Internet Native Private Equity
Recently, designer Ben Pieratt launched Folder.market. With the site, users can sell digital assets living in folders in their Dropboxes. It’s fairly easy to hook up and start selling. The Dropbox integration lowers the friction to get started. While the creator downplays the project, there’s a lot of inertia behind it. When I first saw it, I thought it was a really cool way to monetize digital assets like music or design files. But then, I saw people selling whole apps and websites on the platform. Ultimately, one can view a lightweight software business (app, website, etc.) as a collection of digital files. Another project someone turned me on to recently is Shopify’s Exchange Marketplace. It’s a smart initiative that allows e-commerce entrepreneurs to buy and sell online businesses. The Shopify data colors the due diligence process. Although this stuff is happening on a small scale, I think there’s something here.
To be fair, I’m using the term private equity quite generously. The question I’m most interested in is: how does the Internet change the ways in which we think about buying and selling companies? To date, the Internet hasn’t had a meaningful impact on the private equity industry. Firms operate in the same fashion as they have for the past twenty to thirty years, and the Warburgs, Carlyles, and KKRs of the world are as big as ever. At the scale some of these companies operate, there does need to be a lot of human hand holding and manual processes in place.
Regardless, there have been some new initiatives I’m interested in. Andrew Wilkinson’s Tiny and Savneet Singh’s Tera Holdings promise to be the “Berkshire Hathaway of the Internet / Software.” Ryan Caldbeck and CircleUp have been getting a lot of traction for their data-driven approach to CPG investing. I’d recommend reading this article on him. As one of my friends pointed out, I would hesitate to use the word systematic due to the inability to implement a “fire and forget” strategy and lack of liquidity. These investors are paving the way with new models, and I certainly applaud them for that.
Some change should come to the world of buying and selling businesses. I bet it starts small, looking more like Folder than TPG or Apollo.
This post was part of a larger series I wrote at the end of 2018. You can check out the other ones here. If you’d like to get in touch, you can reach me at aashaysanghvi[at]gmail.com.
