XO Capital's Fund Stuff
Andrew Pierno
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Fund Stuff is a pod about all about micro private equity. We buy and operate tiny saas companies at XO.Capital. Follow along as we continue to buy, grow, and sell sass companies!
Available episodes
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Nov 17, 2023
36 - October 2023 Update
In our latest episode, Danny steps in for the October 2023 update (a bit overdue, but packed with insights). We discuss hitting our 5% month-over-month growth goal for the first time and review the performance of various companies in our portfolio, with most seeing growth except for Analytics. Danny delves into our plans for November and December, including a Udemy course launch, partnerships with prominent figures in the SEO space, and a growth experiment tracker to monitor our new initiatives. We also discuss our recent Google Search Console integration, product launches across our portfolio, and an increase in new subscribers and accounts for Analytics despite mixed reviews about data quality. The episode also highlights successful growth strategies for Cool DM and a slight uptick in MRR for Sheetbest. Tune in for an in-depth analysis of October’s results, future plans, and interactive content to explore.
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Nov 10, 2023
35 - Acquisition #11 - Journey.io (aka Don't Stop Believing)
"Journey to Success: Tales of Triumph and Challenge"
Dive into the candid chronicles of entrepreneurial grit on "Journey to Success." Hosted by a seasoned entrepreneur with a knack for storytelling, this podcast delves into the highs and lows of building and scaling businesses. From a stark "Failure to Raise" capital to ingeniously creating the "Flip Fund," where business acquisition and swift scaling lead to rapid exits—our host shares it all. With a recent spotlight on the acquisition of Journey.io, a storytelling sales tool with a penchant for scale and customer love, listeners get an insider's view of the strategic decisions that lead to 10x growth. It's an unfiltered look at the tactical journey of fund-raising and business development, flavored with the host's dry wit and smart insights. Join us as we navigate the thrilling path of turning challenges into stepping stones for success.
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Oct 20, 2023
34 - Maybe A Thesis - V4
In today's episode, Andrew from XO Capital dives deep into the ever-evolving investment thesis of the fund, giving listeners an insider's view on how the team approaches deal flow and capital allocation. Andrew starts off with the challenges of traditional venture-backed company building, emphasizing the power law distribution where a very few winners give outsized returns.
The crux of the episode? XO Capital targets what the VC world might deem as 'failures'—companies that couldn't secure the next round of funding but are far from being bad businesses. Andrew argues that these companies often have viable products and reasonable growth rates, making them hidden gems.
Key Takeaways:
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Opportunistic Strategy: XO doesn't box itself into a rigid thesis, offering flexibility to spot unconventional winners.
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Power Law Reality: Understanding that in the VC game, only a handful of investments bring in big returns.
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Relative Failure: What venture capital sees as failure could be an opportunity, especially if the business shows some growth and revenue.
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Quality Over Quantity: XO aims to buy the best products in a category, moving away from settling for second or third best.
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Operational Realities: Businesses bought must be 'complete'—ready to sell today without requiring significant engineering work.
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Channel & Growth: Acquisitions should come with a promising customer acquisition channel and a nominal growth rate.
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Initial Customers: Preferably a hundred or more, with no single customer making up more than 20% of the business.
The episode closes with the cheeky remark that founders should meet Paul Graham at the start of their journey and XO Capital at the end. Tune in to get a full grasp of XO Capital's unique angle on investment.
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Oct 13, 2023
33 - Post-Acquisition Growth Strategies
Summary for Podcast 33 - Post-Acquisition Growth Strategies
Hey, it's Andrew from XO Capital. Dive in with me as we discuss how to approach growth after acquiring a company.
Key Takeaways:
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First Steps: If you've bought right, you should have an operational growth channel. But beware of depending on a founder's personal social media for growth; you might be left starting from scratch if they move on.
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Leverage What's Working: Often, one solid channel can catapult you to seven figures. Look at what brought in the money and focus on amplifying that. If it’s SEO or ads, double down on it in the first months of ownership.
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Expand Smartly: While working on the main channel, experiment cautiously with others. Ensure you're clear on what each experiment is designed to test.
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Learn from the Past: Delve into the previous owners' experiments. Understand which ones worked, which failed, and the reasons behind both.
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Diverse Outcomes in Portfolios: Just because a strategy worked for one company in your portfolio doesn't guarantee success for another, even in the same market.
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Experiment Before Buying: If possible, before making an acquisition, test your growth strategies. This will give you a clearer picture of post-acquisition realities.
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Utilize Low-Hanging Fruits: Sometimes simple changes, like refreshing UI or adding an onboarding process, can boost user engagement and conversions.
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The Value Proposition: Always aim to provide immense value, even for free. Sharing your knowledge establishes trust. As the saying goes, "Give away the secrets, sell the implementation."
Remember, many experiments won't bear fruit, but they're all part of the learning process. Stay persistent and keep refining your strategies!
Catch ya next time, and keep growing those acquisitions!
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Oct 6, 2023
32 - September 2023
In the September 2023 recap of XO, Danny discusses the theme of "spinning plates," emphasizing the company's focus on quality over quantity. The month was about taking baby steps to improve the quality of their portfolio companies, team, and customer experience.
Financially, September was a mixed bag. While MRR was up for some products, net volume was generally down compared to August. Danny dives into the performance of individual portfolio companies, mentioning that each has its unique challenges and growth trajectories.
Cold DM saw its first uptick in months, thanks to overcoming Twitter API changes. Screenshot API remained steady but lost some larger customers. Analytics struggled due to new competitors and LinkedIn changes, but a new path forward is in sight.
Danny also touches on upcoming growth strategies, including backlinking processes, Google search cloud integration, and a shift to free trials for some products. The goal for October is to move from a reactive to a proactive approach in managing their portfolio.
Overall, the episode offers a transparent look at the ups and downs of managing multiple SaaS companies and sets the stage for what's to come.
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Sep 29, 2023
31 - Growthbar - 90 Day Review
This week, Danny is taking over with an in depth breakdown of our ownership of Growthbar over the first 90 days. It's been turbulent but appears to be stabilizing.
Here's a teaser:
Month 1 - We didn't change much. great month
Month 2 - We removed forcing people to enter a credit card and nearly destroyed the business.
Month 3 - Recovery
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Sep 22, 2023
30 Grinding It Out
In this episode of "Fund Stuff," Andrew Pierno pulls insights from an unlikely source—pickleball—to shed light on the grinding nature of business. Even when your company isn't making TechCrunch headlines or going viral on Product Hunt, Andrew argues that the real work happens during what he calls "peace time." It's all about sticking to the grind, focusing on metrics that matter, and never letting off the gas. Key Takeaways:
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Facing Equally Skilled Players: Just like in pickleball, your business often competes with others who have no obvious weaknesses. The reality is you're in for a grind.
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Metrics Matter: Peace time is when you focus on core KPIs. Forget the vanity metrics; focus on what truly propels your business forward.
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Routine is Your Ally: Maintaining a steady pace and routine is essential, even when it feels like you're just watching paint dry.
Tune in to learn why you shouldn't let "peace time" lull you into complacency and how focusing on the grind now can pave the way for future success.
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Sep 15, 2023
29 - Negotiating a Micro Saas Acquisition
"The Real Art of Negotiating Micro SaaS Acquisitions"
In this episode, Andrew Pierno from XO Capital offers an insider’s look at how to navigate the complex waters of acquiring a micro SaaS business. Drawing from his extensive experience, Andrew stresses the importance of simplicity and clarity in negotiations. Here are some key takeaways:
1️⃣ Price & Payback: Stick to your guns on the price and aim for a 2-year payback period. A firm price sets the stage for straightforward negotiations.
2️⃣ Deal Speed: If negotiations are dragging, take it as a red flag. Over-complication is not only a hassle but can be indicative of an uncooperative seller.
3️⃣ Initial Offers: Feel free to low-ball at first, especially for first-time sellers who may have inflated expectations.
4️⃣ Diligence: Always aim to agree on a price before due diligence. The aim is not to drive the price down during this phase but to confirm that the initial assessment was correct.
5️⃣ Two-Track Offers: Usually present two types of offers—one with a lower overall price but more cash upfront, and another with more seller financing but a higher overall price.
6️⃣ Turnouts over Earnouts: For businesses with less than 10k MRR and high churn, Andrew introduces the concept of a "turnout" — a reverse earnout that's paid if the MRR remains stable post-acquisition.
7️⃣ Reputation Matters: If you’ve done deals before, flaunt it. The reassurance can expedite the process.
8️⃣ Human Element: Being firm doesn’t mean being an ass. Reputation is everything.
9️⃣ Avoid Bidding Frenzies: Don't let emotions get the better of you. Remember, the price will determine the success of your acquisition.
Middle Finger Response: Expect initial resistance, but don’t be disheartened. Many sellers come back to reality and are open to negotiating after some time.
Whether you're a first-timer in the micro private equity space or a seasoned buyer, this episode is packed with actionable insights. Happy hunting!
Follow us for more episodes of 'Fund Stuff', the podcast that delves deep into the nitty-gritty of buying and scaling SaaS businesses.
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Sep 8, 2023
28 - XO 2.0
Andrew dives deep into the concept of 'corporate versioning,' asking why companies don't iterate on themselves like they do their products. He also shares some cautionary tales from recent acquisitions that defy conventional business wisdom. Want to know what happened when they removed a mandatory credit card requirement for a free trial? Spoiler alert: it wasn't pretty.
Andrew also touches on his company's growth, internal changes, and the importance of staying profitable. With key insights into developing a company playbook, implementing culture, and raising over $500,000 through a flip fund, this episode is a treasure trove for anyone looking to understand the intricacies of modern-day entrepreneurship.
Listen in as Andrew unravels the complexities of the startup world and reflects on the importance of excellence, accountability, and the "year of efficiency."
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Sep 1, 2023
27 - Acquisition Entrepreneurship
️ Welcome to the XO Capital Podcast!
In today's episode, our host Andrew takes you on a deep dive into the fascinating world of Acquisition Entrepreneurship. If you've been hitting roadblocks in building a SaaS business from the ground up, this episode could be the game-changer you've been waiting for.
What You'll Discover:
* The rise of Acquisition Entrepreneurship and its growing popularity.
* How platforms like Acquire.com are simplifying the process of buying and selling businesses.
* The compelling reasons to consider buying a business over starting one from scratch.
* Real-world data from XO Capital's portfolio, including impressive IRR and MOIC figures.
* The unique challenges and rewards of building a $40k MRR business through acquisitions.
Key Insights:
1️⃣ Acquiring an existing business can significantly reduce your investment risk and fast-track your path to profitability.
2️⃣ For software developers, the real hurdle isn't in building a product; it's in identifying a product that the market genuinely needs.
3️⃣ Our portfolio's realized gains have essentially paid for all our other acquisitions, allowing us to operate with "house money."
4️⃣ Acquisition Entrepreneurship offers a compelling alternative to the traditional route of starting a business from scratch.
Recommended Reading:
Don't miss out on the book "Buy Then Build" by Walker Deibel for an in-depth look at the ins and outs of Acquisition Entrepreneurship.
Metrics Explored:
* MOIC (Multiple on Invested Capital)
* IRR (Internal Rate of Return)
If you find value in this episode, please rate us on your favorite podcast platform and leave a review. Your feedback helps us reach more people like you!
Connect with Us:
* XO Capital Website
* Follow us on Twitter
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Aug 25, 2023
26 - Your Ideal Micro-Acquisition Profile
In this podcast episode, Andrew from XO Capital delves into the concept of identifying an ideal acquisition profile, which he fondly terms as the "buy box." He emphasizes the importance of parameters in seeking potential deals and highlights the criteria that define XO Capital's current buy box. Drawing on personal experiences, Andrew shares insights into the journey of acquisitions, ranging from small-scale investments to high six-figure ones, emphasizing the risks and returns associated with them.
One of the key takeaways from the episode is the significance of matching skills with potential businesses. Andrew mentions that while a business might seem lucrative, it might not align with the skills of your team, leading to operational inefficiencies. This is particularly true for vertical enterprise SaaS companies, where diving into a new industry can be daunting. Moreover, from an engineering perspective, he underlines the importance of a business's tech stack and how it aligns with…
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Aug 18, 2023
25 - Growthbar Acquisition Teardown
In this episode, Andrew from XO Capital gives listeners an insider's view of their acquisition process, focusing on their recent purchase of Growth Bar. Growth Bar combines keyword research with AI-driven content creation, offering a unified tool for SEO professionals.
Key takeaways:
* Growth Bar's Value: The product blends functionalities like Surfer SEO and AI content tools, allowing users to conduct keyword research and then write articles within the same platform.
* Acquisition Metrics: Growth Bar reported an MRR of $25,000 and exhibited promising growth rates. Its quick time-to-value for customers was a significant appeal.
* Technical Support: The original developer of Growth Bar agreed to continue aiding XO Capital, ensuring smooth operations and development post-acquisition.
* Financial Insights: Growth Bar had a trailing 12-month gross revenue of $219,000 with last month's net profit at $16,000.
* Platform Risk: Most of Growth Bar's traffic comes directly from Googl…
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Aug 11, 2023
24 - Product Analytics
Topic: Rethinking Product Analytics for SAAS and Understanding Customer Needs
* Andrew introduces the concept of "level 11" experience, an idea that goes beyond the best to provide magical experiences for end-users.
* Current product analytics tools require manual event tracking and configuration. Andrew envisions a world where analytics tools can intuitively understand and deliver insights without the user diving deep into the dashboard.
* Tools like Mixpanel are found lacking, with difficulties in understanding user paths, since real-world user journeys don’t always follow linear funnels. Andrew suggests a tool that can identify user actions regardless of the order they occur.
* A true "level 11" product analytics tool would proactively deliver insights, such as notifying when significant accounts sign up, predicting customer churn, and accelerating users through funnels based on their readiness.
* It's vital to recognize and address both power users and newcomers. For t…
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Aug 4, 2023
23 - Flip Fund Launch
Andrew from XO Capital announced the launch of their first Flip Fund, aiming to raise between $500,000 and $1 million. This fund plans to purchase a single software company, double its revenue, and resell it within 12 to 24 months. The fund, regulated under Reg D, allows for public solicitation of investment from accredited investors and is being managed through a company called Capitalized. The investors will directly be part of the same LLC as the fund's managers.
In addition to the Flip Fund, Andrew is running two experiments. First, he has created a Discord channel where people can discuss various topics related to acquisitions, with plans to eventually introduce a paywall. The channel was inspired by the work of Cody Sanchez from Contrarian Capital. Second, he's piloting an initiative he calls "Andrew as a Service," where he provides consultation services for a monthly fee, the proceeds from which he plans to use to fund his upcoming MBA at UCLA.
Andrew also shared an update on…
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Jul 28, 2023
22 - Preparing For Liftoff
In episode 22 of "Fund Stuff", Andrew Pierno from XO Capital opens up about the latest developments in their project, the "Flip Fund", hinting at potential fundraising in the near future. He also discusses an innovative marketplace experiment with content writers aimed at bolstering revenue. Despite facing setbacks with their product "Support Guy" which failed to attract new customers, Pierno shares his newfound perspective on progress from a book titled "10 X is easier than two X". This concept prompted him to create a Slack bot using OpenAI to log daily victories, reinforcing the idea of measuring growth against past achievements rather than an ideal future.
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Jul 21, 2023
21 - Flip Fund Logs 2
Join us for an insightful journey into the world of short-term investment funds, where we focus on the innovative concept of a 'flip fund.' Dive deep with our host, a seasoned fund manager operating out of Texas, as he breaks down how the fund is structured and how members earn membership units proportional to their investment.
As the conversation progresses, we delve into various exciting and complex scenarios such as what happens when a sale doesn't occur within the set 12 to 24-month period, strategies when the fund is performing exceptionally well, and situations where a sale occurs earlier than planned.
You will also learn about how the fund manages early exits for members, how it handles excess cash flow, and the intricacies of billing hours. An integral part of this discussion explores transparency within the fund, as our host discusses the provision for read-only access to the bank account for investors.
Discover how this unique flip fund model allocates resources for small…
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Jul 14, 2023
20 - Flip Fund® Logs
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Jul 7, 2023
Usage Based Pricing Vs Recurring Revenue
In this episode, we're talking about usage-based pricing vs. recurring revenue.
Is it time to ditch your monthly subscription and start paying for what you use? We'll discuss the pros and cons of both pricing models, and explore how the economic environment is changing.
We'll also talk about some of the challenges of implementing usage-based pricing, and how to overcome them. And we'll share some of our favorite tools for tracking usage and managing payments.
So whether you're a startup founder or a seasoned SaaS exec, this episode is for you.
We'll keep it fun and informal, and we'll promise not to get too technical. So come join us for a lively discussion about the future of pricing.
Here are some things you'll learn in this episode:
* The pros and cons of usage-based pricing
* How to implement usage-based pricing
* How to track usage and manage payments
* The tools available to help businesses implement usage-based pricing
We hope you enjoy the episode!
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Jun 30, 2023
18 - Growthbar Acquisition
For this week, I decided to record our partner meeting as a video and a podcast. We've never done that before and I hope it gives you some insights into how we delegate tasks and work together as a team. I've gotten a few messages about this over the years and think perhaps listening to us chat through stuff might help you understand just how complimentary Danny and Henry are to my skill set (which is mostly just a fire starter).
Announcing XO capital's acquisition of Growthbarseo.com! Our 10th and largest deal to date! Take a look behinds the scenes with us and watch one of our internal partners meeting to see how we think and work together.
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Jun 23, 2023
17 - Flip Fund
In this week's episode, the host delves into an innovative investment strategy he refers to as a 'flip fund'. This strategy involves raising funds to purchase a single company with the objective of doubling its revenue within a short span of 12-24 months, and then selling it off.
The host discusses past experiences and challenges with fund-raising, such as potential investors' concerns about their investment duration and exit strategies. Unlike traditional venture commitments that can stretch over a decade, the flip fund concept offers a brief commitment period and clearer exit opportunities, thereby addressing several common investor objections.
However, there are limitations to this concept. One crucial point raised was that there would be no distributions or "mailbox money" during the investment period, as all earnings would be reinvested into the company for growth purposes.
The host brings up his successful track record, having employed a similar strategy on nine previous occas…
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Jun 16, 2023
The Art Of Waiting
In this podcast episode, the host explores the value of patience in running and growing a business, particularly in the tech sector. The conversation begins with a critique of the "move fast and break things" approach, shifting the focus towards more sustainable, long-term thinking. He emphasizes the importance of patience when negotiating deals, outlining instances where an initially rejected offer becomes viable after other buyers fall through.
The host further shares how their company operates, elaborating on their strategy of acquiring cash-flow positive businesses and reinvesting profits to buy more companies. However, the team is conscious of their limitations, recognizing they can only take on so much, especially with their bootstrap approach. They are focused on growing organically, even if this means periods of inactivity in acquisitions.
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Jun 9, 2023
15 - Acquisition #9 - Userping.io
In this week's episode, we share a surprise announcement about our recent acquisition of UserPing.io, a platform originally known as MailBoat that enables founders to send onboarding emails and drip campaigns. Discover why we decided to make this purchase and how we envision using the product in our portfolio.
We discuss the concept of a waitlist, its pros and cons, and how this applies to UserPing. Our host openly shares his personal distaste for the FOMO strategy, arguing for more direct and immediate product engagement.
In the episode, we also delve into the reason behind acquiring UserPing and the potential for cost savings, especially with our growing portfolio of nine companies. We also draw a comparison between UserPing and other email tools in the market, such as Loops, shedding light on the factors behind our decision.
As we explore the potential future of UserPing, the host discusses the idea of integrating in-app notifications to make user interactions more responsive. He…
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Jun 2, 2023
14 - How we think about investing in generative AI
In this light-hearted, business-to-business podcast episode about private equity, the hosts discussed their investment strategy and how they categorize their investments. They defined two main categories: safe bets and adventure bets.
Safe bets are profitable SaaS companies, such as analytics products, that they purchase based on existing revenues. They anticipate steady growth from these investments and aim for a 5% monthly compounded growth.
Adventure bets, on the other hand, are more experimental and may not have any customers yet. They can involve AI products or other tech products with little to no traction. The expected outcome from these bets is either a significant hit or a total write-off. They hope to have one or two out of five to ten such bets "pop."
They also dove into their interest in generative AI products, citing products like Support Kai as examples of their venture into this sector. They mentioned that they have two more such products under Letter of Intent (LOI).…
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May 26, 2023
13 - AI Generated Content
In this episode, we dive into the exciting world of AI-generated content. Starting with the acquisition of Supportguy.co, we embark on a journey to create engaging blog posts using cutting-edge tools. We use Ghost as our blogging platform, Placid for generating captivating images, and Chat GPT, the AI powerhouse, to write our content. We discuss the prompts fed to Chat GPT and the importance of maintaining an informal and engaging tone. This innovative workflow has the potential to revolutionize text-based content creation, and we're thrilled to share our journey. Tune in to discover how AI is transforming the landscape of content creation!
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May 18, 2023
12 - Acquisition #8 - Support Guy
Read More At https://notes.xo.capital/acquisition-8-supportguy-co
In this episode, we delve into our recent acquisition of another micro SaaS, SupportGuy.co, and the exciting momentum we've been building on with our series of purchases. We take a look at the intricate process of navigating large and smaller deals simultaneously and the constant challenge of maintaining financial stability and business momentum.
SupportGuy.co, an AI-powered chatbot, is set to revolutionize customer support interactions by eliminating the repetitive nature of customer inquiries and providing real-time, accurate responses. It aims to disrupt the market dominated by services like Intercom by providing an efficient, user-friendly solution.
The episode also delves into our "vertical integration thesis" - an idea of owning all the tools we use to manage our portfolio. SupportGuy.co, in line with this thesis, is part of our larger plan to acquire other essential tools such as newsletter and referral soft…
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