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 …
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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)
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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.
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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.
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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.
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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.
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That company is probably worth $2 million to a PE buyer; more if the growth rate looks attractive.
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Replying to @patio11 @tylertringas
Wouldn't it be worth a lot more to the founders, though? Or, at least, why assume that it WOULD it be worthwhile to sell at that particular point in time and at that particular price range?
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Depends what they're doing and what their plans are, right? If their desire was to keep running a business in a market they love for forever, then probably not. If the plan was always to find a hole in capitalism, fill it with a few years of sprinting, then buy a house... well.
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From where I stand as a consultant, I can squint and see the appeal. Solving biggish problems, with the ability to pick a new one as things start to settle into the successful grind, sounds like my kind of living dangerously.
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