenge. This happens a ton when businesses get really big ($50M/yr) plus. They get slower and less agile, leaving tons of room for smaller companies to start a similar business that does a few things way better and be successful! My company WP Buffs was a derivative idea of plenty of others and now we're a leader in our space. Companies like ConvertKit & Drip are also derivatives of MailChimp in the EMS space. Now you see this happening in all sorts of niches, like SaavyCal launching as a competitor to the industry leader Calendly.

          Anyway, just my two cents here. Thanks again for the post. SaaS.group looks cool. Keep rocking and rolling :)

          1. 2

            Really smart post of yours, I agree with everything you say! Definitely there are nuances and bootstrapped-related stuff the Graham post missed, and your analysis is spot on!

  6. 2

    Well done @TimSchu! Are you open to review SaaS MVPs that work technically, look fair and have promising turnout (in a different location from launch) with the need for better UI and some extra hands for documentation + customer support?

    If such SaaS MVPs were launched by developers, would you take chances to make angel investments?

    1. 2

      Hi. In your case I am building micro marketplace where IH could sell their small apps. I make review of each app before listing it on the platform. And give valuable feedback to the founders (both technical and growth). If you're interested feel free to DM.

    2. 1

      Happy to look at it - in rare cases we also do angel investments. Please send your project and ideally a pitch deck to [email protected], and I'll have a look!

  7. 2

    A question about free project.
    There are many projects that are not monetized by indie hackers (sometimes, because they don't know how to monetize, because there are lazy, because they are afraid that no one will buy, because there want to have many many thousands first, and then, monetize)
    There are MANY side projects like that, with some useful online tool that is free but can be monetized by people that know how to do that.

    Such project can be interested?
    Or you prefer only saas that has already revenu ? (like in microaquire plateform...)

    1. 1

      Hi Tim. Right now I am building micro marketplace for IH and I don't care about your app profit. Every indie hacker can sell their apps even in the pre revenue stage. Everyone with the great saas app could be listed here.

      Also, I am reviewing each application by hand and give valuable feedback based on the startup profile. If you are interested feel free to DM.

    2. 1

      Hi fellow Tim, we indeed prefer SaaS with revenue. This is not to say that there are also interesting projects without revenue (e.g. chrome extensions with lots of installs), it’s just not our model with SaaS.group.

  8. 2

    Of all the Saas businesses you own which one has been most tiresome to manage technically?

    1. 1

      I gotta ask our CTOs that ;)

      But if I could take a guess:

      • Sniply.io had lots of issues with fraud management and security, and managing that turned out harder than expected.
      • ScraperAPI.com is also technically hard, because it involves millions of proxies and the scale is mind boggling
  9. 2

    How do you find these startups or SAAS companies?

    1. 1

      We work both with brokers, as well as direct (I simply email founders if I find their project interesting).

      1. 1

        Thanks for hosting this AMA. Could you elaborate on how you find potential companies? Is it through google search, referrals, product hunt etc? How do you determine the value of a private company from the outside and decides which ones to be courted?

  10. 2

    Hey Tim,
    Do most of the deals include earn-outs? Is saas.group mostly hands-off after the acquisition?

    1. 1

      Yes, most deals have at least a small percentage of earn-outs.

      And no, we are not hands-off, we’re operators (unless there’s an existing team in place which continues after the acquisition, in which case we’re really more like hands-off investors)

  11. 2

    Hey Tim,

    Would you buy a SaaS with no/or small MRR and ARR but with a great product and big market?
    Basically buying potential rather than actual.

    1. 1

      No, that’s not SaaS.groups model.

      We sometimes do angel investments though, and there we invest mainly in potential.

  12. 2

    Congrats on your previous exit and current endeavors with SaaS.group!

    My question is: How important is the quality of the code of the project?

    A lot of IHers are self taught developers and especially if it is one of your first projects it might contain some minor technical debt already if that makes any sense.

    1. 2

      Thanks!

      We always conduct a technical due diligence (including a source code review). Minor technical debt is not a problem though, that’s very common and can easily be fixed.

      1. 1

        Got it! In the same sense, I am curious what would be an absolute no-go for you then? And has something like that ever happened to you? :)

        1. 2

          Since we are mostly acquiring businesses from developers, almost always the technical due diligence runs smoothly. Most stuff, including missing documentation, can easily be fixed. Sometimes this can be part of the transition time or even the earn out.

          In our entire history we only had one case where after looking through the code, we came to the conclusion that the entire platform would need to be re-factored, and we had to back away from the project. But in this case, it was not the only problem, there were other other messy things as well which the due diligence brought to light.

          1. 1

            Thanks for the extensive answers! :)

  13. 2

    Awesome business! (Saas Group) Almost exactly what I would like to have in the future, but I first need some more experience haha.

    1. 1

      Thank you! It's also not my first business. This portfolio approach is certainly not the type of business you start with. One for the obvious lack of capital (the SaaS.group model is capital-intensive), secondly, because you need to learn how to operate first (I learned this at Sedo.com, Eyeo.com and my other companies) before you can apply these learnings as scale.

      1. 1

        Yeah exactly! Funding for me wouldn’t even be the biggest problem, but I just have to learn so much yet. I dropped out of uni after my first year, now a year ago, started a company, did some projects, learned a ton, got a lot of customers, but haven’t made a euro yet😂 so as long as that didn’t happen yet I have a long way to go. But your business reminded me of what my end goal is for me, a business like you have

        1. 1

          Hey Dylan, tell me more about your project. I am building micro marketplace for people like you where you can easily sell your apps, even in the pre revenue stage.

          Also, I am giving a piece of advice for founders to improve their projects. Both in technical and marketing areas. And it's free. If you're interested, feel free to DM.

  14. 2

    Where do you share your learning from each acquisition/rejection?

    1. 2

      We have an internal CRM where we put notes and data in from all businesses we look at, which is turning into an awesome knowledge base for us.

      The sharing of what went well (and not so well) in regards to our acquisitions is in a much more tacit way, mostly by us and our team members working on multiple projects over time and thus taking learnings from one project to the next. So for example, if we see that a certain best practice worked at Juicer.io, there's a good likelihood that it will also work with our other social media project (Snip.ly)

      1. 2

        Thanks. I'm trying to acquire SaaS between $1K -$10K MRR so would love to learn from your experience.

        Do you share some of those learnings on any public platform?

        I tried connecting with you on Linkedin but it was asking for your email.

        1. 1

          Hey. For this reason you can message me. I am building micro marketplace where you could acquire startups with this size in MRR.

          1. 1

            I can't message you here. Drop the link.

            If you don't have it ready, you can DM me on my socials.

            1. 1

              I sent you a message on twitter

        2. 1

          Not yet, but maybe we should write things up more often and publish them…

          1. 1

            Definitely. Can you share your email ID? Would love to connect on Linkedin.

            1. 1

              [email protected] (happy to connect at LinkedIn!)

              1. 1

                Thanks. Request sent.

  15. 2

    Hey Tim, great to see that you’re active here as well (not only LinkedIn).

    While the whole world is focusing on hyper-growth SaaS, why are you looking for indie SaaS business? What makes it so interesting for you?

    1. 2

      As you say, the whole world focuses on hyper-growth SaaS, which also means the prices paid in this segment are beyond crazy by many VCs ;)

      Also, I think as a team (I work together with my partners Ulrich and Tobi, plus a wonderful operational team) we are better operators than investors. So in our SaaS.group model, we can help small indie SaaS businesses scale, which is also often a lot more fun than simply betting money on a hyper-growth startup and then see it either work out (or not).

  16. 2

    How are you financing the acquisitions? Did you raise capital or you are using personal money?

    1. 1

      Some money comes from a past exit of my partner Ulrich and mine (Sedo.com). In addition, we did a small friend & family round, and we're taking some bank loans to finance acquisitions. The mix works well for us.

  17. 2

    What's the average monthly churn you see in this segment?

    1. 2

      That's really hard to say. Churn depends a lot on a specific market:

      In a B2C market or in certain 'consumerized' segments of B2C (e.g. social media) a 10% monthly churn is not uncommon. But also a lot more clients sign up and try out the product, and onboarding is easy, so the math works again.

      In a B2B market, especially if you're talking enterprise and/or very infrastructure-heavy stuff, monthly churn can be as low as 1%. But also, it's then usually harder to convince clients to start using and paying for your product.

  18. 2

    How would you go about building/ investing into linktree clone (if not, then why) ? What metric would you use to reason about it's traction, like who the core customers, unique selling proposition and the pricing strategy would be at different growth milestones (say first 100, 1000... customers) and at which point (metric wise) would such project be deemed investable by your fund? Also, what growth channel you think is underappreciated?

    1. 1

      I'm not a user, let alone an expert, on linktree, so that question is hard for me to answer.

      In general, if I would clone a successful project, I would try to look at what made them strong (and copy this 1-by-1), while removing, simplifying or improving areas where the competitor is weak.

  19. 2

    Did these 6 companies have anything in common that made you want to acquire them?

    1. 1

      Yes, they are all low-touch SaaS products (see https://saas.group/blog/why-we-love-low-touch-saas-models for an explanation on what I mean by "low touch"), so while they are different products, under the hood there are 80% similarities (in marketing, billing, product etc).

      In general, we at SaaS.group focus on areas which we understand (developer, marketing and productivity tools), but then treat the projects independently.

      1. 1

        One thing is that with low touch it's easier to scale up if prospects don't need to talk to someone to understand your software.

  20. 2

    Hey Tim, how do you determine company valuations? With companies of this size are you looking at revenue or profit multiples? Can you give a range of the multiples you apply? Thanks!

    1. 2

      The main factor are the company profits (or potential profits, if there are unusual expenses which can easily be cut). On these we - like most acquirers in this space - we usually apply a multiple of 2-7x (mostly 4-5x) on profits/SDE. I know this is a wide range, but: The low end for high-risk and/or low-growth projects, the upper end for low-risk/high-growth projects. Most projects are somewhere in the middle.

  21. 2

    Obviously the goal is for each property to be making more money than it previously was. Do you approach that from a growth angle or a product angle?

    1. 2

      Both! We look at every project and look at things to improve, this can be product stuff, technical stuff (e.g. we often see a lot unnecessary AWS/server costs) or growth opportunitites (e.g. we often see a lack of structured marketing/SEO).

  22. 1

    Congrats on all the success so far. I’ve recently started to pursue something similar with a business partner.

    Do you prefer opportunities where the founders want to stay on with the Company or where they want to fully move on? If they’re interested in staying on, do they retain some equity or do you figure out another method to maintain motivation and align longer term incentives?

    1. 1

      Hi @tallencarey, we like to do what the founder wants most for her or his life.

      Some founders want to get out asap. They are burned out, or simply have other life goals. It's not ideal, and certainly has a small negative effect on the price we can pay, but it's totally possible.

      Most founders like to stay on for a bit. In some cases this can be a few months or a year. In other cases, even longer. In these cases, we definitely try to figure out a model to maintain motivation and align long-term incentives. Depending on the goal of the acquisition this can be revenue / profit based, or also include some project / roadmap goals, or a mix of both.

      1. 1

        Got it, thanks for the insight, Tim. Seems like a very thoughtful, founder-friendly approach.

  23. 1

    Sounds good, Tim. I have three other investment options for you:

    1. ConveyThis.com ($18K/MRR)
    2. Gglot.com ($10K/MRR)
    3. DocTranslator.com ($100/MRR)

    I am the founder. Let's talk?

    1. 1

      Sure, let’s talk! Please email me at [email protected] to set a date

  24. 1

    How were you able to analyze so many SaaS projects? What tools to you use to find candidate projects? Did you talk with every founder from the 1,000+ list?

    1. 2

      We scrape various sources on the web (of course using our own product, ScraperAPI.com), analyze multiple factors (traffic, social signals etc.) to gauge revenues and then email founders whose products we like.

      If we get a response (around 50% of the time), we first email with the founder, and talk to him or her if it makes sense (we don’t want to waste anybody’s time of course). So we talk to a few hundred every year.

  25. 1

    I'm a big fan of ScraperAPI and have used it on a very large scale before.

    Excited to see the new improvements, hopefully the pricing stays great! :)

    1. 2

      That’s great to hear. And yeah, we have no intention on raising prices for ScraperAPI.com

  26. 1

    I see you're the CEO of AdBlock Plus. How do you feel about AdBlock Plus's business model being likened to extortion?

    1. 1

      I‘m just the founder and Chairman of the parent company (eyeo.com), not the CEO. But I feel very good about the Adblock Plus business model, which imho is the perfect compromise between the interest of web sites and users.

      Here‘s a great article on this topic:
      https://www.businessinsider.com/theres-nothing-wrong-about-the-way-adblock-plus-makes-money-2015-9?r=US&IR=T
      (Quote: „But many people fail to look at what Adblock Plus is doing from the polar opposite view. And if they did, maybe they might see it's not as much of a gangster outfit as people are making it out to be.“)

  27. 1

    How did you find these startups?

    1. 1

      We work both with brokers, as well as direct (I simply email founders if I find their project interesting). And we also get inbound enquiries—- we even have a 3% commission referral program, see www.SaaS.group

  28. 1

    Oh hey! I believe it was your external recruiter that reached out to me last year about a CTO position with Prerender. I believe we were going to set up the interviews but then the process just stopped.

    1. 1

      Sorry to hear this. We indeed worked with an external recruiter on this position.

      If you are still interested in working for us, please email me to [email protected]

  29. 1

    Would you consider buying a company that sells online courses? What sort of model would you prefer here? One time sales with lifetime access or some sort of on-going subscription fee to access all courses? Also, do you think it's beneficial for small saas companies to also create and sell online training courses to their customers/audience?

    1. 1

      If there is a large portion of subscription revenue, we would consider it, but most of the time, online courses have much much less of an infrastructure component and that means much higher churn. Also, courses are often tied closely to the personality of the founder, and need to be constantly updated, so they are not ideal for an acquisition.

  30. 1

    Do you care at all about the tech stack of a product you acquire? All of your portfolio companies using the same tech stack?

    1. 1

      Not all of our projects have the same tech stack, but we try to keep variations limited. Just makes things more manageable, for example we can better have some team members take care about multiple projects.

  31. 1

    What are the most common product mistakes you see?

    1. 2
      • Wrong pricing
      • Bad user onboarding
      • Complicated/clumsy UX which hasn’t been properly tested
      1. 1

        What's an ideal user onboarding flow?

  32. 1

    Glad Juicer.io is not Juicero or you would have had a bad time 😏

    1. 1

      Ha, indeed! Fun fact: a lot of traffic to Juicer still comes from people looking for a juicer. If I knew how to segment traffic properly, we could become the biggest Amazon affiliate for juicers ;)

      1. 1

        .io is also the perfect TLD for a juicer 😏

        🥕 in, 🧃 out

  33. 1

    Do you also collaborate/invest along with acquiring?

    1. 1

      Yes, sometimes we do (it's not SaaS.group's main focus, but sometimes we see exceptional founders who don't want to sell, but rather want to get an investment plus mentorship, then we like that, too).

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