#2: Private Equity Redefined
In this post, I will take the time to define what the newsletter tries to achieve: to help you buy digital assets for profit. I would be happy to see your feedback and comments on the web version of this post.
💡Inspired by private equity
Private equity companies buy promising assets, improve them, and eventually sell them at a later stage for profit (or to keep them forever).
Private equity turns to the web
More and more PE companies have increasingly started to invest in digital businesses (see here "Hellman & Friedman nears €2.5bn deal to buy AutoScout24", FT.com), and as we move forward, I expect more of this to happen. One company I find particularly exciting in this space: the EQT group.
Already today, they have created their digital team. They even have their own "motherbrain" that helps EQT's deal teams predict what the next success will be. Mind-blowing!
However, they are doing big business with big money.
So why not replicate this exact process for smaller companies? Why not do "digital private equity" for the SMB companies of today's internet? Why not find and buy exciting websites to keep them and enjoy their cash flow or sell them for profit?
Just this week 20VC published a great podcast on this ideology where Harry Stebbings interviews Andrew Wilkinson from Tiny Capital on how he is building the "Berkshire Hathaway" of Tech.
Click here to listen: Spotify or iTunes.
🎯 What this newsletter will focus on
Our goal is to help you replicate the process of established PE companies and apply it to purely digital assets at a much different, but still very profitable scale.
We help you find simple, cash flow positive websites with stable growth, with limited (to no) offline operations and high scalability.
🙋🏼 Who is this newsletter for?
This publication is for active investors, passive investors, and people who are starters in the exciting field of website investing:
Active investors try to find undervalued websites to buy. They plan to actively grow them - either to keep them for cashflow or to flip them.
Passive investors also try to find undervalued websites to buy but have limited time to manage an acquired company actively.
Starters are just about to enter the field and want to learn more about website investing. While we won't focus on websites at a valuation range <$10,000, we still help you get started.
Get sophisticated analyses and insights from our publication covering website investing deals, with insights into deal valuation, and overall sector trends.
🔐 What subscribers get from this newsletter
Current deals, which we find exciting (& basic due diligence on them)
Tips and insights around the right due diligence
Recommendations for tools, online courses and more
Current industry trends
💰Which type of business do we aim to find
Purely online businesses: more specifically, businesses that monetize their traffic by selling ads, leads, or any type of digital product. We especially like marketplaces for digital products. Essentially we don't want offline operations and look for high scalability. In the beginning, those companies should be manageable with only a few hours of work per week.
The valuation should range from $10.000 to $1 million for now, as we want to enable website investing for a wider audience. We are aware that $1 million is quite a lot. However, there are excellent financing terms (i.e., seller-side financing), which help you to buy more expensive assets with leverage.
We mostly work with the revenue multiple valuation method where we divide the monthly or yearly profit by the sales price. We look for multiples of 28 and lower. This means that we aim to recoup our initial investment within a time frame of 28 months or faster (assuming costs and revenue stay the same).
... there are a few more factors that you will get to know during our upcoming updates, but those are the most important ones for now.
🔦 Where do we look for promising assets?
We are on the constant lookout for new marketplaces and brokers entering the market. As of today, we look at quite a few places, some of them being:
That’s it for now. We hope you like our vision.
Do you wonder who I am? Add me on LinkedIn. However, this publication should not be about me, but rather about the content I am posting.
Best regards,
Alex
And in the meanwhile, feel free to read some interesting finds of this week:
🗞 News & interesting finds
MotionInvest launched a new marketplace to buy websites. They offer direct purchases (0% fee) or marketplace purchases (15% success fee, but no guarantee of a sale).
Investors Club launched their version 2 on ProductHunt and became #1 product of the day. Have a look at their marketplace. 5% success fee regardless of deal-size. Done-for-you legal docs, due diligence, and no-fee escrow, but you have to pay a membership fee to see deals instantly.
Mediavine has changed its requirements for new publishers: If you plan to buy/run a website that sells ads, read this. You now need quite some traffic to use tools such as Mediavine (>50,000 sessions, before it was 25,000) or Adthrive (>100,000 page views per month). FYI, Ezoic has a 10K visits per month requirement. If you have less then that, Google’s AdSense is still there for you.
👌 Quote of the week
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DISCLAIMER:
Lastly, Dealsflow.com and this newsletter is not a registered investment, legal or tax advisor, or a broker/dealer. All investment/financial opinions expressed by Dealsflow.com are from the personal research and experience of the owner of the site and are intended as educational material. Although the best efforts are made to ensure that all information is accurate and up to date, unintended errors and misprints may occasionally occur. Please read our full disclaimer for additional information.