Interviews – The Horizontal SaaS Serial Acquirer

Gustaf Hakansson
September 2, 2022
“We focus on younger companies that are bootstrapped, run on agile methodologies, and have remote-first cultures.”

Disclaimer: This is not investment advice. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. Any reference to or omission of any reference to any company should not be construed as a recommendation to buy, sell or take any other action with respect to any security of any such company. The author may hold positions in securities discussed. Any forward looking-statement is subject to risks and uncertainties. Read further disclosure in the Terms of Service.

Gustaf: Hey Pavel, before joining as Head of M&A, you worked for Constellation Software and in private equity. How does’s model compare to theirs?

Pavel Prokofiev: Gustaf, it’s great to be here today, and thank you for the opportunity to share our story and talk about our differentiation.

During my time at Constellation, there was a strong focus on applying best practices to every single area of the business. This was mainly because Constellation buys older, more established businesses, which offers opportunities to improve many things (e.g., utilization of professional services).

Given that Constellation is great at acquiring businesses that could be improved, their integration playbook is quite prescriptive. We focus on younger companies that are bootstrapped, run on agile methodologies, and have remote-first cultures. This key difference allows our brands to continue with what they do best, with helping them grow faster. Which is a very different approach.

Our differentiated approach manifests in everything we do – starting from how we acquire new businesses to how we run individual products and how we treat our employees.

This is achieved by providing central resources to product teams and helping them operate more efficiently – from running PPC ads to building a better product roadmap. At the same time, this approach works better with remote-first, product-led, growth-focused horizontal companies, which, unlike our competitors, is our sole focus.

From an M&A standpoint, we are focused on delivering a founder-friendly acquisition approach with quick timelines, straightforward diligence, and transparent transition periods.

Our main difference compared to PE or other similar businesses is that we were built by entrepreneurs for entrepreneurs and are closely involved with each acquired product.

Gustaf: How did come to be?

Pavel: While doing angel investing, our co-founder Tim Schumacher came across founders who were not looking for a traditional VC round or PE exit. was born out of the desire to help these founders take chips off the table and realize their dream exits.

Gustaf: What do EBITDA margins look like for niche bootstrapped SaaS firms?

Pavel: An established niche bootstrapped business with ARR growth generates, on average, 20-60% EBITDA margins. And we are in that range. Products in maintenance mode tend to be at 60-80%. We also sometimes see companies growing 100% YoY with no marketing, generating 50%+ EBITDA. Kudos to the founders!

We often see that when founders are running a bootstrapped horizontal SaaS business outside the 30-50% margin range, it may indicate that the business requires a lot of marketing or outbound selling to grow. Or, maybe, their staff expense is impacted by local market dynamics, e.g., the presence of FANG companies.

More often than not, we see that bootstrapped companies are fully remote from day one. For example, it is common to find a US founder with an overseas team.

Gustaf: Could you expand a little on what you do post-transaction?

Pavel: During the diligence phase, we work closely with the founders and management teams to build a strategic value creation plan.

Post-transaction, there is typically a quick adjustment period when a new team is integrated into, followed by a period where various central teams and individuals at partner with each acquired business to drive efficiencies and revenue growth.

These could include helping to design a new marketing strategy, assisting in revamping a product roadmap, and advising on how to optimize pricing strategy. For example, we have a central marketing team that helps optimize product and marketing, websites for SEO, structure PPC campaigns, and so on.

Gustaf: Are you looking to do a capital raise soon?

Pavel: We are well-funded and do not require external capital to grow. At the same time, we are always open to speaking with investors who can bring value-add to our business.

Gustaf: How do you source general managers for your subsidiaries?

Pavel: In most cases, GMs come from within the companies. We are happy for founders to stay on board indefinitely. If that is not the case, we usually identify a successor within the business.

Gustaf: Why are entrepreneurs looking to sell? And why do they sell to you?

Pavel: It ranges from side hustles that have scaled beyond the founder's imagination to life-changing family events (e.g., a child being born), prompting founders to rethink how they allocate their time between family and business.

We also meet many founders that are passionate about building a startup, i.e., bringing something from 0 to 1, and then looking to partner with an experienced operator to scale their product to the next level (say 1 to 5). can also partner with founders that have an outsized cap table and misaligned incentives. By restructuring the cap table to replace VC investors, we can help founders reboot their startups.

The reason why founders sell to us comes back to our ethos and us striving to deliver a founder-friendly acquisition process.

Gustaf: Do you have any particular learnings from your time with

Pavel: My key learning is that having a strong and multi-faceted team of operators is key to scaling our business. There are lots of opportunities to acquire companies, especially following the launch of websites like Flippa and Microacquire.

The biggest question everyone should ask is, “what can I do with this business?”. Having a clear acquisition thesis and a roadmap to value creation requires building a team of leading experts in each field.

Many brokers try to sell a story that everything is going well, but sometimes founders want to sell because they see limited growth potential. So, we go into a lot of detail to understand why customers like the product. That is why we have a market-leading team that helps us assess opportunities. We work closely with founders and often uncover hidden opportunities for growth which we explore together with the founder/management team.

Gustaf: What’s your key constraint for more acquisitions?

Pavel: I would say people and capital. Managing and scaling SaaS businesses requires human expertise in such areas as marketing, product, development, customer support, etc. For larger companies, one needs to find a balance between running a portfolio of brands and dedicating resources to diligence.

Today, anyone with an investment banking or PE background can buy a company, but fewer people can underwrite a thesis and stand behind it. We rarely use external consultants because they may lack the expertise in the bootstrapped SaaS M&A space. Given these limitations, it’s important to find the right mix between the quantity and quality of acquisitions. We’ve seen players in other market segments raising lots of cash and acquiring at a faster rate. We focus on partnering with founders that subscribe to our ethos and on using internal resources to build a thesis for value creation, resulting in sustainable, good-quality execution.

Gustaf: is flexible in structuring deals and allows for minorities. What’s your view on them?

Pavel: Since we are built by entrepreneurs for entrepreneurs, we want to offer founders full flexibility, allowing them to exit business on their terms.

At the same time, we see interest in minorities less often than a full sale since if a founder decides to sell, they usually look for a full exit and a 6-24 month transition period. When founders do seek a minority, they often realize that an earnout gets a similar outcome as a minority, with less paperwork.

Gustaf: What do you think about Constellation Software today? Will their strategy continue to scale?

Pavel: Constellation Software has inspired a whole generation of capital allocators, so I definitely see more competition for them these days, especially in the vertical market software industry.

Despite that, I have no doubt that they will continue growing. It’s a strong product-market fit for their target market (mission-critical, vertical-market, enterprise software, including businesses that sell on-prem licenses). Also, in my opinion, they have the best operating team in the market when it comes to mission-critical enterprise software, which is a huge differentiation to founders in that space. is doing the same for bootstrapped SaaS, which is a key point of our differentiation (in addition to our M&A process).

Constellation’s go-to-market strategy is to utilize various brands and sub-brands, some of them are vertical-specific while others are market-specific (e.g., you recently interviewed Marcin Szelag at Orbis). I can imagine that there could be some competition between them, which is inevitable for companies of that size. I believe Constellation has successfully created industry-specific brands like Lumine (telco) and Modaxo (transportation), which is an interesting direction to pursue.

Having said that, they are clearly the market leader in their niche (mission-critical enterprise software), and due to their scale, they have a time-tested playbook and one of the best track records in the market. We can all learn from them.

Gustaf: How can entrepreneurs and investors reach

Pavel: The best way is to speak with one of our M&A managers: Dirk Sahlmer ( or Rihards Blanks ( Founders can also reach us via our website:

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Chris Mayer
Author of 100-Baggers
PM & co-founder, Woodlock House Family Capital
Brett Kelly
Founder & CEO
Kelly+Partners Group