The State of Micro Private Equity

Monday 8 February 2021

There’s an ongoing battle amongst hedge funds, private equity and venture capital firms to get a piece of some of the fastest growing technology businesses. However, at the other end of the spectrum, there is a whole different breed of investment firm looking for bargains amongst the unloved. In the massive number of family businesses, side hustles and unloved apps, there is some real opportunity. The Micro PE firm has been created to find these needles in the haystack. 

It is a great time to be in Micro PE, with the cost of spinning up a business coming down. On-demand cloud computing, infrastructure platforms and low-code tools have reduced the barriers (and costs) to entry. Something built over a weekend, with nothing more than a Shopify plug in, a WordPress site, a couple of Chrome extensions, or some targeted Facebook ads could yield hundreds of thousands of dollars a year in revenue. 

For these founders, finding a liquidity event is difficult. They are too small to IPO and often too basic to be acquired by Private Equity or larger companies. Micro PE fills this gap. Offering to purchase these smaller businesses outright, giving founders liquidity, and then focusing on optimising these small businesses. They don’t need to become billion dollar businesses. Enough small businesses with consistent profit can build into a compelling story. Perhaps the most famous Micro PE firm is Tiny Capital, that bills itself as “The Berkshire Hathaway of the Internet” and looks to buy “wonderful internet businesses” profiting between $500k and $30m per year. 

The article takes a look at the state of the Micro PE industry, and all of the different players searching the internet for these small, quality companies. It also takes a look at some of the notable successes in this space and some of the firms to keep an eye on as they grow throughout the 2020’s. 

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