We accidentally bought a turnaround. Now, to be clear most of the products we've purchased would fall into the distressed category. 2 have been proper distressed venture deals (former YC companies). But even the tiny ones that are half baked, I'd still consider those distressed. They are! You take them over, and you'll feel distressed!

Seriously though I want to talk through a deal that (to date) has not been a big win for us. What does that mean?

Some numbers first. This is the chart we were looking at when we bought it in March 2022. Looks great right? Up and to the right. Turns out there were a ton of annual subscriptions coming up for renewal ... and they didn't renew. We payed full price for customers we never got any $ from.

Notice these numbers are in Euros, which at the time meant ~$6k MRR. The steep drop is just us transitioning Stripe accounts because Stripe still hasn't figured out a way to transfer international accounts.

And this is what it looks like now. It's stable, flat. Slightly negative. Churn has stabilized, and so has the product. But still, not the growth we're accustomed to.

Cash collections after 1 year are about 40% of the purchase price. Relative to the performance of the rest of the portfolio, that's not a win. So what went wrong?

Diligence:

This one is tough. perhaps we could have talked to a few more customers, but boy is it difficult to get the time and the space in a competitive deal to  talk to more than a handful of customers. It's also painful to set up, schedule, and dance around the topic of us buying the company. We usually go in to these conversations as "investors" doing diligence. It isn't typically a big deal but some founders get spooked by us wanting to talk to customers, so it's a bit of a dance.

I don't think there was something we "missed" in diligence that would have predicted the outcome.

Deal Structure:

I think this is where we missed. Two things happened:

1. We made the seller financed payments based off of Chart Mogul reported MRR which was (and still is) wildly inaccurate. Up to 20% off from reality. We no longer use Chart Mogul because of how inaccurate it is. Because of this, our seller financed payments were tied to this inflated number and we over payed on the seller payments. The sellers got nearly their full earn out. Our mistake, a contract is a contract.
2. Annual payments. Annual payments should be discounted for early stage companies. There's not enough history to reliably say what the renewal rate is on annual subscriptions. We will now, until the end of time (so long as we can get a seller to agree to it) prorate / discount annual payments. We absolutely don't mind paying up if they renew but this is a new area of downside protection we had previously ignored. It could have been partially due to this being the largest deal to date and larger deals have more annual subscriptions to factor in.

Turning The Corner

We're not out of the woods yet, but we did decide to invest in a significant front end rewrite. The product looks much more modern and fresh. That plus the added stability of the system should mean higher retention. We also did a bold thing (something I've found difficult to do when building from scratch) and removed features. When you're just starting out with a product, you will likely say yes to reasonable customer feature requests. a year or two of that though and you end up with a Frankenstein product that's complicated and difficult to use. I'm going through this now with Super Send. It's a little easier as an acquirer to have some distance to look and say "nobody is using these features, let's just kill them".

We hired a dev shop to do some designs for us to help us think through the rewrite. We spent about $2k-$3k and then ended up just buying and using a template for $100. lol.

The rewrite took 1 dev 3 months. We then planned a re-launch on product hunt.  

We didn't actually (yet) relaunch the v2 on product hunt. We did however release a growth tool to try and drive traffic and nearly cracked the top 10 for the day. Even this small amount of upvotes can really boost top of funnel and drive sales. The problem with growth tools is of course they require a very expensive resource (engineers) to create.

Linkedin Headline Generator - Professional headline for your Linkedin profile | Product Hunt

Generate professional headlines for your Linkedin profile.

Product Hunt

The Product Hunt launch went really well. We landed in the top 10 for the day and had a mild increase signups for a few days. The Product Hunt of today is not the same as it was a few years ago, it's not the magic bullet it used to be and is also an interesting data point on building tools as marketing (engineering as marketing).

It's still too early to say what kind of outcome the rewrite will have. We're aiming primarily to lower churn and hope the simplified rewrite more obviously delivers value to people. Obviously growth is nice, but customer acquisition hasn't historically been the problem, it's retention.

TLDR;

• Annual payments are a risk, and should be discounted or prorated. Bake it into the contract to have a variable payment based on the renewal rate of the annual customers. Otherwise you will pay full price for annual payments and never see a single dollar from these customers if they churn.

If you've been missing my dulcet tones check out my most recent interview with Jaryd Krause from Buying Online Businesses

Audio Version

‎Buying Online Businesses Podcast: How To Start Buying & Flipping Small Saas Businesses with Andrew Pierno on Apple Podcasts

‎Show Buying Online Businesses Podcast, Ep How To Start Buying & Flipping Small Saas Businesses with Andrew Pierno - Mar 29, 2023

Apple Podcasts

If you're just here for the numbers, here they are :

ScreenshotAPI.net -- $5,024
Sheet.Best -- $4,898
Colddm.me -- $2,142
WorkClout -- $10,527.32
Inlytics.io -- $5,062
Total: $27,653.32 (+1%)

We're 2 years into this. Acquisitions feel normal. Growth by acquisition feels normal. Jumping into diligence on a new product takes us a week or two at most if people are available. It is slow. I thought we'd be larger by now. I know why we're not but still, 2 years is a sufficient amount of time to figure most things out that don't have any technical risk

The problem now is that we've been playing the game on the small scale. Scale is probably the most overrated term in startup land. For us it just means (for now), how are we going to go from $27k to $50k this year without increasing headcount.

So what are the options for doubling in 2023?

Acquire / Start A Service Business

We could of course acquire a services business (or start one) and try our hands at that to make the MRR number larger but the margins on service businesses are generally lower. The point of doubling for us is to get out of this phase where we're still putting money into the business every so often because we have a burn rate. Paying off Inlytics last month helped, we own the portfolio 100% now, but we're still burning a few thousand a month. Paying rent to AWS / GCP is expensive. In some ways all software is just an arbitrage between what AWS can charge and what you can charge based on the compute you are renting. Kind of a weird way to think about it. Not that dissimilar from buying a house with an interest rate and being able to rent the house out for more than what you're paying for. Same goes for service businesses, you pay people to do work, you charge a customer more than you pay the people doing the work. Of course there are more costs than just headcount, you have to find the customer, keep them happy, prove the work you're doing is accretive, etc.

Danny is experimenting with a service business idea. I don't know if it's a long term strategy, but it could quickly get to $10k or $20k MRR and maybe 50% margins and that would be meaningful to us.

Acquire a few more micro SaaS

This is probably the biggest alpha opportunity on the planet. you buy something basically done and grow it. Our biggest wins (on a percentage basis) are from buying tiny ass things that grow over time:

• cold dm
• sheet.best
• screenshot api

Maybe it was dumb luck that 2/3 of those were the very first acquisitions we ever did. But colddm.me was relatively recent, and has so far played out lovely. I've said it a few times now but if we had to pick just one vertical to play in, it would be sales tools all day.

Buying small in some ways is nice. Small # of customers, small product = small problems. But it can also feel like death by a thousand cuts. And it's a grind finding deals, meeting with the founders, and using our ouija board to see if it will be successful. It's also a grind operating them. Unexpected bugs, scaling issues, customer support.

Acquire a larger SaaS

We haven't really done this. Our biggest purchase to date has been Inlytics for multi 6 figures and so far it hasn't been much of a win. It hasn't been a loss, we're on track to be fully paid back in 3 years, but it certainly has not grown like we had hoped. The team has been working hard on a redesign which we will launch soon so we're optimistic we can grow this thing but it's been a slog. Paying a market rate makes it really difficult to win.

We have been trying to acquire a low multi 7 figure deal for about 6 months now. The SBA won't touch it for various reasons. We're working through how a seller financed deal would work in this situation, but either way we're going to have to write a large check and pay a market rate. That has historically been a recipe for a mediocre return and a 3 year payback period (cash on cash). That's amazing in real estate, but not so great for us.

A larger SaaS  is lovely because we had to kiss a lot of frogs to do the 7 deals we've done to date. But, a larger SaaS would be a lot of concentrated risk. If that deal doesn't go well, that could significantly slow down our ability to buy things for the next year or two as we build up more cash to deploy.

A fun but dangerous idea is to buy the bigger saas and focus on building new things that won't cost us anything to build because your's truly will be writing the code. I'm not in love with this idea. We have the muscle for it though and if that's what it takes to get us to the promised land of profitability then so be it. Hopefully it won't take more than 1 or 2 base hits to work (and perhaps 5-8 attempts). Worst case (1 out of 8) that's a 12.5% hit rate. Incredible really, but painfully slow with just me building out initial products to see what gets traction. I have mixed feelings about this. It is just too at-odds with the scope of XO being a micro private equity company. Although it is just the 3 of us that own it, so we can sort of do whatever we want. But it's also in theory just as profitable to build one thing as it is to have a portfolio of several.

The strange thing is that if you build a saas company that does $1k MRR, that goes for ~$50k+ now. For us to build a small tool and get it to $1k MRR isn't that challenging. I should say, it may not be $50k worth of challenging. If again I'm building an initial MVP, that's $0 cost and then we have a heck of a marketing budget.

There's certainly no free lunch here. Buying small gives us a lot of swings at bat. I used to be in love with the concept of power laws and couldn't tell if we would avoid them with our portfolio. I think now that even though our revenue is split relatively evenly (except for the new one we picked up), we are still subject to power laws. I have no doubt that over time, we're going to have winners and losers and our portfolio will get lumpy. If that's the natural tendency of things then we should be making many small bets, selling off the underperformers and doubling down on the winners.

A Note On A Novel Structure:

Not a lawyer, this isn't legal advice, but I was talking with my accountant and he had a really interesting idea for structuring a company like XO:

1. Top level hold co - LLC but elect s-corp status. Takes management fees from porftolio companies.
2. Each acquisition is put into a new c-corp so you qualify for QSBS. The money for the acquisition comes from you personally bc I don't think another company can qualify for QSBS. If you sell after 5 years it's tax free up to $10M. insane. The c-corp pays the hold co management fees.

That's it! We're thinking through experimenting with this approach for a larger acquisition since some of these smaller ones just aren't material enough to warrant the complexity. If you don't know what QSBS is, it's a lovely lovely thing.

Biggest Wins

• We are now the proud 100% owners of all of our portfolio companies with zero debt

Biggest Fails

• screenshot api database got deleted and we lost ~9 hours of data :/

Other Products

Yes, there's sort of an other projects section

Content Crew

• Mikey (CEO of cold email studio) created a new service sort of within Cold Email Studio focused on content marketing. It's going well and is ~ $8k of CES's MRR.

Cold Email Studio

• $25k MRR
• 8 customers

Super Send - New!

• $5,150 MRR
• 103 customers
• I foolishly built this from scratch - regrets!
• Been a very challenging project technically. Heavy customer support needs. More regrets lol. Hopefully churn will stabilize this month and the product will harden. My god this has been a challenging one though.

Good luck out there this week!

AP

This is Danny from XO Capital chiming in for this edition of Friday Notes.

Productivity is something I've struggled with over the past several years. Shouldn't I have this figured out as a 33-year old? Isn't my job as a founder to be incredibly productive with limited time, limited resources, and an infinite pile of to-dos? Yikes.

I have a long list of excuses you probably don't want to hear about. At the end of the day, I struggle with the quality and quantity of my output because I'm not in control of and consistent with my inputs.

Time is something I'm still learning how to control and optimize.

When there wasn't anything that needed 100% of me, except me, productivity was easy. That's why I think I loved software sales. You eat what you kill, and how much you hunt directly correlates to how much you eat. Early in my career, I dedicated 100% of my time to being a great salesperson.

The past 10 years, things have changed... for the better, but nonetheless, things have changed.

Now, I have a wife, a 2-year-old son, another son on the way, a portfolio of SaaS companies, the XO team, and all the other normal things that come with being an adult. Maybe I'm way behind and I need to figure my shit out, but it's been hard navigating how to manufacture the same level of productivity across multiple things that all deserve 100% from me.

• There's an immaturity I need to work through. I still crave to FEEL worthy whether it's with the founder/startup community or amongst other parents or husbands.
• There are fears I have yet to admit. I still wonder if ultimately I will fail and my family will reap the consequences of my inability to succeed.
• There's inconsistency in my devotion to pursue what I want. I still sometimes am okay where I'm at... not because I'm actually okay with it, but because I want to give up or I'm okay if it doesn't work out. Damn... that was tough to write.

The same fragmented feeling exists with XO's portfolio of companies. Currently, we have 5 different SaaS companies...

• With 5 different audiences
• With 5 different growth playbooks
• With 5 different sets of priorities

Sounds like a lot...of complaining from me haha.

Thankfully I've got a great support system, including Andrew and Henry at XO, who call me out and hear me out.

Enough of the complaining. Here are some of the actionable things I'm doing to improve my productivity across all the important things I want to give my 100%:

Family

• Get back to consistent, don't ever miss, date nights with the wife (still needs improvement)
• Shutting off my computer when my son is home from daycare (work in progress)

XO Capital

• Having a consistent morning routine for XO, started using Akiflow about 6 months ago (still needs improvement)
• Mix in life-giving/joy-giving projects and tasks with the necessary, grind work that comes with being a founder of an early-stage startup (work in progress)
• Consolidating what we can across the portfolio (blog post coming soon on this)

Me

• Giving up alcohol - it'll be 1 year this coming April 1, 2023 (going well)
• Write more publicly. And not care how it might sound or look to other people (still needs improvement)

Anyways, thanks for reading if you got this far. If you have your own lessons learned or thoughts you'd like to share on this topic, ping me.

Cheers,
Danny

What up XO fam. I've had plenty of caffeine this morning so I'm going to be firing from the hip on this one. Example:

Guys (and gals). Listen. buying MRR is lovely. Here's proof (and 13 people agreed). If you haven't tried it. You should.

We're in the process of selling one of the companies. If we get a market price for it, it will effectively have paid back all the $ the 3 of us have put into XO. What does that mean? Basically we will have a portfolio that makes $200k ARR (and growing) that we bought for $0. That's insane. We'll obviously roll that cash back in to other acquisitions, but it's a cool concept. Of course it's not sold yet but we're assuming a pretty unremarkable multiple. Even if it doesn't sell, we currently have a portfolio that grosses more than we put into XO every year. Yes XO is still small but 7 acquisitions in, the experiment has been a success and we can't wait to acquire more. Not to mention the economic uncertainty makes playing the game now much more favorable than it has been over the past few years. Sellers are getting more realistic, and acquire.com has truly opened up the floodgates on supply and demand in what used to be an extremely niche area.

Join the fun.

By The Numbers

Experiments

Here are a few PLG experiments that didn't turn out like we expected. I think you'll find them interesting.

Sending Emails to push people through a funnel.

Most people assume that they need to set up some kind of onboarding. That onboarding usually involves sending emails when people sign up or take actions in the app.

Turns out our experiment in this area across 3 port cos didn't have a significant impact.

The experiment:

• segment users by usage (for screenshotapi it's # screenshots, for sheetbest it's # of api calls)
• send drip emails to those users trying to push them past the free tier to convert. Helpful articles, seeing if they need help, etc. High quality, wasn't spammy or annoying (relative).

Why didn't this work? Intent.

Intent is the biggest unknown and hardest to measure PLG metric. At face value we look at all signups as the same. That is 1,000% false. Not all users are the same. Some people want to check out a thing their friend sent them (high intent). Some accidently clicked your google ad because they fat fingered a search query, are then mildly curious and sign up, then their phone rings and they forget you ever existed and move on with their life.

Based on our little experiment, people with high intent will probably convert with or without emails pushing them along a funnel or through a series of steps. People with low intent will probably never convert with or without emails. The entire PLG community is trying to figure this problem out. We've tried a ton of tools out there and don't have a good answer yet.

So the next question, is how to discover and measure intent. And that experiemnt we'll leave for another day.

I say all this while we're actively setting up a new system to send emails to new users to push them along a funnel. Feels weird not to have it, but it certainly hasn't had the impact I think most people assume it does!

Free Tiers

As a user, free tiers are amazing. I get to use the product below some threshold of usage and I don't have to pay anything. Bless!

As a business owner, free users suck the lifeblood out of an org. They often are the biggest pain in the ass on support, and most never ever ever pay you $1 but will complain as if you stole their life partner and killed their dog at the same time.

In Feb, we removed the free tier on screenshot and added a free trial.  The result? Our best month since 2021. People rig free tiers by having multiple accounts. This is hard to prevent. But if you only get a time limited free trial, it's hard to keep those shenanigans up.

Google Ads

Sheet Best uses google ads to grow. We turned those off for Feb just to see what would happen. The result?

• 3,000 fewer signups  (lower)
• 3x the conversion from free to paid (higher)
• Growth was lower.

Google ads are low intent. Their conversion sucks. And they're expensive. All that being said, growth was lower. It's not quite profitable for us to run them but we may turn them on next month after another month of them being off. This one probably isn't that surprising.

Biggest wins

• Cold DM grew 50% last month. Fastest product to 100+ users we've ever had.
• Nearly done with the Inlytics rewrite. Yes rewrite. Will go into more detail once it's live.

Asks

If you or someone you know is interested in selling a company, please ping us, here's our criteria:

• < $1M purchase price
• Must have revenue
• B2B SaaS only
• Freemium / PLG business model (or something that can have a product led growth motion vs a sales motion)

Staying disciplined is hard.

With all the hype around "AI" or more specifically all the hype around gpt-3 enabled products, it's never been more important to stay disciplined with your investing thesis.

Moments like these create fortunes. A few of the 2,000 AI writers are amazing business. Most will die. A few of the AI image generators will make real $$. Most will die.

What makes this particular hype cycle difficult to get a pulse on is just how damn useful these products are. The last AI hype cycle I recall clearly was with images / video stuff 5-6 years ago when Tensorflow came out and Nvidia was the golden child of the AI revolution. A ton of fortunes were made. But after the initial hype died down, many companies went belly up because they were riding the hype, not a product.

Here's where you can get burned:

In the micro space:

A 3rd party api available to everyone (Open AI) is not a technology moat. It's a commodity. Your defensibility must be elsewhere. It must be in your application of the tech. I'm talking product, customer service, UX, etc. But don't pretend someone can't get similar results from Open AI with a little prompt hacking.

There will be a dearth of businesses listed on acquire.com and other marketplaces with a tiny product using gpt-3 that got some initial traction and want you to pay 4x or 5x. Maybe more. These little ones are tempting because in absolute dollar terms, they're interesting bets, but without further scrutiny, you might be buying the 476th tool in that category. I'm generally not worried (at all) about competition and have had some success buying / building in crowded spaces where a market already exists, but beware of what you're actually buying. There are a ton of eyeballs on this space, and a metric ton of founders are experimenting with new products in this space. Competition usually doesn't bother me but that's because the products are usually somewhat unique or have some differentiation. The big difference here again is that ALL of these products use the EXACT SAME api!

In the macro space:

Sometimes the product is actually playing in a winner takes all market. Careful here, Lyft looked like it could compete with Uber head on for years. Given the most recent earnings report + Lyft's stock price, many people were wrong. It's a winner take most market.

Many large companies and micro caps specifically will ride this AI hype cycle with BS press releases trying to catch a tailwind to recover from the Dec 2022 sell off.

Remember just how much time it takes for these things to play out in public markets. The average sales cycle for a Fortune 100 6-9 months. Sometimes longer. Be patient and if you're buying into the hype on an individual stock, do your homework about how exactly they're using this new tech and if there's real revenue there.

If you're a founder

Jesus christ, jump on this train, raise a boatload of cash, deploy it judiciously and never look back. If you have an existing company, find out where there is a real value add and layer it in. Forget all of the above. Go build something real and shoot your shot, now is the time!

Why the 180 if you're a founder? Raising $ is hard. Venture is an industry of followers, and if a category is hot, there is a lot of pressure at funds of all sizes to have bets in that category. Swimming against the tide of what people are willing to fund is a sure fire way to get stuck after your pre-seed without anyone to give you more cash after you run out. If you're a portfolio's category bet and you're showing traction, I'd say you've double your likelihood of getting a proper seed round. Please just don't take the highest valuation on the terms sheet.

Macro headwinds:

We're still in a weird economy. Hard landing? Soft landing? No landing? Should the fed have hiked 50 basis points earlier this month? Is the bear market over?

Public markets + interest rates affect startups. If fewer companies go public, the venture industry can't recycle winnings back into the ecosystem. It's like a traffic jam. Fortunately a lot of these funds raised in the peak of 2021 / 2022 and are flush with cash, but they're a little more diligent about what they're deploying into.

Stay diligent. Don't lose your marbles in the hype!

xo,

Andrew

Platform risk is when another company controls your destiny.

This week there was a big scare with Twitter's enforcement of a policy they claim had been around for a while.

Twitter’s new developer terms ban third-party clients | Engadget

Twitter has quietly updated its developer agreement to make clear that app makers are no longer permitted to create their own clients..

Engadget

The relevant part:

In fact, Twitter previously changed its developer policies in 2021 to remove a section that discouraged — but didn't prohibit — app makers from "replicating" its core service.

With micro acquisitions, many of the available products for sale have some level of platform risk. They might be:

• sold through an app store (slack, apple, shopify)
• depend on 3rd party apis
• hack their way around another product to get data

On the one hand, they're great little products because you have some level of built in distribution. On the other hand, it's tough to get a good night's sleep because you might wake up one day to a notice from Twitter saying they've pulled your access and your product goes to zero literally over night.

Our portfolio has massive platform risk:

• Cold DM - Twitter - Thought this was dead when reading that article
• Super Send - Twitter + Linkedin + Google (gmail).
• Inlytics - Linkedin
• Sheet Best - Google

Sometimes there's a way to diversify. You can be X for Shopify stores and then branch out to other e-comm stores. You can have a wordpress plugin and sometimes also create value as a chrome

But at the same time, these product all would either not exist or not be as useful as they are with the platform risk. It's a delicate dance. Playing in the micro SaaS space means getting comfortable with platform risk.

XO is 2.5 years old. We're starting to have some history.

Recent milestones include the first ever product we have grown 10x since acquiring it. We bought Screenshot API, our very first acquisition, when it was making $500 MRR. It's now over $5k MRR. $500 MRR is obviously peanuts (I like to call it a bar tab). But $5k pays rent (yes, except for me in Santa Monica). Of course there's a 6-person full time team now so we have a lot of mouths to feed but still, we've put in the work and it's now meaningful revenue for us. Having 10 ish of these at $50k MRR starts to be interesting. Operationally complex, but interesting.

We're deep in the process of our biggest acquisition ever and I can hopefully reveal all about it as soon as it closes but in the mean time we decided to do something we've never tried before. XO as a rule only buys stuff with revenue. But we found a tool that we fell in love with immediately and bought it while it was making <$100 MRR. Again this is breaking our rule, but I'm a big fan of experimenting, especially since we don't have any investors to explain decisions to.

So far it has paid off. We bought ColdDM.me when it had < 10 customers paying under $9 each. Less than 2 months later, it's at $600 MRR. Total cash collections are almost $1k and we're on track to repay our investment in < 6 months. Again, this is a small win, but stacking small wins, especially as we're bootstrapped, becomes meaningful over time. Emphasis on time.

One meaningful metric I don't pay enough attention to when evaluating deals is time to value for the customer. ColdDM had the fastest time to value out of any product I've tried in the past 12 months. I was hooked. You log in, and (everyone says this, but this time it's true) in less than 5 minutes you could DM 200 people who follow one of your competitors and get a 4-7% response rate. That's better than Linkedin (for me) as well as cold email. While the rest of the world was anti-Twitter, we doubled down. My guess is that in a few years, Cold DM will be doing several thousand a month. Another small but meaningful win.

It's obvious that the biggest win (on a dollar / cost basis) is creating something from scratch. You buy it for $0 and sell it for something. There's an entire spectrum of risk vs reward. Of course our thesis is that actually we can buy stuff after it's a little more proven, take on a little less risk and still have an uncapped upside. We've wavered between buying larger businesses (and paying higher multiples) or continuing to dig for gold with these tiny ones. The reality is that we're trying both. We're bootstrapped and I don't care how we get there right now, just that we get there. This is one of those do as I say not as I do things. Are we great identifiers of businesses? So far, I'd say more often yes than no, but we've made mistakes. Two so far out of 7 acquisitions. Both of our mistakes worked out fine. One day we'll stumble. I don't see how we continue doing this for 20 years without a huge face plant at some point. But if we're disciplined, no single investment should ever have the power to destroy XO. Except of course the deal we're trying to close. If it goes through, it will be a bet the farm moment. So again, see above, don't do what I do. Naturally if it works, I'll pretend we were fearless lol.

It's easy to get caught up in trying to hit home runs. Base hits are awesome. They keep the lights on while you're swinging for the fences. This was the reason the venture backed company I was CTO of ultimately failed. We didn't have any minnows to snack on while hunting for whales.

Long live the minnows!

AP

When we started two years ago I naively thought I'd read enough Twitter threads to understand that basically all we needed to do to win was:

1. buy good businesses (hard)
2. accumulate excess cash (hardest)
3. redeploy that cash (harder)

However, we now have two years of operating history and here's the reality:

1. Our largest inflow of cash was from selling a business
2. Our second largest inflow of cash was from an enterprise sale of an enterprise SaaS which we have since concluded is not the right type of micro business for us to own.
3. The rest of the months were roughly break even or operating at a slight loss.

Even in a service business like the email marketing agency, which cleared $350k last year but did not make much profit for reasons we hope are fixed this year.

The point is, when you're buying tiny businesses, there really isn't much (if any) excess cashflow. The "cashflow" accumulates when you sell a business and then redeploy that capital to buy something slightly larger or buy two smaller ones that are growing quickly. In theory, we'd love to own stuff forever that kicks off consistent cash and grows at a consistent rate. The reality is though that sometimes we have to sell stuff off we'd rather keep to be able to generate enough cash to do another acquisition.

The flywheel that i think is more practical despite it not being ideal is:

• flip businesses to accumulate cash.
• redeploy that cash

The tricky part though is that you need to find something quickly to buy if you're watching your IRR #s. Thankfully we've just used our own cash to date so that's not a problem, but one day we may raise a fund and people will ask our IRR so it's still a concern.

In short there's no free lunch once again. If we buy enterprise SaaS businesses, they're really time intensive and labor intensive but have the ability to close 5 and 6 figure customers. Those customers subsequently demand a lot. On the flip side, single purpose applications have relatively lower labor requirements but do not have the ability to have 5 and 6 figure customers.

The last vector is when you buy a larger business but you load it up with debt. This also makes it tough to accumulate cashflow to then redeploy elsewhere because if you're levered at 70% then there isn't going to be much leftover cash. If there is, then good for you, you cut a really great deal or the deal was sufficiently large.

Example:

• You buy a business for $1M that does $250k a year.
• You're borrowing 70% of it at a 10% interest rate that amortizes over 3 years. (good luck finding a seller willing to do this by the way).
• At $250k ARR, that's $20,800 MRR. The debt payment on that would be $22,587 ... so already zero room for operating.

This of course is why SBA loans are lovely in theory, because they amortize over 10 years. This deal amortized over 10 years is way better:

Now you'd actually have some cash to pay yourself (if you were doing everything) or hire one person and maybe be able to pay your mortgage.

So levering up is difficult too. The best way out of this is to of course already be rich. And with that brilliant insight, I hope you have a great weekend.

Are we having fun yet?!?

Andrew

Hey it's Danny. Happy new year!

January 1, 2022 we had 3 full-time employees at XO Capital. Myself, the operator, 1 engineer and 1 support person were operating Sheet.Best, ScreenshotAPI.net and WorkClout. In March 2022 we acquired Inlytics.io. Shortly after, we brought on 2 more full-time engineers and one additional BD/growth person. Finally, in November 2022, we acquired Colddm.me.

By the end of 2022, we had a 6-person full-time team operating and growing five micro-SaaS companies. In 2022, we also sold one of our portfolio companies, Sentiment Investor.

Here are a couple of lessons I learned about growth operating 5 micro-SaaS, predominantly PLG companies:

Lesson 1: Free-to-paid conversion rates are hard to figure out.

Coming from a B2B sales background closing minimum ~10k ARR deals, I’ve always found therapy in playing the numbers game with qualified leads > demos > opportunities > closed won customers.

Our PLG (product-led growth) companies were not predictable. Therefore, it was difficult to pinpoint how to predictably improve the free-to-paid conversion rates for each of the companies.

Top-of-the-funnel was extremely wide and varied in quality (and quantity). I was not in a position to turn off the firehose despite how “unqualified” some of the accounts were.

My goal in 2023 is to run some very specific plays based on product usage to figure to identify any patterns for higher than average free-to-paid.

Lesson 2: Use the users on free plans and their product usage to discover new customer segments

Pricing is typically one of the first things we look at changing (ie. increasing) after an acquisition. We had increased prices for Sheet.Best back in 2021 when we first acquired the business.

Since then, Sheet.Best was getting consistent feedback from our customers that our Free Plan, which includes 100 requests/month, was not helpful. We experienced users going with our competitors who had more robust free plans. We also experienced users creating multiple free accounts hence the extremely bloated sign-up number for Sheet.Best.

As a result, we added the Tiny plan at $9.99/month.

Today, the Tiny plan accounts for 35% of our MRR and a total of 162 active customers as of Jan 2023 (57% of the total customers).

LTV is $90, considerably lower than our overall LTV of $136; however, we now access a new customer base that has improved our distribution of revenue with a larger customer base.

Lesson 3: There are diamonds in the rough

We have this running joke at XO that “growth just happens”. It’s partially true mainly because we don’t have a clear grasp on how and why growth does or does not happen (see Lesson 1 above).

However, unlike non-PLG companies, the benefit of the majority of our portfolio is each business has an existing pool of fish to reel in. One of the cool, positive consequences we’ve seen from really trying to engage with our free users is the one-off custom subscriptions from our “diamonds in the rough”.

I started poking around the paid and free accounts that were hitting their limits pretty consistently, and eventually we discovered two companies that increased MRR by 50%, increased ARPU by 80%, and doubled the LTV.

Now, I get 2 Slack alerts from Metabase - a list of all non-Gmail user sign-ups and a list of users who are close to hitting the monthly limit of their respective account (see example below for the free version of ScreenshotAPI) to monitor potential other “diamonds in the rough”.

Conclusion

Our growth was sporadic and unpredictable for the most part, but overall we experienced a 32% MRR growth from June 2022 to December 2022.

2023 will be about trying to build out some playbooks for each of the portfolio companies. We will be relying on product usage metrics to find the patterns of our most qualified free users.

More to come.

Cheers,
Danny

2022 proved XO's business model. We were able to source deals, close them, grow them, and in some cases sell them. We grew to 6 full time people (not including myself and Henry). We joined the 6 figure club and proudly bootstrapped our way to low six figures in revenue while still maintaining 80%+ gross margins. So far we have turned $300k into $1.3M (unrealized) if you assume we can value each company in our portfolio at a 4x ARR.

Our challenge going into 2023 is scaling this model up. Frankly  we just haven't seen very many businesses we'd love to own in our price range. The good ones are rare, despite what Twitter and Micro Acquire lead you to believe.

2023 Financial Goals:

• $1M ARR

I feel like the $1M ARR mark needs a name. We of course have names like unicorn and decacorn for the billy club, but nothing good below it.  I've seen minicorn, or maybe even a microcorn. Maybe a $1M ARR company should just be called a "corn". No, that's awful too. For now, I'll just call it "awesome".

We have a deal we're currently working through that will bring us most of the way there. I don't want to jinx it, but we found a lovely business from a lovely founder and hope we can get it done. It would be a game changer for XO.

Team

We've only had the core partners for under a year. We started the year with Danny going full time on XO and buying out a previous partner.  This absolutely accelerated our progress. I can't overstate how impactful Danny has been this year. That might be the biggest takeaway... find great partners.

We now have 3 full time developers, 1 customer support person, 1 growth person, and one partner full time for a total of 6 full time employees. Shared services continues to work though I feel like long term it would be better to staff each company with it's own resources and bill it against the company instead of XO.

In 2023 we will experiment with hiring operators to run one or two portfolio companies at the same time to see if that can help us scale beyond the core partners. I believe this is possible. It is, of course, all about finding the right people. We have someone in mind who has helped me launch a business before and I look forward to adjusting to giving autonomy to an operator. In our current small context, operator really means growth / sales and some light product management. For these small, single purpose applications, we don't want to invest a ton of engineering time into them. They do one thing well, and we want to keep it that way, going as deep as we need to on just that one use case, but no more. That has proved to be as close to "passive income" as I'll admit to.

Financials

• $200k Invested.
• ~$27k MRR. $325k ARR.
• Portfolio valuation at 4x = $1.3M

Danny, Henry and I have put in a total of $300,000 to buy 7 companies. Some of which we've sold. Our current MRR is around $27,000, meaning after just 2 years, our portfolio kicks off more than 100% of the cash we invested (top line of course) every year. This is a cool vanity metric. Though, the reality is we're reinvesting dollars back into each business and not taking any distributions. If we were to sell each individual business for a reasonable 4x, we could value our portfolio at $1.3M. If this were a youtube video, it would be titled:

"Turning $300k into $1.3M in 18 months".

I'd click on that thumbnail.

Debt

We didn't make much use of debt. We mostly paid cash and did some small seller financing. We still have ~$20k of seller financing on one deal that will be payed off in March of 2023, so effectively no only do the three of us own 100% of XO, but XO also owns nearly 100% of all our portfolio companies outright. That's pretty neat. On paper, to put up $300k to buy assets that generate ~$335k a year is a no brainer. The question remains, can we add a zero to that number and have it still hold true. That is what we plan to test in 2023.

Narrowing in on a thesis

There is no overarching view of the world that drives our thesis. I feel some pressure to have one, but I believe we're too small to say no to businesses that don't fit a thesis. We have to be opportunistic. Despite what Twitter says, this is still a small pond at this micro level.

We try and buy great products we think  we can nurture and grow. Now when people ask what we buy I have a better answer:

• prefer Product Led Growth (PLG) companies (i.e. freemium, i.e. infrequent sales calls / demos)
• Prefer revenue > 0.
• Demonstration of product market fit. For these tiny companies, product market fit isn't always clear but let's say it's simply 50-100 paying customers with no single customer more than 20% of total revenue. For an enterprise SaaS that number might be lower, but for PLG companies, 50-100 feels good.

It's still not clear whether we're a permanent capital (non) fund or if we're also opportunistic on the sell side. If we need cash to buy a business, and this business feels like a better return on capital for our skill set, then we have no problem selling something. If on the other hand we can start to put away some cash each month, and that cash is a down payment on another business, that's the flywheel I can't wait to get rolling, but is actually very difficult to pull off.

Transitions

Transitions take 1-3 months. We bought a tiny deal recently that fully transitioned (i.e. we're comfortable building new features out and pushing them to production) in two weeks. But generally we expect 1-3 months where we can't acquire anything else. We can only single track things because they're so time intensive, and it's usually bottlenecked by me. We could (and have) done 2 at a time, but 1 is more comfortable.

Lessons

Each company is unique in some respects. This is unsurprising. We have not been able to have 1 playbook we can rinse and repeat on each new acquisition. Each one we've bought has slightly different needs, which slightly different channels that work for growth. The through line for all of them is content and organic growth. We found an agency who writes one post per week for each company and we push this out to their respective blogs and newsletters. This took a lot more work than I anticipated in getting it set up. It's still a pain. We've been at this for 4 months now and measuring results is difficult.

I worry without individual people full time getting into the weeds of each business, we will not grow as quickly. This is a counterargument to the shared services model we currently use. I pray for the day we no longer use shared services. Sharing services, context switching, and complexity are a tax on employees. For our current portfolio, each individual company is still too small to justify devoting 100% full time people, so we will suffer through shared services for a bit longer. The best way to mitigate this for engineering is to have one person mostly full time on one product, but fluent in at least 2. Using the same programming language, cloud provider, deployment methods and tech stack across the portfolio helps tremendously.

Shared customer support is also difficult. It just takes time for a non-technical person to understand the nuances of a developer product. We'd like to invest more in self service FAQs and knowledge bases for a better customer experience.

Conclusion

Overall, I couldn't be more excited about 2023 for XO. If the current deal we have under wraps ends up going through, it will be a "bet the farm" moment. Assuming again the deal goes through, financially next year will be tough. We'll be operating the largest business we've ever purchased on razor-thin margins due to a loan. If we can push through the next 12-18 months and are able to grow the business I believe XO comes out of 2023 looking like a totally different animal. One that can scale and perhaps one that can raise capital if needed.

I'm still unsure how we'll fund future acquisitions. We've failed to raise a fund before at a reasonable valuation (reasonable to me :). If we set up a fund and have our existing portfolio, investors will question how much time we spend on the fund vs existing portfolio companies. If we do not raise a fund, but sell equity in XO Capital (i.e. sell "GP" shares), then we will need to argue on valuation, and why we should be getting the same valuation as a normal tech company. This has proven too difficult to overcome in the past. Raising dilutive capital for acquisitions just doesn't work out. However, if we're doing $1M ARR I believe some of those arguments will be easier for us to make. We will have proved the model, and will be asking for $1M at around a $6M post money valuation. $6M is lower than I'd like (mostly because of the dilution) but may be worth it if we can find a strategic investor that can give us access to reasonably priced debt heading into a potential recession next year.

Individual Performance

Sheet.best

• 6x since acquisition
• cash flowed more than we paid for it.

Screenshotapi.net

• 8x since acquisition
• cash flowed more than we paid for it.

Cold DM

• 2x since we bought it a month ago
• has not cash flowed more than we paid for it.

Inlytics

• has not cash flowed more than we paid for it
• has been kind of a pain in the ass.
• was our largest, most expensive acquisition and so far the least profitable.
• For 2023 we're releasing a redesign with some major improvements we hope will turn this one around.

Work Clout

• currently for sale

Sentiment Investor

• sold
• reinvested profit

Toybox

• sold
• reinvested profit into another acquisition

These are technically not XO portfolio companies (these were built, not bought by people other than the 3 partners at XO) but I call everything XO these days.

Cold Email Studio

• Service business (not really a part of XO, i.e. not counted in our financials, separate cap table, etc.)
• Mikey has done an awesome job figuring out how to scale this business. As with any service business, many of our problems are people and scale problems. Demand for the service continues to be strong despite the balmy economic outlook.
• I still believe CES can be a $1M ARR business by itself as we continue to say no to customers that just don't fit well into our delivery model.

supersend.io

• new!
• also outside XO
• this is a large product for a solo developer and has been a huge distraction and has also been a huge pain in the ass. Getting feature parity with a well funded competitor is not something I'll overlook for the rest of my life.

It's hard to get anyone to pay for something once they've had it for free. Inlytics, ScreenshotAPI.net, Sheet.Best, and now, Cold DM all have one thing in common: Freemium model

We believe companies with a PLG model are great acquisition targets for XO. We work to uncover the main triggers or signals (those AH HA! moments) that maximize conversion from free to paid and invest in product and customer experience to drive value.

What's interesting, and not so obvious (at least to me), is a high conversion doesn't necessarily highlight a strong PLG playbook. Similarly, a low conversion doesn't equate to a failing strategy neither. HBR says a moderate 2%-5% conversion rate with a healthy volume of top of the funnel activity can strike a scalable balance to maximize the freemium model. Here is the link to the article if you're interested.

I did a quick exercise to kick-off the exploration of growing Sheet.best (SB) and ScreenshotAPI.net (SS) by making the freemium model scale successfully.

Below are free-to-paid conversion rates for SB and SS from May-July 2022:

Sheet.Best has a lower conversion ratio than ScreenshoAPI.net

Digging a bit deeper, we see a significant difference in the volume of free sign-ups.

Without necessarily jumping to any conclusions, I ran 4-5 touch email sequences using Hubspot and product usage data we collect in a metabase dashboard:
 1) reached out to users who stopped logging in to re-activate them
 2) engaged with users who had between 10-79 screenshots or api calls – another blog post coming explaining how we define a quality free user.

Here were some of the results from those 4-5 touch sequences we ran via HubSpot:

People were clearly engaging with us (to a certain degree) based on the extremely high open rates. Cold email experts would be impressed.  

In any case, the hypothesis was if we use product usage metrics to trigger more targeted, educational content to free users in a timely manner, we should see an uptick in the free-to-paid conversion.

Sheet.best improved. ScreenshotAPI got worse.

Are the conversion rates purely affected by the total number of sign-ups on any given month?

This simple experiment had somewhat inconclusive results, but it gave us new data points to use and go run more growth experiments. Here were my takeaways/questions from this thought exercise:

• ScreenshotAPI has a healthy conversion rate but struggles with generating top of funnel traffic.

Is our free version too limited? Is the 100 screenshots/month not enticing enough to check us out? Is our content/SEO strategy targeting the wrong ICP?

• Sheet.Best has extremely strong top of funnel traffic, but a weaker conversion rate.

What's happening in the activation phase that is causing potential drop-off? Are the quality of our free users really poor? Are we giving away too much? Are people somehow gaming the free version?

As Andrew pointed out in our October update, these two companies are humming and growing well, but there are a lot of unknowns and a lot of room for growth...one could even say that there's a lotta meat left on the bone :)

And speaking of bone...

Happy Thanksgiving from  Andrew, Henry, myself, and the XO team.

This week we closed on a Twitter DM tool.

It's the smallest deal we've ever done. Are we going backwards? What's up?

We're working on our largest deal ever. Hopefully it will close early next year, we're on a path for that one and it's looking great, but in the mean time I wanted to run an experiment.

If I look out in 5 years, what does XO look like? It think the naive answer is that we'll continue buying bigger / better businesses. We probably will do that too, but I do think there's a massive overlooked opportunity in micro saas.

Instead of (or in addition to) buying bigger and bigger businesses, I would love to see XO be the default buyer for SaaS companies doing sub $10k MRR. Super quick closes, no haggling. We'll be upfront with our valuation, have a quick diligence process and have most everything done in a week.

Why did we pick this?

I love the product. I can use the product to grow the product. I'm long on Twitter in a time when others are leaving the platform. We found this one before it hit significant revenue and bought it at a good price. I think we can 10x this one in the next 3 months. Once we put it on a path of content, automated outbound, etc, I think we could dial this in to 10% MoM growth for the next 18 months.

Affectionately I called this a snackquisition. I wanted us to take something with basically zero revenue but an awesome product and put some solid marketing behind it and see what happens. We've never done it, and I wanted to try it. I want us to have that muscle. This is of course more than just an exercise, I do think we can make some decent $$ out of this one.

For the past 12 months we've realized that long term, if we can collect a bunch of Sheet.Best or Screenshot API type companies that are largely automated, PLG, growing organically, etc, the better off we will be. And if we have the muscle to take something from a tiny amount of MRR and quickly double it with a few tweets from yours truly, then that's pretty cool too. We don't have investors. we don't have to run anything by anyone other than the 3 of us. We're still lean and mean and can try stuff. I don't know if that will always be true.  

Anyways we're thrilled to welcome Cold DM to our lil portfolio!

✌️ ,

Andrew

The three co-founders of XO got together last weekend in South Carolina for a weekend of golf and just hanging out. I am by far the crappiest golfer on the team... it's truly an evil sport. I think I'm also the shortest. Anyways ...

We get together at least once a year. It brought up a lot of the reasons I want (someday) an office where people come in and work as an option. There were just so many small moments of insight or chat that not only sped up some decisions we had to make but overall communication was 100% better. If someone isn't tracking something in person, you look at their face and know that you lost them and can pause and try explaining something differently. Of course you could do this over chat but in my experience, you tend to just give up after a while. I'm long on an optional return to office.

We're only a few months in from having a real content strategy and have yet to see fruit from it. It's tough playing the long game even when your whole company is predicated upon playing the long game.

We're still aiming to do larger deals and are re-evaluating funding options given the SBA want's my first born child as collateral for any loan above $350k. We have some cash in the bank and will likely find some partners to loan us $$. Between a loan and some seller financing, we should be good for our next two deals without raising any money and without involving the SBA, although we may still pursue that path for working capital loans, etc.

Numbers

XO

• $26,968 MRR
• 4 products
• No new acquisitions
• Recovered almost $400 in payment failures from Churnkey (haven’t stopped any voluntary churn though)

Inlytics

• MRR $6,364
• We're getting killed on cash collections. We made the mistake of putting an earn out based on data in chart mogul (instead of cash collections) and chart mogul is horrendously wrong at times. This was definately a lesson learned.
• Churn is still high. Will be launching new pricing + feature gating + some UX improvements to try and mitigate this. We also started a sequence specifically for SOLO users (the highest rate of churn, and lowest $ amount).

Screenshot API

• $4114
• Closed a $1k customer. We're nearly at 10x from where we bought it! Also kind of just humming.

WorkClout

• closed one new small customer

Sheet Best

$5012

God I love this product so much. Just humming. Strong growth this month with lowest churn we’ve ever had.

Bonus - Cold Email Studio

• $32,190
• We're back! After 3 months of tough breaks from customers churning to a war + typhoons in the Philippines, we've been dealing with a ton of team issues. We're just now getting back to rebuilding the team from (nearly) scratch to scale this out.

Bonus 2 - Super Send!

$495 MRR

This is a new email sending tool. We built this and launched it a couple of weeks ago. Sorry if you've been following me on Twitter and are annoyed at all the giveaways ... but they're working!

Happy Friday!

✌️

Andrew

Your boy was on two pods the past few weeks.  Can I still talk like this at 33?

The Startup Blueprint

Episode 9 - Don't Build It.... Buy It? Acquiring a $1M ARR Portfolio

This is a great intro from the perspective of Indie Hackers looking to buy their first company. Full of hot takes I will probably regret saying in a year.

Acquiring Minds

Episode 100 - Would They Do It Again? 1 Year Later with 5 Early Guests

It was great chatting with Will again 1 year later. It was a time for reflection on what went right, and what has gone wrong. TLDR; we're still on that grind one year later and wouldn't change it for the world!

What's up with that SBA deal?

We've been pretty heads down trying to figure out how to finance a low 7 figure deal the past few weeks. The SBA, which looked like the most unbelievable deal on planet earth, turned out to have a dark side ... a full on lien against any property any of the 3 founders have to 100% collateralize the deal. This was profoundly disappointing. A lien on your house is no joke. They also had a really tough time working through (slightly) dirty financials. They were clean enough to where I could make sense of them (a very low bar), and we still got a lot of pushback. It was a great experience though and shoutout to Matt for helping us dip our toes in the water! I'm not saying we'll never do an SBA deal but it's no longer our default source of capital.

Overall I had thought there was a desire in SBA land to figure out how to do SaaS. My perception is that's not true. The objective feels like it's just volume. They want easy to finance deals they can churn through quickly to collect some fees. Totally get it, it's a business, but I am disappointed.

Steal This Idea

I've been working on a new SaaS (yeah I know ... I should focus!) and my dude Shivansh has been doing these giveaways via my Twitter account. They've been working like black magic.

Here are the 3 we've done so far.

#1

My agency has consistently hit >70% open rates for 2 years straight 🤯

I compiled 40+ tested subject lines & every SECRET I know about writing a ‘winning’ subject line

🔁 retweet + comment 'subject' and I’ll dm you the doc containing

- 40+ subject lines
- all the dos and donts pic.twitter.com/iQsQRjHxbR

— Andrew Pierno (@AndrewPierno) October 26, 2022

#2

A well-thought CTA can easily 2x your reply rates.

I compiled a list of 50+ Call to Actions (CTAs) for you to STEAL and use in cold emails or Linkedin DMs.

🔁 retweet + comment 'CTA' and I’ll dm you the doc containing:

- 50+ CTAs
- 5 tips for the perfect CTA
- 5 CTA mistakes pic.twitter.com/EecDE7qrPD

— Andrew Pierno (@AndrewPierno) October 18, 2022

#3

This is the same list that I used to grow my agency to ~$30k MRR and now Super Send.

Giving it away for FREE to celebrate the Super Send launch

>1200 YC Funded tech companies with 100% VERIFIED EMAILS

🔁 retweet + comment 'SUPER SEND' and I’ll dm it to you pic.twitter.com/Ut9MEqYOOM

— Andrew Pierno (@AndrewPierno) October 10, 2022

So yeah... this is working. The strategy goes like this.

1. Create something compelling to give away for free. See above. Can be a list of leads, CTAs, idk something helpful and relevant to the target audience you want to reach. For Super Send, this is marketers, founders, etc.
2. Make people retweet and comment to get the link to the doc. I use Tweet Hunter to automate this. Basically it will auto dm people who retweet and comment the link so you don't have to do this manually.
3. Hide the thing you're giving away behind a google doc so they need to request access (you get their email). Add the email to your email newsletter so you can try to grab them as customers later (provide value first).

Super Send now has 625 ish people on the newsletter in only 6 weeks. Not all of them are from the giveaway but many of them are! Steal it!

✌️ ,

AP

I don't know about you guys but September felt weird. Between all the rate hikes, inflation data, stock market drops, and crypto chills it was a tough month for sales. Also feels like nobody in tech is around August and September (myself included this year!).

TLDR;

September sucked. SaaS is seasonal (come at me). Nobody is around in the summer and the larger the deal, the larger the summer delay. October is already looking better.

Highlights:

• 💰 Total MRR: ~$25,500

New Acquisitions:

SBA Update:

• We're in our 3rd week going through the SBA process and the slowest process by far is getting all the financials in order. We've already lost two weeks to financials and will likely not close this year if the deal goes through. On the upside, we're still pumped on this company and can't wait to get further into the process.
• This SBA process has forced me to start thinking in millions. I heard somewhere the easiest way to make a million dollars is to start with a million dollars. That's true. or $10M. In acquisition land, I think the equivalent is to buy something for $10M and sell it for $11M. $1M used to feel like a lot of money. and it sort of is. But if you think about it, we have 3 partners. $1M split 3 ways is roughly the equivalent of an all in salary at a MAANG (FAANG was so much better) company. If this deal goes through, XO will be at ~$75k MRR ( $100k+ MRR if you include Cold Email Studio). That's ~$900,000 a year. On the one hand, amazing. On the other hand, after expenses that's roughly $600k. We're not doing this but split 3 ways is still just not that much money a year relative to getting a high paying job in the US (which is what we're comparing XO to). And of course, every time we have extra cash, we hire our parts we were doing ourselves. Anyways. think in millions.
• This deal we're looking at after paying off the loan would gross about $15k a month. That's 1 US based person. This game was tough doing micro acquisitions. Looks like it's also tough doing not so micro acquisitions with a lot of leverage.

Screenshot API

• $3257 MRR
• Closed a 4 figure deal this month (go Danny!)
• Starting to get some very well known companies as customers :)

Sheet Best

• $4,306 MRR
• God I love this product so much. So do our customers. It just keeps humming. I hope we never sell this.

Inlytics

• $6,269 MRR
• First up month in 4 months. Churn has been kicking our ass. We've also got a lot of annual subscriptions that we never saw the revenue for so our cash collections on this one are even lower.

Work  Clout

• $11,668 MRR
• no news is good news.
• I will never use Hasura on another project ever again. Feels like trying to snowboard on a wet towel or hang on to a fist full of sand. Bless our dude Diego for his work on the product.

Cold Email Studio:

• $25,194.00 Revenue
• I think we're through CES's first near death experience. We've got a larger team now, with lots of mouths to feed. Even though the revenue number is high, our margins are not, so we need a solid influx of new customers each month. The good news is we've fired some tough customers that were clogging up our process and have continued to narrow in on our ICP and say not to people that we could help, but it would be too operationally complex for us.

Super Send (New!)

• $150 MRR
• Always a blast launching something new :) This email sending tool got a lot of interest in its first few weeks. This is the fastest I've ever gone from 0 to 7 paying customers for a net new SaaS product.
• Down side - I built this myself and with customers comes feature requests!

Personal Growth

I took a break from the 30 minute shoot-the-shit meetings and my zoom fatigue went down drastically. I've also been more aggressive about cancelling meetings if I think I can answer via text or write a blog post or shoot a loom video. Living my life in 30 minute zoom call chunks was starting to get to me after however long it's been.

I've also been rethinking my feelings on remote work. On the one hand I love waking up at 6 am and hammering uninterrupted until 9 or 10. That is my deep work time, and I've long said those hours are not for sale. BUT after those deep work hours, I think it would be fun (and was fun) going into an office and celebrating wins and losses with the team. Shouting at my window in my underwear when something cool happened felt good for like 6 months but I'm pretty over it now. I think one day XO will have offices and local employees that also can go to the office when they want to.

Going back to an office (or having the option to) for me is not about efficiency, and it's not about collaboration. At the moment it's about joy and quality of life.