StartThis Idea #13: Micro-acquisition raffles
Someone should roll the dice on a different way to buy and sell digital businesses.
Since this is the 13th edition of StartThis, it seemed fitting to introduce a pretty lucky idea: A Kickstarter-style marketplace that allows people to purchase small software, app or other digital businesses through a controlled raffle or draw
Categories: SaaS, side hustles, buy/sell marketplace
Skills Needed: Basic software building or no-code marketplaces, community-building
Background & The Pitch
There are many sites for buying and selling small SaaS businesses, also known as micro-acquisitions. MicroAcquire and Flippa, for example, seem to attract a good number of hobbyists and entrepreneurs. You’ll find loads of Shopify sites, affiliate businesses, niche products and services, mobile apps, Chrome extensions, and more.
If you have a bit of capital, these might be a decent way to buy your way into a little side income or even a full-time gig. If you don’t have a minimum of $50k-$100k, though, you’re probably not going to find much that’s worth getting into on these sites. This makes buying and selling businesses at this size very challenging.
So, instead of limiting the pool of buyers, what if this could be opened up to a much bigger audience? Instead of looking for one person with all of the capital, what if these size businesses could be sold off via a raffle to a qualified buyer pool? Would people be willing to spend, say, $100 for the chance to “win” a profitable SaaS business worth $100k? Sell 1,000 of those, and the seller gets to where they need to with a better pool of potential buyers to choose from.
Logistically, it’s pretty simple. Sellers would create a prospectus to potential buyers, the same way WeFunder businesses do. Potential buyers would pay a nominal fee ($100 in the example), and submit a detailed application as to why they are the right fit to get the business. The marketplace or the sellers themselves then shortlist to a handful of qualified candidates. From there, a random draw or panel determines who ultimately wins the right to take it over and call it their own.
Your initial reaction to this idea was probably skepticism, but hear me out: this has successfully worked for many brick-and-mortar businesses. Most of these campaigns have been set up Kickstarter-style, where the campaign must hit a minimum total dollar threshold, or everyone gets a refund and the deal is off. They also often give out small rewards to every person who buys a “ticket”, so that no one leaves empty-handed. It allows businesses to tap into their own communities and audiences to find people who are passionate and talented enough to takeover the operation.
The especially cool part is that this levels the playing field for people who can buy businesses. It opens up entrepreneurial opportunities to a much wider audience.
If this can work for small local businesses, is there any reason it can’t work for digital businesses which have a much greater reach?
I’d bet on it.
Strategy Notes
There’s no doubt about it - this one requires a bit of leverage to get started. It only works if you have enough willing people on the buy-side. Here’s two ways to get that:
Tap into your existing communities or audiences. If you’re lucky enough to have a big Twitter following, or are an active member of a site like IndieHackers, you might be able to tap that to stir up some interest.
Find Seller-businesses that already have a built-in audience of potential buyers. For example, a drop-shipping business would not work here, but a B2B Chrome Extension might. You’d really have to go case by case, but many businesses likely fit this bill.
You need one or two listings first, and then you’d have to go hard on building the buyer pool. Referral incentives, social sharing, and PR would be helpful here. In particular, as this would be relatively novel for the digital business space, you might be able to attract some media attention from tech publications and forums.
The revenue model here is relatively obvious; you can simply take a percentage cut of the transaction on the buyer or seller’s side.
Be conscious of regulation risk here. Governments don’t like businesses getting into the lottery or gambling space - it’s competition for them. Some research into current rules and regulations is necessary, but it should be possible to steer clear. The important element is that it can’t be random chance, which you wouldn’t want here anyway. Buyers are first qualified and shortlisted based on skills and merit. The final decision process can still be modified as needed.
Further down the line, quality control on the sell-side would be important. I’d suggest that sellers would have to pay an initial listing fee of a few thousand dollars. This would be used to cover the costs of an accounting and legal review, to ensure the integrity of the numbers and information provided to potential buyers. Alternatively, you could impose a requirement that the business provides, at their own cost, a third-party endorsement for the same.
No doubt there are some things to think about with this one, but nothing suggests it can’t be done!
Research and Data
According to Pitchbook, Flippa has 64 employees, without having raised capital in two years.
45% of working Americans have a “side hustle”.
Name Ideas
WinAcquisition, StartupLuck, KickSeller. Okay, that last one is a joke… but thanks for reading to the end of this!
Would you participate as a buyer or seller in something like this?