The Micro PE Playbook: They Bought 20 SaaS Companies, $60m ARR, 300 people
Aug 29, 2024
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Tim, the founder of SaaS Group, shares his journey of acquiring 20 SaaS companies since 2018, leveraging his winnings from the Eyeo exit. He reveals insightful funding strategies, balancing personal investments, debt, and equity to grow his ventures. The discussion highlights the importance of navigating deal dynamics, managing customer churn, and understanding founder motivations. Tim also emphasizes the role of personal growth in professional success and the unique challenges of acquiring distressed companies, painting a vivid picture of the SaaS acquisition landscape.
SaaS Group's acquisition strategy combines personal investment and structured financing, enabling rapid scalability without jeopardizing profitability.
The firm's long-term commitment to nurturing acquired companies promotes operational stability and improved performance, diverging from typical profit-flipping models.
Deep dives
Funding and Acquisition Strategy
The acquisition strategy of SaaS Group is characterized by a combination of personal investment and structured financial backing. Tim Schumacher initially financed his first two acquisitions entirely with his own capital, leveraging funds from prior successful exits. SaaS Group predominantly operates with pre-arranged financing—operating cash flow, debt lines, and venture capital that ensure readiness for acquisition without jeopardizing deals. This strategic approach allows for rapid scalability while maintaining a focus on profitability and operational efficiency.
Life After Acquisition
SaaS Group maintains a unique post-acquisition philosophy by ensuring that acquired companies are preserved and not flipped for profit. This long-term commitment often means retaining the legacy of the original founders, which encourages smoother transitions and operational stability during management changes. For instance, the company's experience with Zenloop involved restructuring and rejuvenating the firm after it had been mismanaged, demonstrating SaaS Group's commitment to improving operational performance. By focusing on nurturing these businesses and optimizing practices, SaaS Group aims to enhance overall growth and profitability.
Embracing Churn and Operational Improvements
SaaS Group's acceptance of customer churn rates as a natural part of many SaaS businesses reflects a pragmatic approach towards growth potential. Tim emphasized the importance of understanding the underlying reasons for churn and actively working to improve it rather than being deterred by high rates. For instance, after acquiring DashThis, the company significantly reduced customer acquisition costs while enhancing customer retention strategies. This willingness to address and rectify churn while bolstering operational frameworks illustrates SaaS Group's commitment to driving long-term success across its portfolio.
Tim founded SaaS Group in 2018 using his own money from Eyeo exit to acquire Deploybot. SaaS Group is structured as an LLC and funded all deals with equity until 2020 when they began using debt. In 2024, they sold about 5% of the SaaS Group LLC for $25m implying a value of $500m. They’ve purchased 20 companies over the last 5 years. Their companies do $60m in combined revenue today and employ 300 people. They typically pay 2-4x multiples. DashThis, Usersnap, and Rewardful are some of their larger companies. Can they acquire $60m more in ARR over the next 12 months?
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