Micro Private Equity
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What is it?

Micro Private Equity usually refers to funds that acquire businesses valued at less than $5 million. These funds are not structured as typical funds since they are a group of investors willing to invest on a deal basis. Since typical private equities rarely decide to acquire businesses under this value (due to problematic management systems), that is the time when private equities can step in.

Why is it a trend right now?

In the next few years, there are going to be more business owners looking for exit routes from this unstable market. Micro Private Equity firms will prove themselves vital since they will be among the ones with enough capital to buy off small businesses from retiring owners. Businesses that are acquired from micro pe firms usually do not have high growth potential or huge addressable markets, but they often have a steady income and are tech-oriented. What also sounds promising is that micro private equity is generating higher returns due to smaller investments, possibilities to reinstall new young management that will replace the old one, and a different approach to deal structures that include vendor financing. To boost its returns is necessary for a business to apply some of the practices such as raising product prices, negotiating better affiliate commissions, improving SEO, or making a tax-efficient structure. Making all this is not plausible without a new and young team that could be outsourced since it would drastically reduce company working costs. Remote teams are as efficient as the office team and are becoming quite an asset for companies all around the world.

What to do?

Try to attract as many investment opportunities as you can through your online content (podcasts, blogs, social media posts) or organized events where people will connect (conferences, promotions). You can also look for projects that were not updated on marketplaces like the Shopify App Store or websites like Product Hunt and try to contact the founders as soon as possible. Also, have in mind how important it is to find businesses that attract similar customer groups since that way you can cross-sell your products lowering acquisition costs. Try to avoid grouping your businesses in one platform, invest through different ones, and think about choosing your niche horizontally. Think about what your business characteristics would be, and reflect on whether you would go for B2B, SaaS, B2C SaaS, or digital assets. The last piece of advice would be to start low and slowly grow your deals. It is better to make your first mistakes on a small scale than to get into something that will be impossible to control. Later, when you build your confidence, larger acquisitions will become your next business goal.

Micro PE Funds

Micro PE Marketplaces

Micro PE marketplaces include Quiet Light Brokerage, FE InternationalMicroAcquireEmpire FlippersShopify Exchange MarketplaceFlippaIndieMaker, and more. If you want to search, it could be useful to use Dealflow, which allows you to filter deals from all of these marketplaces by revenue, deal size, and more.

Micro PE Course

If you want to learn how to buy, grow and sell small businesses (mostly digital ones) profitably, consider taking the Micro Acquisitions Course from our partners. They share all the tools, documents, and recommendations they have from buying from more than 10 companies with little or no money.
Mike Rubini

Written by

Mike Rubini

CEO at Treendly.com