Buying a software company and moving the HQ

February 21, 2019

by a searcher from Grove City College in Austin, TX, USA

I currently work for a software company doing corporate development/M&A (operate on Danaher's model). We acquire about 3-5 software companies per year and most of those are sourced directly by my team and me and have no bank involved.

I'm very interested in starting a B2B software search fund in the next year but have a barrier of geographic inflexibility due to my wife's career. I've been talking to my manager about the possibility of running a play that was created by Vista Equity, buying a software business on one of the coasts and moving the key employees to Texas (or re-hiring). This seems to create a lot of operational risks and I'm interested to hear from investors and other searchers if you've come across this model. Another idea is to look only for software companies that have a remote workforce but this, obviously, decreases the size of the funnel.

Thank you in advance for any insight.

Reply by an investor
from University of California, Berkeley in San Francisco Bay Area, CA, USA

It can definitely be done over time if the company is relatively small and you have a good engineering leader who can manage the local product team. In fact, I would say that it is industry standard to work in a virtual environment and all software companies I have worked for in the past had geographically distributed teams. You would probably need to commute to the HQ initially and then slowly transition headcount to the target location over time. I would probably leave the product team in the existing location and hire a good product leader locally who can help you manage it. Sales is often remote anyway. Most other functions can be relocated over time. I think the trick is to manage the additional distraction while you try to get up to speed and grow the company

Reply by a searcher
from Harvard University in Dallas, TX, USA

Worked at Omnitracs and all new joiners were hired in target geo and all hard to replace were left not to relocate. On this latter point ... if you have a 10x developer with kids in high school there's no common sense to moving that person. I have generally seen most small <20 employee software businesses being able to work fairly virtually with jira, zoom, skype, etc. At some point, though having some center of gravity will matter for increasingly larger customers. If you hire for the right attributes, geography doesn't matter in the lower middle market so I'd worry about the 1st order problem 1st ... finding a software business you want to own in the 1st place :) Hope this helps Kyle

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