Acquiring a start-up?

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April 04, 2025

by a searcher from INSEAD in Paris, France

redacted
I know this is far from the search fund model; buying stable cash-flowing businesses, but has anyone ever looked into acquiring a startup?
We have met a founder of a ~2M B2B SaaS company in the Energy space open to sell his company for personal reasons. The company has a great product with a ~60 customers few of them quite prestigious references, with very positive customer reviews.
Did any of you had experience in this space? Pros and cons? How would the finance work (acquisition + post acquisition investment for growth)?
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Reply by a searcher
from INSEAD in Seattle, WA, USA
I've been with energy startup for several years until recently, primarily in renewable energy space.
Curious to learn what this business does in energy sector, but the companies I worked created products that were highly technical and specialized services for the utilities and energy companies. This meant, the potential buyers were not traditional searchfund model but a target for PEs and other large energy companies.
I've seen combination of stock + cash or all cash deals from various different cases.
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Reply by an intermediary
from The University of Chicago in Chicago, IL, USA
SaaS start-up with $2 M revenue is a great opportunity (I presume SaaS implies it is not a construction related business).
Start-ups cannot support high debt (even if debt was available). Contingent price is also not feasible (even if seller is ok with it.). So, the alternative is high $ equity or retained % equity. I have modeled such situation many times on my software (www.BVXCloud.com).
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