You might think of the SaaS community as runners in a relay race. Entrepreneurs collaborate and help each other, even when competing, and occasionally pass the baton of their SaaS business to another when buying and selling. Nowhere is this pattern clearer than on the Acquire.com marketplace.
Take Berkeley engineering alum Michael Lin, for example. He quit a lucrative job at Netflix to pursue entrepreneurship after the streaming giant denied him a product management role. Unsure of what SaaS to build, he scoured Acquire.com for a ready-made business he could grow quickly.
Eventually, he found RecordJoy, a one-click screen recording tool that had yet to make any money. Michael bought the business in 2021 with a cofounder. Together, they grew it to 20,000 customers (from a few thousand) and five-figure annual recurring revenue (ARR) in a year.
But in early 2022, Michael’s partner decided to study an MBA, leaving neither cofounder time to run the business alone. So they re-listed it on Acquire.com and sold it in two weeks. It wasn’t meant to be a quick flip, yet they doubled their investment and learned plenty about acquisitions too.
You might think it crazy to abandon a FAANG role with nothing but savings to support your lifestyle. But Michael was ready to be in control. In that case, why did he buy a SaaS business and not build one? And how did he sell it again at 100 percent profit in a year?
From Chess Master to Netflix Engineer
Michael Lin subverts most expectations of a former FAANG software lead. He wasn’t a high-school math prodigy nor did he build software applications between classes. But he enjoyed chess, playing competitively and slowly climbing national ranks to the title of master.
“I played a lot of chess when I was growing up. I’m a national master, which means I’m in the top 1 percent in Elo (a ranking of relative player strength). I’m in the 99.9 percentile for blitz ratings too.”
Besides chess, Michael also enjoyed public speaking. He was president of debate in high school, a role he credits with sharpening his critical thinking and communication skills. Both of which he’d use later in professional and entrepreneurial settings.
“I advanced to many of the later stages of speech and debate competitions in high school,” Michael said. “I also did a lot of public speaking, which helped with my writing and speaking skills when I started my newsletter and doing entrepreneurship.”
That flair for strategic thinking and verbal articulation helped Michael win an undeclared place at UC Berkeley’s College of Engineering. Unlike named majors, entering “undeclared” meant he could choose any engineering discipline he wanted, settling on electrical engineering and computer science.
After graduating, he worked at Amazon as an engineer for three years before moving to Netflix as lead software engineer on the product growth team.
Everything seemed great at first. An eye-watering salary of $450,000 a year. Unlimited paid time off. A collaborative team in which he could learn and grow as a professional. But four years in, Michael’s passion for the job cooled as he realized he wasn’t learning anymore.
Why Michael Left Netflix to Buy a SaaS Company
A half-million-dollar role at a big tech firm is a dream for many aspiring engineers. Michael had worked hard at school and college to earn his place, but “top of market” benefits don’t always equate to job satisfaction. Especially when your hard work results in rejection.
“I wanted to become a product manager,” Michael said. “I tried everything for two years – networking, taking on product roles, submitting proposals with every application. Nothing worked. Eventually, I felt like the high salary was an increasingly bad deal.”
Michael was tired of “copy-paste” development and wanted to lead product decisions that better used engineering resources. He’d little left to learn in the engineering role, and with the product management doors slammed in his face, he was ready for change.
“Before, I was earning and learning, and then towards the end of my time at Netflix, I was only earning. My motivation declined and my performance declined with it, culminating in a performance review where my manager told me to be more engaged in meetings and improve my communication.”
For someone who’d spent years winning debates, this was Michael’s clarion call to quit. He asked Netflix for a severance package and they agreed to let him go. Friends and family thought he was mad, but his happiness depended on more than a high salary and the approval of others.
Every SaaS Founder Needs an Audience
In hindsight, quitting Netflix was a brave move. Layoffs in the tech sector skyrocketed in 2022. Even accomplished engineers like Michael might’ve found it difficult to find alternative work. But seeking new employment was never part of the chess master’s plan.
“I’ve taken a portfolio approach to entrepreneurship, taking bets on different things,” Michael said. “I split my time between engineering consulting and advisory roles for tech companies. And the other half I spend on audience growth, and particularly, building my newsletter.”
Michael began his Substack newsletter in early 2022 where he gives entrepreneurship, engineering, life, and career advice. I didn’t ask Michael why he started this newsletter (and probably should have), yet it’s clear from its content that having an audience is important to him.
You might, therefore, consider Michael an engineer influencer. Unsure of what SaaS to build, or perhaps unwilling to build one from scratch, he built an audience instead. That audience has no doubt helped him build a personal brand that people trust – and may perhaps buy from.
While his newsletter grew, Michael joined forces with another technical cofounder to begin their search for portfolio companies. What does a portfolio company do? It pays a return to those who can grow it quickly and then sell it – and offers fast-track entry to entrepreneurship.
Buying a SaaS Company on Acquire.com
Knowing you want to buy a company isn’t the same as finding one that fits your acquisition criteria. In the past, you might have relied on a professional network or investment banker to introduce you to the right people. Today you can find thousands of sellers on Acquire.com.
“We scoured Acquire.com for products with many use cases,” Michael said. “Products that we could grow quickly. RecordJoy wasn’t making money, but we liked its clean design, and screen recording can be useful in customer support, video games, teaching, and so on.”
Now Michael and his cofounder had found a company to Acquire, they devised a growth plan. First, they’d introduce accounts and payment plans. Then they’d boost web traffic with Google Ads. Soon after the acquisition closed, however, Michael realized social ads get costly quickly.
“We sought the big keywords with Google Ads but our campaigns were never successful,” Michael said. “You get a temporary spike in traffic, but when you stop paying for ads, that falls to zero again. It’s just not sustainable. In the end, we generated the most revenue from AppSumo.”
Bootstrapped founders often sell discounted SaaS products on AppSumo to grow revenue quickly or “pay” for customer feedback. It helped RecordJoy grow to around $1,000 in monthly recurring revenue. Reflecting on those earnings, Michael wishes he’d bought the company with a business loan.
“We bought RecordJoy for ten grand and sold it for twenty,” Michael said. “If I’d bought it with a small business loan at five percent interest, I’d basically have had a ten grand loan for free as the MRR would’ve covered the interest. Our buyer did that and it was a smart move.”
How to Get the Best Deal When Selling a SaaS Company
Around one year after buying RecordJoy, Michael’s cofounder decided to pursue an MBA. Neither cofounder had figured out their magical growth formula yet, and although revenue was growting, it couldn’t support a salary. The time had come to double down or get out.
“Neither of us could work on the business full time, so we debated whether to leave it on maintenance mode or sell it. For me, you always try to sell because you never know when you’ll get your cash back. Plus being an exited founder earns you some clout and opens doors.”
For many founders, early 2022 invoked the dotcom crash of the nineties. With interest rates and living costs rising, investors were no longer confident of returns. Michael is glad he sold RecordJoy before the money dried up and urges founders not to wait for dream offers.
“You don’t want to get too greedy with the deals,” he said. “If it’s a reasonably good deal, you should probably take it. It’s better to take a little less on a sure deal than waste time optimizing your business to get a little more and risk the deal falling through.”
So how did Michael get the best deal when selling his SaaS company?
First, he listed RecordJoy on Acquire.com (its second visit to the marketplace). Then he sat down with his cofounder and calculated an asking price that reflected the startup’s original purchase price, their time and financial investment, and its status as a cash-positive business.
“At the smaller end, multiple valuations don’t make sense,” Michael said. “A better way to value the company is by figuring out how much it would take to duplicate the project, and then, if it makes money, how much value does that add to the business?”
Michael Acquired RecordJoy in 2021 for $10,000 when the company was pre-revenue. Less than a year later, it made around $1,000 per month. The cofounders ultimately settled on a realistic yet fair asking price of around $20,000, and after listing, received over 20 offers.
Had he got the asking price right? Michael isn’t sure. In retrospect, he wishes he’d spent more time understanding buyer motivations. While he didn’t strictly follow a cost-to-duplicate valuation model, he now believes doing so might’ve resulted in more money.
“A CEO and an engineer came to one of our meetings and I realized they were weighing up a buy versus build decision. If it costs a company sixty grand to build our product, we could’ve sold for thirty and both got a better deal. Understanding the buyer is so important.
“No one tells you what’s possible before entering negotiations. You could invite a potential buyer as a cofounder, for example, and trade complementary skill sets or business contacts. The deal possibilities are huge and you want to explore the one that ends in a win-win for all of you.”
Michael finally settled on a buyer who would run RecordJoy as part of a portfolio of other businesses. A key factor in choosing this person was their ability to close quickly.
“The deal closed in two weeks,” Michael said. “If it hadn’t been some issues transferring my Google Ad account, it probably would’ve closed sooner. We got higher offers but they would’ve taken longer to close, and my cofounder and I wanted to move on to other projects.”
Advice for When You’re Unsure What SaaS to Build
It takes courage to build a SaaS company, let alone buy one. You become duty-bound to your customers to deliver on your promises and to continuously refine your product to stay relevant, competitive, and useful to people. But the rewards are – potentially – limitless.
If you’re thinking about starting a SaaS company, consider your options. One, you could build something from scratch if you possess the expertise and time. Michael suggests scouring startup acquisition marketplaces like Acquire.com for business ideas.
“Acquire.com is a great source of business ideas,” Michael said. “If you’re unsure what to build, scroll through the different companies for sale and you’ll get a million ideas.”
Or, like Michael, you could buy and then sell a SaaS business instead. This is a much faster and potentially easier entry to entrepreneurship because you start with a functional product, and hopefully, some paying customers. Just make sure you know how you’ll grow the business, Michael says.
“Before you buy a SaaS company, prepare a growth plan beforehand. Ask the seller’s advice on what to build or improve. One of our goals was to introduce plan tiers immediately, so we learned how to integrate Stripe into the product the moment we bought it.”
Michael’s bet on himself is already paying off. He might have lost the security and kudos of a six-figure job at Netflix, but he’s learning again – and fast. At just 30 years old, he’s already bought, grown, and sold his first SaaS business. And that’s an achievement worth celebrating.
Enjoyed reading about Michael’s acquisition story? Follow Michael on social media here.
How Do I Sell My SaaS Business?
You could hire a professional, such as an investment banker or business broker, to sell your SaaS business for you. But today that’s no longer necessary thanks to startup acquisition marketplaces like ours where it’s easy to sell with as much support as you need.
To sell your SaaS business, sign up for a free seller account on Acquire.com. Enter your startup details and asking price, and connect your web, customer, and financial metrics. Then submit your listing to the marketplace. It’s that simple. Listing your SaaS for sale on Acquire.com puts your company in front of over 120,000 vetted buyers, and it’s free to list and sell. No hidden fees or commissions.
Is Selling SaaS Difficult?
Selling SaaS is usually easy if you’re already generating revenue and can prove you’ve built the right technology, established product-market fit, and are consistently acquiring and retaining customers. Buyers love SaaS businesses because of their recurring revenue and the predictability that creates.
Finding the right buyer for your SaaS might’ve been difficult in the past, when you potentially required an investment banker or business broker to introduce you to the right people. Today however you can also sign up and sell for free on startup acquisition marketplace, Acquire.com, where you can connect with over 120,000 vetted buyers (we vet on ID and available funds).
Where Can I Sell My SaaS Business?
You can sell your SaaS business on many different marketplaces, but of course, we believe ours, Acquire.com is the fastest, easiest, and best place to sell. Why?
- It’s free to list and sell. No commissions.
- Your SaaS business goes up for sale in front of over 120,000 vetted buyers.
- We verify buyer IDs and available funds. Fewer false starts and better conversations.
- You can connect your web, customer, and financial metrics. This saves you time and ensures buyers see the most accurate data about your business.
- Our team is here to support you with expert help whenever you need it.
You can also hire an M&A advisor to help you get acquired, or if you’re a profitable SaaS making over $1M in annual revenue, our in-house team can handle your acquisition from start to finish.
The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.
