To make it easier for you to read this article, we suggest downloading it in PDF Format.
For 17 years, you practiced private equity and M&A law at a leading law firm. Can you share how your transition from lawyer to co-leading a self-funded search came about?
I was a deal lawyer working with large private equity firms and also investing in their funds. Through this, I saw firsthand the power of multiple expansion in roll-ups, where a private equity firm acquires competitors in a fragmented industry and benefits from a higher valuation when they sell the platform. Warren Buffett refers to compounding as the “8th wonder of the world,” but I think the same could be said for multiple expansion, which can significantly enhance equity returns. In 2015, I decided to partner with an operator in my community, who had bootstrapped and sold a small software company. Together, we set out to do our own subscale roll-up in the SaaS space.
How did you develop your investment thesis when selecting acquisition targets, and what criteria did you prioritize? Can you walk us through your journey from building a company in the SEO SaaS space to selling it to Alpine Investors?
My partner had a computer science background, so we knew we wanted to focus on SaaS.
To shape our thesis, we met with several founders of small bootstrapped SaaS companies and noticed a pattern: many had solid revenue and low customer churn (indicating high product quality), but their growth was slow—often only 1-3% annually. Upon digging deeper, it became clear that many owners were treating their businesses like annuities, pocketing excess cash flow instead of reinvesting into sales and marketing for growth. While this is a rational choice and allowed the operator to buy a home or start another company, it slowed their company’s expansion and negatively impacted its value (the so-called “Rule of 40” basically provides that “high quality” SaaS companies share two main attributes — they grow quickly and have high margins — and can be worth 5-6x ARR or potentially a lot more, while low growth/low margin SaaS companies might only trade at 1-2x ARR).
Our thesis was to acquire high-quality, low-growth SaaS companies at 1-2x ARR, invest in sales and marketing to accelerate growth, perform bolt-on acquisitions to increase overall revenue, and then sell the platform to a financial buyer at a higher valuation multiple. We eventually acquired three competitors in the SEO martech space, and focused on organic growth. After two years, Alpine Investors, which was launching its ASG software platform, made us an offer, and we sold the company.
What were the most valuable lessons you learned from that experience?
First, I’m glad I had a partner. Acquiring and building small businesses can be a lonely process, so having a partner with complementary skills was invaluable.
Second, the subscale end of the market can be messy, but it offers key advantages: lower valuation multiples, the ability to debt-finance acquisitions through the SBA 7(a) loan program, and easier access to proprietary deals.
Lastly, I discovered my passion for selling. Finding a company in a large, fragmented market allowed me to leverage my network effectively to create commercial and partnership opportunities.
You recently started backing a new generation of entrepreneurs through Funded Ventures. What are your primary objectives?
After our exit to Alpine, I began teaching ETA at WashU in St. Louis and UNC. Many students expressed interest in starting a search but wanted a partner with real experience. I launched Funded Ventures to support these searchers, professionalizing a set of tools, systems, and best practices to help them acquire and operate small businesses successfully.
As you mentioned, you teach courses on PE and ETA at various prestigious schools. What key principles do you emphasize when advising students on launching a search fund?
Launching a search requires more than just knowledge; it demands absolute conviction that this is how you want to spend the next 5-7 years of your career. I encourage students to have early, frequent conversations with former and current searchers to gain a balanced perspective on the journey. Additionally, I advise students raising capital from investors to carefully consider what they can expect—and not expect—from their investors.
The SBA loan is a key driver for self-funded search. Could you briefly explain its main characteristics, and do you think recent legal changes or new qualification requirements will affect entrepreneurs pursuing this “self-funded” path?
The SBA 7(a) loan program is an invaluable tool for acquisition entrepreneurs. It allows entrepreneurs to borrow up to 90% of the purchase price (subject to a $5 million cap), with a 10-year maturity, provided they personally guarantee the debt. There’s been speculation that the program might face cuts under the new administration, but I believe the opposite is more likely. Historically, conservatives see small businesses as a counterbalance to Big Tech and foreign competition and in fact, the Heritage Foundation’s Project 2025 policy guide calls for the expansion of certain SBA loan programs.
Reflecting on your journey, what do you believe are the critical factors for a successful acquisition in the EtA space?
The business you acquire is crucial—attributes like recurring revenue and low capital requirements will significantly impact your chances of success. However, a key factor that’s often overlooked is working capital and liquidity. Many searchers, especially in the first 12 months, lack sufficient liquidity to make the long-term decisions they know are right for the business. For example, they might hesitate to terminate an employee who’s affecting company culture, fearing short-term financial strain. Having a liquidity cushion, whether through cash on the balance sheet or a credit line, enables you to better manage volatility and make the right decisions quickly for the long-term health of the business.
Some believe there are now too many searchers chasing too few deals. How do you see the future of EtA evolving? Is the “Silver Tsunami” large enough to continue creating strong opportunities for future entrepreneurs?
Change is inevitable, both positive and negative. While the ETA space is becoming increasingly competitive—due to the influx of new searchers and private equity’s expanding ability to transact at the subscale level (e.g., Shore Capital is a great example of a firm doing innovative things)—there are still significant opportunities. Tools available to searchers, from acquisition financing to sourcing targets and operational support, are evolving quickly. Additionally, certain business owners still prefer to sell to individual entrepreneurs rather than private equity firms, which continues to create valuable opportunities in the market.
I’m particularly interested in how private equity is reshaping the subscale market and traditional search by making larger, more concentrated investments and offering broader support and exit options for searchers and operators.
In the end, smart and determined entrepreneurs will always find ways to acquire, grow, and profitably exit small businesses, regardless of increased competition.
