Batch brew #15

Hey, the Caffeine Capitalist is here! ☕ 

Last week, we talked AutoGPT, and this week we're diving into the world of boring businesses. Yes, you read that right, we know it may sound like a snooze fest, but hear us out. Fascination of boring businesses is one of the things that sparked this newsletter. Our subscriber count grew up since we talked about "the boring stuff" last time, therefore we figured it's high time we explain why we're so head-over-heels for all things "boring." 

This is issue special, so why not brew some specialty hot beverage!

6 minutes and 7 seconds this time.

Welcome to 25 new subscribers from the last Batch! 🙏🏻

Dept. of Tiny Thoughts

Just as the perfect cup of coffee requires the right beans, grind, and brewing technique, the digital transformation of SMBs calls for a strategic and hands-on approach from executives, or even better, owners.

There are those businesses, which stay traditional and disappear with their owner retiring. Then there are those who adopt digital transformation as their lifeblood and allow them to gain marketshare from traditional old fashioned competitors. By adopting tech and adapting to new ways of working, SMBs can boost their operations, streamline processes, and stay competitive in an ever-evolving landscape.

For search funds and micro private equity players, it's time to awaken your inner caffeine capitalist and take the opportunity to invest in the digital transformation of SMBs. Identify businesses with potential for a technological revamp, and offer resources, expertise, and strategic guidance to empower their transformation. Not only can this create value for your portfolio, but it can also contribute to the long-term success and resilience of these businesses.

To make this actionable, we see it this way:

1. Research emerging technologies and digital trends relevant to your target industries.

2. Network with technology providers, consultants, and industry experts to stay ahead of the curve.

3. Evaluate the digital maturity of potential investment targets, and assess the potential ROI from digital transformation efforts.

4. Foster a culture of innovation and agility in the businesses you invest in, encouraging collaboration and continuous learning.

It's time to energize your portfolio and brew success for businesses ready to embrace the digital revolution. Cheers to stimulating growth and future-proofing your investments!

Dept. of Insights

Beating the Bore: Dull Businesses that Thrive

For today, let's forget about those shiny startups with their sexy elevator pitches! Boring businesses are where it's at, our friends. These unassuming enterprises have been quietly making money for years, and they're just waiting for someone like you to come along and unleash their full potential. 

What potential are we talking about? Like.. the economy size one. According to Annual Report on European SMEs 2021/2022, SME's are 99,8% of European enterprises which contribute about 65% of overall employment in the business economy. 

What do we mean when speaking about boring businesses? 

• Accounting firms

• Insurance agencies

• Freight and logistics companies

• Janitorial and cleaning services

• Storage and management companies

• Etc.

These are businesses, that may not provide exponential growth opportunities, but they can offer stable and consistent growth with high profit margins. And there is plenty of them.

How to capitalize on this boring world?

The first idea that might come to mind is starting a boring company. However, why not skip a few steps? We prefer a 'buy then build' approach, where you purchase an existing company, retain its clients, and perform some modern magic such as automating processes, optimizing prices, utilizing revenue streams, and hiring a skilled CEO to run the company efficiently.

Some of you, like us, might want to skip the tricky part of hiring skilled CEO and act only as an investor, adding money and knowhow to the already skilled team. Approaches may differ, but you have to always do the one thing. Find the right company. 

What are our requirements?

Profitable - We are not the turnover seekers. Companies we look for has to be profitable even without our investment. You might want to look for companies in trouble to get a better deal, however, it comes with more work also.

Fragmented market - We're not into the whole monopoly thing, where one player dominates the entire market. We're interested in companies serving their local markets.

Reccuring revenue - We find it's much smoother sailing to work with companies that have a steady stream of cash flow from a reliable set of customers. 

Under-digitised - Profitable company with stable reccuring revenue event though their most complex technology is email? Love it. This signals great upside potential implementing technologies.

Growth mindset - This applies if you don't want to change the company team. It's crucial to be aligned with them on the goals. 

All check? Congrats. You've got the horse to put money on. 

Over the past two years, we've invested our own money into building a tiny portfolio. Our approach is to have two types of companies in this group. The first one we call "enabler" companies, these are agencies that help us transform boring business visually and technologically. Our baseline enabler companies are Kiuub, a no-code agency that streamlines processes and builds MVPs using existing no-code tools, and Birne, a brand studio focused on crafting unique brands.

The second category of companies, are boring target businesses. For now we started experimenting with a rollup strategy in accounting, where Contiver, a digital accounting firm based in Slovakia, is our first horse. We aim to add more industries into this category, but we're keeping it under wraps for now, but stay tuned! We'll be sharing more details about this exciting project in just a couple of months.

Do you have a unique approach to boring businesses that you would like to share? We are happy to turn it into an interview over a cup of batch brew!

Dept. of Twitter Thread Research:

1/ Boomers aiming for retirements, search funds rushing in. It's not only about the amazing graphics of search and micro private equity funds wanting to buy companies of retiring boomers, we also love the comment section.

2/ Hiring Boring biz CEOs? Girdley comes to help again. We love the consistency of content that Michael Girdley is putting out in relation to managing a portfolio of boring business companies. Just have a look at this one:

Dept. of Visual Research:

What should we say to this? Feels like cold coffee ☕

News from our portfolios & where to shake hands:

• Already happening today! The whole Caffeine Capitalist team will be attending Forbes 30 under 30 in Bratislava.

• Podim is happening next week, precisely 15-17th of May. Slavo and part of the ZAKA.VC team will be there, so let's grab a coffee!

Do you enjoy this type of content? We blew through 1300 subscribers, but we want to grow further and the best way you can help us is to share The Caffeine Capitalist in your community using the button below:

Enjoy your coffee fresh, allocate capital, repeat! See you in 2 weeks 👋

The Caffeine Capitalist is a bimonthly newsletter written by Slavo Tuleya, Andrej Petrus & Martin Nemecek. It is written in partnership & in support from ZAKA.VC and Chop Chop Ventures.

What do you think of this issue? We are still collecting feedback on our new layout, suggestions welcome!

• 👍 Great, keep it up!

• 😐 Was ok.

• 👎 Meh.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.