Selling your business is an interesting business

In the past 5 years, marketplaces have emerged to sell businesses.

Ranging from deals as small as $1K to millions.

If you’re a solopreneur with a $500/month business, your approximate rate is $24000 at a conservative 4X multiple.

But why do people want to buy such businesses?

There are 3 reasons usually:

• They have better distribution than you - a newsletter ,YT channel or something else they can shill it on. This lets them automatically increase revenue significantly.

• They know your execution was poor so they can fix the execution and thereby improve MRR

• If you have high user growth but no revenue, they can use it to upsell onto their own main product

While these are not all the reasons (e.g. Zuckerberg buying out a competitor so they don’t compete with him), they provide a better understanding of how certain businesses get acquired and their valuation.

Now let’s break down how Streamlit got acquired for $800M with $1M in ARR.

Given Snowflake’s stickiness, their product is able to withhold a higher cost per acquisition for each user. Given Supabase is has roughly a $10 free tier cost, we can assume Snowflake has the same.

If Streamlit had 100,000 users, assuming 1% of them are enterprise customers who remain sticky (due to the nature of internal data analysis) and want to quickly deploy applications inside their org with small deal sizes of $10000 in ARR, they would make $10M annually.

All of a sudden their $800M acquisition becomes just an 80X of unrealized potential if they get just a 1% conversion rate.

The reality, however, is that SaaS applications are complex assets for a number of reasons. Not having revenue ≠ not having an acquirable business if a larger enterprise organisation can potentially buy it out and justify financials.