I Tried to Buy 4 different (tiny) Startups and (mostly) Failed

Have you ever had a hobby that you're not good at? They can still be kind of fun.

For me that has been acquiring online businesses or SaaS products. It is not easy, but it gets easier, I think.

Ever since I took Ryan Kulp's MicroAcquisitions course, I've been looking to acquire an online business that I can grow and realize cashflow from or exit through a sale. (Disclosure, the previous link is an affiliate link. Thanks again, FTC).

I've had 4 deals that fell apart and as far as I know I didn't sign any NDA's (nor were they really that big of a deal to sign an NDA for, anyway). Let's analyze them.

Instant Chord

Instant Chord was a guitar tablature website that boasted thousands of songs with a sleek interface and an auto scrolling feature. Guitar tabs are like sheet music but easier and for guitarists. They look like this:

e|-------5-7-----7-|
B|-----5-----5-----|
G|---5---------5---|
D|-7-------6-------|
A|-----------------|
E|-----------------|

I found this site via 1kprojects and it looked like it had some potential! It worked well and the founder boasted some really good traffic numbers on it. I could probably acquire it and slap on some ads and make a little bit of cash.

So I paid $250 for InstantChord, received the codebase via email and a domain transfer from Google. Awesome.

Except it was a pile of shit.

Each of the songs on InstantChord was an individual html file and a mobile optimized AMP file. WTF. This would be a pain to maintain and add new songs to. It should be a database.

So I converted all of the html to a sqlite file and served it up via the Flask web framework. Nice. I slapped on some Gibson Les Paul affiliate links to each page template and was one step closer to raking in that sweet dough. 🍞

I added the domain to Cloudflare and added some standard firewall rules to block bots and Russian hackers.

Then I waited and realized that most of the traffic was the Russian hackers and bots.

дерьмо.

(That's Russian for `Shit`, says Google)

Lessons

• Investigate the tech stack and make sure it isn't stupid
• Do Due Diligence on Traffic and Customers and make sure it's real
• Don't make a guitar tab site, there are thousands of them. Make something actually valuable.

Slack Voting App

The first app that I found was through Sideprojectors or 1kprojects (now IndieMaker) was a Slack Voting App.

Companies today use Slack all the time and often for things they probably shouldn't. One of these uses is voting on things within Slack. A user can issue a command like /vote hotdogs or hamburgers and team-mates click on the poll answers and everything is tallied up.

Dead-simple.

I've been a part of teams who estimate chunks of work this way. Kind of nifty but also kind of stupid, I hate Slack at times. Don't @ me.

I found one of these apps that was supposedly making around $3-500 a month on a subscription basis. Cool.

I contacted the founder and talked to him a bit. I got a red flag early on with the him because he talked a million miles a minute about all the programming languages he knew and how the app ran on X.js framework with a serverless backend and he only wrote it to learn more but it was SOOOO GOOD. Okay, cool. Whatever, I can learn that enough to maintain it.

How much money does this guy want for his app?

I asked him the hard question and he tells me something like 6 or 700 bucks. This is stupid cheap. Nice. Yeah, that seems great as long as I can check the app out. "Oh well, you see I'm migrating the app to x framework and it isn't quite up for public users but I definitely have people paying me".

We get off the phone and he sends me a private link to his Slack app. I sign up, it half works. Okay, interesting...can he make it fully work?

Bill (not real name) assures me that there's only a little bit of work to be done on the app before it can be migrated over and sold off.

Sweet. I wait. Nothing. I text Bill and ask for an update and get some BS response. I wait. Same thing. Deal falls apart because Bill probably never had anything. Why let a project generating $500/mo die?

Lessons

• Trust your gut if you think someone is BS'ing you. Too cheap = get out.
• Make sure the engine runs or the app works. (Or that it exists)
• Recognize that hobbyists can be a PITA to deal with

Cleaning Scheduler App

This one was the closest I've come to pulling the trigger. It was a good deal, an okay product and had some promise.

I got in touch with a guy who had been a manager for a big tech Co and started a Scheduling App for Office/Home Cleaning Businesses. He had read up on startups, been on a jog, noticed a bunch of Prius' outside a cleaning business and decided that was his golden goose. Because they had a lot of cars, they must also have a lot of issues around scheduling workers out to locations.

Tim (not his real name) walks into the business, introduces himself and tells the biz he can save them money, all he needs is to shadow them for a while so he can develop some awesome software.

Tim finds a co-founder and they drop $30k on a development team to bring their vision to life.

Tim builds it, monetizes it and finds some success. Really. However, he found bigger success and over 5-6 years after founding the app decides he'd like to sell it rather than letting it slowly die.

That's where I came in. Since I was a big idiot before and this thing was making actual, real money around $800/mo, I wanted to be sure I did everything right. I conducted extensive Due Diligence.

I had 2 or 3 separate meetings with Tim and went into a deep-dive on his business. I asked for historical revenue numbers, traffic numbers from Google Analytics, origin story of the biz, Codebase details, contact details for the developer who built it, customer personas and contacts...the whole gamut! I projected things in Google Sheets and thought about how thicc my checking account would be.

My offer came in around $9k for the business, pending additional due diligence. It was probably a really good deal. I had a friend who was interested in Co-Acquiring and running it.

But then the vision fell apart. Un-sexy businesses can certainly be profitable, but how Un-sexy? Does un-sexy have to mean completely un-interesting? There are many things I'd rather do than operate a cleaning SaaS business. My potential co-founder brought some of this up to me and I realized I never gave a shit about cleaning scheduling apps. The industry sounded boring and wasn't something I was remotely interested in. Did I want to dedicate my lifeblood and time to this? Probably not. Sorry Tim.

Lessons

• Make sure you have an idea about the industry you're entering and envision what working on it will look like in 5 years.
• Don't let the glimmer and sheen outweigh something boring as hell that you own't like.

The Tiny House Blog

This last one is a bit uneventful – a blog about Tiny Houses that had been neglected. It had a massive email list of 30k people and some social media profiles to go with it. I did my standard Due Diligence questions and asked about revenue, traffic history, etc. This was actually a screaming hot deal, I think I wanted to offer around 9-10k for it. BUT, Someone else came along and acquired it for maybe 15k. I'm not sure. I cared more about Tiny Houses than Cleaning Scheduling, but not enough to take the plunge of debt and the on-coming hard work.

Lessons

• Make sure you REALLY care about the industry of the online business you want to enter. Even better, have an investment thesis around this, so when you see what you want, you know.
• If you do actually care, strike quickly and move quickly.

Summary

Hopefully my failed acquisitions of these apps were interesting to you. Each one was massively exciting at the time for me but looking back were not all that good of opportunities. And with each, I learned something that prepared me for the next. The fact that I didn't pull the trigger on them is likely way better than going through with them. So there's that.

If you have an interest in acquiring online businesses, I cannot recommend enough Ryan Kulp's Microacquisitions course. I took it and was better prepared than normal.