We aim to launch several group buys every year, where a group-buy will generally be capital collected to buy a specific deal we’ve negotiated, or a deal within specific parameters.
Why Group Buys?
- We find mid 6 figures to low 7 figure is the best price range to acquire online businesses currently because it’s above the budget for most individual buyers and small funds, groups and investors, and below the range for larger PE firms and public corporations.
- The quality of businesses we see in this range are much better compared to what you can expect to acquire for under $250k. These are well established businesses, with diverse sources of traffic and revenue, lower risks.
- These businesses also typically have more growth opportunities, more ‘levers’ for us to pull to try to increase profit, such as reducing expenses, updating old content and products, modernizing systems and structures, and much more, which are often not available in smaller business
- These deals have an added bonus of being big enough, where with some growth, we are able to reach out and sell to strategic acquirers, for much higher multiples.
- The costs to manage bigger businesses are a lower proportion on revenue compared to smaller sites, so more profits will be available for distributions, and we are able to allocate extra resources to scale these businesses and grow them much bigger!
- Most of the deals we do are private, through our own network and not available anywhere else. Buying directly allows us to save 15% on broker fees right away, and also get lower prices by paying in cash, quickly.
- These are set up via an LLC, where the ownership will be proportional to the investment size.
- Domain Magnate will also contribute a part % of acquisition cost and will be the manager of the LLC.
- For simplicity we plan to acquire only one business per LLC
- Investors are not required to be accredited investors and the minimum investment size will vary, depending on the deal, however expected to be around $50K-$100K
- The typical term for a fund is 2-3 years, as we find 2 years to be the optimal time to hold most businesses in order to implement the optimizations and improvements, and get the most value, while also reducing risks. Some businesses can be held for longer term where substantial future pay off is expected.
GroupBuy1 was started in late 2021, and we’ve acquired two well established content websites in Q1 and Q2 2022, with a total capital of around $800K. It’s now closed to new participants. GB1 has a term of 2 years, so we expect to resell both websites in late 2023. GB1 will pay out quarterly dividends from profits.
GroupBuy2 was launched in late Q2 2022, and aims to acquire one (or potentially two) well established content website in English, in high 6 figure price range, grow it and resell after a 3 year period.
GroupBuy3 was launched in late Q2 2022, and focuses solely on foreign, non-English language websites. We aim to benefit from the lower selling multiples on foreign websites, which can usually be acquired for between 1x and 2x the annual profits, due to lower competition in other languages. However, because of the limited number of buyers, and a potential difficulty in reselling the websites, we expect a longer term holding here, with a hold period of 5 years or more. GB3 will send out quarterly payouts, and we’ll aim to distribute the capital back during the first 2-3 years.
This is a potentially higher risk, and higher reward opportunity, so we suggest to contribute to both GB2 and GB3 for better diversification, which can be done with a $50K minimum contribution in each, while joining only one GroupBuy has a $75K minimum.
GroupBuy4 is planned for launch in Q4 2022 – Q1 2023
(include in the form comment that you’re interested in a group buy and the amount you’d like to contribute per deal)