2 Additional Ways Searchers Can Still Buy Software Businesses

Last week, I wrote a blog post "3 Ways Searchers Can Still Buy Software Businesses." It sparked a great conversation with 24 comments and lots of additional insights.

I've spent the last week talking to 10+ searchers who followed-up on my post where we discussed software and search.

Through these conversations, a few additional ways searchers can still buy software businesses came up:

1 - Micro-SaaS. Micro-SaaS does not follow traditional search fundamentals around revenue and EBIDTA size. Often these micro-SaaS businesses are $500-2M ARR, growing 40%+, with limited EBIDTA. There is a burgeoning ecosystem on Twitter and online discussing micro-SaaS and new funding mechanisms like Earnest Capital. Often these businesses are tied to ecosystems (think Shopify app store) and ETA entrepreneurs who come from more high-tech backgrounds are interested in buying them and focusing on accelerating growth through go-to-market expansion..

2 - Software Carve-outs. As we all know, private equity-backed software platforms and large strategic software companies are active acquirers tucking-in smaller software companies. But not all these acquisitions work out and what can happen 5-10 years later is a small % of those acquired no longer are a strategic fit. Maybe there's been leadership changes, a change in market prioritization, or maybe the acquired never became big enough to be meaningful. One opportunity for searchers is buying out these carve-outs from larger software companies. Like all deals, it's hard to align incentives, timing, and valuation but when done can be great deals.

Are you a searcher looking at software deals? What's your experience - where do you agree/disagree with the above?

As always, let me know if I can help - DM or redacted - as an investor in self-funded search deals I've been having 3-4 calls/week with super interesting people from the community. Sign-up for my monthly musings at bit.ly/etamusings