The below is a full (unedited), machine-generated transcript of a Youtube session / podcasting episode I recorded with Andrew Gazdecki of Microacquire in spring of 2021. You can view the video/listen to the podcast on Youtube, Apple Podcast, Stitcher or wherever you get your podcasts.
Andrew Gazdecki 0:06
I can go this one or I can go with
Erasmus Elsner 0:09
I think your natural ones actually quite quite nice. That’s your natural. Your room right?
Andrew Gazdecki 0:16
It’s my natural habitat. Yeah, no, it’s, it’s, it’s an office but everyone always calls it like a room because I guess maybe the carpet but
Erasmus Elsner 0:29
I get it. Alright. Alright welcome everybody to another episode of Sandhill Road, the show where I talk to mostly VC backed founders but today I have the second bootstrapped founder on the show, Andrew cuz techy and I know Android you have this thing with podcast host where you don’t tell them how to pronounce your second name. Did I did it correctly?
Andrew Gazdecki 0:48
And you you pass? Yes. The most common it’s pronounced gakki. So yes, but the most common one is, guys. Deacy gueuze Dakki set, but yes, gakki all my friends call me guys.
Erasmus Elsner 1:04
Perfect. So let’s talk about your business that you launched to the public last year micro acquire. So micro require. It’s a marketplace for Microsoft’s companies. And it’s really not for the venture scale exit, I would say it’s a marketplace that you monetize, through the demand side quite an interesting model. And you hit some key revenue figures in the last couple of weeks that you shared publicly, but maybe just give us the cliff notes of what Mike requires all about.
Andrew Gazdecki 1:32
Yeah, so micro choir is a marketplace where you can buy and sell small tech companies. So a perfect fit for micro choir is a SaaS company doing a million or 2 million a year, and they’re typically profitable. So maybe they’re generating three, four or $500,000 in profit. Typically no investors typically like small tech businesses and interesting niches. So I kind of have the coolest job in the world. I’m obviously biassed, but I get to see a lot of very niche businesses like CRMs for dentists or Zoom add on for a very specific use case that is surprisingly very profitable. Lots of interesting, like direct consumer businesses. There’s a very profitable coffee for dogs ecommerce store that that listed and sold recently, so So yeah, and I’ve also seen like coffee or protein infused coffee. So I get to see kind of this world of startups that I think a lot of people aren’t necessarily used to which is just really really niched products and interesting markets and seeing entrepreneurs, entrepreneurs make these businesses works microwear helps them exit
Erasmus Elsner 2:44
and what I like about it is I heard one person talk on a Nathan that cars show about how he acquired a really small Microsoft Shopify SAS on on micro acquire, he paid like 20 30,000 for it. And it was for him just a way to sort of get into the water and start surfing, started pedalling. Start, you know, learning everything about marketing, about, you know, building product, iterating on product, and I think it’s a neat way for some bootstrappers to get into this business not having to, you know, be too clever about reinventing the wheel and, and being able to, you know, hit the ground running in that sense, right.
Andrew Gazdecki 3:19
Yeah, I mean, essentially, what you’re buying is product market fit. So you’re buying a product that has existing customers, it has some level of traction. And that’s, you know, the hardest part of building a startup is it’s creating, it’s turning an idea into something that people will actually pay for. So you’re basically you know, time travelling, you’re going from, you know, zero to stage one, maybe not, however you define that but yeah, if it’s got a handful of customers or working product, there’s a lot you can do with that business to potentially grow it add additional functionality you have customers that you can turn to for feedback to help understand where the biggest opportunity in the business is. So yeah, and I’m a big believer that you earn the most by taking action and doing and so I know the business that you’re talking about and the individual that made that acquisition and I think a Smart Company and grow it and probably have a decent profit from doing so. But more importantly along the way, learn a lot learn not just about SAS but about acquisitions and you know, marketing and customers forward and features and functionality. And also also some of the the bad stuff too, like bugs or server downtime, or I haven’t heard any of that happening but it’s inevitable a software company so yeah, I mean, just kind of, you know, if you don’t have an idea you are able to buy some pretty expensive businesses to just learn from on my crowbar.
Erasmus Elsner 4:49
Yeah, absolutely love this. You know, just having had a business before and even if it does failed getting these reps in, you know, and learning about how to acquire customers how to build a product and I think For this, it’s a really wonderful pathway with micro acquired to sort of acquire a side project that has some level of traction and then then build it out. But maybe let’s talk about the founder seat. It’s now your third time in the founder seat, your serial founder, you started two businesses before that business apps, which you grew to, I think more than 10 million in ARR. Then you you will also build a blockchain infrastructure at ALT coin, which was sold to bank to the future, which is acquired a couple of other crypto projects, maybe talk a little bit about your founder, journey and how this has really, you know, sharpened your your eye for this for this specific niche marketplace.
Andrew Gazdecki 5:41
Yeah, definitely. So first business, that was called business as spelled pa Z NSS apps and that I started that in college, I was 21. At the time, we technically bootstrapped it, I guess we raised about $100,000, but grew to 10 million in revenue. And that was a Right Place Right Time business. It was when iPhone first came out, obviously Lucian to an obvious problem at massive market. And so I feel very fortunate to have been involved in that business. And through that, or was involved in that business for eight years. And we sold to private equity three years ago, pretty much to the day on Monday, I got a Facebook, like, here’s what you did three years ago, and I was like, Oh, you sold a company. That was cool. And then after that
Erasmus Elsner 6:30
money, Facebook notification,
Unknown Speaker 6:33
I wish I had that. That kind of Facebook notification. It feels
Andrew Gazdecki 6:37
like a decade ago, and it was a life changing moment. For me. I’ve mentioned this on other podcasts, but I didn’t grow up with a lot of money. And so I started that business with the goal of just being honest to great wealth. And I did not a lot, but you know enough to be comfortable and work on fun stuff. And so that was a life changing moment for me. And it’s so weird when you go through it. And it you know, you have this combination of such like a long eight year journey of working like 100 hours a week. And then it finally happens. Because whenever you do a startup like it almost dies, like 10 times, like every year. So finally, like getting to the end. That was that was a special moment that I will remember forever. And then after that business, I started, like you said a blockchain trading company, what we’re really focused on doing was speeding up transactions on the Ethereum blockchain using a framework called plasma. And the first application we were going to use that for was an actual trading engine and made some good progress on that business and realise that it was gonna take probably years to really commercialise the business from a regulatory standpoint. So we sold IP to bank to the future. And then based off going through two acquisitions, both times were, you know, not relatively easy. I figured, you know, maybe there’s an opportunity to help other business or help other entrepreneurs exit their businesses. And so that was kind of the idea with with Mike requiring, I always have love startups, I get nervous around startup founders that like are super successful. It’s kind of weird, but like, if I meet like the founder of Uber, like Travis Kalanick, I’ll be like, oh, man, like the Travis Scott. So I love startups almost as like my sport. It’s my hobby, I have so much admiration for entrepreneurs. And so I knew my next business is that my next business, I wanted to serve entrepreneurs and help startups in some way. I looked at marketplaces, because there’s, there’s just so much you can do within a marketplace, you can offer third party services, you can position it in a number of different ways. And what I noticed was with some of these other platforms that really catered to startups, like more specifically along the founder, founders journey, product for discovery, and then so you just launched your startup. And then as you started scaling, and maybe you want to bring on investors, you have AngelList, which a lot of early stage investors use. But there’s no platform for the exit of your startup, which is arguably one of the most important parts of the founders journey. So I thought it’d be really interesting if there is a marketplace where you can buy and sell companies. And I built it the way that I wanted it to be built as a founder. So that meant I needed to be private. So I would never list a company on a public marketplace. I also didn’t want any middlemen. So I didn’t want a broker in the middle taking a large commission or an investment banker in the middle taking a large commission. I think getting that sort of advisory makes sense. Specifically m&a advisory and when you could do so on a flat fee, you don’t have to pay 10 15% Commission to sell your business that’s insane. And so micro choir doesn’t have any fees. Are commissions for sellers and it’s private, you get to pick and choose who you share your private information with the full control, you can sell, you can not sell, you can build relationships and then sell to someone two years later. So I really just kind of scratch my own itch. And it’s it’s been a blast growing it so far.
Erasmus Elsner 10:17
Yeah, no, I absolutely loved the mission. And I followed it from afar. And I really like how You’ve crushed it since you launched on Product Hunt. And we’ve touched on bootstrapping already. I’ve been in the indie hackers community for quite a while now, you’ve been three times a bootstrapper. Related to this talk a little bit about, you know, the key metrics for bootstrappers. And I think you mentioned in the past, when you were in business apps, you really have to focus on the payback period, trying to shorten the payback period as compared to a venture backed startup, which can, you know, have a two or three months payback period as bootstrapped? Are you really cash constrained? And as such, you need to have certain tight financial metrics?
Andrew Gazdecki 10:59
Yeah, definitely. So, some main metrics to look at when you’re bootstrapping is definitely customer payback period, because that can almost work as like seed funding, where if you are able to acquire customer for $100, but your product is $500, you’re able to collect that money up front, in an annual payment, we were able to aggressively reinvest that back into the business. So that’s, that’s a key way. And I’ve also done that with my group, our two is we only have annual subscriptions for the buyers. So if you’re a buyer, and you want to learn additional information about a seller, you have to pay an annual subscription, and that allows me to collect, you know, 12 months of revenue up front. So I can aggressively reinvest that back into the business without having to give up equity or bring on other investors. So that’s, that’s one key thing. And then in terms of other metrics, really how to be successful. If you’re looking to sell your business, this is going to be kind of like very basic advice. But the best builders build a good business. That’s it, when you have a good business, everything else kind of takes care of itself. If you have a bad business, if you have high churn, you don’t have a lot of happy customers, you have a bajillion support messages, there’s a tonne of bugs, regardless of your revenue, it’s gonna make it more difficult to sell. So you want to just focus on building a good business and have that be your key priority.
Erasmus Elsner 12:30
Don’t build a leaky bucket, don’t build a high churn business where you know, it looks maybe looks good on the outside. But if you look into into the numbers, and you see such a high churn business, it’s something you really don’t want.
Andrew Gazdecki 12:42
And you’ll you’ll probably have people reaching out to buy it. Even if you don’t miss it on a platform like Mike require or work with an investment bank or brokers. That’s that’s probably my first piece of advice. My second piece of advice would be to have someone that’s able to create a detailed p&l, ideally 36 months, if you’ve been in business that long, that gives a lot of financial buyers just a clear snapshot into your expenses and the growth of your business and your customer concentration, like is all of your revenue coming from, you know, a certain pricing tier is there an opportunity for reducing costs or something like that there’s just so much that a buyer can, you know, learn about your business. And it also shows just goodwill as well, just that you have kind of everything together that the buyers you need to make a decision. So that’s the second one. And the third one is just understanding, you know, why do you want to sell because everyone’s wondering if it’s such a great business, why are you wanting to sell for me at business apps, I was just completely tired. Being in the business for eight years felt like 100 years and so I was ready to leave and so when the time came to sell the business I was happy to do so I did you know have a little bit of remorse once the acquisition went through, and I realised like I’m not involved in this business anymore. And the people that I really enjoyed working with, I wasn’t going to be seeing them every day. So really be clear on you know why you want to sell and also understand that you know, you’re gonna have a much different life if you’ve been running a business for eight years and then all of a sudden you’re not so recommend taking a break in between and really thinking about what you want to spend maybe the next few years of your life doing But long story short, yeah, just focused on having a good business that’s healthy growing profitable, happy customers has a great team behind it and the more you are removed from the day to day operations, the better so that’s really the role of the CEO is to try and fire yourself from every department and every able to do that. No definitely a buyers lined up out the door.
Erasmus Elsner 14:42
Yeah, I love that. But maybe let’s talk about marketplaces and I’ve personally bootstrapped a marketplace for while a niche marketplace and I I love all the marketplace questions and you know what’s coming right chicken and egg problem. How did you solve it? Where did you Startups demand side supply side? And how did you sort of build up this initial marketplace liquidity for micro acquire?
Andrew Gazdecki 15:07
Yeah, so I’ve talked about this quite a bit. The short answer would be I, since I had sold a business, and I had been in tech for, you know, a decade and I knew a lot of private equity buyers, because when you’re running a startup for that long, you just kind of meet a lot of different individuals, private equity firms, or growth funds or other VCs. So I always kind of kept in touch with everybody. And then when I got the idea from Mike require, and this also includes investment bankers as well, just getting their feedback, sometimes investment banks, they’ll have companies that come to them that are too small, where they just, it’s a business doing a million a year, but their minimum is like 10 million a year in revenue, because they try to sell the business to a strategic buyer, or sometimes financial but generally needs to be of a certain size for, for them to take it on. So I just reached out to a large network of people that I felt new startups that might be looking to sell built relationships with them really just kind of got their feedback on the marketplace. So onboard them personally, as you know, the initial buyers. And then the initial buyers also worked as some of the initial supply as well, because they were in venture capital or they were in private equity. So deals that they would pass on, they would send over to Mike require even law firms and stuff like that. And then I started a large cold outbound email campaign as well. So for people I wasn’t personally connected with i Cold emailed a couple 100 people, as startup founders. So are you interested in potentially selling your business has that ever come across your mind? If so, I made a marketplace, it’s completely free if you want to test it out. So I got a little bit on both sides. And then I launched on product guns and got product of the day and couple of 1000 users all at once. And that that spark kind of just really started everything. And it kind of went sort of viral, which was very surprising to me. I actually I didn’t I really didn’t think the marketplace was gonna work. I have a journal that I keep. And every month I write in it. It’s not like a weird journal like teary Andrew like I hope you’re doing well today. It’s just like the this is what happened this month. This is what I think what happened next month things I’m concerned about things I’m grateful for. And in one of the journal entries, December 2019, I launched Mike require January 2020. I said hey, like something along the lines of like, really excited about Mike require. I’m not sure if it’s gonna work, but if it does, I think it’d be really rewarding. And if it doesn’t work, Elisa looks really nice. Because I spent a lot of time on the design. I think it looks nice.
Erasmus Elsner 17:48
I think it’s quite slick and to having designed, you know, a marketplace myself, I I know all the little features and how much time goes into bug fixings on marketplaces. And I think you put in, I think, 200k to build the marketplace initially.
Andrew Gazdecki 18:03
Yeah, yeah. So I literally was like, I think this thing needs to exist so bad that I put not only my time, but my money where my mouth is. And the thesis was, let’s make this thing look really good. You know, so other founders are impressed by it. And I always joke, like, if no one uses it, well, at least it looks good. And that was the initial start. So basically just got on the phone of a lot of people, which a lot of founders typically don’t do, because it takes a lot of time on work. It’s not necessarily like fun, but those relationships, a lot of the people I still keep in touch with today. And it builds like this community around your business as well, where you have these relationships with people, that could probably be another tangent, where when people think about community, it’s like online forums, and it’s, you know, Twitter, following or whatever. But sometimes it’s just these like real relationships. I mean, you were talking right now in a podcast, or, you know, you’re on a call with someone else like that can kind of be, you know, part of the community of your company, because you have all these people rooting for you to be successful. And so I think that little spark, in the beginning was was paramount.
Erasmus Elsner 19:11
Maybe talking a little bit about the company profile, and you touched on some revenue metrics. If I go to your side, I see different categories. I see SAS, I see the Shopify app, I see the E commerce app, if you had to draw a heat map, what’s the most common startup vertical you see there? You’ve hit now I think north of 300 transactions where have you seen the most interest maybe from buyers and the most activity?
Andrew Gazdecki 19:36
Yeah, definitely. So I don’t have full visibility into when acquisitions happen. This is something that I really try to respect, you know, the privacy of buyers and sellers and so sometimes I find out about companies being acquired on literally on Twitter, like someone just says, Oh, I sold my company. I kind of look it up and I’m like, Oh, that was on micro acquire and then the later say, Yeah, listen on microwear because people ask but Yeah, to my knowledge well over 300 acquisitions, the majority of the startups listed are SAS and E commerce, a number of different interesting business, like lots of mobile apps, lots of marketplaces, lots of communities, lots of newsletters, lots of crypto projects, tonnes of Shopify apps,
Erasmus Elsner 20:20
talking a little bit about, you know, facilitating transactions. And you mentioned that before that you’re not actually facilitating the transactions. So you stay clear of that. And that’s quite an interesting model. Because on the marketplace side, it means that you basically focus only on the discovery side of things. And that allows you to stay, you know, lean and not having to, you know, be involved in the transaction, which can be especially when it comes to selling a business quite tricky, you know, you you have lawyers involved, maybe talk a little bit about staying clear of that side of the transaction and whether or not he thought about, you know, bringing, you know, forward integrating and possibly, you know, capturing more value.
Andrew Gazdecki 21:03
Yeah, definitely. So that’s where I’d like to take Mike require an axe, because you kind of just hit the nail on the head with the problem where acquisitions are complex and tricky. And you know, right now, there’s so much opportunity within my work to really contain everything in one place. So you feel secure, you feel safe, where you don’t have everything in like a Google Drive folder, and then you’re sharing passwords and like a notion doc, and then you’re using the other escrow service, and you found a lawyer on this other website, or your transaction is in the millions of dollars and you want some advisory from someone who’s, you know, sold hundreds of businesses as an m&a advisor. So we’re gonna be building all those third party services into microcar we’ve already started. So yeah, it’s it’s definitely a lean and mean business as it is today. But I think the larger opportunity is, again, our goal is to help entrepreneurs get acquired and part of that is making it acquisitions easier, you know, streamlining the legal docs, giving them easy access to quick m&a, legal counsel, or just general m&a advisory, if they’re looking for advice on just simple things like negotiation or when they go through due diligence, what is appropriate to ask what is not appropriate as those little things right there can really help founders a lot. And so 12 months from now, Mike require will be completely different marketplace with some very, very robust functionality that I think other marketplaces are just frankly missing. And brokers and traditional investment bankers today are just doing me really,
Erasmus Elsner 22:39
you have quite an interesting way of monetizing, so you’re not involved in the transaction itself, you monetize on the demand side by charging for early access. And this makes this more of a recurring SAS like business model, right. And you shared some some interesting metrics recently, where you, I think, hit 41,000 in monthly recurring revenue, which translates now to I think, half a million in annual revenue. Talk a little bit about how you landed on this monetization, because I think it wasn’t 100% clear in the beginning that you would monetize by charging the demand side.
Andrew Gazdecki 23:15
Yeah, good question. So it definitely wasn’t planned. 100% wasn’t planned. So that day, I released what’s called micro choir premium, which is a subscription for buyers to be able to contact sellers. So what that means is with micro choir for sellers, completely free, you can list your business, there’s no fees, there’s no Commission’s no hidden costs, nothing like that, as a buyer, you can still create a free account, you can look at the listings, but you don’t know who the business owner is you don’t know the business URL, you don’t have access to additional information that a founder would then share with you if you requested it. So to get the ability to request that information, you have to subscribe to microcar premium, and then you’re able to make requests on any startup and ask questions like What is your CAC or what is your LTV or you know, do you have a p&l that I can review I’m interested in this business. And the reason I put that in place surprisingly was I remember the day it happened. It was like early September, and on the same day two founders have messaged me, and they just said something along the lines of like Andrew, like, Who do I respond to? I’ve had like 150 people reach out to me, How do I know who’s serious? Like how do I differentiate? And I thought, you know, we need to have like, like a vetting process for buyers. So founders are only speaking to people that are serious about acquiring a business rather than just a bunch of people. And then it’s the founders job to figure out who’s serious and who’s not serious. And that still happens now. It’s just inevitable like some people will see a business and request information and then see the URL and not like the product. They’re not interested. But before it was just too hard to tell is everyone the CEO of a public company all the way down to someone who’s still in college. So made it up, I just said, Alright, it’s gonna be around 300 bucks a year for buyers to contact sellers. And I didn’t have any of the functionality built out like nothing. And I sent out an email to everybody saying, like, Hey, this is how it’s going to be moving forward. And I believe I went from zero to like 20,000 annual recurring revenue on like the first day. And if you look at microcars growth graph, you’ll see like a little bump in the beginning, and then it goes flat for about three weeks. And the reason that happened was I didn’t have it built out. So I didn’t talk about it after that one email, and one CEO of a public company, or a company about to go public, a company I’ve admired for, since, like I was in college, the CEO emailed me and he’s like, Hey, you don’t have any of this functionality built out where like, as a premium buyer, only I can contact that business and no one else can. I was like, No, I’m sorry, I’m working on. He’s like, I love it. Like, you know, I love the way you hustle, like keep doing things while you’re doing it. And then once I finally had it built out, so when you actually paid for premium, you got a premium badge that notified sellers that you had subscribed to the premium programme, and then I was able to start locking off certain listings only to premium buyers. And then that’s when I started advertising it more. And then it took off from there. But it was not planned. It was definitely not planned, my initial plan was to go as long as possible without charging any thing at all, just to build the brand to build the customer stories. And that
Erasmus Elsner 26:43
brings me also to the last point on marketplaces, something that I find quite interesting is that you run a curated marketplace. So a startup that wants to list on your marketplace, they have to reach out to you you review it and only after your review, you put it online talk a little bit about this vetting process and how it creates this curated marketplace.
Andrew Gazdecki 27:04
Yeah. So the way to get your startup listen on mic require it’s it’s actually pretty easy. You sign up as a seller and then you fill out some basic information such as what is your startup do like a brief overview? Who are your competitors? What is your tech stack? What is your trailing 12 months revenue, trailing 12 months profit, annual recurring revenue, last month’s profit, last month’s revenue, any growth opportunities that you think any buyer could take place with? Why are you looking to sell and then any financing or funding is a bootstrap just really, you can fill out a profile within minutes. And then after that, what my team does is we go in and we make that look a lot better. We make the metrics, we position that so we’ll take I have a SaaS company in this space. If we make this much money, we’ll turn that into profitable SAS with X amount of revenue in the last 12 months profitable by this much competitors include these companies to really get buyers enough information that they need to get excited about the business or request additional information to help the seller get acquired. We do that all for free. We also create presentations for sellers as well, based on the information that we have private presentations that they share with buyers that they choose. But the curation part I think is really important because there’s so many marketplaces today where it’s just you spend more time going through just low quality listings. But basically, that’s the main function of of the business. Like it just there’s so many listings, and there’s no filters or controls that I think that this is kind of the future of marketplaces is where people will pay a premium for you to save them time. So they don’t have to crawl through 10,000 listings to find the 100 good listings. Instead micro acquire, we just have the 100 good listings. And all the time I refer other startups to other marketplaces like Flippa. And some other places I say like, you know, you’re not a good fit due to revenue. It might be a content website, and just something that’s not specific to the buyer audience. You know, I’ll happily refer those to other marketplaces where buyers are looking for those types of businesses. But I might require when you come there, you can expect to see high quality businesses with sufficient sufficient information for buyers to hopefully get excited about but yeah, I think curated marketplaces are very, very interesting because they save people a tonne of time. And then in terms of brand, you’re known for having high quality listings. I guess another way of putting it is when you try to market or appeal to everyone you end up appealing to no one so I try my best to be very specific about only listing startups that I think are interesting that I could see a buyer acquiring, like seriously acquiring not just putting Get out of the marketplace because it’s a startup and it has XYZ metrics. And I think other entrepreneurs appreciate that. So it’s another way to differentiate the business as well.
Erasmus Elsner 30:09
Interesting. And maybe if I can play devil’s advocate on Product Hunt, you were the product of the day. But there was one comment that I found quite interesting. It was not so much about your site, but it was more about the kind of demands that some founders have. The common read like this, this side should be considered Silicon Valley’s version of Fantasy Island asks for some of these companies are beyond insane. Much of this insanity can be laid collectively at the feet of Silicon Valley for managing to get people believing that 10k In total revenue is worth 5 million in purchase prices. Any marketplace ultimately has to think about matching bid and ask and that’s when most deals business deals fall apart. That you have one side of the equation really having too high asks or really want to lowball How do you think about getting this bid ask spread lower or sort of matching the market?
Andrew Gazdecki 31:01
Yeah, I mean, it’s it’s a very fair comment. And it’s hard. It’s probably the hardest part of what Mike require does is getting a seller’s expectations to be in line with a buyers expectations. One thing that I think’s been very interesting to watch is, as we watch the stock market hit all time high, Bitcoin has hit all time highs, not today, as of this recording, private market, startup investing valuations. Everything is at an even like lumber. And people are just confused at why startups aren’t selling for, or they’re selling for more than, say, four to five times even, which was kind of the industry standard before micro acquire. A lot of transactions happen in that range. But the price for pretty much all assets are increasing. So that’s a trend I’ve definitely seen across my crew choir, which is great for founders, they’re selling their businesses, there’s been several businesses on micro acquire that have been valued in a traditional manner by some of the largest brokers in the industry. And they’ll sell for two times the price on micro acquire. So that’s the market dictating what are these assets really worth? So sometimes I think it’s a two fold problem, one where no one really knows how to predictably value these assets or these businesses, because it really depends. I mean, if it’s just a strategic buyer, a 10x. Multiple is not unheard of, at all, maybe on a brokerage site where they kind of push down the price as low as they can get it so they know that the business is going to sell but since I’m not incentivize to essentially I don’t receive anything if the business sells I do let founders freely price their businesses as if they believe they have within reason there are multiple like what that example in that comment, I wouldn’t take that live so that I 10,000 revenue for what do you say 5 million that would it go live on microcar, but 10x revenue 20x revenue, I do try my best to point founders in the right direction with kind of guides of evaluating their company that I’ve written, but it is ultimately up to the founder. You know, when I was running business apps, I never had a price I just had opened offers. And that’s that was my price opening offers.
Erasmus Elsner 33:18
It’s a fair comment that you made, that you’re really not involved in the price setting. And that brings me maybe to the last point on the murky industry that you’re seeking out to disrupt, which is this business broker industry. Talk a little bit how the standard process has been run. So far in this industry.
Andrew Gazdecki 33:34
I think there’s some good brokers in the market, but some of the bigger ones charge 15% To sell a business if it’s under, I believe 2 million in revenue. That’s the size of his seed round. So that’s insane, in my opinion, absolutely insane. And the reason they’re able to charge that price is they’re kind of the only shop in town. There’s one or two reputable brokers that specialise in software businesses. And most brokers traditionally sell main street businesses like restaurants or laundromats, I saw that and I said, this is ridiculous, like you do not deserve like a couple $100,000 for this amount of work. And typically the processes, you know, they, they look at the business, they’ll look at the p&l, we’ll do a little bit of cleanup on the p&l. What that means is they’ll do add backs to get the discretionary earnings and they’ll add a multiple on the business and they’ll say we have this very complicated valuation strategy, but really what they do most of the time is and you could see all closed listings on most brokerage sites, and you’ll see most multiples are like three to five, so they usually just go three to five as your valuation through our scientific thing. And that’s, you know, that in certain times in market history, that might not be the market rate that could be below market rate. And so but they’re incentivized to, you know, fake and sell a really good deal to a buyer. They still take their 15% commission so you know, they’re more inclined To sell at a lower price and at a higher price, because if they have to push really hard for another $100,000, you know, as long as they just get the deal done the delta between 15% on $100,000 on a $2 million deal, they probably just want to get the deal done. I think brokering is just a very labour is an expensive way to sell your business at a low price. And so Mike requires disrupting that by allowing you to meet buyers in days not months, allowing you to really feel out the market in terms of how is the market truly valuing your business rather than just what is a broker saying your business is worth and then also avoiding large commission fees. And then if you have a lot of interest, you are under no pressure to sell. There’s no exclusivity or anything like that. In terms of other marketplaces. Keno no other marketplace really focuses specifically on startups, you know, lots of marketplaces are kind of very akin to Craigslist, where you can buy anything from a domain to a start a website to a WordPress blog. And it just creates this user experience that if you’re trying to appeal to everybody, you’re going to appeal to no one. And I think there’s a very, I guess, passionate group of buyers that are serious buyers that are looking for real assets and real companies to acquire. And those marketplaces don’t message or cater to them. Well. So I’d say that’s how micropile is different is we provide the same, we’re basically productizing the work of a broker. And we’re basically saying no to all the stuff that a broker would normally not take on. So automating the work of a broker, but bringing the same sort of business model and approach that a marketplace would, or I guess, scale,
Erasmus Elsner 36:40
Understood, understood, it’s it’s a really interesting approach. I think, as a last point, let’s talk about scaling, micro acquire itself. And I shared some key metrics before you put like 200k into the business or now 500k in annual run rate, you have estimated 300 transactions, but it’s still a bootstrapped company. And you would obviously have the option of raising external financing, you would have the option of bringing in additional people talk a little bit about, you know, what’s the plan for next couple of years? How do you want to run this company?
Andrew Gazdecki 37:13
Yeah, that’s a good question. That’s something I think a lot about this. This kind of feels like the business for me that I can see myself running for the next decade. So I’m a huge advocate of bootstrapping, I think for 99% of entrepreneurs, it is the way you should 100% Go because it allows you to build something of value. And when you raise capital, you essentially have this binary outcome solidify, you know, be if you’re able to bootstrap, definitely go down that route as long as possible. And always realise that you can raise money later, you don’t have to buy a domain and then go meet investors like you can talk to customers for so you can figure out how you’d actually spend investor funds. Because you may find yourself in a situation where you know, you want it to bootstrap, you started growing a little bit and you go, wow, this is opportunity. 100 times bigger than I thought. And that’s a perfectly okay reason to go and meet with investors and build, you know, significant business.
Erasmus Elsner 38:09
A really interesting point that you’re raising here that if you see that the problem space is so large, and the problem that you’re addressing is so large for business apps, you had term sheets from some of the leading Sandhill Road firms, and you decided to sort of keep bootstrapping, but maybe for micro require things can be different. And you say this is such a huge problem. And if I want to sort of go capture more of the value chain, like facilitating the transaction itself, this will be a capital intensive play, and then you might end up you know, wanting to raise after all,
Andrew Gazdecki 38:37
yeah, I candidly I have thought about that. Yeah, with business apps. The reason I didn’t raise money was we were so profitable. And I didn’t want to say I didn’t want to give up the opportunity to sell the business for 1020 30, whatever amount and go after the billion dollar exit, when, as a kid who didn’t grow up very much I had, you know, something valuable my hands. But when you raise venture capital, those those options typically go off the table. So I’m glad I bootstrapped that business. But this time around. Yeah, it’s a possibility. But I think the main point is the frame of thinking and being very calculated with raising venture capital and understanding what you’re getting yourself into and what that does to your business. And what you’re signing up for. And what you’re signing up for is to build a very significant company. So the longer you can bootstrap, the more clear how big the market opportunity is, the more clearly you’re going to be on use of funds. And then you might get to a point where you just don’t even need to raise venture capital. And that’s where you should want to be. Or you might realise this market is the next Google like, I need to, I don’t know, like I need to raise capital to, you know, land, grab the market or something like that. But the more the longer you can make progress on your business, the more you’ll learn if, you know, either bootstrapping or raising venture capital makes sense.
Erasmus Elsner 39:56
All right. So as we’re running against the clock, I want to wrap up this session. So Andrew, thank you so much for being with us here today. I think it was super insightful. I’m really thrilled that you’re building this marketplace as a solopreneur still and really you know being a pirate out there and inspiring all of us you never know I might end up buying a Microsoft’s then I have you to thank for it. Thanks for building this and thanks for being with us here today.
Andrew Gazdecki 40:21
Yeah, thanks for having me. I had a blast.