On this week’s episode I chat with Andrew Gazdecki, Founder & CEO of MicroAcquire. MicroAcquire is a marketplace that helps software companies match with interested buyers.
Andrew is a serial founder with a clear passion for entrepreneurship - which I obviously love. After selling his last company, he embarked on his current mission to help founders sell their companies more easily. He’s making a ton of progress. A significant number of companies are being sold through MicroAcquire every month.
During our chat we went well beyond MicroAcquire. We discussed Andrews’s tips for being a solo founder and dove deep into how to sell a company - where we covered important strategies to consider, the M&A process and market dynamics.
Please note, Interplay is an investor in MicroAcquire.
Transcript (this is an automated transcript):
MPD: Andrew. Thanks for being here, man.
Andrew Gazdecki: Thanks for having me. Excited to be here.
MPD: Cool. Let's start off. You want to give us an overview of MicroAcquire?
Andrew Gazdecki: Yeah. So MicroAcquire is one of the largest startup acquisition marketplaces in the world today. The way it works is we help mostly profitable software companies get acquired without some of the typical headaches today.
Zero commissions, 150,000 registered buyers, 600 plus acquisitions. And I believe we're around about half a billion in terms of GMV on the marketplace. And yeah, just really trying to democratize acquisitions for, the software industry
MPD: you were saying democratize what's the barrier you're breaking down.
Andrew Gazdecki: For a lot of people, acquisitions are a mystery. There's a industry quote we're, an investment bankers job. 90% of it is just educating a founder on how to sell their business. And really what we're trying to do is, really bring education and content around how to actually get acquired because you have books on marketing, books on fundraising and books on social media stuff, but there's nothing about, the arguably the most important part of the founder's journey, which is the exit.
And this kind of came to me personally, where, I sold a business. And as soon as I did, I had, I don't know, six friends reach out to me. And they're like, how'd you find the buyer? What was due diligence? What was the legal process? All this stuff. And I was like, I didn't know going into it.
So for me, it's like a life changing moment for the other person on the other side of the table. It's Tuesday. I felt there was a huge opportunity to really level the playing field. So when founders go to sell their business yeah, they're equally matched with the buyer in terms of education and tools and resources needed to maximize our exit.
MPD: What's the process someone goes through when they're selling there's it traditionally, there's a lot of steps in that, on your site. Does it streamline it or what is it doing with regard to the process?
Andrew Gazdecki: Yeah, so typically, this is arguable, but I would say the hardest part is usually just finding the buyer, finding a reputable buyer that will actually transact nos acquisitions.
And we do an exceptional job in terms of bringing in high quality buyers in a MicroAcquirewave. So we solved that aspect. Other things that we've implemented is just making legal doc creation easier. So we built a letter of intent builder. We're building an asset purchase agreement builder. So streamlining, just like the legal doc creation also building a better tooling around just assessing the financial health of a business.
So when you look at a SAS startup, you might get a PNL and then you dig deep into that PNL. And it says on first look, this is a really profitable company. It's growing, whatever. But when you really dig in, it could be the exact opposite story. So on MicroAcquire, or you can connect Stripe or ChartMogul or metrics or Google analytics to get a really healthy snapshot of the business.
And then we're also doing things like, what is your sort of work? If you asked 10 people are going to get 10 different answers, So we're really trying to bring a data-driven approach to that using the data that we've seen from the hundreds of acquisitions that we've closed and really, the product that we're building inside of might require, it's such a multitouch process.
There's so many steps finding the buyer, going through the legal process, going through due diligence even just transferring assets, like how do you transfer, a GitHub repo without how do you put that into escrow tools like that? So those are all the things that, we're thinking about and looking to streamline and more importantly standardize.
Yeah. I think that's something that the market really used because I see all the time a Byron's are get terms and they're like, what do we do? My process, your. So we want to standardize that to bring, more trust and transparency to the industry, so to speak.
MPD: And is there a typical company size or buyer profile that you guys tend to plan?
Andrew Gazdecki: Yeah. Good question. I'll start with the buyers. So we see a very wide range of buyers, everything from the largest private equity groups in the world. So some multi-billion dollar private equity groups. We've seen acquisitions from venture capital firms. We've seen acquisitions from bootstrap companies acquiring other bootstrap companies.
A lot of aggregators, a lot of role-plays public companies as well. So a lot of Corp dev teams. And then I, the larger segment is probably what I classify by is individual buyers. So these are people where, startup, typically when you launch it would be, think of an idea.
It still is that way, but some entrepreneurs maybe they've had a successful exit of a liquidity event and another company, and they're just looking to buy a cash flowing business. So that's other another large segment. So we see a pretty wide array, so you can get strategic offers and then financial offers and then individual buyers as well.
MPD: cool. Now you mentioned this is specifically tailored for software companies, which I get that makes a lot of sense. I'm sure though, the legal varies by industry there's different considerations. Does this apply, down the road or in the future to non software?
Andrew Gazdecki: All the others? Yeah. Yeah. Yeah, I there's so many small businesses.
The whale put, this is, the ultimate goal from my group. And I don't know how long this will take, but we want to be the marketplace where you combine so any type of business. So we're starting with software companies because it's so much easier to do online, getting financial metrics in terms of revenue and expenses is so easy because everyone's already using and adopting tooling that just makes gathering that info real easy, but let's say we wanted to move into main street businesses.
A lot of those businesses don't have a P and L they don't have, accurate financial records. They don't have, knowledge on how to sell their business. And so that's a market that we're definitely eyeing and I'm excited to enter into it at some point, but. Right now we're, I'm a big fan of, definitely have a beachhead versus start, build out everything and be completely dominant one industry.
And then kinda like the bowling ball strategy where you go in with one industry and then there's adjacent markets that you can go after a second.
MPD: So what's the revenue model for this, right? You mentioned before, there's no fees, but obviously it makes money.
Andrew Gazdecki: Yeah. So it should know we are going to be charging commission soon.
But the way that we're thinking about commissions is there's other marketplaces and there's business brokers and investment bankers that will charge a commission for just listing on their marketplace. But what we want to do before charging commissions is we want to add so much value to the acquisition process that we streamline it to make it faster.
We make it more transparent and we allow buyers to make better decisions. We help founders in terms of just confidence in speaking with buyers. And we've just rolled out the first kind of, let's call it the puzzle, the first puzzle piece of 10. So we'll get there. And then your term, and the first puzzle piece was, the letter of intent builder and we just integrated and Astro service.
But right now our only business model is we charge buyers, a nose with description to act as a platform. And what I mean by that is so you can go on my require and you can look at all the listings and they're basically blind profiles. And so what that means is basically it's a private marketplace.
You don't know what the startup is, but it has high level metrics of, trailing 12 months revenue, profit growth rate and recurring revenue tech stack competitor. Growth opportunities. Why is the founder selling all that stuff? But if you want to know, what is the business, how do I contact the seller?
You would just subscribe to what we call Mike require premium, which is just three 90 a year. And then when that happens, we then go and bet the buyer and ensure that they're a real person and they're, legitimate and that's it for now. But in the future, we'll definitely move to a commission model.
But yeah, right now it's the sum, the simplistic business model of might require. I love that.
MPD: Who are the naysayers for this? And what are their objections?
Andrew Gazdecki: What are you here? When I first started the business, everyone. Quite literally everyone everyone is yeah, even when I sold my first company, I got light advice from an investment bank.
A banker it was just a friend and I just would call them for bono Frank questions, and I floated this idea behind him and he was like, there's just no way. So investment bankers, business brokers. Yeah, I mean everybody, but today I would say that's a good question. I would say probably, the incumbents in the industry are probably the biggest naysayers.
Those are the bankers and the brokers are. Yeah. So probably the people that have been, the typical routes for people to sell their startups But it's definitely naysayers have decreased, but I think, if you're building a business and you don't have naysayers, I think that's a red flag.
You always want to have, I always want to hear feedback from both customers, investors, users, friends, like what sucks about the business, like what they think won't work, because that's stuff that I can use to, improve the business. If everything's perfect, then I go, okay that's not very helpful.
I'd rather know what, so I liked the naysayers. Then another thing I'll say about naysayers is it's my personal favorite motivational fuel for building a startup,
MPD: but that's it's a dangerous concept. Not listening to the naysayers. When I was starting out as an entrepreneur in my twenties, I was a bad entrepreneur.
I just, I had heard somewhere along the line, you can't take no for an answer. And I would just keep running into brick walls over and over. And. You figured it out. So what's the fine line there between how do you know when a naysayer is wrong and when you shouldn't listen and how do you know what a naysayer is?
And you should go back to the drawing board.
Andrew Gazdecki: That's really good question. I would say you got to look for pattern recognition. At the beginning, I think with any startup, you gotta be, you gotta believe when others don't believe, like you just got to have unwilling belief in yourself.
And for Mike require, this business for me really isn't work. It's I describe it as like my video game. I, I, my job is to help people sell their business for, life changing amounts of money. And we don't benefit from that. We just add so much value to the startup community and I get to look at interesting businesses all day long.
That part's really rewarding, but in terms of, when to listen to naysayers and when to maybe disregard the feedback is, I would say, if you hear the same thing over and over, there's some truth in there somewhere, there's, that's probably where I'd land is.
You want to look for pattern recognition. If everyone's saying Hey, this isn't gonna work. After you've started, into the market take that as maybe truth and then prove that wrong. So that's probably how I would think about it. But that's a really good question in terms of, the balance of you don't want to listen to every naysayer, because if you did, you just never get anything done.
Because everyone would just say. This isn't going to work for this reason or this isn't gonna work because this other person tried starting this company. And that may be true, things evolve over time, such as the market might be ready for whatever solution you're building a number of other factors.
So I would just say, pattern recognition in terms of, how often are you hearing it? And then how does that compare to the people that support you? Does the naysayers, are there more naysayers and supporters and then bounces to, I
MPD: think for me, I think we're saying what you're saying and little spit on it.
What changed for me when I went from being a bad entrepreneur to a fairly decent one was realizing that when I had the naysayers, they were saying there was a wall in front of me, but they weren't saying that the deal was impossible or the venture was impossible. They were framing the experiment I needed to do.
They were saying, even though they didn't know it, they were saying, Hey, this will never work for that reason. And then I would start setting up once I got better at this, I started setting up experiments to test those things. The idea of determining whether or not they're right, because I couldn't tell the difference between the naysayers who are correct and who were wrong.
So for me, it became, they become a light bulb, a flashlight to help aluminate the opportunities for experimentation to test things, to figure out if the model is right. So I do think they're a useful part of the process. The problem is when I was first starting as an entrepreneur, it was really disorienting.
I just thought I was about to not listen to anybody. But the reality is there was some wisdom, even if they weren't right. They were at least telling me what to tell. Does that resonate with you or
Andrew Gazdecki: that, yeah, I couldn't have said it better myself because usually when you get a naysayer it's the best thing to say, or is a very specific, like it started with how are you ever going to go to to list on a marketplace?
Like they have these options to sell. Okay. So that's the problem I need to solve. And I went and saw that problem. And then the second problem is, okay, so how are you going to, get buyers on this platform? Okay. Solve that problem. So I think the way that you're framing it is I can word it better.
And naysayers can sometimes point you in a better direction then supporters, because, supporters are like, Hey, this is awesome. A naysayer is saying, Hey, I think you got to really think about this problem in this business where I've seen a similar business and they have this problem.
Varying the degrees of, naysayer of this all never work that's that I'd probably, use that as fuel, but when it gets specific in terms of for these reasons, you're right, those are just, barriers that you need to overcome.
MPD: Why don't you start this? I know you had been through the venture and people called you, but a lot of people have sold companies and a lot of people have received those calls and not done anything about it by you.
Andrew Gazdecki: I just felt the startup ecosystem needed a marketplace for, to easily find buyers to easily go through an acquisition process with much more efficiency and innovation than we see today. And when I looked at the market. So here's how there's, here's a story of when I first started my MicroAcquire prior.
So I always. I started with the customer. So I'm a big believer that, the founders that go the distance are the ones that truly love what they do. And I think that needs to start with, the customer, because you're going to be talking to them a lot. So MicroAcquire customers are entrepreneurs and startups, and I love, I'm not going to start a junky.
I love startups. I've been building startups since I was a kid. When I say startups I'll count like an eBay store. But the counseling, I was a kid
MPD: that's proper.
Andrew Gazdecki: Yeah. I looked around the market and I just didn't see anything that was specific to, software companies, specifically SAS, there was no marketplace for SAS.
The typical routes to sell your business. Really cost-prohibitive to a lot of smaller software companies. So let's say you're doing, 5 million of revenue. That's generally too small for an investment bank to take you on in most cases. And that's generally too small for a strategic to get really required interested and just even finding those buyers is extremely difficult.
And it took me three years to find, the buyer for my first business. So I just saw a large market, zero innovation low NPS. And when I say low MPS with the current options, if you were with a business broker, you're going to be paying, up to 15% commission, which is like a small angel round.
When you get into numbers with investment banking you move towards, Lehman scale of two, 3%, but on the lower end of the market, I just saw. Just this huge opportunity to innovate, educate, streamline, and just consolidate the entire industry into one place.
So it operates more efficiently. And that got me super excited. This is an opportunity to not only, I think, do a lot of good for entrepreneurs because this is going to sound kind of cheesy, but, when you start your first business, I believe it's like for purpose.
And what I mean by that is, most entrepreneurs just want to be, financially secure or whatever. Maybe that's just my personal belief. Like a lot of entrepreneurs swing really big on their first shot. And really, they just be happy with, an outcome that makes them financially secure and.
Yeah, that was my goal with my first business. And I was fortunate enough to get there. And so this business was more of a passion business where I would run this business for free. And I did, I ran this business. It was just me for about about a year and a half, doing everything from customer support to bedding the listings, to writing the newsletters, managing the product, getting on podcasts like this, just because I enjoyed it.
And then once I, after going through a year of that, when you like, when you go through a year of that and you aren't stressed out, you aren't, sweating it. That's when you start to realize this is the business I want to work on for the next decade. So I hope that answers your question.
MPD: That's awesome. What we have now is there. Any particular thing about the timing other than it was the right timing for you? Anything I would, I played into this.
Andrew Gazdecki: We definitely saw some good market tailwinds in terms of, there's never been more MNA activity in the last two years and then Navar.
I always say when you think about a startup, you want to make a non-obvious bet. That's obviously you that's going to become obvious over time. So I felt, I love that, growth through acquisition was going to be a trend or entrepreneurship through acquisition was going to be a trend.
And I made a bet on that early and it panned out. The second point I would make is in terms of. Just the amount of starters being created. If we just do the numbers less than half percent of startups raise venture capital out of those, I believe it's let's just follow around less than 1% become a unicorn startup where the, a billion dollars or more.
So there's, millions of startups being created, not just in the United States, but globally. So my require is facilitating acquisitions now. And I believe, 50 plus different countries. So that was like the bet I made where a startup have been democracy. People are gonna be forgoing venture capital and really just looking to build, sustainable profitable businesses.
And I was right to some extent. And so I think we're seeing this new style of entrepreneurship being created on both sides. People are, happy with hitting, singles and doubles. And I think that's great. And I think it's amazing when people, swing for the grand slam as well.
I think entrepreneurship on every level is fantastic, but I think, why now is just the trend of, larger companies growing through acquisition and then other entrepreneurs entering entrepreneurship by actually acquiring company, instead of just starting one and digging of an idea and hoping it works chewing glass for two years, trying to find product market fit.
You can accelerate all that by just buying product market fit, essentially. So those were the two bats that I made. And then like with any business you need a little bit of luck and I think, like kinda just timed it correctly.
MPD: I feel like when everyone's gone through life and working through their careers and they're looking out the windshield at the future or real as.
It feels like you're driving down a windy road, but in hindsight, when you're looking out that rear view mirror, that road can look pretty straight linear path what's what is your background? How did you get, how did you end up being the guys starting this to build a platform, to help entrepreneurs around the world?
Andrew Gazdecki: I w I would just probably go to my childhood. I've been building businesses literally since I was, we should probably classify businesses as again, eBay store counts as one, if it does. Of some sort. Yeah. I've always just been, a big fan of creating businesses that I was just that weird kid that this was when everyone was.
Collecting baseball cards. I was selling them. I started a company in college. I went into college, I went to ECU, Chico state target up the west. And as a joke, as I kept doing that and my goal was okay, I got four years to start a company. That was my only goal. I knew that, my personal ambitions of where I wanted to go in life, getting a job, just wasn't the route for me, not just financially or anything like that, but just, I knew I wanted some kids grow up on an, a, B the quarterback of a football team or whatever professional baseball player I knew pretty young and.
If we, if my mom did a Gammy on this, she could confirm it. But I like openly said, I want him to be the CEO of a company. I want him to be a business owner. It just, I loved that was my sport. And I, Andrew college and I had four years to figure something out. I ended up going five. And then I'll give you a little tidbit on that.
But short story there is entered our entrepreneurship business plan competition every single year. I got fourth, third, second. And then finally first with a business called businesses, business apps, but BSE, N S app which was a drag and drop no code app. And I started that business because I had a job board before that, that connected mobile developers with businesses.
And I kept seeing the same job posting over and over. And I was like, there's this. Do yourself website builders. What if there's is do yourself mobile app builder. And I was in a college town where, you know, every bar and restaurant and pretty much every business was trying to connect to their customers on their mobile, all the devices.
And I built a simple template and made it really easy for me to customize it. It was super, it was like an MVP that would make you just cringe if you saw it. But it started with humble beginnings where I just, I was thinking, okay, maybe I can make like an agency where I have 50 clients and I charge them $50 a month.
I don't know if you get a job. That was literally my only goal. I just wanted to be in control of my own destiny, so to speak that business took off a little bit faster than I could have ever imagined. And the ironic part of the fifth year story is I minored in entrepreneurship.
And I did that, so I can get financial aid and so I can pay for it, rent and stuff like that. Didn't go to any classes, but focused on the business. So it lowered my GPA, but I came out of college with a a pretty fast growing startup, which was nice. I would say just, I've been an entrepreneur my whole life and just helping entrepreneurs is just extremely rewarding for me.
MPD: Now you sold a company before and it was it was business apps, that was your company went to a, to Z on there, a story with that you think was like moving for you or an experience you'd want to share with folks? Yeah,
Andrew Gazdecki: wrote a book about the whole experience because I knew it was so weird because I was 21.
And just to give you some, and I gotta say this was like one of those businesses, like right place, right time ginormous. Obvious problem, obvious solution. And I just got lucky. Obviously, luck is, hard work time matched with preparation, whatever the quote is. And I worked my ass off for sure, but yeah we grew from zero to 5 million in the first three years.
Or first four years or something like that, we only raised a hundred thousand dollars for the business. At one point we were creating more mobile apps than any other company in the world. So to give you some idea of the scale is we, when we would do the math every quarter, apple would release reports.
Like how many apps did they uploaded? And we would just divide by how many apps we uploaded. And at one point we were supplying 5% of all the apps in the iTunes app. And the cool part about how we did that was it wasn't even my idea. It was a customer's idea cause selling one app to a small business at a time is an extremely grueling sales process.
And there was an hour, I'll never forget this moment. So this is, I've always been a solo founder and I remember being alone in my office when it was me trying to cold call I think I was cold calling like restaurants and I call them back. Hey, what's your mobile app strategy?
They're like app do you mean appetizer? No, it was a true story. And there's this individual that built like four apps for these really nice hotels in Switzerland or motto hotels. And I gave him a call just to I'm 21 I'm young. And so I'm thinking this guy. Very successful, maybe. Yeah. Some advice for me.
And so I just talked to him and he quickly tells me like, oh no, I don't own the hotels. I have a marketing agency. And so my first question, my second question is, okay how can I help you sell more apps? This is incredible. And he gave me this advice that changed the trajectory of the business for everywhere.
He just said, if you could white label the product where I can put my company's branding on it, and then present this to my clients as a semi-custom app, I could sell hundreds of these. So from that day, we went from selling one app at a time to hundreds of apps at a time. So we'd have these partnerships with web design agencies all over the world.
And we ended up partnering with a couple of public companies all the do yourself SMB type companies, but that allowed us to keep our Ability to, put another way. We didn't need to raise additional capital because we had this global Salesforce that was essentially paying us to sell our product.
And yeah, we were able to scale the business really quickly. And then just to cap that off exited the business when I was 29 to a private equity firm.
MPD: That's awesome. But you had mentioned before you had started, had been starting companies from a lot younger of an age. This wasn't your first go.
Tell us about the skateboarding competition.
Andrew Gazdecki: Oh gosh. So it wasn't it wasn't a competition. It was it was a petition. So if you Google Andrew Gazdak east skateboarding on YouTube there's a few videos where. You can get the fuller story, but long story short I grew up in San Clemente and it's a beach down, surfing and skateboarding is like the sports that you, that everyone's into.
And my principal in junior high wouldn't let me ride my skateboard to school and he would give me the tension or whatever. And so I remember standing outside of like the local grocery store and I gathered 700 signatures or something like that. And then one of them was like a news reporter for the local San Clemente newspaper or something like that.
And then the next thing I know the LA times is calling and all these news shows and then. I was on the Dr. Laura show. It was like my 15 minutes of fame. I always joke saying that was my 15 minutes, my fame, my life's been downhill since then. But yeah I made a petition to ride my skateboard to school because I was so angry at my principal for not letting me so that maybe gives you a little bit more insight into my personality, but always looking at things and being like, why is it like this?
Like maybe it should be a little bit different. That was that was a fun time. Hell hath
MPD: no fury like a frustrated founder, lookout. So now you mentioned you tend to be a solo founder. That's your move? What advice do you have for folks about how to do that? Because a lot of people don't want to be a solo founder.
These rollercoasters have highs and lows and having someone else to be there to support you as a very helpful. What has worked for you?
Andrew Gazdecki: Yeah. I got to give credit to my wife for sure. She is a secret co-founder and like everything I do like just before this podcast, I was talking to her about it.
I was saying terrible things about you, mark. Just kidding.
MPD: And she was tired anyway,
Andrew Gazdecki: So I met this wonderful Italian lady and college and, I remember coming home to our apartment and telling her about business apps and, she's very business savvy. She owns her own recruiting firms.
She's also an entrepreneur. So I have a little bit of a, an advantage there in terms of it is hard and you do need to, just bent and sometimes just like brainstorm. It's Friday night and you just want to talk about the business and like being able to just openly share your thoughts.
So it's tough being a solo founder. I don't recommend it without any support. But for me, I just generally move quicker. And I would consider myself a pretty decently rounded generalist where I can manage sales teams. I can do sales calls, I can market a business. I know how to manage product teams.
So it's tough, it's it definitely has its drawbacks in terms of you're doing all the work instead of splitting the work. My wife's not helping me build MicroAcquire or anything like that, giving me that support piece. But if you are a solo founder, I think other things that worked really well for me was like, Business apps.
I, two angel investors, one of his names was Christian Friedland and he was like a almost a dad to me. He did make a lot of angel investments, maybe made three or four and he built a company called build.com. It's basically think of like home Depot online. Did you a couple billion in GMV per year?
And the guy just a brilliant entrepreneur and we got along really well and we talk on a near daily basis. If you don't have a co-founder, I highly recommend getting, a mentor that's going to be there along for the ride. Another thing that's worked for me is I'm a CEO. So I worked with a CEO coach.
His name is Tim Porthouse. I met him through a peer CEO group called CEO. So definitely no huge advocate of, when you build a syrup, it's a decade long journey and the more people you can put in your corner, I think the higher, your chances of success are going to be. My decision to be, a solo founder is mostly around is I just like to go, I have an idea.
I just started working on it immediately. I'd say that's probably one of my biggest strengths and biggest weaknesses is I'm a terrible planner. I just, if I have an idea, it just comes out and I just go
MPD: okay, interesting. So that's kinda your background, how you got here, but I also want to spend a little bit of time on the M and a process while we've got someone living this, because I think there are a lot of people who are trying to figure out, navigate this.
I've sold a handful of company. Wide variety of outcomes and seen in those different outcomes, different processes. I just wrote a post on Benzinga that was about some of the things I learned last year. And I feel like I'm constantly learning on the MNA stuff. And the irony for me is I used to be an M and a consultant, but it's very different doing the consulting work and being, on the cap table, trying to go through a process.
It was just a different machine, different set of things you have to manage now that you're knee deep in this. You're probably seeing more M and a processes than arguably just about anybody else. Could you give us some basic architecture and how, if you were to do like a 1 0 1 on how an M and a deal works, what are the basic stages that people have to go through to prep market and get their company out the door?
Andrew Gazdecki: Yeah, definitely. So it depends on. The size of the business to start. But obviously the larger the business, the more complex the process is going to be. But the general process is number one three, or what is your ideal outcome? If you have a good business, you might have multiple options and figuring out what that is, can really help narrow down, your buyers, or at least you really have from when you're speaking with buyers.
And then number two is just, being prepared and taking, that acquisition process seriously. And what I mean by that is have, proper, do a book put together, put everything in a data room put together, a SIM and some of these Sims that you put together, like the ones that we put together, migrant work.
50 plus pages long. And then once you have all that prepared you're going to want to do some buyer reach out, or maybe there's some strategic buyers that you think will be an ideal fit for your business. Those are usually harder to land just because you're literally interrupting their, whatever initiatives they have.
So also include financial buyers, which is typically, a private equity firm. But I think, the biggest misconception that entrepreneurs have about getting acquired is, companies are bought not sold. I think I would argue that term is not true unless you're slack or something like that.
You're growing like crazy. If Salesforce doesn't buy you, someone else is going to like, if you have a lot of leverage, but for a lot of other startups, you really do need to sell your startup. You need to. Map out who potential buyers are. You need to prepare in advance. You need to have a basic understanding of what is due diligence.
What are they, what are the questions you're gonna ask? And can you prepare in advance? So when those questions are asked, you can answer them promptly. And then also having, people in your corner that can help, that can make all the difference, like proper legal representation. If you're completely unsure of what to do, you can hire an M and a advisor or an investment bank to help you run the process.
But yeah, if we went from like step one to like step five, it's get repaired, once you find the buyer you're going to move into typically like due diligence and your goal there is really to line up buyers and you want to have. Typically what I would recommend is like a time process.
So for example, you have you say, I'm going to be taking calls up until this date. I'm going to expect either Lys or IYS until this date. And an LOI for those who aren't familiar is just basically, a non-legal as like a term sheet but to buy our company and then from there you figure out which LOI makes sense and you move forward with that.
And then you move into due diligence, which is basically like getting audited by the IRS times a hundred. It's not fun and it takes sometimes months. When I was going through due diligence for my first company I got the best advice that was, Hey, this sucks, just think of, if you just calculate, the hours in terms of what you're going to make, just keep going.
So that's like the high level overview. There's so much nuance in terms of, are you going to be staying on with the business? Is this going to be to a strategic where it's an all stock deal? Are you staying in the business at all? Are you looking for an all cash buyer? There's so many different factors at play, but those are all things that, we're trying to help with that.
Mike requires really just taking that process and just streamlining it. So it's kinda like a step one, step two, find your buyer gather L a wise move into due diligence, sign a stock purchase agreement or asset purchase agreement transferring of assets, escrow, and then close. And then there's a thousand other ways to do that.
But I think the more that we're able to streamline it what does make the process easier for both buyers and sellers? How long does
MPD: the process typically
Andrew Gazdecki: on Mike require or just in general? Maybe you could
MPD: give us a compare contrast.
Andrew Gazdecki: I've S I've seen it'll be interesting to see how things go over the next, was called like year or however long.
The markets are seeing some volatility, but I've seen acquisitions happen in two weeks, like from like LOI to closing to cash in the bank. I think that's a little fast and loose. But I'd say typically, expect like 90 days, that's a good process. If you have time, the more patient you can be depending on what your ideal outcome is the better, but I would say probably about on my group wire, anywhere from 30 to 90 days is pretty much.
But for me it took years, so it just depends, especially on the scale of the business, because as your business gets bigger, so does your buyer pool gets smaller. So if you're out there trying to sell a hundred million dollar company or a billion dollar company, or $10 billion company, your buyer pool is very small.
And so it might take years to build relationships with those individuals, unless you price it super cheap.
MPD: The the, some of the processes we've been through are typically about six months, which was a lot longer than I had expected, but there was so much diligence being done. And there was so many layers of conversation.
I think one of the things that shocked me most about the MNA cycle was I didn't understand until I'd been through it a few times that the tail end of the M and a process when you've got a counterparty and you've got a medium-sized or bigger. Every contract, which is like the connective tissue in the company.
It's like the tendons and the cartilage of the body ends up at some level getting renegotiated or twisted or tweaked to make sure everyone's going to be happy working, aligned up to be part of this bigger entity. And it is an arduous, thorough, painful process. Just the volume, the sheer volume of it.
Most of it's not that high friction, it's just the volume of it is crazy. So that was the surprise for me and going through it is, it took us six months and a couple of them. But yeah, I think it probably had to correlate more with the scale of the operation being sold. The number of people on the team, the number of customer contracts, things like that.
Everything had to be retooled.
Andrew Gazdecki: Yeah. On, on my group where we generate, I haven't seen like a hundred plus person company had acquired yet, but yeah, that sounds about accurate because. Yeah, you're essentially combining two companies and you have to have everything, sound and stuff. Yeah, that makes complete sense,
MPD: Or are people in the similar comp tiers, but to get to align those between the companies, it's just a lot, I love what you said before about companies.
The adage bought not sold not really applying. I think the subtext of that phrase historically was you make a lot more money when someone's chasing you to buy your company than you do when you're trying to shill it. But I wonder if that phrase came or was Purdue, manifested before there was a really institutional market of people in firms buying companies.
There's so much private equity money out there. There's so many firms where they have to buy something or they're not doing their job, or they're not going to put up generate yield for their investors. So there's a real motivation for people to buy smart, make smart investments and buy companies, even if they've never heard of you before you haven't developed that relationship, that may not have been the way it was 20 or 30 years ago, 40 years ago before the private equity industry was so developed.
Just an interesting side note. I hadn't clicked until you said that, but I think that might be a phrase from before the sophisticated private equity market was developed.
Andrew Gazdecki: Yeah. W I can say that with a hundred percent certain, even, just thinking about like 10 years ago or even five years, even when I, even three years ago from where I sold my business when I was approached by the private equity firm that bought my business I didn't know too much about private equity.
I didn't know how many of these firms existed. But I can tell you, there are legitimately hundreds of them, if not thousands with the huge balance sheets and you're correct. They are all looking to buy pretty much kind of the same thing, at least from my vantage point, which is just, the high growth SAS companies.
So it's definitely a really good time to be a founder because your options for exiting your startup are just increasing exponentially and that wasn't there five or 10 years ago.
MPD: Yeah, really interesting macro trend on this, I think in tech private equity didn't really touch it in the last 20 years ago because the business models weren't well understood, right?
VCs tend to invest in growth and PE shops tend to buy cash flows. They want steady cash flow and they can work some financial engineering and value out of the company and they can make a buck on it. And I think tech was just perceived as too risky. Growth oriented people didn't know there wasn't standard metrics and KPIs and understand the business models.
And that shifted, there was some firms that pioneered and I want to say first decade of the century firms like silver lake and others that came out and put, planted a flag saying, Hey, we can do this steady cashflow game in tech because there are steady cash flows. We understand these business models, they are predictable.
And since then, I think it's proliferated so that the world of opportunity for founders now is different. I think we're not going to see them buying the breakout companies and venture portfolios. Private equity buyers are known for not paying the highest price. If they get no bake-off with a strategic and other company or the opportunity to public, but the middle of venture portfolios bottom, there's going to be a lot of opportunities.
And I think we're going to see more founders. Finally merging with their private equity counterparts. Whereas these two industries have been running in parallel for a long time, but not doing a lot of business together. So it's exciting. I think it's going to put more money in entrepreneurial pockets, help more people fund new entrepreneurs, accelerate the whole machine.
And in the process of doing that help the private equity folks do better with their performance. So I think it's actually a pretty interesting crossover moment. I think it's going to have big impact on the broader economy.
Andrew Gazdecki: Yeah, I completely agree. Like I said before, just the amount of private equity firms being founded and, deploying capital, especially, it'll be interesting to reflect on, what this next year looks like.
Cause there are going to be some companies, like you said, where, they're not going to be able to reset a strategic multiple and private equity is gonna be probably the buyer of those business. And that's not a bad thing. That's great. You are correct in terms that financial buyers almost always pay lower than a strategic buyer, but they're in the business of buying company.
So when you go to market to financial buyers, I've seen deals that are all cash walk away from the business in 30 days, quick due diligence. There's also been a trend in terms of, just like with venture capital, maybe compared to 20 years ago when we had the, I wasn't, I was making eBay stores in the two thousands, but I think, venture capital is really, become, a partnership business with founders and Tono.
You get these great investors that really help your business. And I think I could see that becoming a trend with private equity where maybe they take, more small bites first in terms of, partial buyouts and. Full buyouts later on making it, a more founder friendly process that's already starting to happen.
But I can see that becoming like the industry norm over time.
MPD: Yeah. Two comments on that one. When I definitely want to be clear, I don't think private equity exits are bad. They just tend to be not as high as the strategic, but they're still great for the founders and people do very well.
But to, yeah, I think you're making a point that I hadn't thought about. There's probably through these two oceans colliding going to be some real innovation and a couple of in the private equity model, real opportunity for that. Just shifting back to some knowledge share for folks listening.
What are the top three things you would suggest someone remember or do top three tips for selling a company? You've seen a lot of this stuff now what's the most you can share with.
Andrew Gazdecki: It's all pretty, pretty basic, but also complex at the same time. And I think it all comes down to, the top, top three is number one, again, I'm assuming your businesses, let's say under, 20 million, that's what I see the most, but I don't want to speak to above that because I don't see it that often.
But be honest, be, very transparent with your business. I think, bring your business in front of buyers with warts and everything. There's a certain, if you haven't raised your pricing, if you haven't tapped into certain, ways to grow your business be honest about why are you selling understanding that, this isn't just like buying a car where you just hand the keys and you're.
So the more that the buyer trusts you and, obviously that's going to be come out. It's really going to come out in due diligence. But I'd they're just, being honest being upfront with, really what you're looking to accomplish and then being prepared in terms of, just like with anything is the mama bear.
You are the more serious you appear to specifically financial buyers and also strategic buyers as well. Because people, Corp dev people and people in private equity, they look at deals all day long. And the more serious that you can appear the you're going to make them feel like they're not going to waste their time if they really started taking in.
So I would say be prepared, have a data room, have a clean, a three-year PNL if you have one available. And then also just, be prepared in terms of. Understanding, what to expect and due diligence, what to expect through the legal process. How do you, how are you going to find these buyers?
Mike requires a decent way.
MPD: It sounds like you could help out front all of those fronts,
Andrew Gazdecki: the training as well. We can add another part about Mike required too, is if you need an M and a advisor, or if you need an investment banker, or if you need a, someone to help you with what is your company worth?
We have a directory within my repair where you can hire these people to help all the way from legal counsel to tackling to, and everyone involved in MNA transaction. So I would say build your bench, be prepared and just be honest and just understand what your startup is worth. And then in terms of, when you're actually speaking to buyers, don't be afraid to walk away.
Like the person who wins in negotiation is a person who cares at least. A buyer is always going to be looking for a way to, de-value your business just because, everyone wants to deal so to speak. So if you have a certain number in mind and you're not going to deviate from that, and it's a realistic valuation stick to that unless it's 10% low, lower, and it's going to be a great outcome and extra 10%, isn't going to materially change your life.
But that, that would probably be my top three. I know it's pretty basic, I think the basics are usually the most important. Totally agree
MPD: on that. It's good advice. What do you think your industry needs? You're out there putting together a lot of the pieces of this puzzle.
What are you not doing that you hope other people will pick up the slack on?
Andrew Gazdecki: I would say just more innovation. I think really. Acquisitions, just, there's so much that we can do in terms of using data to help startup founders, really understand what their business is worth.
And, sometimes you know it, isn't a hundred times in your recurring revenue. That's just not what the market is currently paying to acquire your business standardization across, legal docs like w I think, one of the most interesting documents that has, been created for the startup ecosystem is the safe by Y Combinator that had been used by so many different founders to raise capital, standardizing, an LOI or standardizing, a stock purchase agreement or an asset purchase agreement.
And really just streamlining that whole process. I think that's kinda, what's needed to really. A lot of different startups get acquired. And then my hope with MicroAcquire choir is we obviously do work with a lot of sophisticated buyers, but there are a lot of people that are, really starting to get interested in entrepreneurship through acquisition.
I think we have the opportunity to educate and power people on both sides, which could potentially unlock, hundreds of millions or potentially billions of dollars. If we're able to create, a flow that builds trust and confidence and helps, both buyers and sellers, every step of the way of the acquisition process.
Long story short, I would say just, more automation really streamlining things, standardizing things, and just making things a little less confusing would do the industry a lot of good
MPD: we're big believers that entrepreneurs are the driver of a lot of social issues. What you're doing is important.
It's helping people streamline get more done faster. Anyway, thank you for being on Andrea. We're grateful for your time.
Andrew Gazdecki: Yeah. Thanks mark.
MPD: Andrew's got a big mission at MicroAcquire acquire. Obviously I'm super pumped about it. I think this is exactly the kind of thing we need to help moving society forward. Some brief housekeeping. I'm heading off for vacation next week, little family trip with the kids. So look for the next pod coming out in two weeks.
And here's my pandering. If you liked what you heard, please look us up at a like or a five star review and feel free to share with your friend. And you can find me on Twitter at MPD. And to hear more of my conversations with innovators, you can subscribe on YouTube, Facebook, or any major podcast platform.
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