Acquiring successful B2B SaaS businesses with Tim Schumacher @saas.group

saas.unbound is a podcast for and about founders who are working on scaling inspiring products that people love brought to you by https://saas.group/. In this episode #50, we are talking with Tim Schumacher, Co-Founder of saas.group (https://saas.group/), a founder-friendly serial acquirer buying successful bootstrapped SaaS businesses to take them to the next level.

The Journey of Tim Schumacher: From Entrepreneur to Investor

Introduction

In this episode, we have the pleasure of interviewing Tim Schumacher, the founder of saas.group and an investor in Green Tech businesses. Tim has had a fascinating journey as an entrepreneur, building successful companies and now focusing on acquiring and scaling smaller businesses. In this blog post, we’ll delve into Tim’s background, his approach to acquisitions, and his thoughts on the current market trends. Let’s dive in!

Who is Tim Schumacher?

Tim Schumer has always had an entrepreneurial spirit. From a young age, he enjoyed exploring business opportunities. Tim’s passion for coding led him to become a computer nerd, where he developed software and games during his teenage years. However, Tim also recognized the value of a business education and attended business school.

After completing his studies, Tim founded Sedo, the world’s largest domain marketplace, which he successfully ran for 10 years. Following his exit from Sedo, Tim started new ventures, including the company behind Adblock and Adblock Plus and a green search engine called Ecosia. He also began making angel investments and later ventured into the world of SaaS products, leading to the creation of saas.group.

Although Tim no longer codes, he remains the bridge between coders and business professionals, leveraging his deep understanding of software and passion for entrepreneurship. He continues to drive growth and success in the businesses he acquires and operates.

The Birth of saas.group: A Unique Approach to Acquisitions

During our conversation, Tim shared the story behind saas.groupp and why he chose to focus on acquiring and scaling smaller businesses rather than solely investing in startups. Tim’s motivation stemmed from his experience as an angel investor, where he witnessed the challenges faced by early-stage companies.

Many of Tim’s angel investments did not succeed, and he often felt frustrated that he couldn’t provide more hands-on support to help these companies thrive. Additionally, he noticed the presence of wonderful businesses built by independent developers, which lacked a suitable exit market. These businesses were too small for big private equity firms and didn’t fit the criteria of traditional venture capitalists.

Combining his prior experiences and learnings, Tim conceived the idea of saas.group—a company focused on acquiring and developing smaller businesses through a thoughtful approach to product development, marketing, and sales. Tim’s aim was to take these businesses to the next level, leveraging his expertise and the resources available within saas.group.

Since its inception, saas.group has acquired 17 brands, following a model of serializing the development of each company to ensure sustainable and profitable growth. They prioritize finding products that solve fundamental problems for customers, listening to their needs, and building a robust team to drive success.

The Bootstrapper Mindset: Sustainable Growth and Frugality

One of the key traits that differentiates saas.group is their bootstrapper mindset. Tim emphasized the importance of frugality, sustainable growth, and a focus on profitability. Unlike many venture capital-funded companies that prioritize rapid growth at any cost, saas.group seeks a balance between growth and profitability.

Tim explained that the bootstrapper mindset entails being resourceful, building products that customers truly need, and focusing on profitable growth. He mentioned the “rule of 40,” a combination of gross margin and growth, as a guiding principle. saas.group looks for companies with around 20-30% growth and profitability margins, aiming for sustainable long-term success rather than explosive but potentially unsustainable growth.

Tim acknowledged that bootstrapper companies and VC-funded companies have different mindsets. VC-funded companies often pursue rapid growth, swinging for the fences, while bootstrapper companies focus on building stable, sustainable businesses. Tim emphasized the importance of hiring the right people and surrounding oneself with a team that complements their skills and expertise.

The Importance of Relationships and Choosing the Right Acquirer

Tim highlighted the significance of building relationships when seeking potential acquirers or investors. He advised founders to establish connections with potential acquirers early on, even if they are not actively looking for an exit. Tim suggested having a standard email or document ready to share with interested parties, providing key information about the company’s current state and growth trajectory.

Tim stressed that it is crucial to choose the right acquirer, just as one would choose a co-founder or a VC partner. Founders should trust their instincts and ensure there is a strong connection with the acquirer. The chemistry and alignment between the two parties play a vital role in the success of the acquisition and the future of the company being acquired.

Tim also advised founders to conduct their due diligence on potential acquirers, examining their treatment of employees, product handling, and overall culture. It is essential to find an acquirer who shares the same values and vision for the business, ultimately providing the best home for the company being sold.

Looking Ahead: saas.group’s Roadmap and the Concept of Paved Road

In terms of saas.group’s future, Tim shared that the company aims to acquire approximately 10 more companies in 2024. They are focused on maintaining their size while gradually increasing their portfolio through strategic acquisitions. saas.group’s M&A team is experienced and capable of identifying inefficiencies, reducing costs, and driving revenue growth.

Tim introduced the concept of the “paved road” to emphasize the importance of staying on established paths for certain aspects of the business. saas.group encourages founders to leverage existing solutions and processes for tasks like customer service, UX discovery, and online marketing. This approach allows founders to benefit from the expertise and shared resources within saas.group, while still maintaining their independence and focus on product excellence.

However, Tim also emphasized the need for founders to be adventurous and explore new avenues in areas where pioneering efforts are required. It is a delicate balance between leveraging existing resources and taking calculated risks. The goal is to ensure efficiency while allowing room for innovation and growth.

Conclusion

Tim Schumacher’s journey from entrepreneur to investor is a testament to his passion for entrepreneurship and commitment to helping businesses succeed. Through saas.group, he has created a unique approach to acquisitions, focusing on sustainable growth, frugality, and finding the right people to work with.

As saas.group continues to grow and acquire new companies, Tim remains dedicated to building strong relationships with founders and providing them with the support and resources they need to take their businesses to the next level. With cautious optimism for the year ahead, Tim is confident in the potential for growth and success in 2024.

If you’re a founder considering an exit and looking for an acquirer who shares your values and vision, saas.group may be the perfect partner for you.