#02: Colin Keeley

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For the second issue, I sat down with Colin Keeley, co-founder and -owner of Verne, a holding company for wonderful internet businesses. Colin also writes, podcasts, and teaches about buying and growing internet SMBs (see here).

We talk about building a HoldCo with digital assets, venture orphans, and how to get started.

How did you get your start buying digital SMBs?

Colin started his career in tech, building startups, then in venture capital, and finally building a venture studio. At the studio, he and his partner, Brent, would incubate a couple companies each year. Then they discovered some other people were buying businesses that were already working, and focusing on improving them. The idea of buying something that’s already (at least somewhat) working resonated with them.

They decided to take a stab at it, and acquired their first deal, Blinksale, through Acquire (FKA Microacquire). They liked the business because of the niche (invoicing), which is a good control point for a business. It had also been around for ~15 years and was very stable, which gave them the confidence they weren’t “going to run it into the ground.”

If you were trying to break in again today — maybe knowing what you know, but not having access to the same network or resources — how would you do it? Where would you start?

Colin is a big proponent of starting small and getting your hands dirty.

As for where to source deals, if you’re focused on small internet businesses or SaaS companies, as I mentioned earlier, Acquire.com can be a great starting spot.

A lot of people want to start with cold outreach “because they hear that's how you get the best deal” — and of course, inbound deal flow is even better — but the fact of the matter is that both cold outreach and inbound require “a presence.” At an early stage, it can be a time suck where you have to talk to a lot of people, discussing valuations and trying to convince them to sell — few of which are actually interested. “So at least if you're on a marketplace, they're somewhat vetted, and they're somewhat interested in selling.”

From the search to early ownership stages, where do you like to focus your attention?

After closing a deal, Colin and Verne like to focus on stability. They make sure they’ve successfully transitioned and understand the technology, which lowers the risk of things going south early.

Next, they often like to buy targeted traffic to see where things start to “break down in the funnel” and where the product needs improvements. In that same vein, they make sure to “talk to existing customers.” Customers love this in a transition — it engenders confidence in new ownership. They use this time to ask things like, “What's the most annoying thing? What kind of things would you pay more for? What other features would you like to see?” These answers help build the backlog and illuminate quick wins that can make existing customers happy and start to attract new ones.

Where do you think there’s still a lot of opportunity in the space, whether it’s a network, skill set, way to add value, etc?

Historically, Verne has focused on bootstrapped SaaS companies that are profitable and easy to understand.

While that’s still an area of interest, they’re looking more into “venture orphans” — companies that might have raised a lot of venture capital, but are burning through it and/or have a messy cap table and preference stack. These are businesses that might have a good product and path to profitability, but due to competing stakeholder incentives and venture-level growth expectations, can’t make things work. The founders of these companies start to realize their equity isn’t worth what they thought, while investors realize it’s not “the next Uber.” This can leave an open door for negotiation.

In these cases, if you can find a creative way to broker the deal that satisfies the needs of investors and founders — maybe a salary while the founder figures out their next thing — you can get the deal done.

A few people and companies that Colin and Verne have been inspired by that take this approach: Andrew Wilkinson and Chris Sparling (and previously, Jeremy Giffon) at Tiny.com, and Xavier Helgesen and Sieva Kozinsky at Enduring Ventures.

What is the most overlooked or under-appreciated challenge that acquisition entrepreneurs face?

In short, expect it to be “more of a slog” and less smooth sailing than it might appear from the outside.

What’s an unpopular opinion you hold about ETA or the hold co space?

Colin had two things to say…

While holding companies are in vogue — and of course, Colin wouldn’t be building one if he didn’t see the value and opportunity — it’s not a given that everyone should “scatter [their] focus across a bunch of projects” instead of focusing on one business.

He admitted that the comment was probably pointed at himself, and he likes to take “a small bets approach, lighting a bunch of fires” until he sees ones that are taking off. This allows you to diversify, but also not over-invest too early.

A lot of people with tech backgrounds are trying to cut over into blue collar or physical service businesses, thinking that they’re straightforward and easier, and that the people running them are “doofuses.” In actuality, these owners are often sophisticated and have been doing it for a long time. Their problems and challenges might be different, but that doesn’t mean those industries or roles are any easier.

Best piece of advice for people aspiring to succeed in the space?

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