BitsForDigits is a different spin on the traditional startup marketplace model. The platform deals in partial buyouts – that is founders who want to give up some but not all of their equity for cash. Be that 1% or 99%, the amount is up to founder. Partial buyouts are a great way to keep working on your passion but to see the rewards earlier than you would otherwise. We talk to BitsForDigits co-founder Jan-Philipp Peters about this alternative take on fundraising. Where the idea came about and why he decided to take the leap, leaving a well-paid job at Google to do so. Who the typical buyer and seller is on BitsForDigits and how they’d managed to launch and grow the marketplace so far. So, if you’re open to new ways of investing and cashing in on promising online businesses, this BitsForDigits interview is for you.
Hi Jan-Philipp, please introduce yourself and the BitsForDigits team?
Hi everyone! I’m Jan-Philipp, but everyone calls me JP. I’m originally from Germany and after a few years of living and working in Ireland, I moved to Berlin to co-found BitsForDigits.
My fantastic co-founder is Laurits who I met during my studies in Copenhagen. Afterwards, Laurits spent a few years studying and working in London.
During the summer of 2021, both of us decided to quit our jobs to finally start working on building the platform.
Raising funds can be notoriously slow and painful. How are you making partial buyouts better?
There are two ways founders can sell shares. They can issue new shares in a primary offering, or offer already issued shares held by existing shareholders (for example the founder) in what’s called a secondary offering. A primary offering is commonly known as “getting funded” in the startup world, which means the company raises money to be spent on growth etc.
We, however, focus on secondary offerings. Here, founders can sell a few of their existing shares. That means not the company but the founder personally will receive the funds from this transaction.
Partial buyouts are a better option for founders who do not necessarily need money to grow the company but want to take some chips off the table and get experience liquidity (for example to buy a new car or an apartment). They are also a great alternative to full acquisitions in which founders have to sell their entire business.
"Partial buyouts are a better option for founders who do not necessarily need money to grow the company but want to take some chips off the table and get experience liquidity (for example to buy a new car or an apartment)."Jan-Philipp Peters, BitsForDigits
What’s your professional background? Have you ever bought or sold your own businesses before?
My professional background is in Sales and Marketing. I worked for Google and Facebook (I have yet to get used to calling it Meta) before. I always built small businesses and projects on the side and wished something like a partial exit would have been an option.
My co-founder Laurits is the one in our team who is more familiar with the transaction side, as he worked at BlackRock.
What advice would you have for anybody looking to invest in an online business? What are the most important things to look out for?
Do your due diligence and try to reduce the amount of “unknown unknowns”. Buying into profitable companies is definitely a different approach to venture-style “spray and pray” investing, so you will want to test the business’ vitals and understand what the future risks and opportunities are. A good fit with the founder or founders is super important, as you will likely be partners for at least a few years.
On the other hand, look for businesses where you can add value. Being a silent investor is great, but if you can offer relevant industry insights, a good network or other best practises, founders will not only appreciate the help but it will also have a positive effect on your investment.
The selling side really intrigues me too. Do you find some founders are nervous about letting go?
We meet a lot of founders who are nervous about letting go of their entire business. Imagine selling your company to another maker or fund and they scale it to new heights and all you have to show for is the acquisition price. For those founders, partial buyouts are a good option to experience some liquidity without completely losing what they have built.
Back to the marketplace. What’s the typical turnaround time from enquiry to sale?
It’s going to be one of these annoying “it depends” answers. Many factors play into it, such as how extensive the due diligence needs to be, if the founder and the investor live in the same country and also in how big of a hurry both parties are. We see that many founders of profitable businesses are rarely stressed to sell a few of their shares and they like to take their time to compare competing offers.
"We see that many founders of profitable businesses are rarely stressed to sell a few of their shares and they like to take their time to compare competing offers."Jan-Philipp Peters, BitsForDigits
I’m a fan of the BitsForDigits name. How did you settle on it? And how have you got word out?
The name is the result of hours of brainstorming. We wanted something that is unique, explains what we do (at least to a certain extent) without sounding too generic and is available as a .com domain.
We initially got the word out by leveraging our own network of founders and investors, building in public on Indie Hackers and probably most importantly Twitter.
What's your plans for BitsForDigits in 2022?
Grow, grow, grow! We want to help as many founders get their first partial sale done as possible. To do so, we will focus on getting more founders and investors on the platform and build out a lot more features to make the process as smooth as possible.
And finally… can you name 3 marketing tools you love?