Dan Martell - The Limitless SaaS Space with Einar @ TinySeed.com - Escape Velocity Show #11

00:00:00.000 The people are asking us, like, you know,

00:00:02.580 how many B2B SaaS businesses can there be in the world?

00:00:05.120 My answer is always like, you know,

00:00:06.720 100 times as many as there is now.

00:00:08.680 Why is that?

00:00:09.680 Where do you see the opportunity?

00:00:11.000 Well, I think just talk to someone who has a normal job

00:00:13.560 and ask them, like, hey, how's your day-to-day, you know,

00:00:16.800 interfacing with computers?

00:00:18.000 Yeah, your workflow, yeah.

00:00:18.600 Yeah.

00:00:19.120 And then they'll just start telling you

00:00:21.380 how terrible this giant bit of software they have.

00:00:23.680 It doesn't work.

00:00:24.360 It doesn't do this.

00:00:25.120 It's awful.

00:00:25.760 Or that they manage everything in a spreadsheet.

00:00:27.080 Spreadsheet. 1.00

00:00:27.760 It's all Excel or, like, fuck computers, 1.00

00:00:30.700 like that sort of thing. 0.99

00:00:31.960 Admission sequence start.

00:00:33.940 Three, two, one.

00:00:45.140 Ian R. Volsett.

00:00:46.480 What's up, dude?

00:00:48.660 Appreciate you coming on, man.

00:00:50.000 Sure thing.

00:00:50.940 So those that don't know you, YC alum,

00:00:54.320 sold your company to Google,

00:00:56.500 Did another company, exited that.

00:00:59.580 Discretion Capital.

00:01:01.260 Tiny Seeds.

00:01:01.760 Flower farm owner.

00:01:03.320 I own a tractor.

00:01:04.160 Tractor.

00:01:04.800 Two dogs.

00:01:05.580 Where at again?

00:01:06.600 Santa Cruz Mountain.

00:01:07.080 Santa Cruz Mountain.

00:01:07.920 Sounds super stressful.

00:01:09.080 It sounds hard.

00:01:11.460 Sounds hard.

00:01:13.600 And Startupy Guy.

00:01:16.360 Partners are involved in the Tiny Seed Fund with Rob Walling.

00:01:19.400 Yeah, it's me and Rob.

00:01:20.280 You and Rob.

00:01:20.960 And then MicroConf fan.

00:01:24.600 OG, man, in the space.

00:01:26.820 Yeah, I feel old.

00:01:28.880 What do you see as kind of like the fun stuff in the SaaS

00:01:33.480 space that's keeping you busy?

00:01:35.880 What's interesting to you?

00:01:37.720 To me, the most interesting thing

00:01:39.220 is the number of companies started.

00:01:40.740 Like, it's always like, I was always flabbergasted.

00:01:43.440 Like, it's particularly in the B2B space.

00:01:45.140 It's like, I'm always flabbergasted at how much money

00:01:47.920 you can make in tiny niches and how much bad software

00:01:52.360 there is out there that, you know, people and companies are fixing.

00:01:55.980 I mean, that's essentially a big part of the thesis with Tiny Seed is, like, you know,

00:02:00.000 there should be, like, one of my friends runs a kitchen countertop installer software company. 0.99

00:02:07.420 And the first time I met him, I was actually a little bit of an asshole, as usual. 0.95

00:02:11.880 Kitchen countertop installing, so service business? 0.99

00:02:14.640 No, no, no, no.

00:02:15.620 You don't get it.

00:02:16.200 You have to listen to the whole sentence.

00:02:17.800 Wow.

00:02:18.260 Kitchen countertop installer software.

00:02:22.100 If I didn't hear that last part.

00:02:23.860 Yeah, yeah.

00:02:24.360 It's software for kitchen countertop installers.

00:02:26.940 So my, and it's a great business.

00:02:28.840 Hi, by the way.

00:02:29.540 And the first time I spoke to him, it was actually at MicroConf.

00:02:32.800 I was like, oh, yeah, yeah, I'm sure that's a nice business.

00:02:35.760 Cool.

00:02:36.140 Yeah, yeah.

00:02:36.500 It's fun.

00:02:37.740 Yeah, sounds fun.

00:02:38.760 And then I ran into him again like a year or two later,

00:02:40.800 and I was like, hey, are you still doing that kitchen installer?

00:02:44.100 And he's like, yeah.

00:02:45.480 And then he told me what it's doing, and I was suitably humbled. 0.97

00:02:48.900 those are always good i was like damn like his partner drives a 911 put it that way yeah um

00:02:55.460 so so but but i feel like that's people are like asking us like you know how many b2b sas businesses 0.77

00:03:01.940 can there be in the world my answer is always like you know a hundred times as many as there is now

00:03:06.340 why is that what do you where do you see the opportunity well i think like just talk to

00:03:09.540 someone who has a normal job yeah and like you know ask them like hey how's your day-to-day

00:03:14.020 you know interfacing with computers yeah and like then they'll just start telling you how terrible

00:03:19.640 this giant bit of software they have it doesn't work it doesn't do this it's awful they manage 0.97

00:03:23.840 everything in a spreadsheet spreadsheet it's all excel or like like fuck computers like that sort

00:03:28.880 of thing yeah and so um so yeah i just i just think there's a huge amount there and in a way

00:03:33.800 that like you know the the big things like dropbox hubspot sure those are exciting and they're big

00:03:40.680 But there's just like this.

00:03:42.220 It's not even a long tail.

00:03:43.100 It's like a fat tail of products that can come out there.

00:03:46.140 I think it'll be, I'm sure it's sort of seeing it now.

00:03:49.640 It'll be amazing.

00:03:50.360 And then what about the liquidity on the back end?

00:03:52.220 You're seeing this with your fund and you did some due diligence for a lot of PE firms.

00:03:56.460 Yeah, the M&A work for discretion.

00:03:59.020 Basically, so what seems to have been happening the last, I'm going to say like five years,

00:04:03.620 is that there's an awful lot of institutional money moving down market.

00:04:08.120 So I was at a private equity sort of lead gen conference actually here in New York City a year and a half ago.

00:04:15.900 And someone did a slide and it was like, oh, the amount of dry powder, as in like committed capital to private equity, but not actually deployed, doubled.

00:04:26.320 Like it doubled.

00:04:27.240 What, in a 12-month period?

00:04:28.400 No, the last five years.

00:04:29.580 Five years.

00:04:30.740 2x.

00:04:31.360 2x as many SaaS companies.

00:04:33.360 No, but what I mean is these guys are not historically buying SaaS companies.

00:04:38.640 Okay, got it.

00:04:39.160 And typically, there'd be some, and they'd come to me like,

00:04:41.580 hey, let me know when there's anything above 10 million revenue.

00:04:44.880 And now, the same guys are like, you know, we have this project,

00:04:47.780 maybe we'd look at a $2 million business.

00:04:49.580 And so there's just an awful lot of money, institutional money,

00:04:53.540 realizing that particularly a B2B SaaS model with recurring revenue

00:04:57.780 is an amazing business model.

00:05:00.100 I have private equity friends,

00:05:02.080 and like i tell them like oh yeah like uh you know i'm selling this two million dollar b2b

00:05:07.040 sass business and um yeah like the gross margins 90 and the net margin the ebitda is 30 or 40 and

00:05:14.380 and they just they just can't believe it you know they're they're they're buying and selling you

00:05:18.140 know industrial manufacturing or pipe bending businesses or whatever and they just they don't

00:05:22.180 actually don't believe me like i've been called the liars there's no businesses like that i'm like

00:05:25.520 no look and it's all recurring by the way as well um and so i think the smart money in the on the

00:05:31.340 institutional side is starting to realize like what you know you and me and this community has

00:05:35.700 realized for a long time that this is an amazing business model and so that's why you know like

00:05:41.100 five ten years ago if you had a two million dollar b2b sas business good luck trying to find a buyer

00:05:45.880 yeah it's hard to sell and like you have maybe one or two buyers you pick up three maybe four

00:05:51.660 times like seller discretionary yeah yeah and now people are talking revenue multiples yeah like

00:05:56.180 it's just across the board and i think in part that's a smart money like on the lp side and

00:06:00.840 institutional investors.

00:06:02.160 And in part, that's because of just leverage.

00:06:05.500 You see it now.

00:06:06.420 I was on the panel with Timia Capital,

00:06:08.700 and there's SAS Capital, Lida Capital, all these people.

00:06:11.660 Well, it's the same investors behind those guys.

00:06:14.280 So they're just getting part of the whole stack.

00:06:15.960 Right.

00:06:16.380 The same investor bonds.

00:06:17.460 It's the same risk profile.

00:06:18.600 If anything, it's a little less risky

00:06:20.040 to provide that kind of leverage to buyout firms,

00:06:22.720 buying the fully controlling the firms.

00:06:25.980 So that's what's happening.

00:06:26.980 You think it's less risk to buy the asset than to finance?

00:06:30.300 I think so, because then if you're providing leverage

00:06:34.140 to a buyout fund, then you're the first line, right?

00:06:37.320 If something goes wrong, you liquidate,

00:06:39.060 and the person with the leverage, they get paid first.

00:06:42.180 Like, the equity guys get wiped out,

00:06:43.740 or the debt guys don't.

00:06:44.760 Yeah, and what's the thesis for Tiny Seed?

00:06:49.300 I mean, the name in some ways gives it away,

00:06:51.620 but how do you guys think of that?

00:06:55.020 Well, I mean, I have investors who bought hate,

00:06:57.340 and some that love this explanation.

00:06:59.860 But the way that I think about it is,

00:07:01.960 it's like Y Combinator for non-unicorns.

00:07:04.720 So when I did YC, like in 09, and by then it'd become a thing.

00:07:09.700 But like 05 or 06, like when Y Combinator was getting started,

00:07:13.460 when people like First Round was getting started,

00:07:16.820 there really wasn't a hole in the market.

00:07:18.520 Like you couldn't, if you wanted to raise.

00:07:20.020 That Super Angel-ish.

00:07:21.580 Yeah, there was people coming along.

00:07:23.100 And you had to basically have a Harvard MBA

00:07:25.960 and a big business plan and do all this stuff.

00:07:28.300 And what YC did was they came along and they said,

00:07:30.600 no, you don't need any of that.

00:07:31.900 Please, no MBAs.

00:07:33.580 Just like, we'll give a little bit of money to two, three dudes 1.00

00:07:36.760 and then get them to where they can raise money.

00:07:39.140 And that really, I mean, look at them now.

00:07:40.860 They're, like I said, 300 companies a year or something crazy.

00:07:43.580 It's just a machine.

00:07:44.480 Exactly.

00:07:45.020 And so we think that Tiny Seed will fill that same market.

00:07:47.980 But for companies that are probably not going to IPO.

00:07:53.040 Well, they're not going to IPO.

00:07:54.220 So like I said, the kitchen countertop installer software,

00:07:57.020 Yeah.

00:07:57.520 It's not going to IPO.

00:07:58.600 Why would it?

00:07:59.100 It doesn't make any sense.

00:07:59.940 Yeah, it's just a great cash flow and asset.

00:08:00.940 But it can still be an amazing business

00:08:02.860 because of the nature of the underlying business model.

00:08:05.360 And we think like, and there are ways for these companies now

00:08:08.920 to get funded.

00:08:10.340 But it's a little bit like what YC was like.

00:08:12.920 It's like there's some angels, some good, some bad.

00:08:17.960 And there are some people who are able to get a hold of capital

00:08:21.320 because they pretend like they're going to IPO,

00:08:23.300 but they know in their heart of hearts they're not.

00:08:25.520 And so that's essentially our thesis.

00:08:27.400 Can we provide a platform where, if you're

00:08:30.120 building this kind of a B2B SaaS business,

00:08:32.580 but you don't want to sell your soul, work 100 hours,

00:08:35.700 and try to shoot for the moon?

00:08:37.020 You'd be perfectly happy to have a $20 million ARR business

00:08:40.400 that throws off 30% to 50% free cash flow.

00:08:44.460 What's the structure?

00:08:46.900 Structure is equity, basically.

00:08:49.440 We looked at it.

00:08:50.360 There's some other people in the space.

00:08:52.020 Is there some level of expectation for distributions?

00:08:57.260 Yeah, so we basically say, the way we've done it is,

00:09:00.780 and we're sort of, there are other people in this space,

00:09:02.900 like probably the most well-known is Indy.

00:09:05.580 Bryce Roberts is sort of a pioneer in the space.

00:09:08.980 We think of them as a little bit later stage than us, 0.99

00:09:11.260 although Bryce will kick my ass for saying that. 0.97

00:09:15.100 But yeah, essentially what we did 0.99

00:09:16.780 was we adopted very similar terms to what

00:09:19.260 Rand Fishkin did with SparkToro.

00:09:20.800 we essentially say like, OK, we'll take an equity piece

00:09:25.280 and we'll cap your salary at some reasonable number,

00:09:28.240 like an engineer's in the largest, closest large city.

00:09:32.860 And we say above that, for you and the key execs,

00:09:35.560 you have to kick out dividends.

00:09:37.880 And we participate in those dividends.

00:09:40.960 Yeah, I mean, that's essentially.

00:09:42.280 It's a neat model, man.

00:09:43.220 I'm just fascinated with the different ways.

00:09:44.680 It took a lot of time to think about, actually.

00:09:46.780 It's hard to do.

00:09:47.280 Yeah, but it's just cool because there's

00:09:48.280 different options now to founders,

00:09:49.620 like revenue-based financing, the lighter capitals

00:09:52.320 of the world, the tiny seed.

00:09:55.200 The VC seems to have gotten a little bit more value

00:09:57.780 add than just coming in.

00:09:59.620 And there's the spray and pray models of the 500 startups.

00:10:03.480 I mean, it's just neat to see this over the last 10 years,

00:10:06.620 really, the amount of innovation on the financial instrumentation.

00:10:09.660 Because in other industries, this

00:10:11.400 is just how the private equity guys have been figuring out

00:10:14.220 how to slice and dice.

00:10:14.900 They've been doing random stuff for forever.

00:10:16.380 I mean, essentially what we're trying to do is to say, OK,

00:10:18.780 Venture is great.

00:10:19.740 If you're trying a big ability.

00:10:20.700 Yeah, there's just optionality now for the founders.

00:10:22.340 If you're a Tesla or a SpaceX or you're

00:10:24.520 trying to shoot for the moon, great.

00:10:26.340 There's plenty of that capital around.

00:10:28.260 But if what you're wanting to do is, like I said,

00:10:30.840 build a $20 million SaaS business,

00:10:32.580 then we think our model is as good.

00:10:34.500 Yeah, most people watching, $2 million,

00:10:36.360 trying to get to $10 million, bootstrapped,

00:10:38.380 non-coastal cities, Utah for some reason.

00:10:41.220 I don't know what's in the water in Utah.

00:10:42.560 Yeah, something.

00:10:43.280 Yeah, there's something.

00:10:44.040 A lot of really great founders there.

00:10:46.540 And I just love the fact that now,

00:10:48.440 if they're like, hey, we've got this engine.

00:10:50.680 We want to invest in it.

00:10:51.740 We can do some debt financing.

00:10:53.880 And it's fair.

00:10:55.100 It's not ridiculous.

00:10:57.760 Back in the day, there was a handful of players

00:10:59.480 that sometimes their terms were ridiculous with warrant

00:11:02.380 coverages.

00:11:02.880 Warrant coverage and personal, like you'd lose your house

00:11:06.620 if you crashed your business, which is like, come on.

00:11:08.720 What are we doing here?

00:11:09.620 Yeah, there's a risk assumed there.

00:11:12.780 What kind of companies, I mean, you already

00:11:14.440 mentioned kind of these non-sexy, won't be covered

00:11:16.760 on TechCrunch kind of fun.

00:11:18.860 But where do you think the opportunity

00:11:20.540 lies in the different stack of a corporate workflow?

00:11:26.960 I think it's all over.

00:11:28.340 I think I didn't even pretend like we had applications.

00:11:32.720 We stopped taking them for the first cohort

00:11:34.460 now in the middle of February.

00:11:36.080 And I think we got nearly 900 applications.

00:11:38.000 That's amazing.

00:11:38.820 And it was just fascinating just looking

00:11:40.760 through the sort of applications and be like, oh, really?

00:11:43.620 You're doing that much money, and that's

00:11:45.120 in that peculiar niche.

00:11:47.520 And I wouldn't pretend to say, oh, it should be finance,

00:11:52.920 or it should be kitchen countertop installers or whatever.

00:11:55.560 But I think it's a wide set.

00:11:57.280 But the way that I think about portfolio construction

00:11:59.960 and how we want to position ourselves,

00:12:02.240 I think we want a mix of companies that are like my friend

00:12:06.540 Nathan Barry's, like ConvertKit, which is sort of a tech

00:12:09.360 that can go across industries.

00:12:10.500 I just had him on the show.

00:12:11.580 He's a good looking guy.

00:12:12.740 What can I say?

00:12:13.640 And then brings all the viewers to the air.

00:12:17.000 Yeah, it's not the front page.

00:12:17.780 I did.

00:12:18.280 I embarrassed them.

00:12:18.880 I was like, hey, man, not bad, bro.

00:12:20.560 There you go.

00:12:21.860 There's that.

00:12:22.380 And then, but we also like the sort of more traditional,

00:12:25.800 on the higher end, like this is what private equity tends

00:12:28.200 to buy, the holding companies, which are more like,

00:12:30.260 oh, I'm dominating this particular niche.

00:12:32.280 It becomes like the be all and end all.

00:12:34.400 In part because it's just easier,

00:12:36.920 like customer acquisition is easier, churns lower,

00:12:40.400 and it's harder to dislodge.

00:12:42.040 and you're at a slightly less risk

00:12:45.800 of being disrupted or priced out of the market

00:12:48.400 by a super well-funded, venture-funded competitor.

00:12:51.420 So those are the two things.

00:12:53.720 Do you see anybody doing, because in the traditional PE

00:12:57.420 kind of retail brick and mortar, they do these roll-ups.

00:13:00.040 But have you seen anybody in the SaaS space do that?

00:13:03.400 And what kind of things are they putting together

00:13:05.420 to make it work?

00:13:06.220 Is it shared customer segments and then

00:13:09.580 trying to cross-sell to other solutions?

00:13:12.100 Or what are they buying?

00:13:13.220 So certainly that, I don't think it happens as much

00:13:16.000 as I think it will.

00:13:16.720 I just haven't seen it done.

00:13:17.900 I don't know.

00:13:18.460 I've seen it done a little bit.

00:13:20.060 Typically, the sort of big player in this space

00:13:23.860 is like Constellation Software, like their Harris and whatever.

00:13:27.780 I think I haven't seen too many of them.

00:13:30.980 But interestingly, it's not necessarily super related.

00:13:36.620 Like you do a traditional roll-up,

00:13:38.000 it's like, oh, I'm buying dentist offices in Indiana,

00:13:41.640 and then just more and more and more,

00:13:43.240 and they're exactly the same.

00:13:45.200 Yeah, for like a B2B SaaS thing,

00:13:47.100 I think the interesting thing is that

00:13:48.620 the back end is very similar.

00:13:50.740 Like everybody needs figuring out paid acquisition.

00:13:53.880 Everybody needs to figure out SEO.

00:13:55.500 Everybody needs to figure out, you know, HR, whatever.

00:13:58.720 The actual, and everybody needs, you know,

00:14:00.740 disaster recovery and backup and blah, blah, blah, blah.

00:14:03.000 So the back office can be shared.

00:14:04.400 Right, and so what I have seen are people buying companies,

00:14:07.480 And so if you go below, like, a million ARR,

00:14:11.440 there are still deals to be had, like, you know,

00:14:13.660 in terms of you're not necessarily buying.

00:14:15.280 Who's buying?

00:14:17.020 Individuals are buying.

00:14:19.840 A fair amount of, like, these holding companies

00:14:21.640 are putting together.

00:14:22.420 Really?

00:14:22.920 They're building their own teams to manage the technical side?

00:14:25.620 They hire.

00:14:26.240 A lot of them are, like, just contractors

00:14:28.740 they have all over the place in some cases.

00:14:30.900 In some cases, there's a big one out.

00:14:32.700 For some reason, it all seems to be in San Antonio.

00:14:34.700 Like, there's a bunch of the old rack space guys.

00:14:36.720 Yeah, yeah, yeah.

00:14:37.740 are doing it.

00:14:39.480 There's a bunch of these holding companies

00:14:41.280 that their whole shtick is like, we want to go and buy

00:14:44.380 B2B SaaS businesses.

00:14:45.500 We actually don't care that much about the industry,

00:14:47.380 but we're going to centralize, like support centralize,

00:14:49.620 actually engineering in some cases,

00:14:52.140 and then just sort of plug these things on.

00:14:53.680 And if they can do cross-sell, great,

00:14:55.160 but they don't actually need to, I think.

00:14:56.520 They don't care.

00:14:57.500 No.

00:14:58.080 I don't know, man.

00:14:58.620 I'm just such a product guy that I just

00:15:00.780 can't understand how anything great will continue

00:15:03.460 to happen to the product from a product, you know what I mean?

00:15:06.380 Like, innovation.

00:15:07.080 But I think about private equity right there.

00:15:08.940 You know, like, it's not about this.

00:15:10.320 Like, you're the guy who wants to do the product thing

00:15:12.260 for the next thing, and 10x it in 18 months.

00:15:14.780 These guys are like, if they keep it steady and improve

00:15:16.980 the margins slightly, they are, particularly

00:15:19.040 if they have leverage on it, it's cash flow.

00:15:21.420 Like, who do they care?

00:15:22.220 Like, the main thing for some of these guys

00:15:23.760 is like, is it uncorrelated to the general market?

00:15:26.340 In which case, yay, I can get $500 million

00:15:28.520 to buy a fund to do it, you know?

00:15:31.660 That's neat.

00:15:32.580 And what do you think that a lot of the founders,

00:15:34.820 What's going to draw them to decide to take one?

00:15:38.000 When the money all looks, it's all green,

00:15:40.520 what do you think the value adds are becoming important

00:15:43.580 to the funds to have to demonstrate to a founder

00:15:47.000 that decides to?

00:15:48.720 I mean, I think how we position Tiny Seed

00:15:52.020 is that it's just like it's new.

00:15:54.720 It's early stage.

00:15:55.920 We're taking usually sub 20,000 MRR,

00:15:59.600 and we're specifically going after companies that are saying

00:16:03.780 do not have a story that includes,

00:16:05.580 and then we IPO in two years.

00:16:08.500 I think, at least initially, that our positioning

00:16:11.380 will be unique from that perspective.

00:16:13.500 I don't think anyone else is doing that right now.

00:16:15.180 And the capital typically goes to marketing?

00:16:18.780 Typically, no.

00:16:19.800 Typically, it's actually so early stage.

00:16:22.740 Our sweet spot is like 2,500 to 10,000 MRR.

00:16:26.820 And it's actually like, it's funny.

00:16:28.620 I was sharing the deck with your boy, Nathan.

00:16:31.200 And he was laughing because his name

00:16:33.320 all over the pitch deck

00:16:34.220 because essentially

00:16:35.260 what he did with,

00:16:36.020 I don't know whether

00:16:36.640 he's actually shared

00:16:37.240 that on the interview,

00:16:37.920 but like, you know,

00:16:38.600 he was doing ConvertKit.

00:16:40.200 It was just, oh, you know,

00:16:42.180 this thing he launched

00:16:43.260 and it was, I mean,

00:16:44.060 I was a first,

00:16:44.920 I was a customer

00:16:45.480 like back in the day

00:16:46.420 when he was doing nothing.

00:16:47.260 It was awful.

00:16:47.800 It was an awful product.

00:16:48.640 Yeah.

00:16:48.960 It's terrible, unusable.

00:16:50.460 Well, he said he bounced

00:16:51.140 at like 2K.

00:16:52.180 Yeah, like 2,000, 3,000

00:16:53.340 like for several years,

00:16:54.580 you know?

00:16:55.300 And then actually

00:16:56.720 one of our,

00:16:57.820 he's been super helpful,

00:16:59.740 one of our mentors,

00:17:00.540 Heaton Shaw,

00:17:01.920 was like,

00:17:02.360 told him like,

00:17:02.920 dude, 1.00

00:17:03.020 could either shoot this in the head or make it the thing. 0.99

00:17:05.660 And he took some capital. 0.93

00:17:07.160 I think he had some money from his info product stuff

00:17:09.200 and said, all right, I'm going to make it the thing.

00:17:11.060 And he went from like 3,000 MRR to 64,000 MRR in a year.

00:17:15.860 And now he's doing, I don't know, like a gazillion.

00:17:19.280 You know, he's got so much money.

00:17:20.480 He's like, you know.

00:17:21.380 Yeah.

00:17:22.520 Building tiny houses.

00:17:23.660 Yeah, exactly.

00:17:24.740 He's still got his Airbnb, apparently.

00:17:26.460 It's good for him.

00:17:27.980 He's diversifying into real estate, building tiny homes.

00:17:31.580 Exactly.

00:17:32.480 And so that's sort of the thing.

00:17:33.920 And what ended up happening, I pitched this to Rob,

00:17:37.180 and Rob sort of was like, dude, I've had this thing in my notebook

00:17:40.560 since, like, 2011.

00:17:42.100 Like, we should do, like, a YC for this.

00:17:44.480 And, yeah, I think, you know, like, we kept seeing this pattern

00:17:48.280 over and over again.

00:17:49.240 Like, people in the community, like, they built something,

00:17:51.500 they launched something because they saw a need.

00:17:53.800 Either it was, you know, a custom thing that they'd already sold

00:17:57.020 to a customer.

00:17:57.700 They're like, oh, there's got to be lots of people like you.

00:17:59.720 or it's like they're scratching their own itch

00:18:01.700 and they build it and launch it

00:18:03.200 and it gets to a certain stage.

00:18:04.400 But, you know, in most places,

00:18:05.840 if you're making $3,000 M&R,

00:18:07.900 it's not going to pay the rent.

00:18:10.040 No, no.

00:18:10.620 So then you have to be like,

00:18:12.160 okay, well, I'm going to go back

00:18:13.500 and I'm going to do, you know,

00:18:14.620 like a three-month consulting gig

00:18:16.260 and then you come back three months later

00:18:17.400 and your business isn't shittier than it was 0.52

00:18:19.140 and never really goes anywhere.

00:18:20.740 But if they take just a little bit of money,

00:18:22.420 like either usually like friends and family

00:18:24.700 or just savings,

00:18:26.320 if they can make it the main thing

00:18:28.240 for like an extended period of time, then they can take off.

00:18:32.000 So our goal essentially is like we do a cohort.

00:18:35.100 It's like a year long, fully remote.

00:18:37.020 And basically, we're simulating the fact that one or two founders get to

00:18:40.800 focus on it and make enough money to sort of do it for a year.

00:18:43.960 And essentially, you provide the infrastructure from an acceleration point of view

00:18:47.580 to give them some thoughts on positioning.

00:18:50.420 Yeah. 1.00

00:18:50.740 So we have like we have a ludicrous amount of stupidly talented mentors. 1.00

00:18:55.260 Totally. 0.97

00:18:55.480 um you know who are excited about helping and and and that's a big part of it and we'll do

00:19:00.560 like uh you know two or three in-person retreats to get people together we'll do

00:19:05.080 like bi-weekly or weekly sort of mastermind type calls um at least at least that's the plan i guess

00:19:10.520 yeah i guess we'll see still early days it's early days and do you think any of the guys like the um

00:19:15.440 you know the vistas i mean they're probably buying such a later stage company they are typically

00:19:20.080 that you know the the ceos it's really just you know they're trying to get the best price and

00:19:25.120 they don't care so much about how the asset or the company is

00:19:27.640 treated after acquisition.

00:19:29.740 But I mean, how are they competing for deals?

00:19:34.840 Or is it just purely who's going to pay the most?

00:19:38.560 On the buy side, you mean, for later stage?

00:19:41.220 Because I mean, there's deal flow.

00:19:42.220 And then there's like, if you get founder

00:19:43.880 and you've got optionality, I think more and more.

00:19:47.180 I don't know, personally.

00:19:49.300 My last exit, I chose the acquirer

00:19:52.700 that I felt was going to do right, best for the community 0.99

00:19:57.100 that we built and the customers that we built and not fuck it 0.98

00:19:59.460 up. 0.57

00:19:59.960 Well, I think it depends.

00:20:04.260 To a degree, it depends on the founder personality.

00:20:07.420 Some founders really care about what happens

00:20:09.980 with the community thing and with their customers and employees.

00:20:14.240 I think pretty much universally people care about it.

00:20:17.240 I forget the name of the company,

00:20:18.320 but I think he's an old trilogy guy.

00:20:20.020 And he buys companies and just slices out

00:20:21.940 the engineering.

00:20:23.320 Did you hear about this?

00:20:24.100 Yeah, that's the guy out in Texas.

00:20:25.540 Yeah, another Texas guy.

00:20:26.760 Another Texas guy.

00:20:27.640 Yeah.

00:20:28.100 And it was like, you know, they essentially,

00:20:30.040 I think he bought a company in Portland.

00:20:32.100 They had about 300 engineers.

00:20:33.700 They fire everybody.

00:20:35.380 I mean, that's his model.

00:20:36.840 He essentially optimized for profitability.

00:20:39.840 And I'm just like, OK, that's a way to make money.

00:20:41.700 It's just who's selling their businesses to these guys.

00:20:45.140 So I think the people, without sort of bad-marking anyone,

00:20:49.120 I think the people who, there's nobody listening.

00:20:52.360 Yeah, there's nobody listening.

00:20:53.560 Just between you and I.

00:20:54.520 I'm that guy.

00:20:56.620 Ignore the microphones.

00:20:58.240 It's just, I really like to have this big black thing 1.00

00:21:00.580 right in front of my face.

00:21:02.500 Oh, I think I'm going to connect something.

00:21:04.100 Anyway, I think those guys are buying on the downside.

00:21:07.680 So you have to understand, like, yeah,

00:21:09.700 like you can get 3, 4, 5x quite easily revenue-wise

00:21:13.420 if you're growing, and it's on the up, and there's a story.

00:21:16.440 The second you have a year where it's like a downward slope,

00:21:20.580 the number of buyers goes away.

00:21:22.080 I think, in part, that's a leverage thing.

00:21:23.880 The lenders would turn around and say,

00:21:25.500 I'm not going to give you as much leverage

00:21:26.940 because you didn't do that.

00:21:28.260 So if you're down 15%, 10%, 15%,

00:21:31.980 even from a pretty healthy growth rate the previous years,

00:21:35.700 the number of buyers fall away pretty quickly.

00:21:38.280 And I think those guys are like, I

00:21:40.140 wouldn't exactly call it distressed assets,

00:21:42.100 but it's certainly like, you know, they don't.

00:21:45.720 If you go to someone like that, they

00:21:47.600 don't pay the highest multiples.

00:21:50.880 Their whole shtick is like, OK, do we

00:21:52.420 understand the unit economics?

00:21:54.120 You might be losing money.

00:21:55.900 Today, you're losing money.

00:21:57.000 Yeah, so the Portland company might be losing money

00:21:58.740 with 300 engineers in Portland.

00:22:00.300 You know, like the kombucha and things

00:22:01.860 is expensive in Portland, I hear.

00:22:04.920 And so you couldn't sell it on the EBITDA multiple.

00:22:07.300 So then it's like, yeah, you got it.

00:22:09.060 And they turn around, and they can make a profit from it.

00:22:12.300 There's only so many people who can do that.

00:22:13.860 Yeah, they want to buy those kind of assets.

00:22:15.780 Yeah, so I mean, my piece of advice

00:22:18.200 is like, have a profitable company that's

00:22:20.080 growing when you want to sell it.

00:22:21.300 Yeah, yeah, crazy idea, yeah.

00:22:22.740 Things are easier in that case, you know?

00:22:24.540 Like, it's a lot harder work to sell a company that's on the down

00:22:27.060 or is there.

00:22:27.580 Yeah, trying to explain that story.

00:22:29.620 It's like, oh, we'll turn around like six months from now,

00:22:31.560 but you should buy it before we actually check that out.

00:22:33.600 Yeah, yeah, yeah, before we have that thing.

00:22:36.680 What do you see, I mean, you've obviously

00:22:38.440 been around a lot of strong founders

00:22:40.840 that are scaling, growing companies, you know,

00:22:42.660 the Nathans, ConvertKit, and many others.

00:22:46.100 What are you seeing them do right to make sure

00:22:48.600 that they continue to accelerate that growth?

00:22:51.340 I have no idea.

00:22:55.240 I have no idea.

00:22:56.660 I think a high growth business like ConvertKit, no idea.

00:23:02.660 I think usually what happens is, or anecdotally anyway,

00:23:07.540 when I talk to people, it's like people

00:23:08.880 try a bunch of different things.

00:23:10.140 Like they try paid advertising, they try SEO,

00:23:12.500 they try partnerships, they try influencer marketing,

00:23:15.140 they try referral marketing, you know, whatever they try.

00:23:17.440 And then they find one channel that works just a shit ton

00:23:20.260 better than everything else, and then they just

00:23:22.260 throw all their money at that.

00:23:23.740 And big companies can be doing that.

00:23:26.220 Like, you know, I used to do due diligence work

00:23:28.900 for private equity, and you'd see like a $50 to $100 million

00:23:32.940 e-commerce company, and they had one thing that worked.

00:23:35.420 Like, it could be like Google Ads, like all we care about.

00:23:38.180 But they made it work really well.

00:23:39.280 Yeah, the CEO could literally be like,

00:23:41.100 all I care about is CPC.

00:23:42.580 What is the CPC?

00:23:43.420 And I was like, we fired that guy

00:23:46.340 because the CPC went to 2.9 from 2.1.

00:23:50.080 And I'd ask him questions like, yeah,

00:23:51.960 but what is the actual cost of acquisition here?

00:23:55.080 Did it change?

00:23:55.740 Did it improve?

00:23:56.520 Maybe you're spending a little bit more money

00:23:57.860 to convert a lot better.

00:23:59.160 And he's just like, I don't know, but CPC needs

00:24:01.020 to be under 2.5.

00:24:03.240 And that's what he'd been working.

00:24:04.680 That's how he got to the size he did.

00:24:05.900 He was just throwing money at this one channel.

00:24:09.020 Like, I don't think that's necessarily the best in the world.

00:24:11.600 But it is a good, I mean, the strategy

00:24:13.460 of not diluting your focus and doing 15 things.

00:24:16.260 And if you find one, actually double.

00:24:18.500 Find one that works.

00:24:19.340 You don't know how long it's going to work.

00:24:20.780 It could be like a blip.

00:24:21.960 You might as well, you know, put $100 in to get $500 back.

00:24:25.260 It's a good business, I hear.

00:24:27.100 Yeah.

00:24:28.400 And then what about the founders, like the tiny seed founders?

00:24:30.980 Like, you know, what if they, I guess you have equity.

00:24:34.700 At some point, there's an understanding

00:24:36.240 that they'll be doing distributions.

00:24:37.760 But I guess you want them to not do side projects,

00:24:42.480 not do anything else.

00:24:43.820 Yeah.

00:24:44.240 So there's an understanding that this is now your primary thing.

00:24:46.380 This is a full-time thing.

00:24:47.440 The whole pitch is like, we give you the money

00:24:50.120 so that you can do it the full time.

00:24:51.860 There are some people who come to us and say like, yeah,

00:24:54.700 I have this thing, and it's nearly full.

00:24:56.440 Can I take some money?

00:24:57.280 And then I still want to keep this profitable side.

00:24:59.760 It's only 20 hours a week.

00:25:00.880 And I'm like, no, is the answer.

00:25:03.400 So we've turned that down so far, for sure.

00:25:06.020 How many deals do you guys do?

00:25:07.520 We're going to do 10 to 12 in the next couple of weeks.

00:25:12.120 And then we'll do another cohort this time next year,

00:25:14.380 probably similar size, maybe a little bigger.

00:25:17.400 And then, yeah, I'll be on the streets fundraising for fun,

00:25:19.900 too.

00:25:20.400 And do you think there's a lot of brokers out there that

00:25:25.240 are part, like, do you think there's traditional guys

00:25:29.080 that used to do, like, are they getting into the SaaS space?

00:25:32.220 Like, is that growing in regards to the people?

00:25:33.960 On the M&A side, on the sell side, you mean?

00:25:35.420 Yeah, on the sell side.

00:25:37.040 Yeah, I think there's more people moving in.

00:25:38.880 I mean, part of the reason why discretion capital works

00:25:43.000 is because we take the kind of deals that, you know,

00:25:47.000 like a boutique, like your Lazard or whatever,

00:25:49.640 wouldn't actually want to touch

00:25:51.540 because they don't want to do anything less

00:25:52.620 than $100 million enterprise value.

00:25:54.120 It doesn't make any sense for them.

00:25:55.600 Versus we can do, like, sub-20 million, no problem.

00:25:58.200 Like, partly because we wrote the tech

00:25:59.540 to, like, not have to have, you know,

00:26:01.560 five MBA students full-time, you know,

00:26:03.780 working and doing their thing.

00:26:05.980 But I think, yeah, I mean, there hasn't been too much qualified competition in the space so far.

00:26:11.660 But, I mean, who knows?

00:26:12.960 So you guys with Tiny Seed fund and then discretion capital will also represent them on a sell-side transaction?

00:26:21.320 We haven't really decided.

00:26:22.780 I think we probably will.

00:26:23.940 I think the sort of structure will do.

00:26:25.680 At least we'll give them.

00:26:26.920 So one of my pet peeves in the sort of spaces, and this happens in Silicon Valley a bit,

00:26:30.600 is like you have a company that maybe is venture-funded,

00:26:34.500 and it's a good company,

00:26:36.120 but it's clearly not going to be a big unicorn type thing.

00:26:39.420 And so the VC just wants to get rid of it

00:26:40.960 because they don't want to go to the board meetings.

00:26:42.440 It's just a distraction.

00:26:43.220 Yeah, have that on there.

00:26:44.280 And so they will say, like, I just go to sell to that guy

00:26:46.640 or sell it for a board.

00:26:47.660 And they end up selling it for a patent.

00:26:48.920 It's like 1x revenue.

00:26:50.020 Yeah.

00:26:50.800 Versus, you know, like if they came to us,

00:26:53.180 we could turn around,

00:26:53.860 we could probably get them 3 or 4x revenue,

00:26:56.240 which, you know, that's the difference between like,

00:26:58.340 oh, I can afford to buy a used car,

00:27:00.400 or I can afford to buy a house in the Bay Area.

00:27:03.140 So that's a big difference, I think.

00:27:05.800 And how do you think founders should evaluate?

00:27:09.100 I realize I'm asking a butcher to answer

00:27:11.740 what I should have for dinner.

00:27:13.780 I think meat.

00:27:15.280 But how should a founder that has 80K MRR

00:27:22.000 think about financing their growth

00:27:24.400 with these different options, like the equity versus the debt?

00:27:30.080 I don't know.

00:27:30.880 80K MRR would be bigger than we're currently

00:27:33.700 doing with TinySeed, so you should take my advice 100%.

00:27:37.560 It is not.

00:27:38.720 I think it depends.

00:27:39.980 I think I can see, I can imagine scenarios where like,

00:27:44.580 say the TinySeed companies, they get the end of the year.

00:27:47.840 But evaluate both, like the other company mentioned earlier.

00:27:52.300 You've got those guys that are doing later stage,

00:27:55.080 taking equity, but then distribution

00:27:57.260 or buyout their position if you don't want to sell.

00:27:59.540 And then you've got the lighter capitals that

00:28:01.480 will finance on MRR.

00:28:03.900 How should they think about those two options?

00:28:06.860 I think it's a personality thing.

00:28:08.660 We run into founders who are like,

00:28:11.280 and I don't know why they apply to us or contact us

00:28:13.760 just to tell us that they don't want our money,

00:28:15.660 and they would never sell anything.

00:28:16.820 Yeah, yeah.

00:28:18.300 They want to tell you no.

00:28:19.780 We're going to apply.

00:28:20.780 Actually, I don't want your money.

00:28:22.040 I'm like, well, then why'd you apply?

00:28:23.580 I didn't force you to put your name in here.

00:28:25.300 Like, what happened?

00:28:27.240 And I think some of those people are like,

00:28:28.920 I don't want to give it like an inch.

00:28:30.300 I don't want to give anything whatsoever back to my company.

00:28:32.740 I just want to own it 100%, in which case, yeah, do that.

00:28:36.240 And if you're of a certain size, I think 80K,

00:28:39.260 you're probably in an odd spot.

00:28:40.660 But say you get to 100, then yeah,

00:28:42.980 like lighter capital, Timur capital, it's a good thing.

00:28:47.040 I mean, what I'd be wary with some of them,

00:28:50.320 and I'm not going to name any names in there,

00:28:53.040 is that some of them actually you should make sure

00:28:54.640 that they don't actually take personal guarantees.

00:28:56.640 Like, some of them do.

00:28:57.640 Yeah.

00:28:58.140 Like, somewhere in their terms, it's like, you know,

00:29:00.520 yeah, if you don't do this.

00:29:01.520 Fine print.

00:29:02.060 Yeah.

00:29:02.560 And there are some, like, this is partly the reason

00:29:05.820 we ended up with equity is, like, it's pretty straightforward.

00:29:08.000 Like, we own 8% or 12% of your company and done.

00:29:12.080 You know, like, versus some of the more sort

00:29:14.340 of finickety documents or, like, you sort of have to work out,

00:29:18.400 like, oh, well, what happens if, in this case,

00:29:20.500 and I haven't done that, and all of a sudden,

00:29:21.920 it's like, well, how come you own 28% of my company?

00:29:24.120 Why is this backed by mortgage-backed securities?

00:29:25.780 Yeah, exactly.

00:29:27.080 So I think that's the thing to look at with the actual thing

00:29:30.180 and actually understand what things are you actually

00:29:32.880 signing up for.

00:29:33.520 Because in the debt products, it's not so nice

00:29:35.980 and not so easy, necessarily.

00:29:37.780 And I think a lot of them are like,

00:29:40.140 and there are scenarios where like.

00:29:41.900 And are these like some of these debt products,

00:29:43.840 like back in the day, I almost felt

00:29:45.340 like some of these companies were almost like lead gen

00:29:47.920 for the distressed asset buyers.

00:29:50.280 You know what I mean?

00:29:51.220 It's almost like they didn't want to get paid.

00:29:53.380 Yeah, I don't think that's the case.

00:29:54.720 No, it's a lot better today.

00:29:56.480 Yeah, I think so.

00:29:57.180 And I think, again, that has to do with the fact

00:29:59.640 that there's just a lot more money in this space.

00:30:01.580 Yeah, more sophistication.

00:30:02.440 Exactly.

00:30:03.240 And I think a lot of them are really good options.

00:30:07.220 I think it's like, play out in your head

00:30:09.700 over your CFO or whatever,

00:30:10.820 because what happens in a bunch of different scenarios.

00:30:13.440 I think a lot of founders,

00:30:15.160 particularly when they've had some success,

00:30:17.140 are pretty convinced that things are just going to go

00:30:18.840 the way they have been.

00:30:20.260 And I would at least play out in Excel.

00:30:24.240 to say, what happens if growth slows a little bit?

00:30:27.160 Or maybe growth tapers off.

00:30:29.540 How does that play out?

00:30:30.840 Because some of these firms are dependent upon the growth

00:30:35.040 of MRR, ARR.

00:30:37.260 And if you're not growing as projected,

00:30:39.480 they actually take a substantially larger chunk,

00:30:42.160 and they start turning the screws.

00:30:44.580 Yeah, and it could get to the point where they need to get,

00:30:47.220 now, because you are not as profitable growing as fast,

00:30:50.340 they need to get paid back quicker, which is a double whammy.

00:30:52.440 It's just going to hurt you more.

00:30:53.420 Initially, you thought, oh, I'll grow this.

00:30:55.400 And then, hey, I can add some fuel to the fire.

00:30:57.400 Now it's like, oh, you know what?

00:30:59.240 We're not growing as fast naturally.

00:31:00.700 And now I have to pay back quicker.

00:31:02.960 There are some of that things to be aware of.

00:31:05.440 Especially if you plan on doing some kind of financing.

00:31:08.200 And now you can't do it.

00:31:10.000 Right, because you have debt things.

00:31:11.460 And it closes some doors.

00:31:13.280 But I think, in terms of answering your question,

00:31:15.760 I think that people, it's a personality thing more than anything else.

00:31:18.680 Some people really want to own 100% of the company.

00:31:21.020 Or as much as they possibly can.

00:31:22.620 and they want nothing, in which case, OK,

00:31:25.140 then put it off the table for you, which is great.

00:31:28.020 OK, do that.

00:31:28.520 And if you want enough capital,

00:31:29.740 you might have to personally guarantee some stuff.

00:31:31.240 Yeah, I mean, that's just how the world works.

00:31:33.080 It turns out nobody gives you cash for free, sadly.

00:31:37.300 What do you think of events like some of these big SaaS

00:31:40.620 events where everybody, you mentioned

00:31:43.920 you weren't going to a lot of events.

00:31:45.260 We're here in New York at LTVConf, a lot of sassy people.

00:31:50.360 Is it frothy in the market right now for SaaS?

00:31:52.900 Do you think the correction is coming soon,

00:31:54.500 and people are going to be a little bit more less

00:31:58.880 optimistic?

00:31:59.580 Because, I mean, the valuation is weird.

00:32:01.260 Even on the owner's side that are selling,

00:32:03.920 I mean, their expectations are pretty high.

00:32:06.540 Like, I'm like, it's, you know, I'm not buying at that price.

00:32:10.680 You know what I mean?

00:32:11.540 No, I mean, it's crazy.

00:32:13.040 You know, I talked to several people

00:32:15.120 on the sort of holding fund side,

00:32:16.760 and they're like, yeah, when we started,

00:32:18.360 I thought we could do like 4 to 6x revenue or 4 to 6x EBITDA.

00:32:23.480 And I'm like, yeah, no, not for like, you know,

00:32:25.900 you can't buy a $2 million SaaS business for 4 to 6x EBITDA.

00:32:31.680 And I, you know, but do I think it's frothy?

00:32:35.660 No, I don't necessarily think so.

00:32:37.360 I think it's more a realization of like, this is given how churn works,

00:32:41.360 given how the recurring revenue, the value of those cash streams,

00:32:44.560 I think that's the value.

00:32:45.600 yeah um but like talking about the events i was you know you know i'm a big fan of microconf

00:32:50.960 obviously i you know i quite like ltv for the first time i've been here yeah it's been great

00:32:54.960 um but like like like i went to saster which is only 25 minutes from my house somebody called it

00:33:00.200 the uh tech refugee for what was it called because i guess the year before last everybody was eating

00:33:04.360 on the ground like oh okay yeah it was just like too many was a fire festival yeah yeah it was like

00:33:10.880 a fire festival whatever i watched i watched the fire festival commentary the documentary and i

00:33:17.760 was like this this guy could be in silicon well yeah how bad does he want i need some water exactly

00:33:24.720 anyway so yeah no i went to saster i think saster is too big for me i was you know i was i it was

00:33:30.500 so big i was wandering around like you know what the hell's going on here and then i you know i

00:33:34.340 didn't realize that there was a downstairs until day two or something and and i went to the

00:33:38.760 downstairs one and actually like this is uh you know we're in a reasonably sized room here but

00:33:42.380 it was you know the small rooms the talks were tactical and helpful and stuff whereas the big

00:33:46.120 rooms it was like it's pretty clear it's like one sponsor was talking to another sponsor about how

00:33:51.360 great they were yeah and i was like why is there 500 seats here to listen to this because i don't

00:33:55.740 need to know that so and so cloud was really facilitated the transition to the cloud to 0.76

00:34:00.820 acme corp like the fuck do i care yeah and and you know i think that was the main complaint 0.96

00:34:05.540 And that and like, and this is sort of a pet peeve. 0.96

00:34:08.600 Well, I'm not going to peeve, I guess.

00:34:10.140 Like, you go to Saster and there was a lot of companies

00:34:12.820 paying for booths and things.

00:34:14.600 But they weren't companies selling to other SaaS companies.

00:34:17.920 So why were they there?

00:34:18.840 Yeah, like, what the hell are you doing?

00:34:20.380 I don't know.

00:34:21.980 I guess they got to spend their marketing budget on something.

00:34:25.220 That was weird to me.

00:34:26.340 That is weird.

00:34:27.720 Yeah, I mean, in some ways, that just

00:34:29.540 shows how the market is kind of, you know,

00:34:35.360 People are excited, and they're just doing stuff

00:34:37.740 to stay busy, but not measuring.

00:34:39.980 Got to spend the money somewhere.

00:34:40.900 Yeah.

00:34:41.440 No, I just find it super fun.

00:34:43.800 I mean, I get to talk to a lot of Bootstrap founders.

00:34:46.820 And the best ones, I feel, are just like heads down

00:34:49.740 executing.

00:34:50.280 And when they come up for air, they're

00:34:51.520 looking for tactical stuff to add to their quiver.

00:34:57.120 Interesting question that I like to ask

00:34:59.300 is, as an investor and somebody that's

00:35:02.680 involved in kind of like the due diligence side.

00:35:05.620 What are the skills that you had to learn

00:35:07.240 to kind of to be good at what you do?

00:35:13.720 I think, I mean, it still remains to be seen

00:35:16.900 if I'm good at what I do.

00:35:18.140 Yeah.

00:35:19.800 Early days.

00:35:20.420 Early days.

00:35:21.400 On the M&A side, I think actually,

00:35:25.600 a guy I have a lot of respect for is Justin Kahn.

00:35:28.340 Yeah, I know Justin well.

00:35:29.440 Yeah, we just had dinner.

00:35:30.680 He's the guy.

00:35:31.640 I remember him from the vice he did when he was walking around with his thing.

00:35:34.340 Yeah, he's doing Atrium.

00:35:35.660 Exactly.

00:35:35.960 Disrupting VC space.

00:35:37.220 Which is like, yeah, lawyer space.

00:35:39.900 Oh, lawyer, yes.

00:35:40.780 Yeah, and it's like, essentially what he does with Atrium as a play is to say,

00:35:44.920 there's a lot of stuff here that's busy work.

00:35:46.940 And then we can sort of have tech in place in order to do that.

00:35:50.760 And it was looking at that is what made me start,

00:35:55.120 once people came out of the woodwork and was like,

00:35:57.080 hey, you know private equity and things.

00:35:58.680 Like, I've got this business.

00:35:59.980 Can you, you know, look around for me?

00:36:01.640 But it was that which sort of influenced sort of my decision

00:36:06.600 to start building like the tech part of that.

00:36:09.420 And I think we have a, and what ended up happening was

00:36:12.660 I built this system that essentially says,

00:36:15.020 okay, you have this company to, you know, does X, Y, Z.

00:36:18.780 Who should buy it?

00:36:19.820 I mean, that's essentially the problem of M&A.

00:36:21.460 Who would pay the most for it?

00:36:22.580 Like if you can, like-

00:36:23.860 The strategic buyer.

00:36:25.200 Not even necessarily that, but just like,

00:36:26.720 if you have a company that you want to sell,

00:36:29.240 if you as an investment banker can guarantee

00:36:30.900 that you can find the person willing to pay the most,

00:36:34.160 then you're a great investment banker.

00:36:35.900 Yeah, that's your job.

00:36:37.000 So how do you do that?

00:36:38.500 And traditionally, you would do that

00:36:40.300 by just hiring a bunch of MBAs as associates,

00:36:43.660 giving them access to exactly the same databases.

00:36:45.760 Everybody else has.

00:36:46.700 They spend three weeks and just go through

00:36:48.380 and just call email people.

00:36:49.800 So I wrote some tech that essentially just,

00:36:52.640 essentially, without going into too much detail,

00:36:55.440 essentially says, I can figure out

00:36:57.620 which private equity, family offices,

00:37:01.400 you know, strategic acquirers, to a degree,

00:37:03.540 have active portfolio companies

00:37:05.640 where this specific company would be a good fit.

00:37:09.020 And this is the person who did the loudest deal.

00:37:12.300 This is his name.

00:37:14.260 Which is...

00:37:14.820 Sounds like it could be valuable.

00:37:16.800 Well, there's a thing.

00:37:17.460 The funny thing is I was like,

00:37:18.380 oh, this should be a thing.

00:37:19.440 I should go.

00:37:19.960 So I called a bunch of boutique investment guys.

00:37:24.160 And they're like, yeah, I don't know that I would pay.

00:37:26.520 You know, maybe I'd pay $200 a month for this.

00:37:28.540 And I was like, this is far too valuable for $200 a month.

00:37:31.440 I was like, eh.

00:37:32.380 And I don't know.

00:37:33.060 I actually don't know how well it works outside of, like, my subfield.

00:37:37.020 Like, tech-enabled services, B2B SaaS.

00:37:38.900 I don't know if it would work for, like, you know, plumber roll-ups in the Midwest or something.

00:37:43.860 Yeah, but for what you do.

00:37:45.140 It works pretty well.

00:37:45.880 It means I don't have to pay three MBAs who have giant student loans, you know. 0.74

00:37:49.100 Yeah, the tech can take care of it.

00:37:50.720 You and I, where can people find you online?

00:37:52.560 Check out tinyc.com or Discretion Capital,

00:37:55.640 or I'm extremely quiet on Twitter at anervalset.

00:37:59.180 Cool.

00:37:59.500 So tweet at you on Twitter.

00:38:00.520 Do it.

00:38:01.280 Awesome.

00:38:01.620 Really appreciate being on the show.

00:38:02.880 Thank you.

00:38:03.140 Thanks so much.

00:38:04.120 Boom.

00:38:04.740 Thanks for watching this episode of Escape Velocity.

00:38:07.940 Be sure to like and subscribe and leave a comment

00:38:10.700 with your biggest insight from our conversation.

00:38:13.380 Be sure to check out the next episode.

Dan Martell - September 26, 2019

The Limitless SaaS Space with Einar @ TinySeed.com - Escape Velocity Show #11

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