Investment Criteria

Looking for SaaS projects / companies is a bit like dating: You roughly know what you want, but sometimes you are taken by surprise. Like all investors we can’t foresee the future, hence take the following investment criteria with a grain of salt. These are data points that help us navigate our process. However we are flexible when it comes to our convictions. We don’t know, what we don’t know. So if you think you are a good fit, but you are not sure about it – just reach out! We are happy to hear from founders of all sorts.

We buy revenue, not dreams & aspirations. If you want to raise money based on what your company “could” be in the future, you should consider venture capital. We value your company for what it is today. If your company produces X in revenue, we want to buy all assets that contribute to X and value only these assets.

PS: If the stuff below is “investor mumbo jumbo” for you, disregard it. Just reach out. If it works out between us, it works out. We choose practicabiltiy over stagnation 7 days of the week. 

 

Market

B2B: We (strongly) prefer software products that target other companies as clients. Except for SaaS tools that cater to “creators” and help individuals to run their business.

Self-Serving: Even though we do not discriminate between creators, SMEs or enterprise clients, we typically only engage in self-serving products that get sold through online marketing and do not require extensive investments into sales operations.

Distributed Client Base: We avoid companies that are heavily dependend on a hand-full of clients and are subject to counterparty risk when it comes to the renewal of past contracts. The broader your client base, the more interesting you are to us.

Niche markets: Niche markets are more interesting to us than a product for everybody. If you could not raise money from VCs because your TAM is too small, we should definitely talk.

Market position: We favour SaaS products that carved out a clear value propistion for themselves and have a natural business moat that prevents newcomers from entry.

Financials

Revenues: We are looking for companies / projects that make at least 4k USD in MRR per month in order to secure financing for further development. We are interested in companies up to 100k USD in MRR and in a perfect world your ratio of customers paying only a monthly vs. annual basis should not exceed 5:1 (i.e. you should not have incentivised heavy discounts in the past.)

Revenue Quality: We search for clean subscription revenue that is very sticky. But subscription revenue does not equal subscription revenue. Meaning the dirtier the revenue (customer service must scale in order sustain higher revenues), the less interested we are.

Rule of 40: Your combined growth rate and profit margin should exceed 40% over the past 12-24 months. If that is not the case, we consider your company a “turn around” case, that needs heavy lifting. Nonetheless such cases are interesting to us if the core hypothesis of your venture still holds up.

Operations

Product focus: We are looking for companies and teams that describe themselves as product focused and reached their current revenue level organically without the help of marketing, discounts and other aquisiton methods. As marketing experts ourselves these are the situation where we can bring in significant value to your venture.

LTV vs. CaC: Your business should demonstrate a healthy 3:1 ratio when it comes to customer lifetime value / custumer aquisiton costs. If that is not the case due to operational hurdles which we can overcome then it is fine, however the underlying business logic should be intact.

Diversified Acquisition channels: Your users should come from different channels and your whole marketing strategy should not rely on one source alone. Preferably you have not worked a lot with SEO and PPC strategies, so we can take that part over.

Product / Tech

Churn Rate / Net revenue retention: Churn as well as net retention usually depend on target markets (individual, SMB, corporate). Nonetheless your monthly churn should not be bigger than 10% and preferably between 2-6%. Your net revenue retention should at least be 85% and preferably hoover around 90-95%.

Product Lifecycle: Your product should not need major investments when we take over. We prefer to have at least 6-12 months of runway before we need to develop new features, in order to get accustomed with your clients and markets. We are probably not a good fit, if you seek to load off an asset that is not working anymore.

Mission Critical Software: Your product should be “mission critical” to your users and they should not be able to live without it, as it relieves them from huge operational hassle. Or with other words, users face high switiching costs.

Key person risk & Code documentation: Your code should be well documented and for the better or worse not 100% be reliant on you, as this poses key person risk to us. 

Other

Team & Company Size: We prefer to buy from small, organically grown teams usually not bigger than 5-8 people. We shy away from operations that need a team of 20-30 people to keep them going. 

Bootstrapped vs. Capitalised: In order to speed things up, we prefer to make deals directly with founders. Hence we are on the lookout for companies that are bootstrapped without investor involvement.

Company Age: The longer you are around, the better. We don’t do deals on projects that are less than 18 months old. In a best case scenario you operate for more than 3 years profitably.