Tim got his first computer at the age of 13. He eventually started coding websites, games, and all sorts of things throughout university. He was also earning a business degree and learning more about the business side of things.
After graduating from university, he started SEDO, which became the biggest marketplace in the world for domains:
"The idea was very simple and a lot of founders ran into this problem. You have a great name, you want to start a company, but the domain is taken.
With SEDO, we wanted to make it as easy to acquire a domain name as it is to register a new one. The majority of domain names were not being used, but there was no functioning marketplace at the time."
Tim built and grew SEDO to about $100M in revenue, exiting the company after his 10th year. But instead of using his funds from the exit to start another company, Tim went on to buy other companies and established his current company, saas.group:
"I started saas.group because I like to get my hands dirty in building companies. I dabbled with angel investments for a few years as well.
I did some great angel investments, but I figured, 'Hey, I like to be a founder. I like to make decisions on the product, on technology, on marketing - on everything.' And I liked to move things forward as opposed to just giving people money and hoping for the best, even if there were some great outcomes."
Tim also realized that he was not a 'zero to one' person but a scale person. He also saw the lack of exit markets for small SaaS companies:
"There are a lot of founders out there who are really good in zero to one, bringing their SaaS company to a few million in revenue but then struggle with it, or they just don't like it anymore. Some are more unfortunate because they get into a fight with their co-founder, they burn out, or want to spend more time on something else.
Since there's no exit markets for these small SaaS companies, I figured maybe I should start buying those SaaS products and take them to the next level. That's how I started saas.group six years ago."
Saas.group currently has 17 companies in their portfolio.
Developing the acquisition model for saas.group
"I started very slowly and I took my time to find the product-market fit for this. I bought one company in year 1, bought another in year 2, another one in year 3, and two companies in year 4. We also started hiring a professional M&A team around that time."
With the rest of the team amplifying his early efforts, saas.group was able to acquire seven companies last year.
Tim shares that their growth and finding the product-market fit definitely took time:
"We had a hockey-stick situation when we were ramping and it was the same thing with product-market fit. We had to figure out what we had to offer to a founder. How do we also take a company once we've acquired it? Because one thing is acquiring it, but the other thing's actually working with it. So we built some central teams for that.
Figuring out this entire model definitely took time, and I could never have absorbed seven companies in the first year."
He also shares that each acquisition comes with its own surprises:
"Every single project we buy, we think that we can work with it, grow it, and do some things better than the original founder while preserving what made the product strong in the first place. Sometimes our hypotheses are spot on and sometimes they're just terribly wrong and the market goes into a very different direction.
The thing is, you never know. Sometimes we have projects where we thought they're going to be hard, but they're much easier, and the other way around. Every business is a surprise on its own."
Managing a multi-product portfolio
Setting central teams for operative tasks
"One thing is buying them, but in order to own and run them, there are a lot of operative tasks (such as HR and finance) that need to run properly. These tasks are the ones we absolutely always run centrally.
For example, with finance, the numbers need to be working and they need to be in the books a few days after the month has closed. Same with HR where salaries need to be paid, things need to be compliant, taxes need to be paid, all of those sorts of things. You don't have a lot of room for error."
Freedom for brand-specific tasks
For tasks that are product specific and need experimentation, saas.group gives the brands a lot of freedom:
"Product, technology, marketing (to a certain extent), and some of the things which are really more product specific. It's also important to try out new things, make errors, and to experiment because every project is a little different."
Saas.group has something that's called paved road where they recommend best-in-class tools for their teams to use:
"We tell them, 'Hey, you're free to choose but this would be one of the tools we really recommend. But if you want to go on the gravel road with some dodgy tools, that would be at your own risk. You won't get much support and everything.'
Generally, what we tell the brand is to use 80% of the tools from the paved road and to experiment with the other 20%."
What makes their model unique
Unlike the VC fund model that buys a company and sells it after 3-10 years, saas.group doesn't sell their acquired companies:
"In our case, we want to essentially keep the product for eternity. And while that's never guaranteed, our intention is to hold it forever to preserve the brand and the legacy of the founder, by preserving the name and everything, and then just continuously improve it in a very sustainable way."
Tim also says that unlike VCs, they're not swinging for that unicorn exit:
"The business of funding is fundamentally broken. You open TechCrunch or Forbes and you see all those hundred million exit stories that the press is fascinated with. But very often, the founders don't see a dime because the investors have liquidation preferences. A lot of the companies that have gotten big funding don't go anywhere.
And on the contrary, there is this world of bootstrap founders who work very hard, generate revenues often from day one, through consulting or through early versions of the product. In most cases, they own 100% of the company and they quietly build the company without ever any glorious headline being written about them.
Unlike the VCs that have like a hundred portfolio companies and they're totally fine even if a big majority of them don't go anywhere, the founder(s) all have their eggs in one basket and they really own their successes. That's the philosophy we're aiming for and respect quite a lot."
Definition of a good fit with the saas.group
To determine if a product is a good fit with the saas.group, they observe two things: size and topic.
Size
Saas.group usually looks for companies that have generated 1-10 million in revenue:
"If it's smaller than 1M, then it's usually not worth our effort and we'd rather wait a little bit more and pay a little bit more. If it's more than 10M, it usually gets prohibitively expensive because there are a lot of private equity companies who want to get those bigger chunks.
The 1-10M range is really an area where there's a lot of supply and we can also be a really good fit in the value we bring."
Topic
Tim says they prefer companies that have product-led growth in niches such as:
- Development tools
- Online marketing tools
- Productivity tools
Tailor-fit management of brands
Depending on the founder's goals, saas.group gives these founders a certain amount of freedom but they can also step in to control the trajectory:
"We always start with the question: what do you want as a founder? Because at the end of the day, selling a company is always motivated by some desire in your life. It can be just to cash out or it can be caused by external factors (i.e. illness, family issues, fight with a co-founder, burnout). It can be motivated by the feeling that you need help because you got so far, but you feel like you're not going to get further."
From there, saas.group crafts a tailor-fit plan to help the founder reach that goal:
"Some founders leave weeks after they have sold to us, other founders stay for years, and we've had everything in between. And of course it affects the price, the deal structure, and everything else, but we want to make things work either way.
There's also has the aspect of freedom. If there's a founder who says, 'Hey, just give me a goal and I'm going to peg my earn-out to a certain goal, but give me the freedom to reach those goals,' that's a very different story than if we would hire someone into a brand with very specific guidance because it might be a new CEO. So it really depends."
Having one clear hypothesis about what to change
"We like to do a very thorough due diligence. So to look very closely, involve the community, involve a lot of stakeholders, and really build a hypothesis. You have to listen to them about what should be changed.
And sometimes it's very little that needs to be changed. Sometimes it's really okay: we acquire a company and we let it run in a very similar way. Other times, we have a very strong hypothesis on what needs to be changed."
For example, with Prerender, saas.group had the hypothesis that they were spending too much for AWS:
"The project was great and it was run by an excellent developer. But it had one little flaw: it made 2M in revenue (great for a solo founder) but he paid 1M to AWS every year. Our main hypothesis when we acquired Prerender was that AWS was the wrong partner for this.
So we bought 300 bare metal servers and put Prerender on that, and hired a system administrator. And now, instead of spending 1M, this only costs 200,000 — so we cut costs about 80%."
From what they saved on operational costs, saas.group was able to invest the funds to develop a better product, better customer service, a better website, and other improvements on the surface.
Finding successors for exiting founders
For bootstrapped companies, the expertise and talent is usually locked into the founder or the founding team. In order to de-risk losing this when the founder exits, Tim advises founders to build up a successor before leaving:
"A general advice for founders who want to exit is to think about those things and build people up already. This will make your target more attractive for the acquirer and it will also make it easier for you to leave at some point if you know that you've built someone up.
Sometimes these have very positive results. We have some brands where the founders have been great in building up a second level of management. And now those people are the CEOs of those companies, and they're doing fantastic jobs."
For those without a second line of management in place, the saas.group usually steps in and hires someone for that company's C-suite.
Start with product-led growth before adding a sales team
"I think that it's bad advice for a founder who might not have product-market fit to start off with sales. Because you'll basically push products to people who might not want it in the first place. If you do it the other way around, you have a product that's really strong, even without salespeople talking customers into that.
If you add the salespeople at a later stage when you have a few million in recurring revenue, they can just fuel the fire."
Final advice
Do try to be helpful.
"Communities are small so you would meet people a couple of times. Be helpful, trustworthy, and stick to your word, and everything else will fall into place."
Don't try to trick people into doing short-term things.
"Taking advantage of people will always fall flat on your face and will hurt you in the long run."
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