What is Micro Private Equity Funds?
Micro Private Equity (Micro PE) is an investment fund type that specializes in purchasing small or “micro” businesses, forming part of the broader mergers and acquisitions industry. These micro PE funds focus on acquiring small businesses, typically those valued at under $5 million. Typically, Micro PEs focus on companies valued at under $5 million, though this threshold can vary. The primary objective of these funds is to acquire and eventually sell their target companies, often internet businesses like SaaS (Software as a Service) firms, which generate consistent cash flow. Some investment firms, however, opt for permanent equity, holding onto acquired companies indefinitely without plans for future sales.
This investment approach has gained significant popularity recently, driven by successful small business founders reinvesting their profits into new acquisitions via their own Micro PE funds.
The growing number of small business buyers in the Micro PE space has been driven by the availability of creative financing tactics and the transition of ownership from retiring Baby Boomer entrepreneurs.
Micro PE investors capitalize on the trend of bootstrapped internet businesses that become profitable market leaders without needing Venture Capital (VC) funding for growth. These businesses are attractive acquisition prospects as they are more aligned with the “Private Equity playbook” than traditional VC-funded startups.
Micro PEs are distinct from other investors in their focus on profitable, niche-dominated small businesses, often in the tech or internet sectors. They occupy a unique space, complementing traditional Private Equity rather than competing. Traditional funds typically overlook businesses valued below $5 million, leaving Micro PEs to grow these small companies for eventual sale to larger PE firms.
Small private equity firms often focus on partial buyouts and face unique management challenges compared to their larger counterparts.
Moreover, Micro PEs do not directly compete with Venture Capitalists, who look for high-growth, large-market startups, often running at a loss. Unlike venture capital firms, which target high-growth startups, Micro PEs focus on established, profitable businesses. Angel Investors, who fund very early-stage startups, also differ from Micro PEs, which invest in established, profitable businesses.
The Micro PE ecosystem comprises various firms, brokers, and marketplaces, many focusing on internet-based businesses like SaaS or eCommerce. These firms find investment opportunities through inbound channels, brokers offering quality business investments, and marketplaces with a broad range of listings.
Micro PEs often seek out wonderful internet businesses that generate steady revenue streams and operational stability.
Prominent Micro PE firms and marketplaces include:
Calm Capital
SaaS Group
Owl Mountain Capital
Tiny Capital
XO Capital
WeCommerce
Thrasio
Sureswift Capital
Mudbrick Capital
LTV SaaS Fund
Goja
Concrete Capital
Onfolio
Dura Software
Chenmark
BitsForDigits
Flippa
BizBuySell
Duuce
Shopify Exchange
SellMyApp
FE International
Quiet Light
Website Closers
DotMarket
For founders, the rise of Micro PE has been beneficial, especially for those looking to exit bootstrapped internet businesses valued below $5 million. The growing number of market players allows these business owners to receive competitive offers, ensuring fair equity prices.
A notable trend among Micro PEs is the growing interest in partial buyouts. Many of these firms, led by former small business founders, aim to acquire and grow several companies. However, scaling is limited by the operational capacity of the Micro PE’s team. To address this, some have turned to partial buyouts, acquiring minority stakes in profitable businesses, allowing them to share in profits without the burden of extensive management responsibilities.
I have compiled a database of 375+ private equity firms. Information includes name, location, focus, investment exits, website. Hope folks trying to break into PE find this list helpful. It goes beyond the mega funds and middle market PE funds. It also showcases micro PE and smaller funds that are typically hard to find.
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