Published on November 16, 2024

From Sales Leader to SaaS Acquirer: Kjael Skaalerud’s Blueprint for Success

Everyone is familiar with the VC model, invest in a million companies and wait for one to exit with returns so big that it can cover the losses from the rest of the portfolio.

But what if there is another way? Introducing Kjael Skaalerud:

Who is Kjael Skaalerud?

Kjael Skaalerud is an entrepreneur with a strong background in sales and marketing, particularly in the SaaS industry. His career journey includes:

• Operating partner for a private equity firm, serving as a Chief Revenue Officer
• VP of Sales at a venture-backed business
• Founder of a consulting firm working closely with the venture community
• Sales leadership role at ADP
• MBA from Stern Business School

With his extensive experience in growing and scaling SaaS businesses, Kjael decided to leverage his expertise to acquire and build a portfolio of micro SaaS companies through his venture, Skaling Ventures.

Personal Journey and Motivation

Kjael's path to acquiring SaaS businesses was influenced by several factors:

• Respect for the challenges of product-market fit and starting from scratch
• Family circumstances, including a 2-year-old child, wife, mortgage, and student debt
• Risk appetite that favored a more stable approach than the "feast or famine" startup world
• Recognition of the opportunity in healthy SaaS businesses with stable revenues and profit margins
• Confidence in his ability to take plateau-ed businesses to the next level with his go-to-market expertise

Investment Philosophy

Skaling Ventures' investment philosophy is centered around:

• Avoiding competition from both venture capital and private equity firms
• Focusing on a "Blue Ocean" strategy by targeting businesses below certain revenue thresholds - “Profitable Niche Vertical B2B SaaS firms generating $1M - $3M ARR with some growth (~10%), great logo retention (>95%), limited go-to-market (GTM) expertise/investment, fragmented competition, and technical founders.”
• Seeking companies in mature industries undergoing digital transformation
• Prioritizing businesses with stable revenues and profit margins
• Targeting niche industry verticals with small addressable markets

Acquisition Strategy Breakdown

Kjael's approach to acquisitions is methodical and data-driven:

• Initial screening of 20-30 deals per month
• Use of a quantified scorecard with five key metrics for initial screening
• Only about 10% of deals pass the initial screening
• Detailed evaluation criteria for deals that pass initial screening
• Conversion rate of about 10% from initial screening to closing

Landing the First Deal

Kjael's journey to his first acquisition involved:

• Submitting four Letters of Intent (LOIs) in total
• Missing one deal, two breaking down during diligence, and the fourth becoming his first acquisition
• Acquiring a management suite for event-based creatives, such as wedding photographers and DJs

Operational Transformation Playbook

After acquisition, Kjael's strategy involves:

• Identifying areas where the founder may have hit a plateau
• Applying his go-to-market expertise to drive growth
• Focusing on improving key aspects of the business, such as customer lifecycle management
• Exploring both organic growth and potential roll-up strategies

Growing the Businesses

Kjael's approach to growing acquired businesses includes:

• Leveraging his sales and marketing expertise
• Exploring complementary technologies or direct competitors for potential acquisitions
• Considering roll-up strategies to create larger entities within niche markets
• Focusing on profit-led growth rather than growth at all costs

Building in Public

While keeping the portfolio companies anonymous, Kjael is committed to transparency:

• Documenting and sharing insights through a Substack
• Providing analysis of deal pipeline and conversion rates
• Sharing lessons learned and strategies employed in growing acquired businesses

Future Expansion Plans

Kjael's vision for Skaling Ventures' future includes:

• Expanding internationally to explore interesting software companies abroad
• Considering "venture orphans" - companies that raised venture capital but couldn't achieve venture-scale growth
• Potentially pursuing more aggressive roll-up strategies
• Exploring opportunities in complementary technologies within their niche markets

Vision for the Future

Kjael sees significant opportunities in the micro SaaS space:

• Continuing to focus on niche markets undergoing digital transformation
• Leveraging his expertise to grow and scale micro SaaS businesses
• Carving out a unique position in the business acquisition and growth landscape
• Adapting to changing market conditions and founder sentiments towards bootstrapped and profit-led growth

Kjael Skaalerud's approach with Skaling Ventures represents a unique strategy in the SaaS acquisition space. By targeting companies that fall below the radar of larger private equity firms and leveraging his expertise to grow these businesses, he's creating a promising niche in the world of micro SaaS acquisitions and growth.

For those asking “what’s his exit strategy?”

Grow these SaaS businesses to attract bigger buyers or PE firms.

1. Roll-up Strategy: Kjael mentions that micro SaaS is conducive to roll-ups. He suggests acquiring businesses with complementary technologies or direct competitors to create larger entities within niche markets.
2. Profit-Led Growth: Kjael emphasizes profit-led growth rather than growth at all costs under typical VC model. This approach could make the businesses attractive to bigger buyers looking for stable, profitable entities rather than just rapid growth. Very suitable for private equity firms that typically look at businesses with $5 million+ in Annual Recurring Revenue (ARR).