Stats
- Consistent cash flow from online businesses
- Low multiples of 1.5x to 3.5x revenue for acquisitions
- High returns with reduced risk compared to startups
“We first got into online business investing pretty early, and a big part of our acquisition strategy was investing in online businesses and micro-media companies to grow our own company. The problem with online business investing is that it takes a lot of time and effort, and it’s not passive at all. But if you can turn it into a passive investment, now we’re talking. That’s the kind of investment that interests us at Alts.co and me personally.”
– Stefan von Imhof, CEO and Co-Founder of Alts.co
Introduction
Stefan von Imhof is the CEO and Co-Founder of Alts.co, a pioneering platform in the alternative investment space. Alts.co is known for its innovative approach to investing in a diverse array of unconventional assets, from tequila barrels to rugby teams and vinyl records. With a broad portfolio that spans multiple asset classes, Stefan has built a reputation for identifying unique investment opportunities that offer substantial returns. One such opportunity is investing in online businesses.
“We got into online business investing pretty early. A big part of our acquisition strategy was investing in online businesses and micro-media companies to grow our own company and our newsletter.”
This early adoption of online business investing has been a cornerstone of Alts.co’s strategy, allowing them to leverage the digital landscape for growth and profitability.
Benefits of Online Business Investments
1. Consistent Cash Flow
One of the most significant benefits of investing in online businesses is the potential for consistent cash flow. Unlike high-risk startups that may or may not become profitable, many online businesses already have established revenue streams, making them a more stable and predictable investment.
“These are under-the-radar, cash-flowing businesses. It’s just such a fundamentally simple thing, and we understand it. But so many people when they hear about online businesses or startups, they don’t think of them in that way.”
2. Under-the-Radar Opportunities
Online businesses often represent undervalued assets that can be acquired at relatively low multiples. This creates a unique opportunity for investors to purchase profitable businesses at attractive prices, leading to substantial returns on investment.
“It shocks people when you talk about being able to buy a cash-flowing business at literally one and a half times revenue. Even in a high multiple scenario, it’s three and a half times and up, which is pretty unheard of with most investments, especially in the startup world, where buying equity in startups often involves much higher multiples.”
3. Lower Acquisition Multiples
A key advantage is the ability to acquire online businesses at lower multiples compared to other types of investments. These lower acquisition costs can lead to higher returns on investment, particularly when combined with effective management and operational improvements.
“After a serious round of due diligence, you can still find incredibly great deals with low multiples. Perhaps the seller is just getting tired and wants to sell and move on, put it in good hands, or they need immediate cash, and they’re willing to sell for lower than what the market will bear.”
4. Stability Compared to Startups
Investing in online businesses provides a level of stability that is often lacking in startup investments. While startups can offer high returns, they also come with significant risks, including the potential for complete failure. In contrast, established online businesses with consistent cash flow and lower acquisition multiples present a more balanced risk-reward profile.
“These are not hyped-up unicorn startups that could very easily go to the moon and also very easily crash and burn. These are under-the-radar, cash-flowing businesses. Online cash flowing businesses.”
How WebStreet Addresses the Challenges of Online Business Investing
Challenge: The Need for Active Management
One of the primary challenges in online business investing is the significant time and effort required for active management. Running an online business involves various tasks, from content creation to marketing, which can be overwhelming for individual investors.
“The problem with online business investing is that it takes a lot of time. It’s a lot of overhead, and it’s not exactly passive. It’s not passive at all.”
This challenge can deter potential investors who are looking for more hands-off opportunities.
Solution: Passive Online Business Investment via WebStreet
WebStreet addresses this challenge by transforming the traditionally active process of managing online businesses into a passive investment opportunity. By partnering with skilled operators who handle day-to-day operations, WebStreet allows investors to benefit from the profitability of online businesses without intensive involvement.
“What WebStreet solves is basically moving it from being an active investment that’s very lucrative to a passive one. And that’s tremendous. If other people can do the work for you, and you can take advantage of that, now we’re talking. That’s the kind of investment that Alts.co and I are interested in.”
Challenge: Due Diligence
Another significant challenge in online business investing is conducting thorough due diligence to identify high-quality, cash-flowing businesses. The market is filled with a mix of high-potential and below-average businesses, making it essential to separate the wheat from the chaff.
“There are a lot of below-average businesses out there. The key is to do the due diligence. After a serious round of due diligence, you can definitely still find good deals.”
Solution: Expert Vetting
WebStreet’s rigorous vetting process ensures that only the best online businesses are selected for investment. Their team of experienced operators conducts comprehensive due diligence to identify valuable opportunities and mitigate risks.
“WebStreet’s ability to find those deals and then use operational efficiencies to operate them so that their value goes up and the cash keeps coming in is crucial. That’s where the rubber meets the road.”
Challenge: Operational Efficiency
Effective management and operational efficiency are critical for enhancing the value and profitability of online businesses. This involves regular updates, strategic enhancements, and consistent efforts to stay relevant in the digital market.
Solution: Leveraging Skilled Operators
WebStreet leverages the expertise of skilled operators to manage and grow online businesses effectively. These operators apply their knowledge and experience to improve business operations, increase cash flow, and drive value appreciation, ultimately leading to profitable exits.
“When WebStreet first came out, I looked up the operators they were working with and saw a lot of names I recognized and respected. Mohit Tater is one such example. It’s all about the operators. If it’s any Tom, Dick, and Harry, that’s just not going to work. But with WebStreet, you know you’re in good hands.”
Conclusion
Stefan von Imhof’s journey into online business investing highlights the transformative potential and strategic advantages of this asset class. His experiences underscore the value of consistent cash flow, the appeal of under-the-radar opportunities, and the importance of thorough due diligence and expert management.
Investing in online businesses offers a unique combination of high returns and manageable risks, especially when compared to traditional high-risk ventures like startups. The ability to acquire these businesses at attractive multiples and enhance their value through strategic management further solidifies their appeal.
Furthermore, Stefan’s trust in WebStreet and its operators underscores the importance of partnering with platforms that offer rigorous vetting processes and operational expertise. His confidence in WebStreet’s ability to transform active investments into passive income opportunities has been a key factor in his continued support and investment.
By leveraging the expertise of skilled operators, accessing attractive acquisition multiples, and transforming active investments into passive income opportunities, platforms like WebStreet provide a robust investment avenue.
“It’s been amazing watching you guys grow. I’m here rooting for you and cheering you on, continuing to invest in you.”