Colin Keeley's SECRET to Acquiring Software Companies FAST

 Summary

In this conversation, Colin Keely shares his journey in acquiring companies, starting from his early ventures to his current successes with SaaS businesses. He discusses the challenges and strategies involved in the acquisition process, the importance of building a strong network, and the creation of his course, IndiePE, aimed at helping others navigate the world of business acquisitions. Colin emphasizes the significance of taking action and learning through experience, while also reflecting on the influences that have shaped his approach to entrepreneurship.

Takeaways

Colin Keely transitioned from startups to acquisitions after learning from venture capital experiences.
His first acquisition was Blink Sale, a B2B payments company.
Colin emphasizes starting small and learning through experience in acquisitions.
He believes in the importance of building a strong team post-acquisition.
Colin's course, IndiePE, aims to demystify the acquisition process for aspiring entrepreneurs.
He focuses on sourcing deals and emphasizes the importance of networking.
Colin's growth strategy includes improving product usability and marketing efforts.
He draws inspiration from successful entrepreneurs like Andrew Wilkinson and Mark Leonard.
Colin believes that buying established businesses is a highly effective way to build wealth.
He encourages aspiring acquirers to take action and engage with business owners.

 Watch the Interview:

Transcript:

Jon Stoddard (00:00.108)
Welcome to the top &A entrepreneurs. Today, my guest is Colin Keely. Colin Keely has acquired two companies, working on his third. He's got a company called Verne, which buys SaaS, buy and build. He's also has a little course called IndiePE, which helps buy small businesses. And he's also got a podcast called Indie Acquisition. so welcome to the show, Colin. How are you? Thanks for having me. Doing great. Yeah.

So let's go back kind of where this started. What was your call to adventure to start acquiring companies? Yeah. So background, did a bunch of startups. Most of them failed, some small successes. So software marketing agency, a TV and movie recommendation company, at a sharing economy startup that raised the money and flamed out.

Through that process, I met a venture capitalist who liked me, didn't like my business at all, but liked me well enough to bring me on. So ended up in venture capital and we were leading series A deals and also we were a startup studio. So once to twice a year, we'd spin up new companies and that process of like finding product market fit is just really, really hard. And I was a student of like how other people were trying to do it. So there's a lot of other startup studios out there. Stumbled on Andrew Wilkinson.

in tiny out in Victoria and he was just buying product market fit. So he buys businesses that were working, put in best practices and grown. And I was like, that sounds amazing. I would prefer to do that. So did it. I did our first acquisition a couple of years ago and just been off to the races since then. Yeah. What was that first acquisition? What kind of company? Blink sale. So B2B payments. It's actually like the second Ruby on Rails app ever. Blink sale? Yeah. sale. Yeah. Blink sale.com. That's B2B.

Yeah, like invoicing for freelancers and small teams. very cool. How big was it when you bought it? I don't know if I could say exact numbers. I think that's in the APA, but it's like a six figure deal. Six figure deal. And what's it? How long have you owned it? We just finished off paying off the seller side financing. So 18 months. 18 months. So that's the next question. How did you buy it? Did you have a fund, your own money?

Jon Stoddard (02:16.299)
some investors money or 100 % seller financing kind of deal? I'm a big fan of starting small and making small mistakes. So we'd never done it before. So it was just our money, me and my partner. So I'm like the marketing and the business and side of it, finance as well. My partner is the tech and product. So it was our own money and seller side financing. Yeah. How much kind of seller financing, kind of a range? it majority or?

Lower, lower. I'd to be completely public about all our deals. I think we aren't allowed to. OK. But it was a significant amount of seller financing, does say? There were some. were some. So why did they sell? What was the motivation behind them? Actually, the owner was super cool, Brandon and Patrick. Brandon just came out public. He's building a electric boat startup, like electric speed boats.

so you raise money for that. And this was, you know, smaller thing, just like the typical deal we buy is like, a technical founder that has other projects been working on this for like five to seven years and that is ready for the next adventure. Was he paying any attention to it or was it kind of a distraction at that point? software is kind of nice because you can mostly neglect it and it just kind of keeps going. So they were just using it as a cash cow, basically just taking money out of the business. Yeah. So it was profitable. Yeah.

So we do two different things. Like we do bootstrap companies and then like venture orphans and the bootstrap companies are almost all profitable by necessity. where did you find that? This was on Microquire. So Microquire. Very nice. Yeah. I just did an interview with Andrew. So yeah, they're great. You know, really helping out the market. Yeah. Was the valuation you thought fair when he was offering? Because this is something I talked to Andrew about is when they first

list on their founders, like, you know, they think it's worth 50 X, right? and Andrew said that was one of the biggest challenges is getting the right price. Yes. That's definitely a problem for us. Like, especially if you're doing cold outbound and just like trying to talk to founders, everyone thinks their baby is worth like 10 to 20 times ARR. And so you're kind of, you know, reality smacking them in the face and they don't always love that.

Jon Stoddard (04:36.741)
I basically give it up trying to convince them what the market price is. You could hand over the data and this is what things are acting at, but you can't convince people or change their minds. Yeah. He calls it like, look, it's hard to have a conversation with somebody who would say their baby's ugly. Great. It's not ugly. It's a beautiful baby. It just isn't worth what they think it is. Yeah. Yeah. Well, so how long did that conversation last where you guys came to a reasonable price on the business?

The first deal, this guy had done acquisitions before and sold companies before. So he kind of out the gate had a fairly reasonable expectations and we definitely weren't the highest offer. I would say we just vibed the best. We had similar startups that had flamed out in the past. And then I have a lot of, as you've of alluded to, like public writing and public podcasts out there. And he consumed a lot of it before meeting me. So I think he was a little smitten like at the start, which helped us win the deal. Yeah. I have to tell you, you came on my radar when you wrote that article about Mark Leonard.

at Constellation Software and the Serial Acquire. It's great analysis on that. By the way, I saw that on searchfundr.com. cool. Yeah, thank you. I've done that. Yeah. Operating manuals I received well. Yeah. And then your second one, what kind of company was that? That was a SaaS company, software. Data backups. Yeah, we're not, I would love to do everything and build in public, but we're not announcing the name of that one. Yeah, that's okay. That's a more sensitive one.

Yeah. And where did you find that? That one, like an intermediary reached out to us and was like, this was the end of last year. The founder wanted to sell before December 31st. He thought there were going to be some tax changes. so we pushed and closed it within like, that was like 14 days. was incredible fast. Was that an intermediary, like a investment banker or kind of just a broker from one of the, yeah, was a broker in the space. Yeah. And then, and

He sounded like he had motivated to sell before a missing out date. Did you get a good price on that? A reasonable cash flow price? Yeah. I mean, we only do, I guess, reasonable deals. At least I like to think so. Yeah. Yeah. We're not in the market of overpaying. Yeah. What kind of deal stack was that? Was that your money again, or SBA, or

Jon Stoddard (07:03.255)
seller financing or mix of the above? SBA is really tough to pull off for these software deals. So I've talked with all SBA bankers. They're great. If I ever wanted to buy a physical business, like I would entertain it for sure. But in this space, it's really hard. We have a debt partner in, based in Spain, like a number of family offices. If you want to reach out, you're happy to make an intro. But that, so we did that deal with our own money, this debt partner and seller side financing. Yeah, that is correct. I will talk to you after that.

About that. So a lot of these deals are coming to you because you create this social capital and they're attracted to you. So where did you see that? Hey, you know what? I need to have a podcast to get out there to so somebody is attracted to me. I also need a course. want to talk to me about this course that you did. Why did you build the course? How to buy a business?

I found this to be a very opaque industry. So I went to business school. went to university Chicago. I was like, barely aware that this was a thing that you can buy software company or buy companies. thought it was just like Fox making those businesses in like Idaho. I didn't know you could buy software ones. So this was all like trial and error and figuring it out ourselves. And then back when I was a VC, I talked with like all the college alternatives and I was like, I thought this was an interesting opportunity to be like,

You know, so many people go to business school to like learn how to do business. And it's like, well, you could actually use that money and go buy a business. And I'm a big believer in actually doing things and learning that way. So that was kind of my initial thought there. And now I'm going to do a live version of the course, like a cohort based version. So it's just a, well, like you talk about like Kajabi or something, or, what do mean a live version? It'll be based on Maven. Maven's like the new software company from the guy who started Udemy, he spun out and did this.

And so it's just a cohort based course platform. Yeah. I, the way, he's talking about Udemy. I almost bought a courses from a guy from Udemy that had software courses. He sold a million of them software and it was just a cashflow King. mean, was sold a million courses, doing 2 million a year with about 95 % profit. I was trying to buy it. How'd it go? It was in the UK and it was difficult to get any financing because they didn't want to move money over to the UK. Yeah. Yeah. European deals can be tough.

Jon Stoddard (09:28.533)
Yeah. So what is the focus of the course? Is it just on software companies? There's a lot of courses out there. Yeah. I'd like Cody sent you as Carl Allen, Roland Fraser, a whole bunch of people out there teaching. But they each have their own specific niche. Yours is SAS. I say it's more focused on Internet companies, but there seems to be a lot of overlap that people really just want to be their own bosses and like have freedom. Yeah. So in like the basic things you're doing of like

looking for a business to buy is very similar, whether it's a physical business or an internet company. So I would say it's internet focused, but not exclusive. Yeah. And you go through the entire process of finding the deals to reaching out, to having a conversation, to making an offer, to raise in the capital to do it also, you know, that's kind of a, sometimes if you don't have the money, you're going to go raise capital to go acquire a software company.

Do you also teach how to do that? Yeah, it's not as finance heavy as it certainly could be. I think I'm mostly focusing on the sourcing phase, which is like the hardest thing for people to actually put the time in to call brokers, to do the cold outbound to like owners. So it's mostly focused on that. And then on the backend, yeah, I'll talk through financing. The reality in this space is like great deals is kind of the limiting point. It's not as much capital. Like if you could get a great deal under LOI, I think you could find the capital out there.

Yeah, I think so too. These companies that you've acquired in the third one you're working on, tell me how it's gone. You buy and build. you, has it grown since you purchased them and you're focused on the energy versus this guy that was, you know, off to build electric boats? Yeah. So I would say our ideal is like a company that's already growing. think momentum is really strong. And so something that's already growing is likely to continue. But yeah, everything we bought is up since we did it.

I would say it's not that hard. Like we're not geniuses over here. We're just doing like the basics. So I could go through like what our basic playbook is. Yeah, yeah, please do. Yeah. Yeah. So the goal is like stability. So you take it over. Often the founders are technical and want to walk away. And sometimes there's employees, but more often than not, there's not. So we have to put a remote team in place. So like our database company, put a team in Albania in place. So product manager, developer, you have developers kind of all around the world.

Jon Stoddard (11:56.269)
Then we push on sales and marketing. So we have a big checklist we go through. Robert F Smith and Vista has this a hundred point checklist. have something similar. So it's things like moving their crappy WordPress marketing site over to Webflow, making it beautiful. Making sure nothing's blocking SEO pages load really quick. And then we push on different channels. So in previous history, I ran like large software marketing campaigns. So push on Facebook ads, Google ads, you know, see what works. Offer amazing customer support. So immediately put someone dedicated to it.

really want word of mouth growth. And then a product makeover. So my partner is very technical, he's a very good product manager. And so that's what the goal of making things look pretty, but also improving the conversion rate, reducing churn and then adding premium features. So things that more enterprisey customers would be willing to pay more for. Yeah. Are you designed to stay in a specific range of like micro kind of...

acquisitions or do you have designs on going larger? Yeah, every deal we're doing seems to be getting bigger for sure. So we'll entertain like 200K on the low end ARR to 5 million ARR. And the reality is like a 500K deal and a $5 million deal are about the same amount of work. So we would love to do just bigger deals. There's also more systems in place and they're generally better businesses at that point. Are you kind of like Andrew Wilkinson and Mark Leonard?

buy and hold forever. We have been to date. I would say if you made a outrageous offer, one of our companies, we'd certainly entertain it. So we're not like married to the idea. Yeah. I love the holding company model. certainly the students of all those guys. Yeah. What do you like about, I went back and listened to a lot of podcasts that Andrew did on, my first million. I've read some stuff on him and

amazing guy. actually reached out to me on my podcast. He hasn't said yes. Yeah, but I love to, he's busy guy, but he's active on Twitter. What do you like about his style that to buy in businesses and holding businesses? Because the, the, the hardest part, I don't know if it's your article or somebody's article is the shared operational excellence program and identifying what those are to each business because they're in different niches.

Jon Stoddard (14:20.269)
so there's a lot there. the rabbit of Smith as the famous quote that all software tastes like chicken. So the end customers can be different. They can be dentists or like bowling alley owners, but like the core things you're doing as the software owner is like improving the software, improving usability, doing very similar marketing channels. So you have different end customers, different niches, but like what you're doing day to day is pretty similar. What the companies are doing. Yeah. Nope. Why do I like Andrew?

Aside from his amazing track record with WeCommerce, the Shopify stuff, and then the, what, I don't know, what is it? 28, 32 acquisitions at Tiny Capital? yeah, he's got a bunch. He must be approaching like 40 wholly owned companies now. But I think there's, I think starting companies is really fun. It's really sexy. It's a lot of work and it's very, I think there's a lot of randomness to it.

I think buying established businesses with like existing cashflow isn't as sexy. And I think there's a boringness discount, but I think it's a wildly underrated way to build wealth. I just think it's very effective. And like everyone that's done it, SBA is a quote that I think like 98 % of SBA, seven day loans, like never default. Never default. It's just finding somebody in the SBA that does software. Yeah. Fair. Yeah.

Yeah. What about Mark Leonard, man? I love reading his annual reports because he's got a home spun like Warren Buffett stuff and the the transparency he gives and the responsibilities he gives to his business units. Like they're allowed to make acquisitions without him knowing it. Yeah. Yeah. We've been beaten out by a constellation a number of times recently. So definitely it's like losing a basketball game to Michael Jordan. So

I mean, it's cool. Of course we lost to Michael. don't have the money, but, yeah. Why? So why did you like any of these operating manuals? So I came across Andrew first, Andrew said Mark Leonard was one of his idols. So was like, well, I got to learn all about that guy. And so he's probably the best, one in the space and one of the originals. So he's done 500 of these acquisitions at this point. and then my other ones, you're Robert F Smith. He's probably the biggest software bio fun. Andrew models himself as like the nice guy in this space.

Jon Stoddard (16:39.694)
And Joel Lamont and ESW are like the dark force of the dark Vader in the space. So they're the most cutthroat. So there's interesting learnings from him. and Mike Spicer is the best startup studio. So that's kind of how like my thinking goes. I hop from one to the next and just kind of take away what I can. Yeah. Well, have you tried to get to Mark Leonard on a podcast? That would be great. Wouldn't it? That would be awesome. yeah, he's not on a lot and he doesn't like doing press. I think he was misconstrued 20 some years ago. So he doesn't do that kind of thing.

I'd love to just have a conversation with them. But like every time I write one of these operating manuals, people that work for these teams or the actual person reaches out. So that's been cool. I'm sure. I've noticed a couple of people left their business units and started their own acquisition team. Yeah. yeah. Tons of people leave Constellation and start like mini Constellations. Yeah. Are you currently working on a fund to help you acquire companies? Yeah. I mean, that's what we've encountered is like,

People really like Brenton Collin, but there's a limitation to that. And it turns out a limitation is like millions of dollars. So we just need more money. I think we win all the deals if we were competitive, but we just haven't been competitive on some. It's because, you know, bringing cash to the party kind of, you know, bringing cash to the party. It is the game. That's the game we're in. Yeah. Yeah. What's, where do you want to go with this? I mean, do you want to be a tiny capital where you own 40 companies and

I did see an interview with Andrew Wilkinson said, you know, my, my sole job is to hire and fire CEOs. Yeah. I think as you get bigger and bigger, you know, hiring quality operators becomes limitation. we're not to that point yet, I would say, but yeah, I just keep executing, build more attract more of a track record and get bigger and bigger is our plan. Whether you stay, do really small deals like constellation, or eventually you grow up and do bigger and bigger things, I guess is a bit of a question. but that's a question for a later time.

Yeah. So what do you get out of offering that course? I mean, I've seen some successful students. They bought the course. They acquired company. Does it help you with Teoflow? yeah. Yeah. think reality with courses is like a lot of people do it. They like it. They enjoy it. They get closer to you. And then people send you deals and whether they like I'm not that concerned about launching like a million competitors. I don't think that's reality.

Jon Stoddard (19:01.343)
I don't see that as a problem. You wouldn't be interviewing with me if you had a problem with that. Yeah. I think it's fun. I was kind of intended to go back to like one of my alma mater's and teach when I was like old and retired. It's like, it turns out I can do that right now. And get 40 million in your bank and go, you know what? Students, you don't have to be here. Yeah.

Yeah. So I, you I don't think I'll ever do that. I think the scale of the internet is just great. And it's like, it's been fun. And also like putting a course together is probably like the best way to distill your learnings. Like, you know, you think you know it, try to teach it. And then you really, you know, then you get better at it because you're consciously taught thinking about it. Yeah. I would say the same thing about writing, you know, posting to Twitter, posting to my blog, any of that stuff. It's just like, you know, making my thinking more concrete. Yeah. Do you, are you active on all the social media channels, you know, just to use one?

Or is it Twitter, SMB, LinkedIn, SearchFunder? Yeah, Twitter is my main one. And then I started cross-posting to LinkedIn because they're starved for content. It's just a bunch of crap, like employee stuff over there. Yeah, it's like 2%, actually, post out of the 800 million people on there. Yeah. So I cross-post. And that basically doubles your reach. Or sometimes things will kind of not do anything on Twitter and blow up on LinkedIn. So that's been kind of nice.

But no, I haven't done TikTok or anything. I'm not much of a dancer. Yeah. What about, yeah, I don't use TikTok, but I watch Miss Excel make millions of dollars from TikTok. Yeah. Yeah. We should probably all be on there at some point, but I don't know. don't know how to take like how to buy a business course, like singing, going, Hey, you know, that doesn't seem to translate for me. No, we'll see. Yeah. I got to go back something you wrote on your website that one of your startups was stretchy pants. Now what?

What was that? Is that Jack Black stretchy kind of pants? This was just scratching my own itch. And like this is what I said earlier, like finding bad businesses and sticking my hand in electrical sockets. And yeah, I'm kind of an odd body shape. I'm pretty tall. I'm six, seven. And so this is really sad. Yeah. Can you still dunk? yeah. Yeah. Yeah. Yeah. I basketball. You're just like, you're the tallest guy that I've interviewed. I'm six foot. Yeah.

Jon Stoddard (21:23.831)
Doesn't come across on the podcast or on Twitter, but so that was scratching my own ish. Just like building the pants I kind of wished I had. but yeah, I didn't like apparel. Didn't like the space. People are always lying to me when you're like producing stuff. but yeah, don't like economy e-commerce. Yeah. Will you do startups anymore? yeah, I think it's very likely we'll spin up kind of like shared agencies, kind of like the Amazon model where if your company is all it needs something.

you do it just for internal companies and then you spin it out and start taking external clients. So I think we'll do some version of that, but definitely not our main focus going forward. Yeah. Let me ask you about mentorship where you get advice, masterminds. You know, I talked to Michael Gurley and he said, yeah, he still uses Vista, the local Vista. Who do you go to or inspired by? It could be books, could be anything. Yeah. I mean, I have this kind of weird approach to mentors where it's like, just,

consume everything that they've done and really study them and write up these operating manuals. So that's like my basic way of learning. And then from there, I talk with either them or their people that worked for them and kind of understand their playbook more. And then besides that, it's more so Twitter, just meeting people, doing like-minded stuff. That's been great. I should probably go to more conferences. I haven't done that. Yeah. Is that a COVID thing? I don't go to conferences.

Yeah, no, I just didn't. wasn't in this space before COVID and then COVID killed everything like all the conferences and now they're just coming back. So I should probably take like a few a year and go meet up with people in person. man, they should pay you to be there. Or Neil Patel says he doesn't charge any more to conferences because he gets better deals, not charging. Huh? Yeah, that's one way to do it. Yeah, I love watching him. So I got to ask like guys, what kind of books do you like to read? Is it the?

biographies of people or the how-to books or concepts. I like the last book I read. No, it wasn't the last book, but eight unconventional CEOs and they talk about the top people. Outsiders. Yeah, the outsiders. Yeah. I love business biographies. I hate self-help books. I won't read any of them.

Jon Stoddard (23:39.405)
What have I read? I read a lot of sci-fi. My favorite book, if you're looking for recommendation, is American Kingpin. So the story of Ross Albright and starting the Silk Road, which is basically like Amazon for drugs. I think that is like, very well written. So it's very entertaining. It's a great story. And then it's like all your traditional entrepreneurship with shopping issues, but on a much more exciting scale because it's dealing with like, you know, selling drugs and guns and an online marketplace. Yeah. Behind the stuff, I think,

I think I've seen that something on net Netflix, but it was the most hated man in America who started that. Yeah. He's in prison for life. Prison. what was it? revenge more. Yeah. but yeah, otherwise it's like, you know, cable cowboy would be another one kind of in that vein. So John Malone is another one of these, he's actually in the outsiders is a chapter rolling up cable companies, in the eighties and very similar. That was like software companies of the day.

to taking away learnings from him. So if somebody was coming behind you and say, hey, what's the first thing they should do? He's like, hey, Colin, I'd like to buy a company. Start by your course, join Twitter, follow you, connect with you on LinkedIn, and just follow like Mark Leonard, Robert F. Smith, Vista, and Andrew Wilkinson. All those are great ideas. If you want to buy my course, great.

But really just make moves. I mean, everyone says they want to buy a company, but like be serious about it and do it as a job, reach out to business owners and like start talking to them. And I think that's really the only way you know what a good business looks like is like just doing it, doing the work, getting into conversations. So you reach out to brokers in your space, set a goal, maybe do five in a week or something like that. Try to talk cold email business owners and email five and get on the call.

What do you do for off-market acquisitions, finding deals that are off-market? It's nothing groundbreaking. We have a number of people in the Philippines that work full-time for us, and they'll build out email lists. And I'll say, like, go after this vertical and go find all the emails. And then I'll write basically drip campaigns. So it's just lead generation, like B2B lead generation. Put them on drip campaigns and start conversations.

Jon Stoddard (26:01.257)
If you're trying to advise people for like the first deal, I wouldn't waste time with that. But it's like a huge time suck. I think most people find their first deal in a marketplace. That's also getting your toes wet too quickly because it's a motivated seller. You know, they want to sell it. You're skipping the whole process of going, once you get a deal like that, it's a lot easier to get off market deals because you got cashflow. You understand a little bit more about the process.

Yeah. I would say most people screw up. They just never get in the game. Like they're, they always want to buy a company and it's like, well, next year I'll do it. Five years, we'll do it. 10 years. do it and they just never do it. so my recommendation would be, you know, make moves, get in the game. You cannot lead a horse to water unless they're really, really, really, really thirsty. Yeah. Yeah. I think it's about 97 % that start out looking for a business. Don't buy a business. Yeah. Yeah. It's unfortunate for sure. Yeah. Well, Colin.

Thank you so much for being on this show. I really appreciate getting an overview of your business model. Absolutely. Thanks for having me. It's great to meet you. Yeah. Thanks, Colin. See you. All right. Bye. Thanks for watching this video. Make sure you're a subscriber by clicking on this button right here down below. And if you want to watch more serial acquire interviews, click on this button right here. If you're ready to buy your first business.

Get my course at dealflowsystem.net right here. Take care. Cheers, John.