My Journey to Discover the Serial Acquirer Business Model

Don Wharton of Victoria, B.C. SureSwift Capital Inc. Founder

In the entrepreneurial world, where the stark reality is that nine out of ten startups fail, discovering a business model that flips the odds in favour of success was a turning point in my life. As an entrepreneur and capital allocator, I’ve experienced firsthand the transformative power of the serial acquirer business model – a strategy that leverages the strengths of existing successful companies to build a diversified portfolio of businesses that can deliver robust long-term returns with the right capital allocator at the helm.

What led me to discover the serial acquirer business model and how did it influence me to start my own serial acquirer?

Before discovering serial acquirers

My initial foray into entrepreneurship began with ParetoLogic Inc., a software company I co-founded in 2002, which served as the foundation for my future endeavours and taught me invaluable business lessons. Even from the beginning, my partners and I approached the traditional entrepreneurial path differently. Instead of creating a product first and then figuring out how to sell it afterwards, we started by building a marketing infrastructure by participating in reseller and affiliate programs, learning the ins and outs of online marketing, and understanding customer needs.

I vividly remember signing up for the McAfee Antivirus reseller program and creating the marketing capabilities to drive sales. The knowledge gained from these marketing efforts was instrumental in successfully launching and scaling our own anti-malware product and software solutions when we eventually decided to create our own products. By building our marketing capabilities first, we generated cash flows to grow our business, remained self-sufficient without external funding, and overcame the hurdle of acquiring new customers for our products.

Our success wasn’t without its challenges. A significant policy change by Google affected our internal marketing efforts, forcing us to re-evaluate our strategies. This setback enabled us to innovate and diversify our business, and we quickly adapted to changing circumstances by developing new programs, channels, and organic marketing relationships. Over the years, we invested heavily in R&D, growing the team to 140+ amazing and hard-working professionals, fueling growth and expanding our product line significantly to fully benefit from the tailwinds behind the booming PC market.

While in the short term Google’s policy change was a formidable obstacle to overcome, in the long run, we became a better company with a more robust and durable business model. By becoming a pure software development house and providing custom, white-labeled solutions to leading direct-to-consumer marketers and brands, our growth resumed.

However, the significant policy change by Google and how it affected our company always lingered in my mind. That experience showed me how dependent a company can be on factors outside of its control.

Was there a better business model with the upsides of starting a business without so much concentration risk?

Discovering Internet Brands and the serial acquirer business model

Although I was already familiar with the concept of acquiring other companies during my time at ParetoLogic, where we acquired multiple profitable utility and security software companies to complement our portfolio of products, it was when I first discovered Internet Brands in 2007 that it all came together for me.

Internet Brands’ business model focused on acquiring profitable businesses and wisely allocating capital from those profitable businesses to continue purchasing new companies. As I continued to delve deeper, I realized the great potential of this model. A far cry from the hit-or-miss nature of the traditional startup model where 90% of companies fail, the serial acquirer model is about sustainable growth through repeatedly acquiring already profitable businesses. It wasn’t only about the survival of the fittest; it was about creating a diverse portfolio where the success of many could offset the struggles of a few, leaving the company less vulnerable to the changing fortunes of any single company.

Utterly convinced by the merits of this model, I invested in Internet Brands, which was publicly traded at the time, hoping to reap the compounding growth of the serial acquirer model for many years to come. Unfortunately, it wasn’t meant to be. Internet Brands was scooped up by another company in 2010 at a 46.5% premium to the market price. While many may have been thrilled with the significant overnight gain, I believed that the company would have been worth ten times the price it was sold at over the long term.

While I was disappointed by the sale of Internet Brands, it solidified my determination to create my own serial acquirer – and thus, in 2015, SureSwift Capital was born.

The beauty of the serial acquirer model

What sets the serial acquirer model apart is its inherent flexibility and resilience. Unlike traditional startups that bet everything on a single vision or innovation, this model spreads risk across multiple businesses. Even as individual companies face threats from new technologies or competitors and become stuck in challenging environments, a serial acquirer can pivot by acquiring companies in different industries, taking advantage of the full spectrum of opportunities to grow.

Serial acquirers can even take advantage of the shifting tides of macroeconomic conditions. In a downturn, they can acquire companies at lower multiples. During a boom, they can raise capital at attractive valuations, pay down debt, and divest assets at a premium.

Are the odds in your favour?

Innovation is celebrated in the startup world, with venture capitalists chasing the next unicorn. But the reality is harsh – very few make it. In contrast, the serial acquirer model isn’t about betting on the next big thing; it’s about identifying and nurturing the opportunities with higher chances of success. It’s a model that favours the tortoise over the hare, where slow and steady wins the race.

For me, the serial acquirer business model has turned the daunting odds of entrepreneurship into a game where the house doesn’t always win. Rather, a game where strategic thinking, patience, and a diverse portfolio can build an enduring legacy of success.

By Don Wharton, SureSwift Capital Inc.