41
63 Comments

We’ve acquired 40+ bootstrapped businesses in 6 years, and run a growing portfolio of SaaS products. AMA!

Hello to all the IndieHackers out there!

I’m Kevin McArdle, and I’m the Founder and CEO of SureSwift Capital. We’ve been buying online businesses from independent Founders since we launched in 2015, and we’ve made more than 40 acquisitions since then.

In 2016 we really started hard-core focusing on SaaS products, and that’s still what we buy today. We don’t flip businesses, we hold them and grow them.

So, in addition to acquiring businesses, we have a global team of product managers, marketers, customer happiness folks, and developers who work on maintaining and growing each of our products.

We’ve got tons of success stories from the portfolio, as well as mistakes we’ve made along the way while we scaled (like trying to build our own product from scratch).

I’m happy to answer q’s about anything from what we look at when we’re buying, how to prep for exit, metrics we track and how we approach growing a product once we own it.

My VP of Acquisitions, Chris Reedy, will also be on here to help answer questions, so we’d love to answer any you have!

  1. 5

    Hi Kevin! I see SaaS acquisition funds are becoming more and more popular. Congrats on getting in on the ground floor!

    • What's your investment thesis? Do you buy supplementary SaaS around the same industry or diversify?
    • Private equity funds use a buy-to-sell strategy, so it's easier to calculate the return. How do you track the ROI with your buy-to-grow approach, or do you track growth-related KPIs in each business separately?
    • What were the most painful mistakes as you scaled?
    • With 40 acquired companies, you must have looked at thousands. What are some red flags that discredit an investment right away? And what are the commonalities of all "investable" companies?
    1. 4

      Hi @psto thanks for the question.

      1. We DO....but it isn't required. We have a nice portfolio of Shopify apps and recently TraderVue and Wingman complement one another.
      2. We can calculate 'unrealized return' by putting a reasonable, market-based estimate on the value of our portfolio. AND we do track growth related KPIs just as a healthy business practice.
      3. Some painful mistakes:
        a. Not having enough smart people to manage a growing portfolio (i.e. trying to do too much with not enough talent).
        b. Hiring a person that did not align with our Core Values
        c. Taking too long to fire someone who did not align with our Core Values
        d. We had some earlier acquisitions where I missed some big red flags in due diligence....mistakes we'd never make today.
      4. #1 Red Flag that stops a deal in its tracks - if I find a Founder is not trustworthy. It's over. The commonalities of our best investments....great founders who built their companies the right way.
      1. 4

        I appreciate the sincere responses, Kevin!

        Interesting how values tie everything together from painful mistakes, hiring/firing to red flags and commonalities.

        Good luck!

      2. 4

        Hi @psto - Thanks again and I'll add one red flag that I think we're watching for more and more: Customer Engagement. For niche SaaS businesses that we buy, we really want to see that customers are using and seeing value from the product regularly. Doesn't need to be 95%+ monthly actives by any means, but we want to make sure customers really see active value from the businesses we buy. Particularly for smaller bootstrapped SaaS businesses, I think seeing that your customers are regularly engaged and using your SaaS product is a powerful signal that there's more value you can add for them over time - and really de-risks the business for buyers.

        1. 3

          Hi Chris! Thank you for responding.

          one red flag that I think we're watching for more and more: Customer Engagement

          That's an undervalued metric!

          I think seeing that your customers are regularly engaged and using your SaaS product is a powerful signal that there's more value you can add for them over time - and really de-risks the business for buyers.

          Great insight, Chris. It's something that both founders and investors can benefit from when deciding the right time to add additional features, offerings etc.

          Good luck with SureSwift!

  2. 2

    Hey Kevin. I've gotten a few offers for Sizzy but I didn't engage because I'm not sure what would I price it. Any tips about this?

    1. 1

      Hey @kitze If you aren't in a hurry to sell it...you could just see how other people price it. Nothing wrong with that. Testing the market is also helpful because you can get constructive feedback from some buyers on why they are pricing it a certain way. That might give you ideas of how to improve upon the business for when you are ready to sell.

      If you think you might want to sell now, it's good to have a number in your head (or in your gut) that makes it an easy decision - like "if someone will give me $X, I'm good selling." But keep in mind that price is only one aspect of a deal. You need to pay close attention to all of the terms.

      Sizzy looks really cool! Beautiful landing page...and I love how you expose the roadmap!

      Good luck! Hit up @chrisreedyMN if you want a valuation from SureSwift (no pressure, no obligation...we just like to be helpful!).

      1. 1

        Yes @kitze - Happy to talk anytime! Cool that you've succeed with a pretty technical SaaS. In my experience, businesses like this often have very low churn and multiples will of course be higher because of that.

  3. 2

    Where can you findout more on how to become an investor in the fund and is there a minimum investment level?

    1. 1

      There are rules about what I can and can't say on this forum...but if you are an accredited investor and serious about wanting to invest...just shoot me an email.

      [email protected]

  4. 2

    Are you able to find synergies between acquisitions? Overlapping customer bases? cross-selling opportunities, bundling? I am sure there are economies of scale for marketing and growth etc. as you mentioned but are there other, maybe surprising ways of leveraging the fact that you own a whole slew of SaaS companies?

    1. 2

      Yes, yes, yes to all of those. Part of our strategy is synergy and applying learnings across the portfolio. There are some easy/obvious situations - like we have one team that operates all of our Shopify apps (common tech stack, common marketing principles, common customer profile, etc.). But there are other, non-obvious was that we can use our scale. It turns out that ~80% of what it takes to run a SaaS company well has nothing to do with the market it serves.

      1. 1

        It turns out that ~80% of what it takes to run a SaaS company well has nothing to do with the market it serves.

        What do you mean by this?

        1. 1

          Hi @Alessss - Jumping in with a bit more here. The 80% that's remarkably similar is not that the technical part of the product but how the team will find and manage growth, prioritize work on what's next for customers, and take care of customers. In short, our vales and operating principles are fixed even in different sizes and categories of SaaS.

  5. 2

    What are some of the reasons people with functioning SaaS businesses are willing to sell?

    1. 2

      I've said before, publicly, that there are 100 reasons people would decide to sell a successful, profitable business...and only one is "for money".

      Life circumstances change. Sometimes people have multiple projects going and they decide to sell one to focus on (or to fund) the other. Creators love starting/creating but they don't love the growth phase. People get tires of a given project. I could go on...my point is that every situation is different and any reason is a good one.

      1. 1

        I'd add that a lot of founders - especially IndieHackers - are starting to take a portfolio view of their career timeline. Some founders still want to run their one SaaS for a really long time - which is awesome - but a lot of builders are thinking about small wins, big wins, some self-funded and some perhaps taking outside capital and having larger teams.

  6. 2

    Are you hiring part-time? Im a full-time lead developer at a large company but would love to helpout and gain knowledge.

    1. 1

      We love to hire part time people!

      Here's some "evergreen content"...
      SureSwift is hiring! Check out open positions below:
      https://www.sureswiftcapital.com/remote-careers/

  7. 2

    How do you deal with tech stack fragmentation? I imagine the technology used by the companies you acquire is all over the place, or do you factor that in during the acquisition process?

    1. 1

      Astute question, @hoefferd

      Indeed our collective tech stack is "all over the place". I made the decision along time ago that we would be tech agnostic. That allows us to acquire great businesses regardless of the stack. It does add some complexity when we think about staffing, but it’s worth it to be able to acquire any business regardless of the platform on which it was built..

  8. 2

    Congrats to you and Chris on your success! Thanks for taking the time to do this.

    1. As previously stated, holding companies for smaller software/digital product companies is a huge investment vertical at the moment. What were market indicators or trends that convinced you to get started before this current surge?

    2. In an average month, how many companies are you prospecting, how many are you engaging, and how many are you closing?

    3. What are indicators, whether in the team, business or industry, that you see as red flags for acquisition?

    Continued success to you and your team!

    1. 1

      Hey @AnErik thanks for the high five for the team!

      1. I wish I could say I was prescient enough to have seen this trend early. We got in early...but not because I'm that smart. I just saw an opportunity and had the guts to jump at it. The fact that it's turned out to be something that other people love I think is validation for us...but doesn't revise our own history.
      2. @chrisreedyMN can probably give some more specific stats...but in general we look at 100+ deals for every one we do. And I love playing a very long game. I love (LOVE!) meeting Founders and learning about their business long before they are every thinking about a sale...so between me and Chris and our team, it's reasonable to say we're talking to hundreds of Founders each month. It's the most fun part of my job!
      3. Lack of trust, as mentioned before, is my biggest red flag. Scammy businesses or things that are in fleeting markets are also not our jam (e.g. "our software will get you more followers for XYZ social platform").
      1. 1

        Hi @AnErik - Kevin's 100:1 ratio is about the right ratio for contacts:acquisitions for SureSwift - there's a lot of great bootstrapped SaaS out there today!

        I'd also add that it's very common for us to have multiple contacts with founders before they are sure they want to sell. 'Fit' is a term we use a lot in our acquisitions, and timing is very important for the right fit - and 'fit' works both ways for sure.

        Often founders talk to us when they are thinking about an exit sometime but still excited about what they're working on - they just want to know how it works and whether their product is a good potential fit with us.

        Kevin and I actually love when we can track founders and products over a longer period of time, and then it's really easy to pick up the conversation and move quickly to an LOI if things line up.

  9. 1

    Hi, Kev

    Looking to start a SaaS and because I have no great idea of what to do, I started looking for SaaS that were build 2y ago with <5 ppl and which are listed on MicroAcquire for selling.
    It could work from your pov?

    Cheeeers,

    1. 1

      Sounds like a pretty good strategy from my pov. Even if you don't find a deal, you will learn a ton!

  10. 1

    Hey Kevin, how was the acquisition of your few first projects? Meaning, how did you prospect those and where did you go to find those opportunities?

    1. 1

      Our first several acquisitions were sourced through brokers or marketplaces. It took a ton of research and time to look through hundreds of opportunities to find the right ones. Today, most of our deal flow is direct with Founders...but we still look at 100+ deals for every one we close.

      1. 1

        Could you quickly elaborate on those? How did you get in contact with brokers and which marketplace would you suggest. Also, in the beginning, what was the range you were aiming to invest on an acquisition (6,7 figures...)?

  11. 1

    Hi,

    Are you usually buying companies or just their assets?

    Thanks!

    1. 2

      Assets. I think you'll find that this is most common in our segment of the market. Buying shares (or buying the business itself) comes with a host of legal and tax challenges.

  12. 1

    Hi Kevin. Thanks for doing an AMA. Very insightful responses.

    1. How important is the uniqueness of the SAAS product idea?

    2. Are there particular SAAS products you don’t see in the market that you think could have legs? I’m fishing for new ideas 😀

    Thanks,

    Justin

    1. 1

      Happy to do it, Justin! This has been really fun.

      1. Not that important. Most good businesses are going to have competitors. So it's rare to find a truly 'unique' idea. It's more important that the business solves a real problem for customers and that those customers really like the product. I'm happy to go compete. We love competition and we hate losing :)
      2. My family could use a SaaS product that folds laundry. Four kids and the clothes just pile up!!! On a more serious note...I'll give you two things to think about:
        a) if you have a friend that works at a big company, ask them what process sucks the most or where they have to use a spreadsheet to solve a problem. Then go build a SaaS product to fix that problem.
        b) It would be ideal to find something that you personally care about. I don't know where you are on your journey, Justin, so I won't presume. I will tell you that, in my experience, entrepreneurship is fricking hard! During those hard times, it's really helpful if you love what you are doing, love your product, and love your customers and the problems you are solving for them.
  13. 1

    Hey Kevin, Thanks for doing this. I'm also trying to acquire businesses doing $100-$1K MRR and have few queries.

    1. How did you get the initial funds?
    2. How do you negotiate deals where the seller is expecting 20x ARR?
    3. How are you managing your deal flow to find motivated sellers?

    Thanks

    1. 3

      Hey @Honeysyed

      My pleasure! And thanks for the questions!

      1. Myself and some partners pooled our own initial capital to get started. I was fortunate to have built up a nestegg from a 15 year career in corporate America ($CERN if anyone is interested) and living well below my means for my whole life. I share that because, though I have a lot of privilege in my life as a white dude born in America...'coming from money' is NOT on my list of privileges.
      2. I would tell that Seller, "Best of luck! I sincerely hope you can get that amount of money for your business, but I can't pay that. If you find you can't get 20x...let's talk further."
      3. We're fortunate to get a lot of deal flow from sellers who are motivated (meaning they are ready to sell soon) AND those who aren't 'ready' but want to 'sell someday'. And that's okay! We love talking with Sellers/Founders wherever they are on their journey. Earlier, I suggested that @kitze go 'test the market' and even book some time with @chrisreedyMN even though it seems they aren't in a hurry to sell. We're lucky to be able to handle that volume. I'm going to assume that your question comes from a place of "I only have so much time...how do I avoid spending time with people who are 'kicking tires' and not ready to sell." If that's the case, I don't have a great answer for you. People are complicated and selling a business is very personal and complicated. You could email people and say "I only have so much time, so if you aren't ready to sell in the next 90 days, please call me when you are." But, honestly, I don't think that will work in your favor.
      1. 1

        Thanks for the detailed response.

        I'm open to investing time and money and understand that humans are complicated.

        I'm just frustrated with the kind of valuation sellers are expecting right now but I will keep trying.

        Thanks again.

  14. 1

    thanks for a AMA

    • How to ask potential user to join our platform
    • How and where to find our potential users
    • How to make our post "not spammy" if ask about same in a community
    1. 1

      Happy to do it @Itsanishjain

      Tough to say without knowing your platform...I hit your profile and didn't see a link. If you drop it as a comment I might be able to give you a better answer. Without that...I'd say just ask. "Here's our platform. Users just like you get XYZ value from it and love it! I think you'll love it too."

      I think sincerity and authenticity might be your best answer here.

  15. 1

    Hey Kevin!
    That's awesome! What is the best way to contact you?

  16. 1

    Hey Kevin,

    Your approach is really interesting.
    One that I was wondering.I imagine that you had thought about investing more on fewer products versus investing less on more products?
    How do you see that? What you look after on those business that you bought?

    1. 2

      I think about that all the time @hugopenna. We like the diversified approach. One big deal that goes well can be wonderful...but if it goes poorly, you're in a painful spot. Our target acquisition size has grown with our capabilities and our capital and it has created a wonderfully stable and diversified portfolio. The result is that no business accounts for more than ~15% of the portfolio revenue or profit. So when a bad month happens for a given portfolio company (and I use "when" on purpose...because bad months always happen), we don't have to panic because the portfolio itself should be fine.

      1. 1

        Thanks Kevin for the clarification.
        I imagine that it can be a tight line to work on.
        When you look back, do you thing that is a sweet spot?
        Would you keep buying products until owning 100+ products or want to double down in a smaller set of product, I mean less than 50, for example.

        1. 2

          Our plan is to eventually own 100+ products by continuing to buy in the range that we're great at and holding in perpetuity. We do "double down" on the ones that are most successful, but I think it's VERY unlikely that you would every see SureSwift say "we're good with this portfolio and we're no longer acquiring." Won't happen.

  17. 1

    Do you use Slack as the company chat tool? If you do, how do you structure it with all of your products? Is it just one workspace with each channel as a different product? Or a new workspace for each product?

    If you're not using Slack, how do you manage communication internally across all products?

    1. 1

      We use Slack big time. Each portfolio company has a dedicated channel. We also have channels for 'communities' within SureSwift (e.g. Growth Marketing, Developers, Customer Happiness, etc.) that cut across the portfolio. And, of course, we have other groups for our leadership team and the place where we #celebratewins and share pictures of pets. :)

  18. 1

    It feels like tons of interest has picked up this year in pursuing micro-private equity and building a portfolio of SaaS companies.

    What are the implications of this on 1) SureSwift 2) smaller micro-PE players and 3) SaaS founders

    1. 1
      1. Implications for us are net positive. More competition, yes...but there are tens of thousands of people building amazing SaaS businesses...so there's plenty out there for lots of buyers. The upside of the interest picking up is that Founders know how to find the right buyers and the industry as a whole is becoming more professional - which is super healthy for everyone, including us.
      2. Smaller players have better access to Founders and to funding (I think)...so it's probably easier to get started today than when we started. Also, net positive as long as people come in with good intentions and are good actors in the community.
      3. Great for SaaS Founders! More players with more access to capital means more options for growth (i.e. investment if you're going that route) or exits when Founders decide they want out. There will be some 'bad actors' out there that will cause problems and torch some peoples' businesses, which is a sad reality...but those people won't last long and the best micro-PE firms that emerge are going to be great for the SaaS Founder community.

      Agree? Disagree? Lemme here other takes....

  19. 1

    Hello Kevin,

    Congratulations on your achievements.

    You have said that you hold and grow the businesses that you acquire. How do you ensure that customer acquisition costs for these businesses is less than lifetime value of the customer acquired?

    Thank You

    1. 2

      Hey @DSarkar CAC to LTV is something we'd assess before a purchase. Often bootstrapped founders don't rely on paid acquisitions (which is great)...so if we start testing paid acquisition we watch CAC/LTV ratios very closely to determine how much to continue to invest. But we also use dozens of other growth strategies (mentioned previously) that aren't paid ads.

  20. 1

    Hi, Kevin

    Glad to have you here with such a huge exeprience in saas acquisition.
    Got 3 questions for you:

    1. what did you lear when you scaled all this startups?
    2. what range of ARR saas and what you look for when consider buying?
    3. Im a nontech guy but Im looking to start a SaaS since I have 3y experience in working with them, what do you recommend me before starting a startup? Did you acquire any SaaS founded by nontech person?
    1. 2

      Hey Alesss.

      1. People are the most important part of any business. Our most critical job is to recruit, retain, recognize and reward the most talented people possible.
      2. $250K to $3M+ in ARR. The 'floor' is just because smaller companies often are just as hard to run as larger ones. The 'ceiling' is very soft because we can make very large acquisitions...we've just found we're great at a certain size and if a deal gets much bigger, you get private equity interest and prices can get pretty crazy (especially lately).
      3. I'm a non-tech person too! I know there's infinite advice right here on IndieHackers about choosing a problem, interviewing customers, etc. etc.. So I'll skip the SaaS-based tactics and go a different route. DO SOMETHING. Don't wait to start because you don't have the perfect idea or a tech co-founder. Start a business. Any business. It's likely to pivot and change and you'll learn and grow. The most important step to any entrepreneurial journey is the FIRST ONE. To answer your question directly...we have acquired a couple of businesses from founding teams where one person was non-technical. FeedbackPanda was a recent one and a great story. I'll link it below later today.
  21. 1

    Hey @KevinSureSwift @chrisreedyMN! Been following you guys and SureSwift for a while now. It's one of the main goals I have is to create a portfolio of digital products.

    Here are a list of questions I'm curious about:

    1. Why specifically SaaS, as opposed to other types of businesses (like physical, etc)?
    2. With software evolving fast, do you see the products in your portfolio being around and profitable in 5, 10, 20 years?
    3. How are you getting the funds to actually acquire these businesses?
    1. 3

      Hello, my dude! Thanks for the quesitons.

      1. The truth is I have a software background (non-tech) and that we stumbled into SaaS and were good at it. In a parallel universe (where we stumbled into physical goods and were good at that), the portfolio would look quite different.
      2. 100%. Software moves fast...but it's inherently 'sticky'. We like buying software that is critical to somebody's job...not 'optional' stuff where things are trendy or unnecessary.
      3. Originally we used funds from myself and a few like-minded partners. Now we have 60+ LPs who have invested in our most recent fund.
      1. 1

        Thanks so much Kevin for the reply! I'll need to check your portfolio out to get some ideas on sticky SaaS products. I'm currently building Playgroup, which is a community software. It's essential to anyone who wants to build a community online, but there is a lot of competition. The stickiness of it, is once someone starts a community they'll usually stick with it for the rest of the communities life.

        1. 2

          You're on the money there. Stickiness doesn't mean there aren't other options. It just means that a customer is happy and there are some switching costs. Don't be afraid to compete in a market with competitors...that's validation that the software is needed by people.

          1. 1

            Thanks for the clarification :) Yes agreed! Super excited to get this to $20k MRR!

  22. 1

    Do you typically keep Founders on to help with growth post-acquisition?

    1. 2

      It depends on the situation, meaning the needs of the business and the founder(s). We like to have the Founder(s) help with transitioning the business for several months to make sure nothing gets dropped. A few founders have stuck around longer than that, even taking on roles at SureSwift that didn't involve their old companies. A couple are even current investors. Every situation is different because all people are different. But we always like to have some measure of transition help from founders immediately after the sale.

      1. 2

        One addition to Kevin's comment I'd have is that it's important for IndieHackers to know that we can and do buy side projects where the founders know they need a fast transition and full team ready from the acquirer quickly.

        To give a specific example, we bought Wingman (https://www.indiehackers.com/product/wingman-tracker) from @benlatz and his co-founder and felt great about our ability to let them quickly move their attention off the business while keeping customers very happy.

        But if a founder is more available/interested for a longer period of time, that's cool, too.

    2. 1

      This comment was deleted a month ago.

  23. 1

    Congrats, Kevin!

    What’s the most used tactic on your side for growing these SaaS products?

    1. 1

      Hey @BraydenTW

      Growth is complicated, and while we have tactics like SEO, ads, and content marketing that we scale across our portfolio, we also have a whole team dedicated to driving growth and strategy for each product we own. Having those people who really understand the customers, their problems, and their needs = key. Then you can develop features and strategies to target them. So...sorry I can't give you a single most important tactic...but there isn't 'just one'. It isn't a tactic per say...but my real answer is Focus and Discipline. We have great teams working on every product. They know what strategies and tactics we use...and they are focused on executing. And we are disciplined to make sure we do the right things for every business...and every customer...every day.

      1. 1

        Great stuff, Kevin! Best of wishes to your future!

Trending on Indie Hackers
I make $100K+ ARR from my micro startups. AMA. 76 comments Looking for a super basic analytics app 20 comments How BaseTemplates grew from $500/MRR to $10k/MRR 12 comments Roast my startup 3 comments Roast my campaign - a free 1:1 with a startup advisor 1 comment Best way to utilise amazing customer testimonials 1 comment