As an investor in self-funded searchers (and also 3X exits of GovTech SaaS businesses), I'm meeting more and more searchers these days that are looking to acquire software businesses.

It makes sense - software businesses are great businesses - they have high gross margins, recurring revenue, and often low customer concentration.

The bad news is the secret is out - from famous investors like Constellation Software to Vista Equity Partners and hundreds of private equity shops - there are billions of investor capital going into software companies and they are going down market and bidding up deals.

Which begs the question - "Can Searchers Still Buy Software Businesses"?

Here are 3 areas where I think Searchers still have a shot at buying software businesses:

1 - Small TAM - Most large investors care a lot about the total addressable market. You can have a great financial software business but if TAM is perceived as too small (anything <$1B is often seen as too small), investors will walk away. Searchers can focus on the uber-niche, small TAM markets.

2 - Software: Service Mix - The standard rule of software companies is you don't want more than 20% of your revenue from professional services. Businesses that don't fit those ratios (maybe they are 50%+ services) can be great businesses but don't fit investor criteria. Searchers can focus there and can either just enjoy the additional revenue or work on changing the mix of revenue over time.

3 - On-premise software - Private equity investors are generally looking for cloud-based software. If the business is large enough, they are willing to buy on-premise profitable software companies and migrate them to the cloud. However, PE investors often are unwilling to make an on-premise to cloud migration at the sub-scale level. Searchers should look for sub-scale software businesses that are already partly through the journey and clear path to cloud.

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

As always, let me know if I can help - DM or - Sign-up for my monthly musings at