The Joy & Pain of Buying a Tech Business

Sometimes will. And this is something that happened to me when I was searching. Sometimes you will have conversations with business owners along the lines of, you know, I would ask them, how much do you think your business is worth? And they would say, well, anywhere between five and 15 times EBITDA.

And I was like, okay, the only thing you're telling me is you're actually not a motivated seller. You're not selling your business if you had a clear valuation range in mind, even if it's lower high, but at least I'd know that you're willing to sell. And in most cases, once the range narrows, it will be going down to the lower end.

Well, it's different, but once you educate them and talk through dynamics of the industry and, and the fundamentals of the business, then they will presumably be willing to receive a lower price.

Yeah, yeah, great. Yeah, I had not heard that that valuation specificity of, of a seller is a, a tell as to how serious they are about actually selling. Yeah, it's. And also on the second, that second kind of example that you just gave on SAS versus H Vac, even down here we should call out SaaS. SAS actually does command different multiples even in the lower middle market.

Right? Yeah, for sure. I'd be careful about paying a lot for SaaS since our friends at ChatGPT came out. Just because the entire world of agentic AI, and we'll talk about this later on, but the world of agentic AI poses a huge threat to SaaS businesses. And maybe when I was at relay back in 2018, 2019, looking at SaaS businesses, the heavier the code and the more robust the infrastructure and…

And that's not necessarily an exciting thing in SaaS businesses today because heavy code and lots of just like millions of lines of code means it's really hard to update and improve your product. Whereas if you have lean code and just like easier to upgrade technology, then your company might be worth more. So just that concern about SaaS on AI.

But yeah, in general it should be more expensive. Well, also code itself, there used to be a perceived premium with every line of code because it costs so much to, to have those lines of code written.

Now that we've got vibe coding, software development itself is not necessarily perceived as valuable. I mean we are very in a moment of flux there. So let's not, let me not overstate it, but, but it sure does seem like, I mean, I see clickbaity but still intriguing headlines about how SaaS is going to be eaten by agentic AI and, and SaaS businesses.

I, I do get the sense are, are very concerned and of course software developers are very concerned. It's just a, it's just shocking what has happened to software in the last few years thanks to ChatGPT. And you sir, are, are kind of Right in the middle of that.

So we're going to hear much more about it. Great. So you decide to do a search yourself to get in the game, and you partner with Antonio. Why do a partnered search?

So while I was at Relay and, you know, by interviewing and meeting and working with so many searchers, you. You can't avoid doing some soul searching yourself. And I, I realized, and.