The Moment: A wave of founder-owned, profitable, $1m-$20m ARR SaaS companies is maturing. Founders, employees, and early investors are seeking liquidity

• Software as a Service companies selling recurring revenue products to a diversified base of SMBs, with high margins and defensible profits, are some of the most valuable assets in the world right now.
• There are 100,000s of privately owned software companies, the vast majority of which never raised Venture Capital and stay quietly out of the headlines.
• The Calm Company Fund (previously Earnest Capital) launched in 2018 to fill a gap in the market: early-stage funding, community, and mentorship for founders building these companies. We built our fund primarily with LP capital from successful founders of bootstrapped, profitable SaaS businesses who intuitively understood the market opportunity. We now have 200+ of them as LPs and mentors for our early-stage companies.
• After collectively speaking with many 1,000s of these founders of mature profitable businesses, we noticed another problem/opportunity: there are very few options for founders, employees, and angel investors to get liquidity from $1m - $20m ARR mature bootstrapped profitable software businesses. These opportunities are still too small for traditional Private Equity and virtually all existing buyers have a strong preference for at least a majority stake or full buyout.
• Much like the maturing enterprise software wave that powered the early success of funds like Vista Equity and Constellation, a second much larger wave of SMB-focused SaaS companies are maturing. The time is now.

The Opportunity: There is a gap in the market with no dedicated fund vehicle offering the kind of liquidity these founders need

• Despite a vast increase in demand from private equity (from individuals and small micro-PE shops to top tier PE funds) to own this asset class, there is a gap in the market where companies are too big for micros/individuals, too small for large PE, or professional funds want too large of a minimum ownership stake. This gap is most prominent in the $1m - $20m Annual Recurring Revenue range.
• Founders often find themselves with a 7 to 9-figure net worth from their ownership stakes but with limited options for liquidity. Without a "blue chip VC" backing the company, lines of credit or mortgages are comically challenging to come by. Most founders at this stage are eager to de-risk and/or create liquidity for major life purchases. Unlike a majority buyout, which has the risk of de-motivating a founder, taking a small amount off the table can re-energize founders and enable them to take more risk and make long-term bets on their companies.
• Additionally, without a clear path to liquidity, retaining and attracting top talent can become very challenging for these companies. There is a strong motivation to create a clear path to realized value for employee ownership stakes.

The Product: We can rapidly build a portfolio of stakes in profitable, recurring revenue, founder-led software companies with a very attractive risk-return profile while solving a huge pain point for founders

• Passive ownership stakes in these companies, especially while still founder-led, are a phenomenal asset class.
• Exit multiples for profitable SaaS businesses are continuing to soar. Businesses that sold for 3-5x EBITDA a few years ago are going for 5-10x+ revenue now.
• SMB focused SaaS can be evaluated with comparatively fast and low-cost diligence with standardized business metrics, minimal complex contracts to review, and straightforward key data that can be accessed via API through products like Stripe, Profitwell, and Chartmogul.
• These businesses are capital-efficient, profitable, and diversified recurring revenue businesses. They typically have no debt and the risk of failure is extremely low.
• With a fresh infusion of capital, which can be kept in the business or taken off the table by the founder, these companies will have renewed resolve to go the distance to 10x - 20x ARR from current levels.

Calm Company Fund has the brand, network, and track record of creating alignment with this founder type, and genuinely proprietary dealflow

• We have built the premier brand among this large category of founders that identify with running 'calm companies.'
• These opportunities are primarily from founders who are not running a process and have no intention of working with anybody but us on this. These are mostly off-market opportunities done directly without involving brokers or other intermediaries.
• Our network of 200+ value-add mentors, a scout network, and a thriving community will be the tipping point that wins us opportunities to work with top entrepreneurs thinking about how to take their business to the next level.