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patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

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Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

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    1. Patrick McKenzie‏ @patio11 18 Nov 2019
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      Patrick McKenzie Retweeted Andy Artz  🌮

      There is, in fact, such an absurdly high of demand for this business by buyers (see the thread for examples) that I think it is going to bootstrap a supply chain for them. We're already seeing strong inklings of it in the MicroConf community. h/t @tylertringashttps://twitter.com/artzandy/status/1196519171393081344 …

      Patrick McKenzie added,

      Andy Artz  🌮 @artzandy
      A friend is selling their niche, profitable SW business - $1.5M rev / $500K net income. Are there any PE buyers at this nano-scale?
      8 replies 15 retweets 163 likes
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    2. Patrick McKenzie‏ @patio11 18 Nov 2019
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      "Absurdly" meant as an intensifier rather than a pejorative here; the economics absolutely work out for the PE firms and their LPs. (As to whether they work out for the people selling the software company, "It depends" but I personally have no regrets around selling my companies)

      1 reply 0 retweets 17 likes
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    3. Patrick McKenzie‏ @patio11 18 Nov 2019
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      What does a supply chain look like for software companies? Well, think of how YC/angels pass companies to Series A firms pass them to ... pass them to an IPO. Particularly concentrate on early stages there around e.g. market selection, prototypes, meat-and-potatoes execution.

      1 reply 1 retweet 18 likes
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    4. Patrick McKenzie‏ @patio11 18 Nov 2019
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      If you think that the rate limiter is simply engineering hours, then you'd want the supply chain to all be in-house at a company which you control, where you pay teams of W-2 engineers to ship 8 SaaS companies a year and sell 6 of them in year 3. I bet rate limiter is founders.

      2 replies 1 retweet 49 likes
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    5. Patrick McKenzie‏ @patio11 18 Nov 2019
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      In which case supply chain looks like people identifying would-be founders, staking them with enough money to get the ball rolling, and educating them about exit options at the appropriate time for their circumstances.

      1 reply 0 retweets 24 likes
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    6. Patrick McKenzie‏ @patio11 18 Nov 2019
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      "Sketch the math out for me." You could imagine a hypothetical SaaS company with 1 to 2 co-founders going through ~$100k of living expenses before revenue came in, covering reasonable engineering salaries after 12~18 months, getting to $500k profit on $1.5M ARR in 3~4 years.

      1 reply 0 retweets 26 likes
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    7. Patrick McKenzie‏ @patio11 18 Nov 2019
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      That company is probably worth $2 million to a PE buyer; more if the growth rate looks attractive.

      9 replies 0 retweets 19 likes
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    8. wily mandala‏ @babarganesh 18 Nov 2019
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      Replying to @patio11 @tylertringas

      are there tons of opportunities of this scale? i could see doing this in a couple years

      1 reply 0 retweets 0 likes
      Patrick McKenzie‏ @patio11 18 Nov 2019
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      Replying to @babarganesh @tylertringas

      Tens of thousands of them, minimally. There are individual firms which have bought hundreds of these companies.

      4:42 PM - 18 Nov 2019
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      • Raghav Agrawal wily mandala
      1 reply 0 retweets 2 likes
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        2. wily mandala‏ @babarganesh 18 Nov 2019
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          Replying to @patio11 @tylertringas

          can you point me to examples?

          1 reply 0 retweets 0 likes
        3. Patrick McKenzie‏ @patio11 18 Nov 2019
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          Replying to @babarganesh @tylertringas

          Constellation Software is a publicly traded (in Canada) company with this model. If you're looking for the portfolio software companies, find a software PE firm (examples are abundant) and look for their portfolio. They're pretty loud about them.

          1 reply 0 retweets 6 likes
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