The Limitless SaaS Space with Einar @ TinySeed.com - Escape Velocity Show #11

About this video

In this Escape Velocity interview, Martell talks with Einar of TinySeed — introduced as a Y Combinator alum who sold a company to Google and now also does SaaS M&A work — about why the B2B SaaS space is far from saturated. Einar argues there could be a hundred times as many B2B SaaS businesses: ask anyone with a normal job and they will describe terrible enterprise software and work managed in spreadsheets, and tiny niches can be lucrative — his example is software for kitchen countertop installers, whose founder’s partner, he says, drives a 911. He explains TinySeed, co-founded with Rob Walling, as ‘Y Combinator for non-unicorns’: equity funding on SparkToro-like terms, with founder salaries capped at a reasonable level and dividends above that shared pro rata, aimed at companies happy to become, say, $20 million businesses throwing off 30-50% free cash flow rather than shooting for an IPO. Their sweet spot is roughly $2,500-$10,000 in monthly recurring revenue, cohorts of 10-12 companies run remotely over a year with mentors and retreats, and they received nearly 900 applications for the first cohort. He also describes institutional and private-equity money moving downmarket — buyers who once wanted $10 million-revenue companies now looking at $2 million ones, paying revenue multiples for 90% gross margins — plus holding companies that buy sub-$1 million ARR businesses and centralise support, engineering and back office. His cautions: selling is far easier while profitable and growing, debt financing can hide personal guarantees and growth-linked repayment traps, and the equity-versus-debt choice is largely a personality question about how much ownership a founder wants to keep.

Key takeaways

• B2B SaaS opportunity is a ‘fat tail’: bad legacy software and spreadsheet workarounds in countless tiny niches can support highly profitable niche products
• TinySeed is positioned as Y Combinator for non-unicorns — equity, capped founder salaries and pro-rata dividends for businesses not aiming to IPO
• Institutional and private-equity buyers have moved downmarket, paying revenue multiples for small SaaS businesses with high gross margins and recurring revenue
• Growth usually comes from trying many channels, finding the one that works far better than the rest, and concentrating spend there
• Sell while profitable and growing; scrutinise debt deals for personal guarantees and repayment terms that tighten if growth slows

Episode details: published September 26, 2019 · 38:20 long. Summary written by Self Growth Videos from the episode itself. Business results and any income figures mentioned are Dan Martell’s own claims, shared for education — they are not typical or guaranteed.

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