Can You Create a Small Tech Startup and Get it Acquired for 3–10x the Revenue in 1–3 yrs?

Kabir (ko-bir)
Dec 1, 2019 · 5 min read

If you are planning to play it big on the world’s tech scene as a rockstar startup, do not read this any further. Are you interested in creating a low budget (50K-500K) tech startup that you want to exit for a profit? Then you might want to read this article.

What is a Nano/Micro Startup?

These ideas also are not likely to turn into a public company. Their niche ideas solve real-world problems. But, the niche is often too small for a big company to jump in headfirst.

What to build?

Don’t create something that requires educating customers or building new sales channels.

Both of these activities are expensive and require external funding. Short-exit startups should focus on:

  • Improving an existing product or service by saving time or cost
  • Bank on the existing market and not need to build a new one
  • Rely on existing sales channels to sell its product or service
  • Rely on existing marketing channels to promote it

Do you need colossal traction?

For example, say you create a subscription-based service that has 1000 paid subscribers and 10,000 unpaid free users. If you charge ten dollars per subscription every month, your gross revenue is:

Gross Revenue = (1000 x $10/mon) = $10K/mon

So if you want to sell such a business to a prospective buyer, you can expect anywhere from ($10K/mon x 12) x 3 . to ($10K/mon x 12) x 10.

A $10K/mon startup can be sold for $360K to $1.2M depending on the future prospect of the category of business and scalability of your technology

You might ask what magician’s hat I am pulling these numbers from, right? Well, they are based on my personal experience in helping tech investor friends with tech due diligence over the last decade. I cannot cite some online references here that you can look up to get reassurance. But, this is the ball-park estimates that I have seen over the years. I have multiple micro startups in development right now. All of them are spread between consumer and enterprise niches. I hope that we will be able to exit them with the gains that I have observed in similar deals.

When to Sell?

$600K = ($100/customer x N customers x 12) x 3

Here N = 167 customers. So that means that this company can have 167 customers, which gives its projected revenue to be ~200K/year.

How long will it take to get 167 customers for such a startup? It all depends on what kind of sales channel exists for such a business. If the business can tap into existing sales and marketing channels, it should be able to get such a customer base over the course of 1–3 years with reasonable success.

What if you love your startup and want to hold on?

Who will buy your company?

However, a better buy for a nano-size startup — say run by a single founder with no employees — is a tech investor/marketer who can hone the marketing and sales to increase the revenue. There are many micro tech investors/marketers who are buying small startups and turning them into more profitable companies and possibly selling them for a bigger return to larger companies.

I will do a follow-up story on where to find these tech investors/marketers if there is interest in the future.

Final Thoughts

Good luck!

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