XO Capital's 12th acquisition

Sometimes I build things and sometimes I buy them with an acquisitions group I created called XO Capital. It’s the strangest possible startup given we buy other tiny products and operate them. We’ve been doing it for 4 years and have deployed about $3M and now collectively all the products do ~$75k-$80k MRR. It’s all b2b saas.

That sounds like a big number but the reality is we don’t “own” all that revenue. Some of the businesses have outside investors so we don’t get to pay ourselves. We do have a chunk of that cash that is owned 100% by us with no debt so there is some cashflow but it’s not nearly as much as you’d think after hearing “XO does $80k MRR”. That’s the TLDR of buying businesses. Basically you buy something for “X MRR” and you think “oh nice, I can earn X every month,” but no. You’d be very wrong. There are expenses! Sometimes lots of them! and shit breaks! and you have to pay people to fix them! And then the product isn’t growing! so you pay more! And then finally, if after 3 years of grinding you and if you do manage to squeeze out some growth, you can sell it and make $. But making money along the way? It’s tough.

Buying stuff overall is cool. I do wish we had a primary product that we could then acquire add ons to such that the core asset is more valuable. We could then sell the whole thing together. But we don’t, so for now we’re buying disparate businesses with no real overlap which is great from a diversification standpoint but not so great from an operating standpoint.

Here’s a little something I wrote about our 12th acquisition on our XO blog if you want to learn more.

The way I think about buying vs building is:

1. Lower beta (lower risk) from buying businesses already in flight. They have cashflow, rev, and lower risk (in theory).

2. Alpha through building stuff from scratch. Higher risk. Most are a waste of time and money, but when they hit, they can be (obviously) lucrative.

This works for me (for now). I can’t say I’d recommend it though. Managing 1 business well is tough. doing several at a time is death by a thousand cuts.

For onsched, it’s a bit bigger so it has 2 FTEs which is amazing but even still, I have gotten my ass kicked over the past 2 week since we acquired it trying to get the house in order.

Ideally you just have one thing that grows really big. That’s not necessarily easier but it’s simpler in some ways. To each their own.