@adam_keesling - I’ve talked to dozens of software businesses in the last

I’ve talked to dozens of software businesses in the last two months. There’s a wide open opportunity to buy $1m - $5m ARR, profitable software businesses. More: My job is to help bootstrapped software companies sell their business, so naturally I talk to a lot of software companies Many of these end up being too small for us (our sweet spot is $8m-$25m ARR), but in talking to them I’ve learned a lot about the buyer universe for these companies Basically, if you’re a $1m - $5m ARR profitable software business with decent metrics, you’re likely worth an exit, but there’s fewer buyers for you A bit larger and you are in great shape. At $10m ARR, there are a TON of software funds that will buy your business. This size is right at the beginning of being large enough to be a “platform” investment for them. Level Equity, Serent Capital, Marlin Equity, Banneker, and many more will take a serious look. Some might even dip down and buy an $8m ARR business But there’s a gap in the buyer universe for smaller than this. A few reasons why: 1. These companies are (often) lower quality. Smaller companies don’t have strong management, repeatable internal processes and multiple sales channels. Sometimes they have 1-2 customers that make up half their revenue. Sometimes the founder does 7 different jobs, or is the only sales person. Nonetheless, they aren’t high quality. 2. The small size (“subscale”) makes it difficult to attract talent. If you’re a F100 company, or a startup with $50m in the bank, paying top dollar to executives to solve big, important problems is reasonable. For a company with $4m ARR, it’s unreasonable. Because of the scale, you often can’t attract high quality talent. 3. PE funds - the most reliable buyer - naturally move up market. Imagine you’re a PE fund: you raise a $400m fund, make 6 investments of $65m each, and they perform well. What’s your next move? It’s likely to raise a $600m fund - LPs are happy, and you can make more money with larger funds. Now with that $600m fund you still need to make 6 investments, but now they are at $100m each. Do this a few times and it’s easy to see how PE funds naturally gravitate to larger businesses. It takes a lot of discipline to stay at the same level. “But large competitors in my industry want to buy us”. This is a common misconception I’d say something like 60-80%+ of large corporations are just plain bad at acquisitions. Prime example: we chatted with a company that was trying to sell to a well-known tech giant and it required 3 board meetings (once per quarter) to make a decision. 9 months! This is why it’s so important to have an understanding of private equity funds (or PE-backed strategic): the know how to buy companies Anyway, the conclusion is this: there are a lot of $1m - $5m ARR businesses that have great qualities about them, even if they aren’t perfect. If you have a competitive advantage to overcome the imperfections, there’s a real opportunity for good acquisitions