Large TAMs Are Overrated
We Prefer To Dominate Niche Markets Instead
Happy Wednesday, folks!
Thanks for joining us for another edition of Atlasview Insights. We use this newsletter to share our strategies, philosophies, experiences, and lessons we’ve learned along the way. Small bite-sized insights for business owners, dealmakers, and investors.
In this newsletter, we cover:
Have An Opportunity For Us?
Large TAMs are Overrated
ICYMI - Popular Previous Issues
Our Deal Process
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Have An Opportunity For Us?
Before we jump into this issue, a quick reminder, Atlasview Equity Partners is a private equity firm that acquires and builds B2B businesses in the lower middle market. For platform investments, we look for:
Business Model: software, business services, value-added distributors
Business Size: minimum $1.5m EBITDA or $10m revenue
Business Profile: sticky B2B customer base
Business HQ: US & Canada
For add-on acquisitions for our portfolio companies, we have no size/geography criteria. We’re seeking add-ons in the library, archive, legal, and government niches for our portco Soutron Global and HVAC distributors for our portco PureFilters.
Whether you’re a business owner interested in working with us or an intermediary with a deal to share, always feel free to contact us!
Large TAMs are Overrated
One of the most overrated metrics is Total Addressable Market (TAM). Large TAMs have established competitors, are saturated with capital, and have a constant supply of new entrants. This results in low returns on invested capital for most businesses in the market.
At Atlasview, we love businesses that dominate niche markets with sustained demand. Typically, these smaller markets are overlooked and undersupplied with capital. And often, these businesses have a high degree of pricing power, resulting in fantastic returns on invested capital.
Here are some ways in which small businesses can achieve a very high market share:
Localization – geography can be a moat, especially if you sell physical goods. Larger national players may not be able to economically justify entering a small local geography to compete, and small geos naturally deter new entrants.
Verticalization – hyper-specializing in a single vertical can eliminate direct competition. Solutions, especially if iterated over time, become so tailored to the vertical’s specific nuances that generic competitors are no longer comparable alternatives.
Specialization – skillset/knowledge of a solution to a niche problem with acute demand. Sometimes, there are even required certifications or regulatory barriers to entry.
Since these businesses already have a majority share in their market, we pursue growth primarily through strategic M&A into adjacent markets. We seek to expand in concentric circles, which involves:
Leveraging Existing Competitive Advantages: We ensure incremental growth builds upon existing strengths without diluting the core attributes that created success initially.
Deepening Vertical Penetration: We aim for comprehensive penetration within a vertical by acquiring complementary products and services that serve the same customer base.
By first dominating a targeted niche and then strategically expanding via acquisitions, Atlasview builds a sustainable pathway toward long-term profitable growth.
In Case You Missed It
Here are some of our previous popular issues:
Atlasview-Backed Soutron Global Completes Take Private of Auto-Graphics
Agent Information Software, Inc. (OTCPK: AIFS), parent company of Auto-Graphics, Inc. (“Auto-Graphics”), a pioneer in State Interlibrary Loan (ILL) software systems, announced today that it has been acquired by Soutron Global, a portfolio company of Atlasview Equity Partners & Bloom Equity Partners.
Evaluating Pricing Power
At Atlasview, we highly value businesses that can consistently raise prices without losing customers. Pricing power is a critical indicator we assess when evaluating new investment opportunities.
Money Costs Money - How Growth Can Destroy Value
We all understand the obvious ways that growth can destroy value—unprofitable business models, negative gross margins, or scaling something that was never economically viable in the first place. But even profitable growth can destroy value.
Our Process at Atlasview
We pride ourselves on having a simple and transparent process. Our streamlined process enables us to move quickly to get you answers fast.
Step 1: Contact Us
Step 2: Execute NDA & Schedule Call
Step 3: Receive Offer & High-Level Terms
Step 4: Execute LOI & Complete DD
Step 5: Close Deal & Receive The Cash
Step 6: The Fun Part Begins!
Whether you’re a business owner interested in working with us, or an intermediary with a deal to share, always feel free to contact us!
About Atlasview
Atlasview Equity Partners is a founder-first private equity firm specializing in acquiring and building businesses in the lower middle market. Atlasview seeks businesses with defensible moats and multiple levers to add significant value to create an asymmetric returns profile. Atlasview works closely with management teams to execute organic and inorganic (M&A) growth initiatives to build businesses into market leaders.