Summary

In this conversation, Jon Stoddard interviews Andrew Pirno, who shares his journey from working in a venture studio to acquiring small SaaS companies. Andrew discusses the lessons learned from his past experiences, the shift in focus from venture capital to cashflow, and the strategies he employs in the acquisition process. He emphasizes the importance of building a strong team, managing partnerships, and the challenges of trusting financials during acquisitions. Andrew also shares insights on his future plans for a fund and the inspiration he draws from industry leaders.

Takeaways

Andrew Pirno transitioned from a venture studio to acquiring small SaaS companies.
He believes the goal for first-time entrepreneurs should be cashflow, not just growth.
Lessons from his venture studio experience shaped his current acquisition strategy.
Acquiring companies allows skipping years of development and guesswork.
Andrew emphasizes the importance of a strong team and clear communication in partnerships.
He is focused on opportunistic acquisitions rather than a rigid investment thesis.
Trusting financials can be challenging, but payment processors provide a reliable source of truth.
Andrew aims to buy below the current private equity infrastructure and sell into it.
He values transparency and honesty in business dealings.
Learning from industry leaders like Andrew Wilkinson and Charlie Munger influences his approach.

 Watch the Interview:

Transcript

Jon Stoddard (00:00.11)
Great. Here we go. Welcome to the top &A entrepreneurs podcast. got Andrew Pirno today. How you doing, Andrew? Doing all right, John. How are you? Yeah, good. So you and I reached out because I saw you did a podcast with somebody else, but you're doing some micro acquires. You got to, and then a company called XOXO Capital too. So tell me about that. Where did this all start from? I mean, why did you just, just like it?

I don't want to work for anybody else. want to do it myself. So I'll start midway through the past 10 years or so. I worked at a venture studio for a number of years. I was there head of engineering. So venture studio is a little bit different than traditional venture capitals, right? So instead of just kind of investing, you are actively building. like we may come up with an idea.

And we may choose to build that and fund that ourselves, right? With the ultimate goal of spinning it out, raising outside capital and creating a proper company. It was supposed to be like a startup incubator type deal. We got a couple million bucks to do three companies and what ended up happening, there were a ton of lessons learned and I draw a lot from what we're doing now and how we're thinking about setting things up from the venture studio. Cause I don't think we got it right. mean, well, we definitely didn't get it right.

because what ended up happening is one of those companies ended up being kind of the leader, right? Like in any given portfolio of companies, right? You have some winners and some losers, right? It is kind of a power loss thing. One of those companies, you know, we ended up taking in a lot more investment. And at a certain point, those investors said like, you guys got to stop messing around with the studio stuff and just go focus here. So I became CTO of that.

a company, was, was, raised about 8 million bucks. We were on the full venture train and we fell off at some point. And well, we didn't, we didn't hit our numbers to get a series A and we were just kind of, found ourselves in no man's land. So what happens when a venture company falls off the venture wagon? Well, they generally they die. And, and it baffled me that we spent however many years, four or five,

Jon Stoddard (02:18.754)
however many millions of dollars, eight, and the value reflected in the market for when we went to go do kind of an asset sale wasn't commensurate with the effort that we put into it or where the business was. And it occurred to me that A, I could go out and acquire a company like this that somebody has invested $8 million into for a couple hundred grand or I don't know, maybe a million bucks.

skip the four or five years of the pain in the ass that was building that product and figuring out how it should work, what it should do. And so when that company spun down, that's when I put this group together to start kind of buying small SaaS companies, just pure software companies, and skipping that year two or three or five of guesswork and just getting right to kind of growth, product improvements, potentially scale.

Yeah, I just had a conversation earlier this week with a company that was growing at 40 % per month. And they took $2.4 million from DC's and the way the industry was trending was, I mean, it was a hosting solution. Amazon and Microsoft are now its biggest competitors and the DC says that we're out, we're done. So he had to figure out how to get out of the investment. He bought them out.

and take a lot of debt on that. And it's still, I mildly profitable operation, but that's what happens. I mean, if they said, if it's not going to grow 40 % more, we're out. Yeah. Just to be clear, I, I am not anti VC. I have a bunch of friends that are in VC, like grit, really great people, super value added people. I just think the type of deal that is a venture deal is not what, the, dogma coming out of Silicon Valley says that it is.

Dogma coming out of Silicon Valley says, for any ambitious human on planet earth that wants to go start a company, thou shalt raise a fuck ton of money and thou shalt grow or die, right? Like that is kind of the ethos. And I actually think for a first time entrepreneur, the goal should be cashflow, right? It should be like financial independence and you should try and build a business.

Jon Stoddard (04:37.015)
that is a proper business, right? It's not based on these kind of like crazy evaluations. It just makes proper money. And don't get yourself in some of these sticky positions. I, know, venture is amazing for creating markets, but I think for most businesses, they're not trying to create a new market, right? They're trying to just build a profitable software company and it may not be venture scale. And there's absolutely nothing wrong with that. the, again, like the kind of framing that's coming out of

Silicon Valley or TechCrunch or all these companies, I think really pushes people into this scenario where they're trying to build a venture scale company. And frankly, the idea was never venture scale, right? And they would be perfectly happy with a $10 million a year business. Yeah. I mean, you look at MicroAcquire, I mean, it's got so many businesses. The only charge is $300 per company to list on there and all the companies that those are companies that will never get VC back, but it was...

They think, a lot of them think they are, but that's just not gonna happen. I don't think it's going to happen for them, but from, and just for clarity, I know Andrew at Microquire a little bit, they charge us as buyers an annual subscription fee. So they don't take any money on the transaction. So it's really kind of the Robinhood of acquisition marketplaces, is great. It's not so much that the companies that we see are

you know, whether they're venture scale or not, to be honest with you, it's mostly younger. Well, age, age isn't really into it. It's, mostly entrepreneurs that just don't know how to build a proper business. So we have one deal right now under LOI that is two gentlemen midway through their careers, maybe three quarters away through their careers. They spotted an opportunity. They built something, but they have no intention of going full time on it. And, and they hit a scale, they hit a point at which they saw

that they themselves were hampering the business's growth. And so for us to go buy that and put some capital behind it and some more resources and dedicate some full-time staff to it, that's gonna be our alpha on that deal. The other kind of category of deal that we see is that there's kind of two, maybe first-time entrepreneurs, generally software developers for the things that we're looking at, and they don't know what marketing is, right? They couldn't sell me a million bucks if it was free, or I don't know, there's some...

Jon Stoddard (06:59.755)
better analogy there, but like they're not salespeople, right? They're just engineers and they hit a market. They got some traction in that market, but to say that they could scale it up 10 X, I think would be false. Like that they're probably not the right people to do it. Yeah, I agree with that. I've had a couple of conversations with sellers there. Like, you know, the software engineer goes, I don't know anything about marketing. I mean, I know how to build something. And if it's not taken off by himself, it's just not going to,

he's going to have to hand it to somebody else or bring somebody else on. Yes. And those are the opportunities where we're looking for. We've bought three, done pretty well with the first three so far. Yeah. So let's rewind now. The VC company, they say, hey, look, we've got to deboss ourselves from this or shut it down, whatever the case was. And then you were CTO and you just said at some point, know,

I've got a different thesis. I want cashflow companies and I want companies that are already in orbit where I'm you know, working so hard to get them to orbit. Where was that? I mean, how long did that take? And you figured that out and said, this is what I'm a new. Well, I mean, it took up to, you know, last year for me to really kind of sink my teeth into the idea that going from zero to one sucks. It's really hard.

I've done it twice. I've built like two, I currently have two six-figure businesses. One's just a straight services business, which is kind of interesting for me. The other is a software company. And it's really tough. It's really tough. There's a lot of luck involved, but going from zero to one is hard. Going from three to 10, that's when you can start thinking about like a playbook. There's a lot more of a straightforward path and a well-worn trail for going from three to 10 than there is from going to zero to one. Zero to one is...

Sometimes it's a lightning strike, sometimes it's grits, it's magic. it's the owners, founders pissing on each other's couch. It's just many ways to die in the West. that's right. so yeah, out of frustration, really, I said, you know, why don't I put a group together? We'll just do some with our own cash to start, to see how this goes. This is the thesis that going from three to 10 is easier, at least more logical than going from zero to one.

Jon Stoddard (09:15.329)
And so far it's been right to the point where now we're looking at doing deals where we're bringing in outside investors and trying to move up stack a little bit. Yeah. So the first company you bought, was that listed on Microquire or was it somebody in another network? No. So we've only bought, so we bought one on Microquire and we sold that same one on Microquire. So we did that one, the full Microquire 360. The other two we, we sourced. They were off market.

that's been an area of focus for us is to find off market deals because frankly, a lot of the valuations on these marketplaces are just not based in reality. That's so true. 10 Hex time sales? Really? Dude, you only got 70,000 a year in income. Yeah, but that's kind what I'm talking about. if you Google this right now, that's what

like that's what Silicon Valley will tell you is that you can take, should expect 10X top line ARR. That's your company's valuation. And that's true for a strategic acquisition. Yeah, is price value. If you're a big company and you could tuck this in and get your IRR of your investment, MOIC back in one month because you just plug in the technology to your channel. Yeah, sure.

Yes. I'll give you 10X. I'll give you 20X. Exactly. But for these other little businesses where it's not a strategic acquisition, we have to base it on cashflow. Yeah. And you're starting off with the micro cap companies really small, below a million or where are you at? So we're just approaching a million now with these deals that we're doing on a deal by deal basis. That's where our target is currently.

But the ones we did just with our own cash were below that. Yeah. And they were profitable or did you or some are non-profitable? They were all profitable and we ran them all profitably. So whenever we did any kind of engineering work or marketing work, we took it out of the cashflow that came in from the cash revenue. Did you use your cash to purchase it or any kind of creative financing like, you know, I'll put a 20%, 30 % cash down.

Jon Stoddard (11:35.917)
30 % seller financing, maybe some. Pure cash. Yeah. What's the price? Here's the wire. Yeah, that was it. Yeah. And, and then you, you're a marketing guy, well, you're CTO guy, but you have a marketing team and you take this, like, let's take the one that you bought from Microquire. You bought it and then you just put marketing to it, or you put people process products to it or.

What did you do to just turn around and? So that one was cool because it was an XY Combinator company. The real story for that is that we had a kind of falling out with one of our partners, but that's kind of secondary. What we did when we bought it is A, we saw that it was underpriced, so we got it for a great deal. B, when we got it, the technology had not been touched in about two years.

So there were some really quick wins that we could do by just modernizing the technology a little bit, making it little bit more robust, making the product a little bit more stable, right? So that we were not bleeding out on our conversion rates, which is exactly what was happening. And these guys, and this is, again, kind of is part of the reason we bought it is their investors told them that this product they had was not venture scale. So they either had to switch products or, you know,

their investors were out. Yeah. And so we took that business and we ran it properly and you know, patched it up, like put it in a lot better position for somebody else to take it on and then ended up selling it to another group that's going to do just that. Did you how was your IRR or your return on that? Did you three exit or five exit or? for that one, I haven't.

I'm generally like, if you follow me on Twitter, I'm super open with all these numbers, but this one, just haven't asked the sellers yet if I can share it. So that one I consider it was not, the win was in kind of knowledge gains about how we do diligence and all these things about how we kind of patch some of these things up, but it was not necessarily a financial win. The other two that I can talk more freely about just because we own them, we have 5X1 since we bought it in November. We have 3X another one since we bought it in mid January.

Jon Stoddard (13:53.495)
So those numbers are, the numbers are across the border looking pretty good, but those two that we still have are looking pretty good. Yeah. So I have two questions in my mind. Now, did you have to deal with any of the venture capitalists that own part of it, or do they just say this guy can sell it?

that's always the, that's always the first guy. got a partner that's does a lot of deals. And it's always like, Hey, we took VC money. And the first question we ask is where are the VCs at with that? Because they could, they're a stakeholder. could veto it. Yeah. The, think in, in absolute terms or well, in relative terms for these VCs, that dollar amount that it was sold for just wasn't like, didn't matter to them. So they were.

like, great, you guys can go sell this. It was like, you know, selling shit at a garage sale, basically, you're like, I got 100 bucks, like sweet, extra 100 bucks. That's how they thought, that's how it felt like they were treating it. It's already written off. Yes, that's exactly right. Yeah. And these, I'm really curious about, you know, I had a, worked on a startup called Hemp Exchange and they, they had, it was a marketplace and they had

two million in revenue in about nine months and then $650 million in merchandise. And the two owners, one was 60%, one was 40%. Well, it was less than that because I own five, but, they started pissing on each other accounts and blew it up. I mean, how do you find somebody to, get to that point where you're, you know, like we have to depart with this guy. It's not working out. I mean, it's like,

How do you find the right contractor? How do you find the right people to work with knowing what you want to do with this fund and acquire companies? There's two levels to that. One is kind of the GP level just for us as partners. Obviously, the more aligned we are, the smoother the companies can run. then, know, contractors and employees, I think, are a little bit more straightforward in the sense that

Jon Stoddard (15:53.729)
you you do your best to hire the right person. And if you make a mistake, you know, you just communicate along the way about what your expectation is. And if that expectation is not met, then that person doesn't work out. I just think I've always tried to be as communicative as possible in those kinds of delicate, sometimes delicate situations. And that's about it. Sometimes it just doesn't work. Right. They're just not into you. Yeah. It happens all the time. Or they suck at their job.

Like that happens too. So these other two you bought without cash. Now I understand you're starting a fund also, right? You have a thesis for that fund or how's that going? So I don't like to use the word thesis because I think that generally that's it's like a bunch of kind of fluffy bullshit that doesn't actually have any real meaning to anybody. But

I will say that what we're trying to do right now is I don't have the ability to go out and raise a $10 million fund, which I think is the point at which a fund starts to become realistic, just with all the setup fees and all the shit that comes with a fund, right? Like doing a million dollar fund is not, you're losing money. Like you can't put food on the table with a million dollar fund. Yeah, it's a defeating purpose. It's just like almost a waste of time. doesn't make sense. So I would so much rather start to get really strong investors in on these

one-off deals and build the network that way. And once we've done five, 10 of those, then I can come around and say, listen, we've done a bunch of these deals. We're doing a fund that has like, I wouldn't say a thesis, but I would probably describe it as picking a market segment. And for example, we would go and buy anything for this particular fund that would be a developer tool, or we could do one for a blockchain or climate or all these other kinds of market segments.

and do it that way. But at the moment, we're just doing a deal by deal. We're just investing a lot of time with our investors. It doesn't hurt to start something like a syndicate, Angel List, where you just have a group of 100 investors you go to and say, we're looking for $50,000, a little help to purchase this company. So Angel List, actually, I reached out to them because we have effectively the same

Jon Stoddard (18:14.113)
back office requirements as a fund and Angelus won't let you use their back office for buying companies. It has to be acquisitions. It wasn't clear to me exactly why that was, but they said it was something legally on their side where they couldn't do that for us. yeah. Yeah, you're right. Tell me a little bit about your outreach. mean, there's very distinct parts of the business.

searching for the business, resource and sourcing deals. And that's very challenging to find somebody that's, know, software business and they're motivated seller. How are you doing that?

Jon Stoddard (18:56.887)
Two things, we have four partners, myself included. So there's four of us total. That's like kind of a lot of firepower. If you come from the small startup world, like I do, four people is not, that's not that small, right? That's a lot of- You quadrupled your efforts possibly. That's right. Yeah. So we can spread it around. And then the pitch that I've been making, and I should probably keep this closer to the vest than I do. But when I approach somebody, I just say like, look, and this tends to be true.

You probably haven't thought about selling and you're probably not ready to sell, but when you are, like, I'd love to just introduce myself and have a chat because this is our little startup. that kind of leveling with another founder, says like, look, your big idea was this little company, right? You've built it and made it profitable. know, we're a bunch of guys similar to you and this is our big idea, right? But like, we're just kind of a startup just like you. And we really want to see this cool thing that you've built succeed.

All of that happens to be true, which is helpful. But I think that that pitch and just leveling with them and not showing up like in a suit, right? And like, this isn't some big private equity firm, right? We're just like, you know, I'm intentionally wearing like this sweatshirt, right? Like I show up just to look just like these guys, because I am just like these guys, right? Like I've had, I've been on the other side of the table before, and this is the kind of seller that I would want to have interacted with me. Right, right. Are you with the intent of purchasing a

controlling interest of the company or, cause I see that conversation happening goes, cause a lot of founders start businesses and it goes, gosh, I got it to a million bucks. And I just can't figure out how to get to a million five or the next level, but I still want to go on for the ride, right? But I still want control, right? Yeah. Yeah. We've had, so one deal right now we're looking at, the founders are kind of, they have full-time jobs and they don't want to go full-time on this thing because I think

you know, whatever, that's not for everybody, right? Not everybody wants to go do the whole startup thing where you leave your job and maybe your pension or whatever. And there are other people, like you just said, and we're looking at one deal like this now where the founder does want to stay on. And so we haven't structured a deal like that yet. What we're thinking roughly is that we'll buy it outright and then we will give the founder a salary and then the ability to earn back some equity over time.

Jon Stoddard (21:21.003)
and that equity will be vested. So they have significant upside if we can do what we say we can do by partnering together, but we'll be buying like 100 % of the company at the beginning and then kind of dishing out equity like we would for any of our operators. Yeah, interesting. when you bring a deal to the four other, three other guys, it, they each have like a percentage of say, like one could veto it even though three say,

Great, thumbs up? We don't have to. It sounds like you're still trying to work that out. No, I don't think we're still trying to work it out. think that I, so like technically speaking, I put this group together, but do I have any other rights that some other people in the group do not? No. And so it hasn't come up where like three of us want to do a deal and one person does not, but there's a lot of like conventional stuff, particularly from the BC industry actually.

around how like partners say yes or no to deals, right? It's like strong convictions weekly held is a really great phrase to think about, right? So you come in with really strong convictions. And then if you get new data points that turn your opinion around, you just kind of, you just switch, you just switch your opinion. So I think for us right now, because it's so small and because we have so few deals, if we didn't have a hundred percent buy-in from everybody, that would be a bit of a red flag.

because we all do different functions, right? I'm an engineer, we have another engineer, we have a finance guy and we have an operations growth sales guy. So if we're on all four not aligned on a particular deal, we're gonna be weak in that particular area because again, these businesses even at low seven figures, like, you know expensive as software engineers in Los Angeles, like we can't afford, you know what I mean? We can't afford to staff all these guys. Like we're actually doing a lot of the work so far, which of course is not the ultimate objective, but.

That just is kind of what it is right now. Yeah. Yeah. I mean, there's no perfect deal that comes about. And, you know, if everybody says no, every time something comes up, you'll, you know, you're to die of thirst. Yeah. And that's not what's happening. It's every, it's been, it's been good, but we're still, we're still early. think I'm eager to do five of these, 10 of these over the next year or so, and really start just getting some more reps in.

Jon Stoddard (23:44.113)
And I think we'll know a lot more at the end of that. And I always just try and be transparent with anyone coming along for the ride with us that we're new and we're figuring a lot of this stuff out, but we will do it while communicating really clearly to everyone involved. Is your goal to grow at say specific level 3X, 5X, sell it, or do you want to purchase a platform company and kind of build around to it, get to a much higher multiple?

Yeah, that platform approach is a really cool idea. I feel like that happens by accident, right? If you're opportunistically buying stuff and the big winner in your portfolio of 10 becomes like an anchor that you want to then go grow by acquisition. I think that's a really cool concept that really only comes about kind of organically. I think it's really hard to shop around and say, hi, I'm looking for not only like all the other deal terms, but like,

this is going to be the anchor for the fund for the next 10 years. I think that's a really difficult thing to predict and go out and hunt for. So it's a cool strategy. I think that right now, again, we're just focused on being a little bit more opportunistic and seeing what comes. Yeah. And when you guys, the four of you, you said you each have different disciplines. Do you say, I mean, if you go to a house, I'm going to rehab this house. He goes, hey, I need the bathroom needs to be done. The kitchen needs to be done.

that'll add X amount to it. If you don't have that, if you in a section in the business, do you say, would you go out and hire it or does the expertise need to be in house? We would definitely go out and hire it. But on the diligence side, if Henry who's running the financial says like, this is funky, we're going to have cashflow problems because of XYZ,

even though we might say, the engineers might say, this looks great. And our growth guy, Danny might say, I have a bunch of ideas on how I could do this, right? That's gonna be a pass for us. Similarly, if they're excited, but the engineering sucks or the product sucks, or it's gonna be a lot of work, then we'll pass based on that. So the conviction side is colored by the discipline that we are focused on at the moment. And again, that's kind of why it's so important that all of us are aligned because

Jon Stoddard (26:01.417)
if any one of those three engineering products or growth are misaligned, engineering, would say growth and maybe financials, those are the three, then we're gonna have problems, right? And so if all four of us are aligned on each of those fronts, then maybe we'll make fewer mistakes. Yeah, no. Have you ever considered purchasing a company that if you saw it come across your board, say, it's not profitable, but

you saw a clear way to make it profitability. Would you add that into your deal flow sourcing? The way I've been thinking about doing. And then let me interrupt you because a lot of the businesses between zero or $1 million just haven't totally figured out their market fit yet. So that's a possibility. And I'm not saying you have to plug it into something a bigger channel. mean, well, geez, they're

Maybe the people weren't seeing the opportunity. We can make it profitable real quick.

We would go first as GPs with our own cash before we brought outside investors in for an experiment that we haven't done before. I'm running this relatively conservatively. Could I go try and really blow out a fund at five, $10 million right now? think maybe, I could maybe do that, but I would so much rather just take it easy, do five of these, be really conservative, really just, you know, I love pitching investors to be honest, I don't know why.

but it's so much easier when you can just post really great numbers. The conversation is just so much better, right? Like right now I would have to go out and like, there's a lot of caveats like, okay, we've done three and the numbers are great, but the numbers are small. It was pure cash. We're kind of like cash flows. We're kind of cash pour relative, you know, most of the time. It is going to be so much easier in a year. So when we've done like five low seven figure deals, we're still posting great numbers.

Jon Stoddard (27:58.093)
That's all the slide deck needs to be is that one page. The rest of it is just context and, you know, them getting to know me a little bit more, right? Or us as partners. Yeah. Do you have a pretty good sense? You know, if you're a rehab in a house, you say, this is going to take $300,000 to get to the market cops. and we can buy it. If we can buy it for a hundred thousand dollars, $300,000, and we'll sell it at $600,000. You have a pretty good sense that you could.

take a look at a company, know what it's actually worth, the time that you need to put into it and the resources you need to put into it to get to that. Yes, all of that except for the sale price because I still think this market where we sit is figuring out how to value these things. And frankly, in some cases, I worry about who's above us. So in an ideal world and we'll get there eventually, we buy below the

current private equity infrastructure and we sell into it, right? So we buy these things lower, we put a team in place, right? We grow it up to where it's a deal size that a private equity group could actually look at, right? Cause it's gonna be, I mean, it would be too expensive for them to do like a million dollar dealer, a $5 million dealer for some of these big companies, a hundred million dollar deal is too small. It's annoying. Yeah, yeah, yeah. So if we can take, if we can buy below that existing infrastructure and sell into it,

then that's gonna be our huge alpha because we're gonna get like multiple expansion, all that kind of good stuff. I don't know when we're gonna get there. I think it's gonna be as we kind of move up stacks, so to speak and start buying slightly bigger companies. But we do have a pretty good sense so far of what's missing, especially in the context of, and this is all we're focused on really like B2B SaaS, B2B software companies.

those look, smell and feel and taste relatively the same. so doing this for 10 years, right? You just kind of pattern match and say, well, the pricing sucks. This is the weirdest pricing I've ever seen. No wonder people aren't upgrading their packages. We just need to do these like, you know, tweet little things here and whatever. Yeah. Like we ratio or whatever.

Jon Stoddard (30:14.605)
Yeah, we bought one and the price is one of them. The lowest package was like $7 and 90 cents. I'm like, what the hell is $7 and 90 cents? Like, is this milk? Like, do it like there's no reason we can't just triple this. And we've been we did and like the product's worth that. It's it's that good. And lo and behold, like, you know, we've tripled revenue. Yeah. Who do you look at or kind of a model that's going for? mean, I like to talk.

about Tiny Capital and what's his name, Wilkinson over there. He's got a great little model purchasing, know, a little bit higher than yours, I think, but he had a lot more capital to work with. Well, yeah, I mean, Andrew Wilkinson's the man. I haven't met him yet, but I would love to at some point. yeah, he's got to him on a podcast, but he's on sabbatical right now. is he? Okay.

Yeah. I mean, it's, tiny capital. And then above that, you know, I know Andrew looks up to Charlie Munger a lot too. And I read a lot about his, his thoughts and yeah. I mean, tiny is like, I think they're close to, or if not surpassed a billion in like assets under management, so to speak. yeah. He was, he was just doing it with his own cash. I mean, even my service business. So Andrew started with a service business, right? He was doing design.

that kicked off excess cashflow that he then used to purchase businesses. I have a service business, but like, I don't know how the guy got so much cash out of these little service businesses, man, cause it's just like, there's a little bit extra going around, but not, not much. you know, think if I, story was correct, his, some piece of some technology he wrote or did for people was purchased and he had some royalties from it. correct me for, you know, I might be wrong about that, but

That seems like his timeline there, that happened all of sudden he started buying these, you know, five to $15 million SaaS business. Now he's got what? 10, 20 of them? Yeah, he's got a lot. I think it is closer to 20. And some of them are like sizable, like public company size. Yeah. I like Charlie Munger. Have you read his book on the Mungerisms? Yes. Yeah. Charlie's an almanac? Yeah. He's it's,

Jon Stoddard (32:35.593)
It's nice to hear somebody so smart talking about avoiding mistakes. That was the kind of big, the big insight I took from it. Here's a guy who's really, really smart and all he talks about is not making mistakes, right? That is going to be what, that's going to be the secret to his success is not making mistakes. Yeah. What does he call it? says like, Hey, if I wanted to do this, what's the opposite I would do to make sure it didn't happen.

Right. Yeah. Figure out all those things to go, well, just don't do these. Yeah. He's a, he's a crass guy. I love it. It's Yeah. So what's, what's next for you? well, first of all, I have to admit, I love your transparency on your, Twitter and the blog stuff. I mean, that has to help you with deal flow and people saying,

Great, I like what this guy's doing. I feel comfortable. I'd be interested in selling the business or partnering the business. Cause there's a lot of people, I'm in a mastermind and there's a thousand other people around the world and they want to get involved in deal flow, but a lot of them don't know how to source it. So that's a really big challenge. Yeah. Well, I mean, it may, it might look a lot sexier than it is, but like I'm hustling people on Twitter all the time, right? Like it's not, this isn't magic. It's not.

It's not rocket science. I'm literally seeing tweets, reaching out to people immediately and just saying like, Hey, you know, like the pitch that I went through, Hey, you know, you probably haven't thought about selling. Maybe it's not ready, but I'd love to hop on a call and just introduce myself or when the time's right. That's it. And I just, you know, and sometimes six months later, people reach out and say, here's my deal. I'm thinking about selling it. and they go to us first. The transparency came first though. That was, that was,

You know, I've been doing this for a little bit now and I've had some like character building moments, right? And I just am a big fan of just being honest. It's just so much fucking easier. you know, this business is a full contact sport. People are gonna get, you know, hurt and beat up and stuff, but the least you can do is just be straightforward. Yeah. You feel comfortable talking about a couple of those characters?

Jon Stoddard (34:47.543)
building moments? I the ones that really stand out and say, gosh darn it, you know, that's a lesson to live with me for the rest of my life. No, I can't. There are there. I mean, it's all active stuff. So it's, it's literally still, it's still going on. Nothing that I'm directly involved in yet, but like it is, I can't, I can't chat about it. How the ego trips us up.

Yeah. And it would also just really damage some people. just said, no. Keep that close to your chest. That's interesting. So, but yeah, I've gotten, I've gotten kicked in the teeth for sure. Yeah. Yeah. I mean, that's a point is like how, trusting, have you ever had any issue with trusting the numbers or the financials with some of the people that you purchase companies from? The reason I brought that up, but if you follow Warren Buffett,

And Charles Munger, mean, when they first started out, all the companies that buy now are mostly public, but when they first started purchasing companies or private, they, Hey, just send me your financials. You've seen the letter, send me your financials. and they don't even have a conversation on the phone. He'll look over the financials and they'll make an offer in 72 hours. Yeah. And trust them based upon knowing the industry so well and the numbers.

that correlate to that industry saying, we know what a good valuation is on this? Well, by the time they were doing that, there was a lot of trust on their side, right? And so it was him extending kind of the golden branch first. But if that trust was betrayed, I don't think that that would be, I don't think that that would have been taken to too kindly, right? Like that would have been a career ending move for whoever lied to Warren Buffett over those emails. I think it was a lot of trust.

Warren was going first, Charlie was going first, which is great. But there was teeth behind that, right? Like they had some serious firepower to back that up with, right? If somebody was not truthful. Also too, I mean, that's the kind of shit that lands you in jail. It's just so easy to prove. Yeah, to the quality of your name stuff. Yeah, but for us, to be honest with you, I don't trust the numbers as much for the stuff that we are doing, but it's not because of trust issues between humans. It's more so just like,

Jon Stoddard (37:06.573)
people make mistakes and like, honestly, finance is hard, right? Like it's actually pretty annoying to get really solid books and like, are you doing it on a cruel basis? Or like, you know, we bought a company from the Netherlands, like how the hell do they do shit there? You know what I mean? Like what did these, how did these numbers line up? But for what we do, most of the time the payment processor has like the source of truth, right? Like real credit cards hitting and real dollars hitting real bank accounts.

And so we always get access to that. And that's kind of where we base our source of truth on. It's not like a spreadsheet that somebody just sends to us. Yeah. And how do you check for expenses? I mean, from the bank statements? Yeah. Yeah. Yeah. But again, for some of these really small deals, like it doesn't matter too much in the sense that like we're basing this on SDE. And so if they want to put a bunch of expenses in there, like

that's going to come out in our offer, right? We're only going to pay on the actual, you know, SDE and not, know, after expenses and stuff like that. So, you know, if they want to fight to go add those back in, then they're going to have to show it to us and prove to us like that those wouldn't be there in the future, but it hasn't been that big of a deal so far. Have you figured out the numbers on the top of the funnel where you say, Hey, we need to be talking to this many people. We need to have this many LOIs in place.

and then we need to have this many to make this happen? No, it's just not big enough yet. I I don't know that you would ever get there. I mean, imagine doing a couple of hundred million dollar deals a year. What do you need a process for? Like you're sourcing a shit ton. There's not that many. There's not that many hundred million dollar companies. Yeah. But I mean, it's not like we're going out to 100 companies at the moment with this message.

there's just not that I don't think at any given time there's that many quality businesses we would buy. Yeah. And just curious, do you guys use the same attorneys and tax people all the time and due diligence people or? So we, I've been kind of a stickler on diligence. don't, I can see why some people outsource it. We are not outsourcing it at the moment. But yeah, same lawyer, same accountants, bookkeepers. That's cool. Cool.

Jon Stoddard (39:24.461)
Well, man, I, I, Andrew, I wish you best of luck at this, man. I love what you're doing here. Thanks so much. I think you'll do well because the base, you know, following Charles Munger, these guys, tiny capital, Andrew. mean, those are good, great role models. Yeah, they are. They are. Got to get them on the board. I,

Well, I got a pretty positive response from Andrew said, Hey, I'd love to do it, but I'm on sabbatical. Let's check back when I come back in. So I'd love to get him on my podcast. yeah. Yeah. He's the, what do they call him? The Oracle of Vancouver. So, yeah, yeah. That's amazing. And, do these companies are you, do you have an incorporation and, all these companies under a holding company, like an LLC?

Yeah. So we just have a GP that's an LLC and then each of the companies is in a manager managed LLC. It's like a super, super, it's like a poor man's Yeah. Straightforward. Typical. Very typical. That's great. Andrew, man, I want to thank you for being in the top entrepreneurs podcast today. Thanks so much for having me, John. I appreciate it. All right. Take care. Cheers. Bye.