Where To Source SaaS Companies?

One question I get asked often from people looking to buy or invest in their own SaaS company is, Akeel, where do I go and find my own company? Where do I find high-quality businesses where I can put my cash and start operating my own company? My name is Akeel Jabbar. Welcome back to another episode of SaaS District. I am the founder and GP at Horizon Capital. where we help unlock the true potential and growth of SaaS companies. Today we'll be talking about where to find high-quality SaaS companies. Hey guys. So welcome back to SaaS District. On today's video, what we're going to talk about is where to source SaaS companies. So if you're looking to buy or acquire your own SaaS company, I'm going to share with you 6 different ways where you can start looking for your own deals and acquiring a company for yourself. All right. So there's 2 different ways I'm going to break it down. The first one is privately sourced deals and the second one is partnerships. The first way is through networking events, conferences. Go to these events where there's highly targeted people. You have founders. You have investors. You have people there looking to sell their business or possibly be the right target who might start that conversation with and be willing to sell their company. So some really popular ones that you guys may know include SaaStr, tech conferences such as South by Southwest, Web Summit is another famous one as you guys may know, or even just local ones. So those are the big ones. Obviously, if you can't travel right now due to COVID, you obviously can't go there, but there's a lot of local meetups happening in your in your city such as tech events where there's founders there who've maybe started a company. They've built it for a couple of years and you just never know that they might be interested. Say, hey guys, I'm here to look for a company to acquire and I want to run a company of my own. You never know who you'll meet. So that's just doing a bit of networking and reaching out to find who might be interested to sell. Okay. The second way is using directories and this is what we do as well for outreach. We go through different directories. Some I really like include Capterra. Another one is angel.co. So you can go actually directly in those databases. They actually have a full database of all these SaaS companies available. You can filter them by location. You can filter them by size, the size of the team, how much money they raised, their industry and location. So all of these things, you know what you want to buy, but there is a database already ready that you can filter through, get their contact information, go on LinkedIn, Reach out to the founder directly and say, hey, do you want to sell your business? But look at these ones. There's thousands and thousands of businesses right there that might be interested to sell at any time. Okay? This is a little bit time-consuming. It does take time to build those relationships, but there is a list of people there ready to sell. Okay? The next place that I would look at is marketplaces. So that's number 3, marketplaces. It's my favorite one right now, microacquire.com. So check out Andrew Gazdecki. He's the founder of MicroAcquire. He's got companies there under $500K in ARR. If that's the sweet spot you're looking to acquire, check them out. They don't charge any commissions. They don't charge any fees. So you can know that they have no intentions. They have no agenda behind it when they're working with founders. Okay? So they have like hundreds and hundreds of companies coming to them, listing their product on their platform, and they're not charging them any fees. So you know that they're unbiased to try to push and sell the deal. Okay, some other ones include Empire Flippers. Sometimes there are SaaS companies there, so empireflippers.com. Mostly a lot of e-commerce and content-based companies, but you might find something on there. Okay, one other one, flippa.com. Personally, I'm not a big fan of Flippa. It's an auction-type website where people sell their websites. You may find some hidden gems there, but it does take a lot of time, a lot of sifting and attention to be able to find deals. In general, I would say the quality is a lot lower there. The higher ones you'd probably find here, here, or here if you know what you're looking for. But then, you know, if you're still looking and you have the time, you might find some sweet gems over there as well. Okay. So that's the private route, just reaching out to people, building relationships, looking what's out there, and trying to contact the owner directly. Okay. You're going directly to the owner and saying, hey, I want to buy your company. The second part is through partnerships. Okay. There's 3 ways. That you can build partnerships, leverage partnerships, and people who already have qualified, ready sellers or founders that they can make introductions to and help you buy a company. Number 4, what I— it's a term called river guides. You may have not heard that before. What a river guide is, is basically a partner, okay? And they're a referral partner and they are well-connected in the industry. Maybe they're an accountant. Maybe they're a lawyer. And they work specifically with a bunch of SaaS founders. So they have a pool, maybe 50, 100 different founders. They know exactly what's going on with their companies and they can make an introduction. So you have an agreement with these River guides. Reach out to accountants, lawyers, and say, hey, look, I know you're working with 50 different founders. Do you know any of them that are selling? And if you do, here's an agreement. Let's sign something. I'll actually pay you a referral fee. Okay, so they're going to go out of their way. They're actually going to make an introduction, validate the company, make sure the founder is actually interested to sell, it's exactly what you're looking for, and then they're going to make the intro and build that— help you build that relationship to try to close the deal. And if you close that deal, then you pay them a percentage, a small amount or a fixed amount that you guys can agree on for referring you that deal. Now that saves you a lot of time and effort. Yes, you're paying some money out of your pocket. But at the end of the day, that time and transaction for finding you a good deal is well worth every dollar that you spend. Okay? Number 5, brokers. So many of you guys know brokers. There's a lot of brokers out there. The ones I really like right now are FE International. That's a really, really good broker, highly regarded in the industry. So FE International. QLB, which is Quiet Light Brokerage. There's another one. They have a couple of SaaS deals that come in through their broker. Now, you can check them out, subscribe to them, look at the deals coming up, and review the deals. My only note to mention about working with the brokers is they're going to help you find deals, but just know that they work for the sellers. Okay? They're compensated if they sell the deal. Their intention is to obviously make the company look as best as possible to sell it. And you have to do your own due diligence, obviously, and they understand that. But there is a risk component in that you're not dealing directly with the buyer sometimes, and there may be information that you have to do extra steps to verify. And just know what the intention is. Sometimes the brokers will say, yeah, this is a great deal, high growth, high this, high that, but then when you look into it, but then it's high churn, poor user experience. There could be a bunch of other things. So just beware about that when you're working with a broker. Finally, another way you can work is actually through an M&A advisor. That's a little bit different than a broker where brokers have a bunch of deals on their table and whatever they have, they're just going to send to you and see if you're interested to buy. With an M&A advisor, what that is, is you go to them and say, hey, I don't have the time. I'm extremely busy. I've got this business and that business. I'm running my show, but I'm looking for maybe an add-on company or a bolt-on company to— or a tuck-in is what it's called— to my own business. I've got a budget of say half a million dollars or a million dollars, and I need you to go out there and find me a deal that fits exactly what I'm looking for. This is your job. You present to me what's a nicely prepared memorandum, IM, or business plan of what the company is. This is what they're looking for. You do the negotiating, and you present it to me, and I give you a fee if we successfully work together and close the deal. So M&A advisors have different fee structures. Some will charge a flat retainer fee, and then on top of that, a success fee because they're putting a lot of effort and work and going out there and doing all the work for you. So they're doing this, this, this, this, and this. They're building all those relationships, talking to all those people for you, and then they bring you the highly qualified businesses. So there is obviously a time factor behind that you have to consider. So if they're asking for a retainer, don't be surprised. And then they ask for a success fee once you guys actually close a deal. But their expertise is invaluable because they've worked with thousands and thousands of deals. They know the market. They know if you're overpaying. They know if you're going to be underpaying. They know if it's a good deal. They can help you structure it. They can help you reduce the risk. There's so much value in working with people who know what they're doing. If this is your first time, it might be worthwhile because you might easily make some mistakes here if you don't know what you're looking for. You go speak to a private seller and he might be hiding a bunch of things behind the doors if you can't catch it yourself during due diligence, or you might be overpaying. And these guys are worth their weight in gold by making sure you're paying the right amount and you get a good deal at the end of the day. And that's what's the most important. Okay, guys. So that is the ways that we at Horizon Capital source our companies. A lot of them obviously now come through inbound as well, directly reaching out to us. But, you know, a combination of all these. We are M&A advisors. We are listed with a couple of brokers. We have a bunch of River Guide partnerships. We look at marketplaces all the time, including MicroAcquire, and we spend a lot of time reaching out to founders directly through the list and target of companies that we're looking for specifically to acquire, okay? So I hope that was helpful, guys. If you guys liked this video, if this was helpful, please comment below. What has worked for you? What are you doing right now? to find your own SaaS companies and acquisitions? How are you sourcing deals? Is there something else I missed here and that you have a better way of sourcing deals? Let me know in the comment below, and don't forget to subscribe and like this video, and we will see you guys on the next video of—