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XO Capital - 2021 In Review

XO Capital - 2021 In Review

XO was started in the summer of 2020. It was in the wake of a failed venture backed company where I was CTO for several years. In addition to the (concurrent) medical shit I was dealing with, it was one of the toughest periods of my life (so far!). Having a big failure is embarrassing no matter what the technocrats shout on twitter. It sucks. You put everything into a thing for years and got nothing but an education. I'm grateful for the learnings, but it still sucked. Some people like to call those moments character building moments. I don't like those people (kidding).

If I'm being honest, XO was set up not to win necessarily but, a la Charlie Munger, trying not to lose. If we earn our investors a safe, consistent 2x year over year, I'd be over the moon.

Team

I started putting together XO in the summer of 2020. I went fishing for people to join me on twitter and indie hackers. I'd pitch anyone who would listen. The team started out as two people. Myself and one other developer. Soon after, a third developer joined us. I didn't know these guys very well, and they didn't know me. Given covid, I knew we wouldn't be meeting anytime soon, so we had to go on trust. After a few months of talking and trying to think about how we'd do this, I got impatient and we bought our first company together. We quickly bought a second, and then a third and before we knew it, we had just bought ourselves jobs. Not particularly good jobs either! I think the stress of it and the reality of how much work it is took it's toll and we had some team changes. At this point Henry joined us and we started really looking at financials. Before him, I don't know what the hell we were looking at.

After a few failed acquisition attempts we had another member decide to go a different direction. He was awesome and I felt the loss personally. I had to reframe this as another opportunity to find yet another partner to balance Henry and myself out. That's when I asked Danny if he'd be interested in joining us, and after a few weeks of talks, he finally decided to quit his job and join us full time. Technically he starts Jan 1, 2022 and I can't wait to see what having another full time person with a complimentary skills does for our growth trajectory and momentum.

At this point we're 3 people. The team is well rounded. We have dev, finance, and sales. The trifecta so to speak. We work well together. We're still figuring out how exactly to run these little companies, but we've either gotten very lucky or we're doing something that works. Unfortunately the three of us are all dudes. It's not ideal, and I hope that mix changes in the future. If you know of a strong candidate, I'd love to speak with her / them. But, for now, I'm thrilled to have a solid team in this for the long haul with me. Company building can be a lonely exercise.

Operations

This is a work in progress, however we do have some key pieces in place that I couldn't live without anymore. These are all the people as of Jan 1.

  • Danny - Sales / Operations / CEO of WorkClout / COO of XO
  • Henry - CFO of XO
  • Julius - Customer support, book keeping, content
  • Diego - Developer. JR but learning fast and is great
  • Cold Email Studio - This is a service arm of XO to help us grow. It's a stand alone business we can lean on for growth. I think it's important though we haven't made much use of it yet.
  • Myself - Dev / Whatever / Can't bring myself to say CEO but CEO

Performance

I'll try to let the numbers speak for themselves. We both got lucky and did some things right.

  • 5 acquisitions to date
  • 1 exit
  • 100% bootstrapped
  • fun fact. Our exit payed for the acquisitions of sheet.best and screenshotapi.net. for that little portfolio, we're playing with house money!
Sheet.best: 3.8X
Screenshotapi.net: 6X
Toybox: 33% gain (exit!)
SentimentInvestor.com: new
workclout.com: new

We'll likely sell screenshotapi.net and sheet.best next year. I like having realized gains when we go to pitch investors. Makes things less fluffy. The pitch will roughly be:

We bought it for X, solid it for Y in Z timeframe. Do you want in?

If the numbers are good (they are), then this is an easy way to raise money.

Next

We're going to be syndicating our first deal likely in Q1 of 2022. We're still kicking around the idea of raising money directly into the GP as opposed to doing acquisitions on a deal-by-deal basis (fundless sponsor). This is a bit different than a fund. A fund would not sell shares of the GP. But it's an interesting model to think about raising money directly into the GP and being able to run faster than we can now since we're bootstrapped. I don't want to do it until I can get $10M ish into the GP. We'll bootstrap until we can justify that. I think roughly if we get to $100k in MRR, I'd be able to go raise $10M into the GP (if we decide that's what we want to do) and start treating XO like a VC backed startup. We can move faster, be slightly more price insensitive, and if it works, we'll be a public company within the decade. I like that idea. It's  more risky than a small, diversified portfolio of cash generating businesses but potentially has a much larger return. Also, it sounds fun.

On the other hand, perhaps once we get to $100k MRR we'll be able to do some reinvesting with the existing cashflow and focus less on raising money, and more on servicing the portfolio. This is the harder path for sure, but we'd own much more of the company than we otherwise would if we pursued any other path.

If next year goes right, I'd like us to get on a pace of 1 acquisition every one to two months. I don't know if we'll be able to move that fast being bootstrapped since raising all this cash is going to be basically a full time job, not to mention actually running all these companies. It will be easier if we buy bigger. If we can buy something, put a developer, growth person, and CEO in place from the beginning I think we actually will be able to scale this. Otherwise, the danger will be in us gettin stuck operating, which is definitely going to happen at times. Hopefully next year we'll lock in on what a good buy looks like for XO.

Hope you have a great holiday break! Thanks for reading!

✌️,

Andrew

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