EP32 Akeel Jabber from Horizen Capital: Buying SaaS Companies. Starting or Building Companies? Hire Developers in Mexico?

Akeel

Podcast

Jorge

MVP. Internet to product service app Welcome to the software podcast, And I have Akhil. Akhil is the podcast host of SAS District and investment director of Horizon Capital. They acquire and operate a portfolio of SaaS companies. Welcome to the podcast, Akhil.

Akeel

Thank you, Jorge. Glad to be here today.

Jorge

Thank you for being here. And my first question is, What is your job or your story? Like, what do you do?

Akeel

Sure. Sure. Yeah. So my background is I'm actually a former petroleum engineer turned entrepreneur. I always knew, you know, even when I was working in the corporate world that I'd be building my own company one day. Even when I while I was working, I was always building companies. Yeah. Even when I was in university, I started my own recruitment company.

So that entrepreneur drive was always in me, you know, since I I was a teenager. I always love the the investment space and learning how to best deploy capital and be as efficient as possible. So I started investing in the stock market when I think I was 18 years old and I can open up my 1st account. But then I realized you just didn't have as much control, and then, you know, in terms of the business at the stage of where it's at, if something happens in the economy and the company's, drops, you couldn't do to control and and grow the company. And you're competing with Wall Street with guys who already have who study the market, better than than than I could. So then I started getting into the real estate industry. I bought a few real real estate rental properties in Canada, which I still have. But I realized, you know, real estate is great, but it's So more of a long term investment.

I look at as more, you know, maybe a 20 year trajectory if you're looking through that kind of investment. So, you know, I'm still young in my twenties, and I wanted to, you know, move a little quicker. So I bought a actual physical business. So I I, you know, buying a I bought a gym franchise in Canada, which we still operate. But it which is nice, you know, physical business, it generates a revenue and and good profits, but the issue is you're kinda limited on how fast you can scale it. Right? You have your limit to your geographic region of where you can sell, and to, you know, build future or more, gyms, You know, such as, like, content advertising sites, e commerce, SaaS companies, product or service. But and that's where I bought my 1st online website at the time. I think it was About, you know, $50,000 at the time.

So that's where I got to learn, you know, after hours in between, you know, work and after work. I was learning how to Grow that business. And then over over time, over the last, you know, couple years, I I I kind of moved away from being an engineer and and, you know, open Full time, to work on my online projects. I met a I met a company, actually, the the the founder was based in Mexico at the I'm using by the Bravo company called Wired Investors. And they they were doing the same thing as what I was doing. You know, I was doing on the smaller side of the size of the companies. They were doing this for, you know, 1,000,000, $2,000,000 websites, and I thought I would get involved in. So I I joined them at that time.

That was back in 2016. Worked with them, helped Some raised some capital, operated some of their their companies such as $99 Social and help we actually actually helped bubble that company within 5 months of that acquisition and, you know, moved out to grow other companies, moved to their portfolio manager where I work closely with the CEOs to help them And then eventually last year in in 2000, you know, late 2018, 19, we started Verizon Capital. So I spun off and And really focused on on the SaaS, the SaaS space. And that's where we are today is where where we built Horizon to where it is today. And we're doing actively Acquisitions of of SaaS companies.

Jorge

Great. And and what was the first website you acquired? Like, for 50 50 k.

Akeel

Oh, I can't I can't remember the name, but it was a it was a content website. It was monetized through ads and affiliates. I think It was it was a very niche website. You know, looking back now, I I sold it to my me and my partner bought it, and I sold it to him. So I can't remember the name right now.

Jorge

That's interesting. Yeah. And why buy on like, focus on SaaS companies and why buy, software

Akeel

Yeah. Instead of instead of other kind of business models. So when I was at Wired, you know, we worked mostly on content and product type services, so content The publisher websites and then, you know, productized service, and then I moved into SaaS. I've also had an e commerce business in the pa in the past, so I I got to explore and and play with different business models. And I just found that I really love SaaS, and that's why I decided to focus on that specifically. I think it's interesting They would sell pens, buy for a dollar and sell it for 2. I I don't know. It's not very interesting to me.

Number 2, I think, you know, SaaS is is is is a scalable market. You know, your Whole world is your market to sell to. Like I I mentioned the gym. You can only sell to you kinda your neighborhood. Right? Most of your your customers are within a 5 kilometer radius. So here, I can pick up the phone and call somebody in Colombia. I can call somebody in the US and and we can have a deal and start selling our product. Right? I also find it a lot less risky.

If you build a, you know, solid product, that's defensible, I think you have an IP and intellectual property behind it. So it's actually a lot less risk for somebody to come I copy you. There's also a higher appetite and growth opportunity in the space right now. Investors are are have been and they're still all are, you know, super interested in So a lot of the the investors we work with are actively, you know, deploying a lot of capital. The evaluations are going up. The the hunger for these type of businesses are going and then finally, it's a space we have developed to operate and become experts in. So that's what we do. We we know we're experts in that.

We apply expertise to come in And grow the business. So we decided to focus on on what we're good at and just double down on on that.

Jorge

Yes. I I first saw you in Dealer, bust, and that and that, what is a program, a YouTube program?

Akeel

Mhmm. Yeah. Yeah.

Jorge

Yeah. And I saw you, like, buying companies or seeing if you could buy them, and and then I I reached you, And we are here.

Akeel

Yeah. Yeah. It's cool. We actually actually have, I'm actually back on his show later today in about, 2 hours. So We cool. Yeah. It's a cool it's a cool show. You guys should check it out.

Jorge

Yes. It's interesting. It's like a shark tank. Think more. Fast companies.

Akeel

Exactly.

Jorge

So and what do you think about, Latin America and the start up, The the Latin America startup and SaaS landscape, like, for for you that you are looking to buy How how do you see it?

Akeel

Yeah. I mean, so we did one acquisition so far in Brazil. We did That back in, I think, late 2018. And I also many I know many founders from the US and Canada who are coming here to Mexico and other areas of Latin America, and they're building their teams here in Latin America. So I I think there's a lot of hot tech startups that I've come across. You know, I go to go to conferences like in Sao Paulo, There's a lot of ambitious founders that are building really, really great businesses. They're growing. They're super ambitious and, you know, they're they're profitable and and, you know, I think there's lots Opportunities from an investor perspective, and there's also like the talent perspective.

But I would say the 3 main reasons why I like Latin America versus some some other areas, like, you know, Focuses in North America and a little bit in Europe as well. Number 1 is, you know, there's massive micro opportunities everywhere. I think everywhere you go, they just haven't been capitalized on to to build a solution for. So I'm very bullish of the space and, I think there's gonna be a lot of growth in the next few years. Number 2, I think there's a there's a great Talent pool of developers, you know, engineers, that you can hire and work with to build your product or to grow your company at, a, in a super affordable Price compared to the USA, so I think it's some people say it's almost a tenth of the cost if you're going to the valley. So that that helps you grow a little quicker. And 3, I think we're still in the early stages. I think there's less competition.

There's still a lot of problems to be solved all around us here. And there's still Space for somebody come in and to be the market leader. There isn't a lot of, you know, opportunities that have been, you know, businesses that have taken taken over the market in in some areas.

Jorge

Yeah. Exactly. And there are other kind of opportunities like like here in Mexico, we use a lot of WhatsApp. So a lot of solutions tailored to sales or customer support or or that kind of stuff Or even invoicing, digital invoicing, and all all that kind of of stuff. Maybe invoicing platform for SaaS companies, Mexican SaaS companies.

Akeel

Exactly. I think we saw More in, the last few months during COVID. Right? I think even now it's even more important. I think there's more opportunities where, you know, there's a lot of companies who are just scrambling. Right? They were working on spreadsheets and they had zero idea how to even, you know, set up a CRM. How to, you know, pay somebody remotely without giving them a check or paying them in cash. So those I think even now more than ever, Ever, I think there's gonna be a lot more opportunities.

Jorge

Yeah. Exactly. And focused on the market. Like, for different markets is different Loss of invoicing and all that kind of stuff or maybe different APIs that Create invoices for Mexican businesses or for Colombia or for Brazil. Right?

Akeel

Exactly.

Jorge

And the the majority of the SaaS companies are from the US, and and the Latin people need to adapt to that Software and they don't develop to to that to those regions. Right?

Akeel

Exactly. So there's a space. I mean, you see that a lot. Right? A lot of people are copying the US products, Building them here, you know, translating in Spanish, you know, adjusting it to the local market, charging in the local currency. And I think Isabel did it to do that as well.

Jorge

Yes. And and you were talking about developers and, like, you are in Guadalajara, Mexico right now. Right? Mhmm. Yeah. What made you look into Mexico or Guadalajara?

Akeel

Mhmm. Yes. So I actually been down to Guadalajara about 2 years ago. So when I when I mentioned I was working with that private equity firm, Wired Investors at the time, I just happened to be here. I was working with with one of the companies here, that we acquired. But, you know, I I just like the the city so I decided to come back. I lived in different areas. I think think there's a lot it's a it's a great city to live in.

I think Mexico has lots of opportunity. We're we're looking at at some deals here. I actually have a friend, Naveed, he used to own a company called Placeit. He's an American and he he built it really well and it's been recently acquired. Podcast by Envato, and I think he's doing a little bit of traveling right now. But also, it's it's also in the middle. Right? So, we have a company in Brazil. We do deals in North America.

I think this is kind of in the middle of ground of, you know, easy access to North America. You're still in the same kind of time zone where we do a lot of the business. And it's a quick flight. So, to whether we have to go down to Brazil or the US or Canada, it's it's really accessible and easy for us.

Jorge

Yeah. Yeah. I wanted to to touch 2 points. Like, I remember Embato and I Forgot the name of the founder.

Akeel

Naveed. Yeah.

Jorge

Naveed? And he started with a blog freelance, which I I It had been very long time in the Internet. So he started that, like, freelance switch, talking about tips about freelancers, And then he built. And is the largest marketplaces of selling WordPress themes or Video, stock footage, and many marketplace marketplaces. So he's now in in Guadalajara. Right? Like, with 500 employees and developers and all that. And I think the other point is Talking about developers, like, how much do you pay, like, for salaries? Do you have develop developers here?

Akeel

We don't. So we don't hire any developers here, but I do know, you know, a couple of other founders here who build teams. So if you're looking, you know, in terms of salaries, I hear anywhere between, you know, like, entry level, I think 25 to 30,000 pesos all the way up to, you know, 40 or 50,000 1000 pesos is what I what I hear is what they they pay. So I think it's it's above average, right, for

Jorge

Like, $1,000

Akeel

Yeah.

Jorge

Per month. Well, a 1000, 2,000.

Akeel

Exactly. Yeah.

Jorge

And in the US, it's like 80,008, $88,000 per month or something like

Akeel

Yeah. If you go to the Valley, if you're, you know, super experienced, you're looking at, you know, 2.50, 300 k a year or more. Right? So that's 20, 30,000 a month. So, yeah, can get expensive

Jorge

Yeah. So the message is come to to Mexico.

Akeel

Yeah. Yeah. Yeah. It has its issues as well. I mean, there's, but I think there's if you if you know how to work it properly and you have the right connections, I think, you know, check out, like, Hacker's Garage, you know, get involved with them, learn from the local, Startup Guadalajara. They they just built a big, building as well. I think, you know, Wise Line, the founder there is really investing In the city. So I think, you know, there's there's some cool networks and and, people you can meet if you wanna get in get used, you know, Guadalajara as a base as well.

Jorge

Yeah. They they have the, digital city. It's the translation, and it's like a hub Of startups. I I think you know it.

Akeel

Exactly. Exactly. Yeah.

Jorge

So let's jump Into this question. How do you set up the teams that manage the software or the SaaS companies that you acquire?

Akeel

Yeah. So our we have a, pretty specific criteria on what we look for in in an acquisition. We look for SaaS companies with, you know, we buy at least 51% percent of the companies who are actually acquiring the majority state. We don't do minority VC investments. The minimum size we look at in terms The revenue is at least 500 k in ARR. So 500,000 US dollars per year. You know, been around for At least 3 years, the product, you know, has a great product and they've they've already kind of established product market fit. And if we see you know, we come in, we look at the business, is there Clear growth opportunity because a lot of the founders are really focused on product.

They've built a really good product, but they don't really do much on on the growth and marketing. So that's where we come in. We apply our Sales, our growth marketing playbook, and we really wanna accelerate the growth side of it. And in terms of the team itself, we we normally keep the team as it is on on the initial stages. So during due diligence, we get to know the team. We try to understand what their experience, what value do they bring to the company. But we do replace the founder. So the founder generally is moving on, and they and they move on to I know they take their their their payment, and they move on to another project or whatever.

But we we keep the team. Sometimes, you know, after the transition, the some of the employees maybe not wanna stay, or we just find it's not a good fit for for us. We already have a team of of, you know, designers or for example, that we don't need to pay for another designer. So we might have You know, let them go and use our our our designer. But, typically, we keep the team and then we just try to build upon it with with with our own team that comes in and helps

Jorge

And why change the designer? You you already have, like, a structure of UI or or things that you want to do?

Akeel

Yeah. So we we already have a team of experts who have already proven themselves. We already know their they they can deliver how we want to kinda execute. So we have a playbook of what we need to do, you know, conversion rate optimization. So we already have the Version rate optimization. So we already have the team that we're working with that knows what we're looking for, what we're trying to achieve, versus trying to you explain somebody, teach them. And, you know, if if they've the thinking is a lot of this, like, for example, the founder, people ask, you know, why don't you keep the founder? We've done that sometimes in the past, but typically, if the founder knew how to grow it and accelerate the growth, he would have already done it by now. So that, you know, he's not gonna bring kind of the value that we think we can bring to help grow it.

Yes.

Jorge

And I I have a question. Do you are are you a marketer, or what is your your special ability, your your magic

Akeel

Yeah. I would say so I'm an engineer, but I think, you know, there's always two sides of an engineer or even in in a startup. You have the the product, the CTO who's Very, you know, wants to just, like, live in the lab and build the product and just wanna perfect everything. I'm I'm not that guy. So I'm more of the the other side, which is like the business development, Marketing, you know, I really focus on the growth and revenue. So I would say that's my my expertise. I like to find something that's really well built that I really believe in the product, And then you'll be able to get it out to as many peep people as possible and then manage the the business efficiently.

Jorge

Do you use your podcast to do something like that? Like, push your portfolio companies or your comp port portfolio SaaS? SaaS?

Akeel

So we have we haven't yet. You mean, in terms of, like, doing ads and sponsorships? Yeah. No. We haven't done anything there. We just actually We started doing, a few sponsors, I think starting, next week, but this is more of as a way. We partnered with LD from Balsamiq, and we're helping entrepreneurs. So actually, If you're an entrepreneur looking to, you know, get a free spot on our, podcast, we're giving away, you know, 7 free to entrepreneurs just as a way to give back and get some free kind of visibility. So, you guys can check that out.

I think it's balsamic.com/go Slash, SaaS dash district. So if you wanna put in the show notes, people can apply there as well.

Jorge

Yeah. I will put it down here. Yeah.

Akeel

So

Jorge

the next question is interesting, to me because, well, Well, I just resonate with the with the concept. What do you think is better for for an entrepreneur, a new entrepreneur, Whoever starting, or buying an online business. Well, especially as us.

Akeel

So I think it really depends on your Personality. Do you see yourself as, like, a builder and a creator and innovator that just has to build something? Like I mentioned, like, do you get the joy of from scratch. Or are you more of like a manager operator who who wants to work with the team, wants to take what's already a product there, and, you know, build upon it? I look at building a house. Are you an architect or, you know, developer? Or either one who who's a builder operator and, you know, managing different, you know, real estate all over and leveraging deals and whatnot. But from a financial perspective, I think we know the stats. Right? 90 I think 90 95% of businesses fail within the 1st 5 years of starting. Right? So when you're when you're buying an existing business, you yes. You may spend a little bit more upfront buying it.

But, you know, you get access to more capital to help you acquire it. It's already a proven business, and you're generating revenue from day 1. So, you know, 2 things, I guess, it's your personality and also your skill set. Do you do you know how to manage? Do you if there is a team of 10 people and engineers and And marketers or salespeople, do you know how to manage them? How to push them? How to get them to grow? Because if you come in and try to, and you don't know no. What you're doing, you can also, you know, take in the wrong direction as well. So I guess it depends. If you're just starting off, maybe, you know, play around, get some experience. And then at some point, if you have some capital or if you have the experience, I I personally am a big believer pushing people to buy companies that they feel confident that they

Jorge

Yeah. Also and in in the US, it's it's much easier to to buy a company, like, for Like, with a 100 k, they can lend you, like, 90% of of the loan, and you pay it with the with the money that is coming from the business. I don't think that's possible in Mexico, but, if you have something saved, you can buy a, Like, $500,000 company, like, what your test is is. Mhmm. And start looking For companies that that's the problem or the main main goal is the deal flow. Right?

Akeel

Exactly. Yeah. Deal polls always an issue. I think, you know, if you have the thing is, you know, even in Canada, we have something called the BDC loan. In the US, we're referring to the SBA loan. At the end of the day, it's not not that easy. Just they don't wanna spend with a 10%, and they'll give it to you. What is what is a bank looking for? Just like as an investor, they're looking for a really good company that's actually gonna Be able to service the debt and pay back the loan.

And then number 2, they're gonna look at your profile. Do you know what you're doing? What's your background? What's your experience? Do you actually know how to manage? And you have experience working with this. So, you know, I I imagine, you know, in Canada, there's 25%. In the US, it's probably 10%. I imagine there's probably something similar in Mexico. I don't know about SaaS Pacific. But, you know, if you if you wanted to buy a business, I'm sure there is financing to acquire a a business. And maybe that's something people can look at.

Right? Maybe they wanna buy, you know, local a local business, and it's already been around for a while. It's profitable and has track record if it's been around for 3 to 5 years. And then you go to a bank and say, hey, I've I've managed a company Because before I've been a manager, and you have a bit of cash. I I don't see why they they would say no.

Jorge

Yeah. I saw, like, 2 years ago, like, a box Not related to SaaS, but a box company that was selling for, 400 k. Mhmm. And I Like, something like creating boxes for e commerce and, like, doing software for Shopify or some kind of Integration.

Akeel

Mhmm.

Jorge

Because there is cash cash flow already in the in the Vox Company that was the example.

Akeel

Exactly.

Jorge

That could be a a cool a cool sleep or or something For 10 years. Well, that's a lot of time.

Akeel

Yeah. Yeah. Did did did did you end up taking that to the bank and seeing if they'd they'd finance it or no?

Jorge

No. Just Like a like a exercise of looking, applying the same in the US, like in Mexico, but I I think there's not the banks don't help you like the SB loan SBA loans or something. I think It it could be like more like private capital. Like, bringing in more investors into the equation.

Akeel

And there's actually a lot of, investors here. I know there's a lot of, like, you know, family office offices that are, you know, pretty big here. I know even in Guadalajara and all Over Mexico. So, I mean, if you bring to them a a stable business and you can show what you're doing, I'm I'm assuming that they might, be interested to invest. Right?

Jorge

Yeah. Exactly. Yeah. So where where can we follow you, in your social media to know more about Your podcast and your what you are doing and and your appearance in Latin, Latka podcast?

Akeel

Sure. For sure. Yeah. So you can check out, our podcast is SaaS District. So just SaaS and then district. And in terms of following me, you can check me out on Twitter. So just at Akhil Jabbar, or you can hit me up on LinkedIn and just please send a message, include a note of, you know, where you heard about me, and you can connect through LinkedIn. But, you know, Horizon Capital Our business with the e n horizon.

And if you're looking to sell your company, feel free to reach out and we'll happy to look at it.

Jorge

Excellent. And what will be the last words to entrepreneurs that want to start as a company for the Latin American marketing Or in general start as business.

Akeel

Yeah. I think, if you're thinking about starting it, I think now is the time. Don't wait Too long. I think there's tons of opportunity to look around, look at problems, talk to your your friends, colleagues, you know, co founder, co workers, and and see what problems they're facing, you know, from the digital age that we are right now, I think there's a lot of new solutions that can be brought to the table. Get involved with, The different networking groups in the SaaS space or the the start up scene and and see maybe you can form some kind of partnerships and and launch. But I would say, you know, this is the time I I would definitely go out there and, yeah, There's lots of opportunities to to have.

Jorge

Perfect. So thank you for being the in the podcast of