Brandon Pindulic (Spacebar Ventures)

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Brandon Pindulic is the founder and owner of Spacebar Ventures, a digital business incubator and investment firm. He previously founded and sold OpGen Media.

Brandon and I talk about “startup holding companies”, digital businesses, incubating vs. acquiring, using debt, and more.

How’d you get your start?

After selling his agency about 2.5 years ago, Brandon started doing consulting as a fractional CMO for a few businesses. The consulting had fewer headaches than running a business, and while cashflow was solid, it wasn’t as good as running the agency and wasn’t quite the situation he wanted.

He had always wanted to get into B2B media — his agency was also heavily a lead generation business — and he started searching for a business to acquire. He eventually came across Planet Compliance, a site focused on covering business regulations and highlighting the top compliance software applications. He found it on Acquire.com (FKA Microacquire).

In terms of revenue, it was really small (~$22k/yr), but it was exactly what he wanted. He saw a lot of upside (it had 40k readers, but only ~3k people on the email list), and he’s since grown it to a ~50k engaged email list and low six-figures in revenue.

He’s since bought and incubated more businesses that have collectively become Spacebar Ventures.

Why buy a small business instead of swinging from the fences from the get-go?

Although he had run an agency, Brandon knew that buying and taking over an existing business was a different beast. He wanted to learn with lower stakes, while also buying something he could sink his teeth into and grow significantly.

He paid ~$67k for the first business, but since he’s always been debt averse, he put it on American Express card and paid it off almost immediately. While he still thinks there’s value in starting small, he’s gotten reps with smaller businesses and now feels comfortable with going bigger.

Why are you debt averse, and what do you think about people taking on large debt from the beginning?

Ultimately, it’s a matter of personal preference and risk tolerance. Even if the SBA failure rate is exceedingly low, taking a substantial personal guarantee should be seriously evaluated and not taken lightly.

If you were to start over again — maybe from the perspective of someone who’s just entering the space — how might you do things differently? How would you start today?

Personally, Brandon definitely would’ve bought Planet Compliance again. Although it has taken some work, it was a great introduction to the acquisition space and process.

Related to his debt aversion mentioned earlier, Brandon advocates for having cash — either through a previous exist or a cash-flowing business that you don’t operate day-to-day — to fund future acquisitions and operation. He points to Andrew Wilkinson’s Tiny as a great example, where he turned one cash flowing business, MetaLab, into what is now a public holding company. “You can do whatever you want in that [situation] … I don't have investors or debt … so you can kind of go at your own pace. And I think that's a massive, massive advantage.”

As far as other potential strategies he’d recommend for younger people trying to enter the space:

1. There are businesses out there you can get for at or near 100% seller financing — assuming “you can prove yourself to the owner” and build a relationship with them over time. You need to be able to make a compelling case to the owner, and be action-oriented (e.g. take a task off their plate, give them a new idea, or introduce them to a new client). “A lot of people have the skill set to run a business, but they get in their head” about what idea to pursue or what strengths they have. But you’ll also have to find a business that “has some hair on it.” You’re not going to get the best business in town with seller financing, but that’s the trade off.

2. Find someone with a project graveyard, and offer to take it off their hands in return for “a percent of the revenue or equity.” Brandon said this is what he might’ve done if he was 19 or 20 trying to get into the space.

Where do you feel like there's still a lot of opportunity in the space, whether it’s an industry, application of a particular skill, or ways to add value?

Brandon mentioned a couple approaches (with an emphasis on online businesses):

1. Buy a smaller asset from a larger business. Bigger businesses might have a smaller asset or property that they can’t give the attention it needs, is using a lot of resources, or they’re just generally willing to part ways with. You might be able to strike a deal on it.

2. Assets which need help primarily in your area of expertise (e.g. you are great at monetizing but the asset is under-monetized. The same goes for creating content, generating traffic, and other related skills).

What is maybe the most overlooked or under-appreciated challenge you think people wanting to get into this space don't recognize?

Brandon had three things to say:

1. “You just have to be honest about why you're” starting a holding company. Is it in your nature and interest to be an investor and manager of multiple businesses, or an operator of one? A holding company is a very different type of work than starting or buying a single company.

2. Related to the above point, it’s harder to run a holding company than one business because you can get to a solid revenue or profit milestone simply through “brute force.” Taking multiple businesses to new heights — especially when you’re not managing them day-to-day — is a very different skill set.

3. Figuring out cash flow across multiple businesses — where some are profitable, some need more cash injection, you want to buy new businesses, etc — is very challenging.

What has been your biggest lesson?

As mentioned earlier, in addition to buying companies, Spacebar Ventures tries to incubate companies. He has done three incubations, and 2/3 failed because he “gave too much slack without enough resources.” Being highly trusting and giving a lot of autonomy can backfire if you’re not tracking results properly. He recommends setting KPIs and setting performance-aligned incentives. You’re going to succeed and grow faster with accountability mechanism.

Why split your attention across buying and incubating businesses?

The benefit of incubating a business is that “you can do it for much cheaper.” Each of the incubation failures have cost only cost ~$20k, whereas buying an established business — even a smaller one — can cost significantly more and require time to close the deal and ramp up. The trade off is that they aren’t proven and can “take longer to start seeing returns.”

Especially if you’re someone who has an existing audience or distribution in a space (e.g. Nick Huber), you have a massive advantage when incubating and can de-risk the business.

With that said, the “pendulum swings back and forth” for incubations at Spacebar. They aren’t planning to do any in the near term, but they will definitely be doing a few next year.

What’s the #1 thing you wish someone would’ve told you before starting a holding company?

Brandon wishes he took on more mentors — or at least sought out more people in the space who could point questions to and get advice from. He would’ve loved to learn from others who had already been in his shoes and do things properly — things like legal agreements and accounting, understanding incubation success rates, and recognizing the opportunity costs of keeping cash on hand.

He made it out to be easier than it actually was.

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