One Page Investment Memo

Hi everyone,

Hope you had a great Easter.

I spent the week leading up to Easter putting together a one-page Investment Memo for our B2B Agency Joint Venture.

I’ll copy the highlights into this email, or you can visit this page to read it on a browser instead.

Most importantly, I share details (but not URLs/names) of the first few acquisitions we’ll make, so you can start to better understand what these businesses are, how they generate revenue, and so on.

If you’re already happy, you can also click the “invest now” button to start filling out your info.

The first acquisition we close this month in April, so your money will generate a return work immediately.

Here’s the one-page memo copied into the email body.

SPV Overview

Onfolio Holdings and Onfolio Agency SPV will co-invest to acquire profitable marketing agencies.

Onfolio will acquire, hold, and grow agencies that are already profitable.

The investors (you) will participate via the SPV, which will make minority investments into the agencies Onfolio acquires.

While Onfolio will hold these agencies forever, investors will receive quarterly dividends, and can cash out annually if they wish.

See the economics further down the page to learn more.

What’s The Opportunity?

There are hundreds of profitable B2B agencies available for sale in the United States and globally, and they can be acquired for attractive prices. 

Through our network and outbound deal origination efforts, we have identified a number of potential acquisitions that will provide lucrative returns for investors, and add value to our portfolio, with potential for capital gains as well.

We love agencies because they are agile and cashflow well.

They are capital light and do not usually require additional cash injections to grow or stay profitable, unlike eCommerce.

They can enjoy gross margins above 60%, and can adapt with the rapidly changing pace of digital marketing.

What Do We Mean By “Agency”?

A “B2B Marketing Agency” provides services for businesses.

An example is an advertising agency that manages media buying and advertising campaigns for small businesses.

Many agencies specialize in one particular area of marketing, such as advertising, email marketing, conversion rate optimization, search engine optimization, and more.

What Are The Risks?

Each business has its own risks, and we diversify by owning multiple agencies in similar, but separate industries with unique client profiles.

That said, any one business we buy could start to underperform, experience headwinds, or find its methodologies out dated.

Some people have claimed AI will eliminate most marketing agencies. We think AI will eliminate agencies that are unable to embrace change, but will augment those willing to learn.

There is a great opportunity to acquire agencies and use AI to improve their margins and results.

SPV Economics

Below is an example of how we expect a $100k investment to cash flow. The increase in NAV (value of your investment) is due to organic growth of the portfolio, and cashflow is generated by the revenue and profits of the acquired businesses.

We already have several agencies lined up ready to acquire, so we would like investors to be prepared to send capital within a few weeks of signing up.

Have You Done This Before?

Yes, we’ve acquired 5 profitable agencies to date, with the earliest acquisition in December 2020.

That business has earned us 25% cash on cash returns annualized over that period, and has fully paid back the investment, while being valued about 10% higher than where we bought it.

Our most recent agency acquisition, on January 1, 2024 has already grown its net profits by 50% in 3 months.

Not every agency acquisition has gone so well, but all 5 are cashflow positive, and that is the beauty of this asset class.

About The Agencies

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For confidentiality reasons, we won’t share all the details of our current acquisition pipeline, but to help you better understand what you’ll be owning, we have included some information about 4 of our targets here.

1 - Full-Service Digital Agency

This agency, located on the east coast, offers a range of services from branding, to web design, to digital marketing, and user experience optimization. We’ve been speaking with them since late 2022, and have followed their growth well. They spent 2023 improving their systems, adding more recurring revenue to their sales, and building out their service offerings.

The leadership team of 3 co-founders will retain some equity in the business and stay on long term. They plan to continue with organic growth while we support them in making accretive acquisitions of their own.

2023 Financials:

• Revenue: $4M

• Gross Profit: $2.2M

• Net Profit: $630k

This is a healthy business with relatively strong gross margins and an acceptable net profit margin. We see good opportunities to improve the margins, add scale through acquisitions, and support the founders in the natural growth of the business.

This is a truly impressive team that is ready to take the business to the next level, with our guidance and capital. They understand the benefits of retaining smaller equity in something much bigger.

Acquisition Economics:

• Total valuation: $1.8M

• Up front cash: $750k

• Seller note: $600k

• Onfolio preferred shares: $550k

• Investor/SPV Contribution: $250k for 14% ownership

Expected Investor Cash Returns: 25-30%

2 - Digital PR Agency

This is a company that has built relationships with journalists, editors, and writers for major publications. In total there are over 2,000 publications across 20 countries.

Through these connections, they offer unique PR and marketing opportunities directly to client companies, or to other agencies through white-label offerings.

With incredibly high gross margins, this is an opportunity to acquire a business that will not only make a great standalone portfolio company, but will also help provide additional revenue streams to the wider portfolio through the white-labeling of its services.

2023 Financials:

• Revenue: $1.8M

• Gross Profit: $1.3M

• Net Profit: $1.2M

The business has never done a lot of marketing, with people reaching out to them directly via their connections, which means the net margins are very high. We see this as an opportunity to reinvest capital into marketing to grow the business further.

Once again, the owner of the business is interested in retaining some equity and working with Onfolio to unlock growth opportunities across the wider portfolio, plus continue a build and buy opportunity directly with the acquired business.

Acquisition Economics:

• Total Valuation: $4.2M

• Up front amount: $1.2M

• SPV Contribution: $600k for 14% ownership

Expected Investor Cash Returns: 20-25%

3 - Web Development Agency

This company has carved out a niche for itself in the Microsoft dot net ecosystem and multiple team members are thought-leaders. The brand is one of the best known web developers and website builders in its corner of the internet.

They make money by performing web development and maintenance work for a range of corporate clients.

While the founder has a strong reputation, which we consider a risk as well as an advantage, she has agreed to stick around long enough for us to offset any risk of the agency performing poorly after her exit. What’s more, other members of the team with strong reputations are motivated and incentivized to stay as well.

2023 Financials:

• Revenue: $1.8M

• Gross Profit: $1.5M

• Net Profit: $800k

Expected Investor Cash Returns: 20-25%

Another business with strong margins, which is especially good for a US-based team.

We are still negotiating the acquisition terms for this business, but you can expect them to be a similar structure and valuation multiple to the two above.

4 - Marketing Tech and Revenue Optimization Business

This agency helps companies, particularly venture-backed startups, optimize their revenue operations through correct implementation of their marketing tech, also known as their marketing architecture. In other words, they become embedded in companies by helping them configure their marketing software to get the best attribution and understanding of where their marketing dollars are coming from.

Revops is a newer specialization in the marketing space but is rapidly becoming vital as both clients AND agencies are finding it provides vital information, which both improves results and validates their efforts.

2023 Financials:

• Revenue: $1.1M

• Net Profit: $900k

Expected Investor Cash Returns: 20-25%

Very strong margins and a lot of net profit to play with in growth. The founder wishes to move onto something else long-term, but is committed to a structure that will alow for a smooth and long transition, and is also interested in helping implement revenue optimizations across the portfolio.

We are still negotiating the acquisition terms for this business, but you can expect them to be a similar structure and valuation multiple to the two above.

5 - TBA

We will acquire more than just these 4 businesses, but for now wanted to focus on the most “ready” acquisitions.

Investor Cashflow

After each acquisition is completed, the business will start paying dividends at the end of the following quarter. We expect each business to be acquired over the following 4-5 months, meaning your dividends will increase over the coming quarters.

See the chart again below for an example of how your earnings will flow over time.

As there are limited spaces in the SPV and only $2MM remaining, we suggest you make your investment sooner than later.

How To Invest

• Onboard to the Dealmaker platform via the “invest now” button

• The minimum investment is $5k USD.

• Fill out your information and investment amount

• Sign the agreement and provide accredited investor verification

• Wire funds

• You’ll be accepted into the SPV

• Dividends will start being paid from the following quarter

Further information

If you have any questions, require further information, or would like to schedule a call, please email Onfolio CEO Dominic Wells at [email protected].