Buying & Selling $500 Million in Micro Technology Startups

 Summary

In this conversation, Andrew Gazdecki, CEO of MicroAquire, discusses the inception and growth of his startup acquisition platform. He shares insights on identifying market gaps, differentiating from competitors, and the unique business model that prioritizes sellers. Gazzdecky elaborates on the challenges of startup valuations, the profiles of buyers and sellers, and the negotiation dynamics in acquisitions. He also expresses his vision for the future of MicroAquire and highlights success stories that demonstrate the impact of strategic acquisitions.

Takeaways

Andrew Gazdecki founded MicroAquire to empower startup founders during acquisitions.
The platform addresses a gap in the market for seller-focused startup sales.
MicroAquire prioritizes trust and security in its marketplace.
The business model charges buyers instead of sellers, facilitating a unique transaction process.
Valuation challenges are common, especially for startups with varying revenue multiples.
Most sellers on MicroAquire are bootstrapped entrepreneurs looking for liquidity events.
Negotiations are primarily between buyers and sellers, with various deal structures.
MicroAquire aims to standardize and streamline the acquisition process for startups.
The future of MicroAquire includes expanding its tools for due diligence and legal documentation.
Success stories highlight the potential for acquired startups to thrive under new ownership.

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Transcript

Jon Stoddard (00:00.46)
Welcome to the top &A entrepreneurs today. My guest is Andrew Gazzdecky, who goes by the, to his friends, goes by the name Gazz. Welcome. Andrew is the CEO. He launched a micro acquirer, as you can see in the background. Welcome to the show, John, thanks so much for having me. Yeah. I'm excited. Yeah.

You've got a pretty great launch going Microquire. And I just wanted to talk to you about the business, why you started it, where the idea come from. And was, was there, just noticed a big need out there or were you just testing the market? Yeah, good, good question. I'll give you two, two stories and just, why is more of a thought? Not a story. but so.

Prior to Microquire, I bootstrapped a company called Business Apps. was a drag and drop mobile app builder. We grew to about a little over 10 million in revenue and then sold it to a private equity firm. And the first thing that happened when I sold the company was I had probably like 10 friends saying, can I get an intro to the private equity firm? What's due diligence? How did you find the buyer?

And that was probably the first click of like, like, you're all running startups. I assume your goal one day is to get it acquired. And you don't know the basics of how to find a buyer, how to, know, what is due diligence? What are the legal steps you should take? Aside from hiring an investment bank essentially. And so I thought that was fascinating. And then the second point was.

as I looked through the market in terms of, you know, putting myself in the buyer's shoes, you know, looking to buy a SaaS company, I looked at, you know, brokerage websites. looked at, other marketplaces in the industry and nothing really felt like it really favored the seller, so to speak. all felt like it was favoring the buyer. and so I felt there was a void in the market that, you know, really empowered founders when they're going up against say like a

Jon Stoddard (02:16.354)
multi-billion dollar private equity firm like I did, we can empower them and help them maximize their exit. And then the second or the third thing, I'm like totally just getting up my numbers wrong here. But the third thing was for my next startup, in between business apps and Microquery, I also started a company called Allcoin, which was acquired by a strategic buyer. Because once you go through the process, you kind of learn how to position a business for sale.

I always wanted to have a company that helped, you know, founders, entrepreneurs, startups. I'm a startup geek. I can meet LeBron James and be like, cool, man. But if I meet like the founder of like a cool startup, I'm like, my gosh, you built that. That's so cool. so yeah, I guess, you know, part of it was also, you know, this is kind of a thesis I always run with, with basically all the businesses I've ever started, but, I'm a big believer in,

trying to spot trends before they're obvious to everybody. with business apps as an example, it was in 2009, Android hadn't even come out. Blackberry had apps at the time, if you remember that. So we just built an iPhone app builder and then we eventually expanded to Android mobile. But I was in college at the time. And so I had unique insights into

You know, I think every business is going to need more web. And so I built that business. So, my point is, is I always try the way I try to phrase it is I try to look for trends that are gonna become obvious to everyone over time, but are not obvious today. So they're obvious to me. So when I launched my group require in, 2020 of January, you know,

entrepreneurship through acquisition wasn't really as talked about as much. felt it could be in an emerging sort of category that could be created, but no one was really leading the charge in terms of like standardizing things, making tooling for acquisitions easier, empowering founders, just bringing the whole market together essentially. So I made the quote, if I ever get a quote, I hope it's this one, make...

Jon Stoddard (04:37.363)
an obvious bet to you today that will become obvious to others over time. And that's how you can build some really, really interesting businesses. And that's what I did. I didn't even think it was going to work. was like, your business on a marketplace and buyers will come and we'll help sell businesses for millions of dollars without investment bankers and intermediaries. So the idea at the time and it being private and

you know, asking for data sources to better verify revenue. Basically everything I wanted when I was thinking about selling my first business is what I built into micro-acquiring. To me, that was super obvious because I was a customer essentially. but then to my surprise, you know, a lot of people, you know, were interested in acquiring these digital assets, so to speak, or, you know, status companies, e-commerce companies.

And now it feels like everybody's doing it and talking about it. And maybe you have a different vantage point because you've been, you know, in this market for a while too. Yeah. What, what was the, I don't think you're really competing against biz by sell because they just do, you know, the seller put something up, they pay $50. They put their ad up there. what, what about Flippa? What was it different than saying Flippa Flippa has been around for a long time. Yeah. So I looked a lot at Flippa and just.

read the reviews in terms of, you know, trust and security, thought was an issue. Lack of customer support. It kind of felt like a marketplace where everything go. It had kind of like a Craig's this field for me. think they're a great business, but it was just too broad. And so when you have a business that's too broad, especially as a marketplace, you know, there's a saying when you try to be everything to everybody, end up being nothing to anybody.

I think I got that quote wrong, but so I felt there needed to be something more specific to startups, specifically SaaS with, you know, higher caliber buyers, like private equity groups, family offices, venture backed companies, you know, real serious buyers. And I felt that was lacking. And when you list on another marketplace,

Jon Stoddard (06:59.711)
Instead of getting a message from, you know, John two, two, four, nine, one with no image or background or any information about you, every buyer on micro requires ID verified. they have a bio, a picture, their LinkedIn profile is attached. So we put trust and security at the core of the entire marketplace. Cause so many scams can happen when you're selling your business. that's really an entrepreneur's worst nightmare. So.

That was, and then another part was just the privacy. you know, when you list on some other marketplaces, it's, it's public. You can choose to be private, but on micro-car, it's completely private. And the reason for that was just a personal experience I had when I told my, you know, a hundred person team at business apps were being acquired. You get questions ranging from, I remember it like it was yesterday. Like I had people were like, am I a millionaire now or a billionaire?

And then someone else comes in, am I getting fired? Like, and it's everything in between. So I knew it had to be private. And as I was, you know, before I sold the business, I did a lot of due diligence on the buyer. So long story short, you know, I felt, you know, there was room in the market for, you know, something specific to profitable tech startups, with more trust and security and more privacy for the founders and putting the founders first. that's.

essentially how I position my group bar. So when everyone was going right, we were essentially going left. If that makes sense. Yeah. No, I think anybody's in the acquisition games, they visit both sites, but see Flippa has actually kind of changed to your direction because they verify the buyer now much more than they used to. Yeah. I've noticed your product roadmap is oddly similar to ours. Yeah. Very interesting. Yeah.

So you charge the buyer. Yeah, we I've had a subscription. I don't think I have one. It was, had a 12 months subscription, but you charged the buyer. is it? 299. We raised it to 390, 390 a year. then, so I'll explain the business model really quick. So instead of charging the seller commission, there's no commissions to sell your business on micro require over time. We're going to layer on commissions, but

Jon Stoddard (09:25.037)
to get the flywheel going. We've been zero commissions for about two years now and we've helped. We've definitely facilitated over half a billion in transactions, but exact number, I don't know off top of head. But yeah, we charge the buyer. And when you subscribe as a buyer, we will kind of look at your profile. Sometimes we'll ask you to add your LinkedIn, verify your ID.

But yeah, we just started to buy our then from there, what you can do is you go and you request access to startups. So you basically see like a blind profile. So it's kind of got like a, it's like a blend between a marketplace and what you would get from an investment bank where we give you kind of a teaser where an example would be a listing on microquire looks like profitable SaaS company and email marketing space making, I don't know, 2 million and trailing 12 months revenue.

500,000 and trading 12 months profit. Here's some more information about the business. And if you want more to know who owns the business, you have questions about growth rates or customer acquisition costs or churn or whatever it may be. You send a request to the seller as a premium buyer after you've subscribed. And then the seller has the ability to approve or deny your requests. And essentially what they're doing is giving you access into their data room. What is...

What do you guys do when I first looked on it a couple of years ago, I would see some kind of app there, small amount of revenue, SaaS business, but their multiple was really very high, almost more than the distance between what I valued at and what they valued at. How do you bring that together? Yeah, that's probably the toughest part of the job.

so we have some guard rails in place. It's like, won't list any startup with an asking price over seven X TTM revenue. think is our threshold. There's still some really highly valued startups that are just kind of like a, like a Zillow make me move sort of price, which I don't recommend, nor is it effective. but we have put some guard rails in terms of utilizing the data that we have to kind of give a.

Jon Stoddard (11:43.117)
almost like a data-driven, you know, valuation based on, what we see. So prices can vary, but we have based on, just feedback from our buyers and also our sellers. Cause as a startup acquisition marketplace, again, we want to help sellers. So, you know, we, at first it was kind of a wild wild west. was just me running microquire for probably literally just me for.

the first year and a half and that's customer support, that's product, that's marketing, that's janitorial services, everything. But now that I have a team in place, we're able to kind of curb some of those things. So when the server comes in, we'll give them an opinion of value, where we think you should price this at.

But again, it's kind of like telling someone their child is ugly. So in some cases we'll let them price, you know, up to seven times trailing 12 months revenue. If they really think they have an opportunity at a potential strategic acquisition compared to a financial acquisition. they stay? mean, if they, they think it's, you know, a 50 X and they could literally

stay on the platform forever, just fielding these inquiries and going, no, I'll give you 10 X, but they keep saying no. Do you say, well, yeah, yeah. Yeah. We've curved it a little bit, but surprisingly it depends on the cohort of the business. Like, so for sub, let's say we're looking at the, we have three different cohorts that we look at. One is, sub 100,000 in TCM revenue.

The next one is a hundred thousand to a million in TGM revenue. And the next one is a one million to 10 million in TGM revenue. We've actually seen 50 X multiples. We've actually seen, I think the highest multiple we've seen is like something ridiculous, like a hundred X, but this was on like a, you know, 10 K, you know, revenue business. So the multiples, you know, below a hundred K from the data that we've seen is

Jon Stoddard (13:56.845)
kind of go out the window because you're really not buying. It's hard to value a business and based on those financial metrics and really what you're buying is the product, the code base and the potential upside. And that's where we've seen some really interesting strategic buy. So we've seen it. It's not common. I don't recommend it. Yeah. No, I want to make a point out cause I followed Neil Patel and Neil Patel just

You know, three, four years ago, bought Uber suggest and turned in that into a big moneymaker and recently bought answer the public, which was just a website that showed you long tail keywords of something. And it wasn't really building revenue. He just told the story about, know, it wasn't really making revenue, got it like traffic and we could do this, this, and this to it. yeah, yeah. Yeah. And Neil's great. He's actually a small investor in, and

Micro wire, great guy. And I believe he just acquired something else, but I don't think he's announced it. But yeah, I mean, if you have situations like that, where you have a huge audience and you buy a product and you basically sell that to your audience, I mean, that could be a very, very good and lucrative strategy for acquisitions. So who are these entrepreneurs that, that decides like, I'm going to build this product. It's going to be a billion dollar thing.

But then it just taps out, know, it doesn't go as far as it can go.

there's a lot of them out there, but I would say, so the majority of buyers or excuse me, the majority of sellers on my bar actually bootstrap startup. So, that's by design because my, again, my first business was bootstrapped. So when it came time to sell the business, I just, I sure I'll sell it. But when you have any sort of investor involvement, you know, the more people involved, you know, the more sort of.

Jon Stoddard (15:59.617)
You got to get, you know, maybe one VC partners approval and then you need to get a VC firms approval. And then the partner needs to get the other partners approval. Then you have a second VC firm. And then you have some Yahoo angel investors like let's use this investment bank. used 10 years ago. They were great. So, my point being is, we really don't work with a lot of those types of businesses, a lot the, the main.

profile of a startup that we work with on MicroQuark is generally fully bootstrapped, fully owned by the founder, ideally profitable. Some are running a break evening because they're pushing for growth. we don't really bump into too many of the, you know, I raised $10 million and now I'm fire sailing my businesses necessarily. I think that'll

probably pick up just given some of the craziness we saw in the last few years in the venture markets, but that's not the marketplace we want to be. We don't want to become the graveyard marketplace, if you will. Yeah. That's a cigarette butts of the VCs. Yeah. Yeah. We have a saying internally where we want to be the marketplace where we help. And I'm putting quotes of small, life-changing acquisitions and really remove that stigma of, know, selling a company for

$200,000, half a million, a million dollars is pretty fucking cool. But like in the world of tech, it's not talked about, it's not celebrated. And so that's kind of like what we want to do at MicroWire is really, you know, show entrepreneurs, you know, a more practical and realistic path to creating wealth, if that's what their goal is. So that's what we do at MicroWire. And I have a few.

interesting stories if you'd like to hear them along those lines. Yeah. Who are the buyers that come to it? they, as far as, know, did they say, here's 200,000 cash or do they negotiate with the seller? Like, Hey, here's, if Neil Patel came to me and I owned Nant to the public and it was listed on MicroAcquire, I'd say Neil, either give you a $200,000 or I'll give you a hundred thousand dollars and I'll give you, you know,

Jon Stoddard (18:24.279)
cashflow out of what I'm gonna do with it. I'd take the plan B because I know what he could do. What does that negotiation look like? Do you get involved with them or not get involved with them? Yeah, good question. So we just launched a service called Manage by Microquire. It's basically our brokerage service offering where we basically help startups with over a million in revenue get acquired.

And that's more of a, you know, we'll create like a SIM, blind profile. We'll map out all of our, you know, we'll basically build a market in terms of, you know, the most ideal financial buyers or Gigi buyers. So that's a new service that we just added to appease some of the larger startups that, cause when you get to the, you know, seven figure numbers and eight figure numbers, a human element is generally very helpful.

But for most startups and pretty much all the acquisitions that we do, we aren't involved at all. in terms of the negotiations, it's just between the buyer and the seller. we typically see mostly all cash deals. We see a lot of seller financing, but we've also seen some crazy structures. We've seen pretty much every structure you could possibly think of, including the one that you just mentioned where

You know, I just found a co-founder. That's one of my favorites. you know, cause now you get to keep going. Like, you know, cause the big reason that people will list on microquire is, know, they're either, you know, working on another project, they've taken the business far enough or, know, they feel like this is a good time to see a liquidity event and, you know, kind of reap the rewards of their, their work, to speak. we see the full gamut is the short answer. Yeah.

Now you, so you don't really, I mean, I know they have a price listed, but if you don't get involved in it, you don't really know what the, you know, say if it's a $50,000 business, you don't know whether it's 25 now or 25 later, it's just whatever it was listed for, right? When they sell. For some, yes. But when a company gets acquired, what we'll do is we'll reach out with a survey that

Jon Stoddard (20:49.677)
We'll send swag to them, just implement. How do we do, what was the sale price, who was the buyer? But we also have tools on marketplace where you can build a letter of intent. You can build an asset purchase agreement. So we've built like this step-by-step flow. We call it our guided acquisition process. And so from that, we gather data of like, okay, this is what the LOI price is at. And so that's where we're able to get a lot of our most accurate data in terms of, you know, what buyers are paying.

know, how our valuation is fluctuating. And as just micro-parts stays alive, that data just grows and grows and grows and grows. Yeah. So I'm just curious back to that VC question. Now, a lot of VCs, they'll have 20 in their portfolio and 18 of them are kind of dogs, let's say. They're just not going to return money to investors. Have you been contacted by VCs say, can you handle this? Help sell it?

Yeah. So we have a lot of quasi like unofficial handshake partnerships with accelerators, VCs, know, any sort of pocket, any sort of organizations with large pockets of startups, including, you know, law firms, restructuring companies. We've done a big part of our deal. Full strategy is partnerships. so, yeah.

I mean, all the time you see, and sometimes they're great outcomes. Sometimes it's, Hey, we raised, you know, two or 3 million. And then those are really good strategic buys for larger companies that may be looking for an acqui hire or they have a phenomenal product, but they weren't able to get that next round of funding. And so they ended up seeing a great outcome arguably or potentially even better if they had raised more funding. So, yeah, I, we do see that quite a bit. Yeah.

Where are you going with this? mean, is it turned into more than you ever expected in the last, you know, two to three years and you can see this growing to, I don't know, 50 million, a hundred million dollar company in revenue. What's the opportunity? Or are you a startup guy going, okay, I'm at the end of my road. I want to go back to the startup, the next project. Yeah, good question.

Jon Stoddard (23:12.479)
You know, I think we'll to start investment banking is a hundred billion dollar tan market. So, and I, have two theses that kind of drive me with the business. One is, you know, creating a startup has been democratized in the sense of you don't need to be technical. there's just so much content out on go to market strategies. So it's, it's never been easier to build a startup, especially to, you know, it's not easy, but.

you know, it's a lot easier than it was a decade ago in terms of, cause we were just guessing, like we were just, this work? And through the last decade, so many entrepreneurs have been successful. it required us so much more money to get a app built, you know, 10 years ago. yeah. And then it looked like crap and then it had bugs and just, you know, so there's been a lot of standardization in terms of, know, these are the things you should do to build a startup. And I think a lot of.

entrepreneurs are going to forgo the venture route and realize, you know, what I really want out of a startup is just to not worry about money. just want to be financially secure. And the difference, like you don't need a billion dollars unless you need a private jet or something like that. Like you're perfectly fine with like a couple of million dollars. And that's, that's truly life changing in terms of, know, how far this business can go. I you know, I'm an optimist.

say sky's the limit. And then in terms of how far I want to take it, what I really want to do is help millions of entrepreneurs across the whole globe. We've had acquisitions happening on every continent except Antarctica. don't know how big of a startup scene is up there. It's cold. It's a cold scene. Yeah, but we're working on that one. Bridget.

Yeah, but the main goal is we want to standardize, streamline, and just make acquisitions as easy as possible at MicroQuar. So, you know, we want to create basically tooling so advanced and just so easy to use that even if the deal isn't found on MicroQuar, you still bring it into MicroQuar to facilitate the transactions. So that's kind of the level of what we're thinking is innovating on due diligence products, innovating on legal doc creation.

Jon Stoddard (25:32.449)
you know, finding the best buyer possible. There's so many different steps in an acquisition and each one could be an individual company. And so we're attacking each of these problems pretty aggressively. And it's a lot of fun. So I could see myself definitely running this for the, this is my third startup, probably my 10th, depending on what you classify as a startup. I've been an entrepreneur my whole life. But yeah, I'd say, you know,

We'll have to see, but I will say I'm having a blast running it. So, good, good, good. You ever seen any stories where somebody's acquired something for, you know, let's say we bought this app, it's running, but the entrepreneurs tapped out and the buyer turned it into a $10 million, $50 million as an example company.

Yeah, I got two, two quick stories off the top of my head. one person acquired a company, I can't say their name, but they raised, like a, they bought something for, let's call it like a hundred K and then ended up raising 5 million or something like that based on that acquisition. So we'll see where that goes. the second one, is a company called median that was acquired for, I believe about

half a million and it was sold by an individual named, Derek common, who now is, working on a new startup called workshop. And the story there is, this individual named Spencer bought the company and he's been growing it. And it's kind of like zoom for your website. Like you go on micro four as an example, and you're like, I don't know how this works, Andrew. And I can log in your computer and, know, kind of move stuff around and saying like, Hey, John, click that I can just.

login. And anyways, great product. And the founder basically was like, Hey, you know, this is a great product. We're probably going to shut it down and ended up selling it using those funds to help see their new company, which I believe they just raised 6 million for. So the seller exits the business has some capital to put into their new startup.

Jon Stoddard (27:51.073)
that new startup is doing great. The buyer is now, I believe he's doubled the company already and he's aiming to build it towards 10 million in revenue. He's been really public in terms of like how he talks about it and stuff like that. But that's one of my favorite stories to share in terms of, know, progress off the top of head. Andrew, I love it, man. I want to thank you. I know this is one of my shorter, but I love what you're doing here and I want you to wish you the best of success in the future.

Thanks, John. I really appreciate that. All right, man. Thanks so much for being on the show. I appreciate it. Yeah. Thanks for having me, John. Cheers.