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Investing in pre-revenue startups: pros and cons

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Investing in pre-revenue startups: pros and cons

Ilya Novohatskyi
Feb 2
3
Share this post

Investing in pre-revenue startups: pros and cons

newsletter.microns.io

Hey guys.

Last week I came back to work on the platform to help more people become tech entrepreneurs. I prioritized the next stage for development with my team and started working on a marketing strategy for 2023.

This week I prepared data about the micro-acquisition market for 2022. I shared my thoughts about pre-revenue startups and why they might be a good acquisition target for someone.

We also started partnering up with other makers and newsletters to spread the word about Microns. If you have a tech audience (entrepreneurs and investors), feel free to reach out directly.

This time I'm giving a shoutout to my old friend Jakob who built and launched many startups for indie hackers. In addition, he co-founded a new project with a partner called DamnGoodLeads. It helps to manage your cold outreach campaign for an affordable price.

P.S. I still do cold emailing for Microns because it works well with a proper email script.


Photo by Tristan Pineda on Unsplash

👋 Welcome

Welcome to the 62 new people joining this week.

Let me know what you think of your first issue. Replying helps Google realize it’s not spam.

Prefer Twitter? Drop me a DM here.

Now let’s crack on with the newsletter ☕️

🎉 Recently sold startup

My congratulations to the founder 🥳

Another small deal was closed successfully. The transaction started when the wave of hype about AI tools and apps only began. After this, many AI-driven projects appeared on Product Hunt and Indie Hackers. I like that Microns becomes the platform where early trends and innovative projects are revealed first (that's why we have a .io domain which means innovation, not .com).

As you can see this founder spent seven weeks from building the project to selling it. This is all because he had a lot of development experience and had previously run a few startups. Besides this, I see a few other success factors: timing and product.

The timing was chosen 100% right because the topic became hot after the ChatGPT launch. Another success factor is that product solved a real problem that people are willing to pay for. Even I needed a tool to help me craft and send cold DMs on Twitter. Because doing this manually takes a lot of time.

Twitter avatar for @NuzairNuwais
Nuzair Nuwais @NuzairNuwais
Sold my 'side' startup 👉 crmish.pro 🥳 7-Week Timeline 📅 🔨Nov 24th - Built V1 📢Nov 26th - Posted on IH 🔨Dec 9th - Built V2 with AI Features 📌Dec 12th - Listed @micronsio 💸Jan 10th - Funds Transferred 🤝Jan 14th - Repo Transferred #buildInPublic
3:04 PM ∙ Jan 16, 2023
19Likes3Retweets

P.S. If you send us a founder who would sell the project on Microns, we'll pay you a $100 bonus for referral. The only requirement is that the transaction should flow through our escrow service.

📊 Market annual report: 2022

As promised, here's our slice of data about the micro-acquisition market. We're still a small platform, so there may not be enough data to make a constructive summary.

Twitter avatar for @ilyanovohatskyi
Ilya Novohatskyi 🇺🇦 @ilyanovohatskyi
We processed 364 startups in 2022. Published roughly 200 of them.
12:17 PM ∙ Jan 20, 2023
7Likes1Retweet

Of the ones we published, total number of categories we published:

  • Micro-SaaS: 70

  • Web Apps: 20

  • Databases: 15

  • Mobile Apps: 14

  • E-Commerce: 11

  • Newsletters: 10

  • Communities: 9

  • Extensions: 8

  • Directories: 8

  • WP Plugins: 7

We sold 21 micro-startups in 2022. The GMV is $130,000. We sold 6 web apps, 5 micro-saas startups, and 4 Add-ons/Plugins. The smallest project was sold for $150. The largest project was sold for $40,000.

🧵 Pre-revenue startups

In this issue, you'll find three pre-revenue startups for sale. I intentionally featured them to cover the broader topic of such startups and highlight their pros and cons.

There is a good chunk of projects with growth potential and some traction but no revenue for some reason that you could invest in. Those startups are great for entrepreneurs with experience. But, unfortunately, they're the wrong targets for beginners.

If you want to avoid overpaying for revenue multiple, have experience growing and building startups and free time. Then you should consider pre-revenue startups as one of your acquisition targets.

On Microns, we have around 20% of such projects and balance them with profitable startups. We have strict criteria to publish such projects and filter any trash or overpriced projects. We don't publish CodeCanyon scripts, templates, domains, or unfinished projects. We sign up and try the project before sending it to our premium members.

Thus, choosing the right pre-revenue project could give you at least 100% ROI. I even saw a 2,000% ROI. Which might be an attractive opportunity, but only in the right hands. So, I recommend targeting such products only if you have experience and a lot of spare time to work on it.

📰 Looking for new owners

Niche site for home office related content

WFH Content Website

  • Pre-revenue

  • Business model: Ads

  • 800 subscribers

  • Target audience: People that work from home

  • Built with WordPress

  • Founded in 2020

  • Growth opportunity: Focus on organic SEO and build the database of office tours

🔥 Asking Price: $500


Track your ideas using text and Telegram

SMS Idea Tracking Tool

  • Pre-revenue

  • Business model: One time purchase

  • 2 customers

  • Target audience: Entrepreneurs

  • Built with FastAPI, Postgres and Twilio

  • Founded in 2022

  • Growth opportunity: Use social media and targeted newsletter sponsorships to attract users

🔥 Asking Price: $1,000


Accept donations from your supporters in crypto

Crypto Donations Tool

  • Pre-revenue

  • Business model: Commission

  • 10 customers

  • Target audience: Creators

  • Built with Next.js, Alchemy and Vercel

  • Founded in 2022

  • Growth opportunity: Focus on niche creator communities for outreach

🔥 Asking Price: $1,500

💡 Wisdom from subscriber

Twitter avatar for @bentossell
Ben Tossell @bentossell
Zapier acquired Makerpad 12 months ago today. 12 thoughts on selling a company:
3:18 PM ∙ Mar 2, 2022
333Likes34Retweets

💌 Share with a friend

If you found value in reading this issue, please share it with your friend.

To check all newsletter issues, visit our library.

Stay awesome,

Ilya Novohatskyi

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Investing in pre-revenue startups: pros and cons

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