B2B SaaS Institutional Investor/Family Office/Search Fund intro

professional profile

June 02, 2024

by a professional from Indian Institute of Technology, Delhi in Atlanta, GA, USA

Hello,
I am currently pursuing a Shopify back-in-stock SaaS product that is currently being sold by a PE firm. The sellers are willing to execute LOI with me but they want to see a support letter from a strong capital partner. Is anyone here or know of a investor firm who might be willing to issue a support letter provided they like the deal?

Deal Structure (proposed by the M&A firm)

  1. Purchase Price: $15M-$16M (~5.5x EBITDA)
  2. Cash at closing: 80%
  3. Seller Note: 20% repaid in 12 months after closing (transition period) and tied to successful transition and performance benchmarks during the transition period.

Timeline

  1. Execute LOI: end of June
  2. Closing date: 1-Sep-2024

    Capital Structure
    1. Open to traditional/independent sponsor/self-funded models
    2. Debt + Equity (tentatively equal split)

Highlights

  1. Trusted by brands like Kylie Cosmetics, Steve Madden and SKIMS
  2. ~60% EBITDA margins and 98% monthly net revenue retention
  3. More than 12 years in operation with a fully-remote team
  4. A lean team of 8 people leaving room for more hires
  5. Owns the US trademark
  6. $575k annual revenue per employee
  7. 4.8 star from 800+ reviews on Shopify app store

Growth Areas

  1. 58% of customers on legacy pricing
  2. Establish a sales and social media content teams
  3. Integrate with other Commerce platforms like Salesforce Commerce
  4. Establish alliance with platforms and agencies
  5. Take advantage of Shopify's big push into the enterprise space and target more enterprise clients

Based on my strong eCommerce experience with Deloitte, the sellers have shown interest in engaging with me https://www.linkedin.com/in/avinashboyana/

Any connections/intros will be greatly appreciated. https://calendly.com/aboyana/30min

contact: redacted

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commentor profile
Reply by an intermediary
in New York, NY, USA
I would recommend steering VERY clear from a Shopify App as a search funder. Shopify are notorious for cannibalizing apps on the marketplace, where they just create an app for a category and then put themselves as #1 for all keywords. Back in Stock is all very saturated, when you search for "Back in Stock" on the Shopify App marketplace, there are 100's of apps, what makes this one different? Is it at least "Built for Shopify"? If not, then Shopify are going to naturally place it lower on the search so you get less sign ups. If you want to get it approved for "Built for Shopify" you then have to jump through a lot of hoops, and risk the app being taken off the marketplace if they reject the application - there will be a reason why the PE hasn't got the badge for it if they don't. This market also has a few aggregators in the space like Stay Tuned, and if they are not a buyer at 5.5x EBITDA, with all their cross-sell and upsell opportunities, why should you be as a searcher? Without seeing the business, I believe I can make a good guess as to why they are selling - relatively flat YoY growth (sub 10% yearly), have started to cut back on expenses in preparation for the sale and EBITDA margins have been improving over time, yet this is not seen in the revenues just yet as there hasn't been enough time for churn to start to increase, and look at the Shopify share price over the last 5 years, it has been on a consistent decline and is now back to April 2020 levels - there is too much platform risk associated to a Shopify App as a searcher, and any sophisticated investor (Family office etc) will see straight through this risk and not partner with you, and in all honesty, you shouldn't be going after this opportunity if anything I said above was new information to you. Oh and the Shopify Summer editions is coming soon, and who knows what curve balls they will through to their app creators this time round, just read what they have done previously - https://www.shopify.com/editions/all.

Now I am not trying to discourage your search, there are just a lot better businesses out there with a lot less risk involved, and as a searcher you want to be buying directly from founders, not a private equity firm who have teams of people who know how to run businesses. When a PE is selling it is usually to another PE, as they have exhausted all their growth and marketing initiatives and can no longer grow it. Respectfully, why do you think you are going to be able to come in and grow a business that a PE hasn't been able to grow (assuming it is barely growing based on the information you posted).
commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Happy to take a look at see if we can put a pre-approval together for you from a lending perspective. However, if they are looking for equity support, you will need to bring in an equity advisor for that. You can reach me at redacted
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