🟣 Lessons in Building a Tech Empire

how I'm building a portfolio of software companies

Author

Matt Espinoza
March 02, 2024

I'm obsessed with building a software empire.

We've raised $0 and have been profitable from day 1.

Today we are at six-figures and growing quickly.

This might be the most important post I've written in a while...

Here's how I'm playing asymmetric bets so I don't lose:

Estimated reading time: 6 min 13 sec

Progress Update: We’re Hiring!

At one of my portfolio companies (Flair) we are hiring top designers.

If you want to work with other A-players, shoot a email to [email protected] with your portfolio.

Why I’m Building a Portfolio of Companies

I’m a taking a bit of a contrarian route.

Rather than put all my chips on a single company, I’m building a portfolio of companies.

In particular, I’m building a holding company (holdCo).

There was a couple ‘aha’ moments for me that led to that conclusion.

One of which is the fact that the “largest percentage of billionaires come from private equity (building, buying, and selling companies)”

I’ve explained the other reasons for my decision in a previous post.

But since that conclusion, I’ve been going full-force.

AND THINGS ARE WORKING BRILLIANTLY!

We’ve been incubating a new company at least every 3 months.

And although I haven’t gotten around to buying any companies yet, that is definitely on the horizon.

Things are still early (started in August), but here are 5 MAJOR LEARNINGS that have made all the difference.

Here is a diagram to show the flywheel of how things works

1) Build to Sell

Not all your products will succeed.

Focus on profit-first companies

If it can't reach a significant user adoption then sell.

I've seen $300 MRR software sell for $5,000

As long as you break-even consider it a win.

Then reinvest all the additional capital in your next project

You just need one cash-flowing winner.

2) Build a Core Team

Currently the main team at Halation (@halationco) is 3 killers.

A dev, a designer, and me.

Our last company was built & scaled in less than 35 days.

The product has gotten 5 new users every 3 seconds.

We then took what worked (and also what didn't) and then adopt it for the next venture.

This allows us to learn faster than anyone else.

Paired with revenue-based incentive models, I'm convinced this is the best way to build companies.

3) Bring an Operator

This is an area I've still fleshing my knowledge in.

It's unrealistic to be running more than 3 different companies at a time.

This is where bringing a management team (CEO, CTO) comes in.

If you have a rollup of similar companies (e.g. all b2b software) you can have a top management team running all of them.

Similar structures can be found in holding companies like Constellation Software.

4) Share the Winnings

I’m very much a ‘if I win, we win’ typa guy.

And I've seen a couple way to redistribute profits.

But the most popular is the dividend model

Essentially the cash flow from the companies is given to the shareholders every quarter.

5) Hold or Sell

Not all companies you own need to exit.

Some are cash-cows that grow 50% a year.

If you don't need immediate liquidity —just hold them.

Or take the cashflow to reinvest into new ventures

To summarize, here are the main components to building a tech empire

  1. Build to Sell

  2. Build a Core Team

  3. Bring an Operator

  4. Redistribute Winnings

  5. Hold or Sell

Forward this to someone who might also want to build an empire of tech companies. It's free to share. 😉 

If you aren't subscribed to this newsletter, subscribe here.

🧪 This is going to be my place in my newsletter where I can run some fun audience experiments

REPLY to this newsletter with the answer to: ‘what’s your end goal in life’.

That could be in terms of net worth, it could be terms of job/family. Honestly whatever first comes to mind. Interested in hearing some responses, and will share some common answers on the next newsletter!

Also, the most voted topic from the last experiment ended up being:
‘How to Reverse Engineer an Exit / How to Sell Companies’

So that will be the topic for the next issue :)

Chat soon,

~ Matt | (@mattespoz) 🥷🏼

Looking for more? I gotchu!

  1. Want a dedicated design team? Try out Flair, our design subscription service to level up your app, website, brand, and deck. Trusted only by the best.

  2. Want AI generated assets? Try Journey+, a way for designers to use Midjourney without Discord.

  3. Want to read more?: check out my Curated X (Twitter) threads here.

BTW - This newsletter has been super fun to make — I’ve gotten more positive responses from the last newsletter than from anything I’ve ever written online lol. Will continue posting these every 2 weeks, I’m backlogged with the amount of topics I wanna chat about.

Hope you’ve enjoyed this post, tag me on X if you shared it - love hearing feedback.

Subscribe here if this was forwarded to you, or read my past updates.

Was this 🚀 or 🗑. I read every response 🤩

Join the conversation

or to participate.