No More Starting from Scratch – A Parallel Between SaaS Companies and Real Estate Investment
Starting a business from scratch is an exciting challenge, but it can also be exhausting. After dedicating time, energy, and resources to building projects from the ground up, it's natural to reach a point where you desire a more pragmatic, structured path, without sacrificing growth opportunities. In this context, acquiring SaaS (Software as a Service) companies appears to be an attractive strategy, in many ways similar to real estate investment. In this article, I’ll explore why I’m moving toward this business and how the parallels between SaaS and real estate illustrate this new approach.
Starting a business from scratch is an exhilarating adventure, but it can quickly become a draining process. The journey is full of obstacles: finding the right market, developing a product, convincing customers, raising funds, managing competition, and all of this without any guarantee of success. The failure rate of startups is high, especially in the tech space. At a certain point, the ability to face these challenges diminishes, both physically and mentally.
For me, after launching several projects, it became clear that I no longer have the energy to start from zero. I now aspire to focus on improving and expanding existing businesses, rather than engaging in battles from the ground up.
SaaS businesses, unlike fledgling startups, offer an established structure, recurring revenue, and a customer base in place. This is much like acquiring an already-built property. It's no longer about laying the foundations but managing, optimizing, and increasing the value of an existing asset. By purchasing a SaaS company, I don’t have to start from scratch. I can rely on solid elements such as:
The parallel with real estate is striking: instead of building a house from scratch, it’s about acquiring an existing property, renovating it, improving its returns, and potentially acquiring others to diversify the portfolio. Acquiring a SaaS company allows me to play this role of manager and investor, without having to face the uncertainties of starting from nothing.
One of the reasons real estate is a popular investment is that it generates long-term returns, as long as it is well-managed. Similarly, SaaS businesses, thanks to their subscription model, are highly attractive assets that, although requiring ongoing maintenance and optimization, generate regular and growing cash flows.
In real estate, a well-managed investment allows rent increases and asset value appreciation. In SaaS, revenue can grow through acquiring new customers, raising subscription prices, or upselling additional services. These businesses, therefore, have significant growth potential even after their acquisition.
Just as a real estate property can increase in value over the years, a SaaS company can also appreciate, especially if it grows, reaches a critical size, or becomes attractive to other investors or large corporations. The M&A market in the tech sector is booming, with buyers willing to pay a premium for high-potential SaaS businesses.
One of the key differences between an entrepreneur starting a project from scratch and an investor buying an existing business is the nature of the work. As a manager-investor in SaaS, my role is to optimize and improve the company’s efficiency, not recreate everything. This involves:
Another similarity with real estate is the possibility of diversification. Real estate investors often acquire multiple properties to spread risk and increase returns. Similarly, by investing in several SaaS companies, I can diversify my portfolio, reduce overall risk, and increase my chances of success. Each business may have its own market dynamics, which limits the impact of a potential failure.
After years of creating projects from scratch, I now feel the desire to rely on solid foundations and bring value as a manager and investor. The parallel between SaaS and real estate is evident: it’s about acquiring existing assets, optimizing them, and enhancing their value to achieve growing returns over the long term. While the idea of building is thrilling, managing an existing asset offers a new form of fulfillment, where the experience accumulated over the years can truly shine.