Deal Abstract

Private equity for small businesses. Very solid investment thesis, but uncertain whether it’s venture backable. What technology are they building that lets them scale to buying and operationalizing dozens of businesses in the next 3-5 years? In addition, with a downpayment of $200k per business (leveraged,) how much capital will they need to get to $20MM in EBITDA per year?

Shoutout to Moe H. for the tip!



Why Investing/Passing

  1. Not a startup or tech company.
  2. That said, I really like this business and think anyone whose investing in this would be making a solid, stable investment.

The 6 Calacanis Characteristics (91 161 18)

1. A startup that is based in SVFail: Seattle, WA (based on contact page.)
2. Has at least 2 founders Pass (2)
3. Has product in the market Fail: (investment fund)
4. 6 months of continuous user growth or 6 months of revenue.Fail: no revenue.
5. Notable investors?Fail: CEO comes from Highland Capital and Goldman. No other high profile investors.
6. Post-funding, will have 18 months of runway Pass: Raising $1MM at $463k yearly burn means ~26 months, though obviously burn increases once the money comes in.

The 7 Thiel Questions (ETMPDDS)

  1. The Engineering question:
    • N/A: No technology.
  2. The Timing question
    • Good: Can see COVID being a great time to acquire boring businesses on the cheap.
  3. The monopoly question
    • Bad: though not necessary for this to be a good business.
  4. The people question: 
    • Good: this team definitely seems well-positioned to execute on this hypothesis.
  5. The distribution question
    • Fine: nothing bad but nothing remarkable.
  6. The durability question
    • Sure: The upside to boring businesses is you know HVAC and plumbing will in demand for a long time.
  7. *What is the hopeful secret?: 
    • They can build a good business by using timing to buy businesses cheap, offer retirement plans to operators, and make superior market returns in an investment that is more venture.

What has to go right for the startup to return money on

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