Meet Onfolio, pumping out 12% returns for investors

The Offer Sheet readers —

This Sunday, we are excited to tell you all about Onfolio, a holding company that specializes in acquiring highly lucrative and profitable online businesses. They focus on a soft spot in the market - companies that are sub $2MM EBITDA and often too small for institutions to get involved. In so doing, they’ve been able to generate 12% returns for investors.

We sat down with their founder and CEO Dom Wells to discuss many topics including more about what makes them unique, how they source their acquisitions, their vetting process, his personal background, what the future holds, and how readers of The Offer Sheet can invest. Hope you enjoy!

Dom, welcome. It seems to be a unique investing opportunity to get a piece of the action with Onfolio, while having your team do all the heavy lifting.

Dom, can you tell our readers a bit more about the Onfolio concept, and what makes your company unique?

Onfolio is a holding company that buys profitable online businesses. The basic idea is to run in a decentralized structure so that these small businesses can retain their entrepreneurial nimbleness, but at scale we can build something significant by rolling up the smaller businesses.

We’re unique because we’re pretty much the only publicly traded company acquiring small, profitable online businesses. This gives us an interesting and appealing opportunity for sellers to exit to a reputable company, and participate in our upside in the process.

How do your source the online businesses that you eventually acquire and what’s your strategy in terms of the perfect fit?

We source them from everywhere. Marketplaces, brokers, outreach, networking. We also get a lot of inbound requests since we’re so visible and people generally know we are trustworthy.

There’s no “perfect fit” because every business is different and comes with its own challenges. However, we regard our ideal fit as a business that is stable, not reliant on its founder, does not require a large amount of reinvestment. Essentially something that will generate stable cash flow reliably.

How can The Offer Sheet readers get actively involved with Onfolio? Are there specific investing opportunities?

Yes, since we are publicly traded anyone can buy our common shares on Nasdaq under the ticker ONFO. For those who are accredited investors, you can also buy our preferred shares, which come with a 12% annual dividend. These are currently sold privately here https://investinonfolio.com/?utm_source=TOS, but will be publicly traded in the coming weeks.

How successful have your current acquisitions been to date?

All the most recent acquisitions are profitable. Some of our earlier ones were painful lessons and we have moved on from them, but all the ones we’ve made since the IPO, which contributed 5x revenue increase to our company, are profitable.

What’s your background and how did Onfolio come about?

I started building and buying online businesses back in 2012. Around 2017, I started blogging about my results, and attracted an audience who also wanted to buy online businesses. This was the inception of Onfolio. Initially we were a service provider helping others buy businesses. In 2020 we pivoted to a holding company so we could raise money directly and buy businesses in a consolidated manner. More profit for everyone, and much better diversification.

How do you successfully scale the operation as you bring on more and more online businesses into the fold, i.e. how do you make sure the businesses continue to perform and outperform?

That’s the real trick. If you can’t do that, the model doesn’t work. This article about our decentralized approach really dives deep into that. https://onfolio.com/operational-update-the-move-to-decentralize/

What does your vetting process look like once you are down the road with a potential acquisition?

We don’t get down the road until we have heavily vetted one. The process always varies due to the nature of the business and its founder, but the basic process is that we will first analyze the PnL of the business, and research the wider market it is in. Is it facing any threats, is it a market in decline? Is it becoming much more competitive and the founder is trying to quit while ahead?

What is the team like, are they staying on? Is the business in decline or on an uptrend? Can we improve its margins? What do the next 3 years look like? What can we do to grow it? What can we do to prevent it from declining? Who else can we talk to in the space? These are just a sprinkling of the kinds of questions we need to answer.

Is there a category of online business that you prefer / have seen perform better than others? As an example online course vs. agency vs. physical product sales.

Surprisingly, we find Agencies are some of our best performers. They are nimble, they don’t need a ton of cash reinvestment, and they can scale expenses up or down as necessary. 

How are you able to find and operate these businesses at optimal levels if they are seemingly different from one another category-wise, albeit all online?

Because we are not the ones operating them. Each business has its own dedicated team and CEO.

Why did you decide to IPO and was it the right decision in hindsight?

We decided to IPO as a way of raising money. It was successful in this regard. We also wanted to be able to attract talent, increase visibility, make acquisitions easier, make fund raising easier, and have the ability to use our stock as currency in acquisitions. In all these aspects the IPO was a success.

Do you like to establish best practices / tools across all the businesses you acquire, i.e. a requirement to use the same CRM, accounting software, etc.?

The only things that are required are accounting practices, which is a public company must. Everything else is a suggestion and we give individual business managers the freedom to choose what they think makes the most sense.

That said, we do knowledge share and encourage business managers to speak to each other about what tools and practices work best, we just don’t force anything on them.

What percentage of online businesses do you actually buy that you’ve looked into?

A very small percentage. We probably have to deeply evaluate 10 to find 1 we really like, and we have to scan 100 to find 10 that we want to dig deeper on. So I would say about 1%.

What’s the future of Onfolio? How many businesses do you eventually want to have in the Onfolio portfolio?

There’s no fixed size, but I believe we can become a billion dollar market cap company in a 5-10 year period.