Why Acquisition.com Says No to Almost Every Deal

0:00How has your criteria changed for businesses over the last 2 years? >> Um it's just much bigger. It's just the businesses have to be a lot bigger. Um they have to be billion dollar opportunities now. Um when I first started, I think honestly when I first started, the goal was like 50 million dollar opportunities. And then it became like 250 million dollar opportunities. It's it's almost like 5x actually like every every like 18 months or so. It's almost 5x.

0:25>> So how does it work exactly? A company reaches out to you and they say, "Hey, we want to sell." >> through acquisition.com on the site and then >> And what do they do? They submit their info that they want money or they want to sell or what what is that? >> So we have we have um we basically have three kind of places that someone can go. So for like seed capital SaaS, you know, software type startups, we have ACQ Ventures which is our venture arm. And so those are typically like smaller checks that are between like 50 and a million dollars like check sizes. And so we do, you know, a lot of those deals.

0:57We do probably like a couple deals, three, four deals a month sometimes. Um like December we did four, I think we did four in January. Like we we do a decent amount of deal volume there. And those deals are much more like meet the founder, understand the idea, cool, we can we can just deploy. Um we have uh the private equity side which is kind of like the the big big the big boy side. Um and those businesses like if we're going to do a deal, they're all bespoke based on, you know, the value of the business, where we think the business can go, what our value add is. Um and typically in that side it's like right now we're 40% SaaS, 40% um uh B2B services and then 20% consumer services.

1:36And we're shifting over time towards just a blend of a SaaS and professional services. That just tends to be where we just do really well. And so that's on the private equity side. And then um we have the advisory division which we started in January of last year. Which is uh companies that are like not really portfolio ready. And so that's kind of like that, you know, 1 million, 10 million, 30 million sometimes uh dollar per year business where uh it's like they need to change a couple of things. And the reason that happened was for the 3 years prior to January of last year, um we you know, we'd look at a business, we'd do four, five, six, you know, diligence calls, get to understand the business, and a lot of times like 90 times out of 91, we'd be like, "Not a fit for us, we're not a fit for us right now. Maybe change these two things, move this metric up, and when you do, like call us back." And what ended up happening is a lot of founders were like, "This was more valuable than anything I've ever had to go through, and thanks for doing it for free." And for me it was like it was actually super expensive cuz I'm doing that 90 times times however many calls, lots of companies. And I was like, "I wonder if we could do this in a way that we could charge to do the same basically assessment of a business and say here's all the things that we would do, here's how we change it." And so then we you know, we we we wanted to see if people were interested in So January I was like, "Hey, if anyone wants to come out to Dry Bar Headquarters, you can meet my portfolio team, we'll kind of assess the business and be like, these are the blockages to either making it more valuable or scaling it." And so it's like you'll meet with my head of marketing, he'll be like, "Okay, change this on your webpage, change this on your ads, change this on whatever." Or meet my head of sales if sales is constrained. These are the These are the things that we'd do. And um people have really really really liked it. So it's been exceptional. Um and I think the reason that it works so well is that there's kind of what I was alluding to at the beginning is that there's just not a lot of help at that one to 100 million dollar range.

3:10Um and I think we can provide that. And so >> you make money from that? Are you taking distributions from the company or have you sold some of the companies >> we sell it as an advisory service. It's just a service, B2B service. >> for acquisition company. >> oh, overall Well, no, we have distributions that come from the private equity side. Um the venture checks obviously I'm not going to see anything for that for 10 years. And then um services is just normal business. >> Why don't you have a website or a place where where people could see the companies that you've invested in?

3:39>> It's a good question. It's something that I've gone really back and forth on. The main reason is like when I sold Gym Launch, um I sold Prestige Labs, which was a sister company that did supplements and sold through the distribution base. And I remember in the diligence meetings uh for that that it was like a huge point of contention that I had a 10,000 person Instagram following at the time. And they were like, are all the sales coming from your Instagram? And the business doing like 20 million a year, just the just the supplement side. And I was like, no, it's not coming. They're like, well, this could be a this could be an issue for us if like we can't have complete control of the Instagram. And how do we know you're going to keep promoting it? I was like, my Instagram is not driving like 10,000 people does not make a 20 million. Like I promise you.

4:17And uh seeing how sensitive they were to kind of like key man risk around uh an acquisition, I was like, okay, uh if I do deals and I grow my brand, uh I don't want people to know what the companies are because I'm going to have to go like I'm going to write a check, but then if I publicly associate with it, then I'm going to have to go with the deal later. So if like for example, School, that was purposely, you know, like a brand association plus money, obviously, that went into it. Um but I know that I'm in that I'm in that for the long haul. You know what I mean?

4:43Like I'm going to be with School for many, many years. And so my key man risk is something that I'm willing to basically deal with. Whereas if I buy a, you know, an HVAC business, I publicly associate with it, um a potential acquirer will want me to sign some other non-competes. I'll have to have some provisions around uh promotion, and I just didn't want to do that. I have gone back and forth on it, though, to be really honest. Like I've gone back and forth on it. >> It seems to me like there would be a net benefit on that. Reminds me something of >> I've gone back and forth. I have gone back and forth on it.

5:10>> Shark Tank business, where it's like as seen on Shark Tank is pretty big. And you could argue that the business you bring to that would drive up the valuation to a point >> Yeah. Or even without you, it's still higher than if you were never involved. >> Agreed. So then the next thing that goes is if I have all of these different things that I'm like pseudo promoting, then it almost feels like I'm shilling a lot of things. >> No. >> And so that's been that's been where I've been like

5:35>> just as a viewer of you, not that anyone like not that I would crush question your credibility, but I think that it would it would bring a lot more clarity where I've actually seen you do it. And I think it would attract a lot more And I think it would attract a lot more where you could say, "Hey, when you started with acquisition.com, you were valued at this much, your revenue was this much, and now look at you." >> Here's the other thing I think it would help you negotiate better terms saying that you're going to be on this website where it's even 100 companies. And I think it's important you put them all in the same place so that it's not like you're promoting this or promoting that or you you should never talk about these businesses unless in a podcast setting where you're giving an example.

6:11>> the other and yeah, I mean I've been very I've been torn on it. Like you know what I mean? Like I've been very like uh because of all the reasons I just said, but the other one is kind of like the um the compliance thing that I just said, right? Like if if a company Could you imagine like a company does something stupid, and companies do stupid things. Even if I wrote a venture check to a business and then and a company does something, I'm an owner, and any any, you know, reporter or, you know, clout-seeking YouTuber would then be like, "Hermosi is saying doing this."

6:42And it's like >> it different from Y Combinator? >> Well, they're very public. A lot of these like even some of these private equity funds are just like >> That's their value prop though. Y C's value prop is Harvard's value prop is like the the main thing they get is the >> Yeah, but there are plenty that go through Y Combinator that just turn out to be, you know, yeah, maybe not the best. >> Yeah, but I think it's well Y Combinator is kind of unique in that like I mean, to be fair, if if a if a Harvard grad does something bad, Harvard takes a hit.

7:10Um but it's a law of averages. I told you. Like I've been I've been >> Yeah, I think I think it's going to hurt you if a business does something that reflects on you, and if you do something, it reflects on all the businesses. I think it goes both ways. I think the net benefit is like a 51 to a 49. Like 49% down to 51% >> been like I have I have gone back and forth to the degree where I've been like I'm going to I'm I'm going to make all of our stuff public. Um I think we are make I think the ACQ ventures, if I'm not mistaken, I think our ventures things are public. Um so, it's really just the private equity side. If you like this video and you're a business owner who wants to break through your current revenue ceiling, I just filled every lesson from scaling 10 businesses past 10 million and three businesses past 100 million into a completely free scaling roadmap that I've used to go from zero to one, zero to 10, and zero to 100 plus. And so, you can click here and you can check it out.

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