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2024 In Review

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Dom Wells

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Dear Shareholders,

What a difference a year makes.

2024 is finished and I’d like to review it in light of our thesis.

When we began this journey, we had 4 core beliefs.

  1. We believed there are a vast number (hundreds or thousands) of profitable online businesses that could be seen as undervalued due to idiosyncratic risks of those businesses (platform risks, key man risks, etc.) or suboptimal operational capabilities (e.g. management lacks certain marketing skills).
  2. We believed by aggregating these businesses, we could reduce the idiosyncratic risks of the portfolio of businesses as each individual risk became less significant as a part of the total portfolio. While the risk of having a revenue source decline for a business with only 2 or 3 sources may be existential, within the context of many businesses with many revenue streams, it becomes relatively inconsequential.
  3. We believed our existing operational expertise and commitment to expand upon it would allow us to run and grow these businesses as or more effectively than their existing management.
  4. We believed our status as a public company would allow us to access additional capital at a cost significantly below the returns achieved by the acquired companies.

In short, we believed there were a number of mispriced, underrated online businesses for sale, and we were developing the due diligence and operational expertise to acquire, and grow those businesses.

By becoming a serial acquirer who could use our unique operating leverage and financial leverage on a diverse portfolio of online businesses, we felt there was a very long runway over which we could provide superior compounded returns to our shareholders.

In this light, 2024 represented significant steps forward across all four domains:

1. We acquired 3 new businesses with 8 revenue streams and $6M revenue.

In January we acquired RevenueZen (RZ), an SEO led content marketing agency with $1.4M revenue and $227k net profit. RZ was the first acquisition we did where the entire team stayed with the company post-acquisition, and represented a watershed moment for us, in terms of leveling up the talent density and capabilities across the portfolio. The RZ team brought with it the operational skillset and management discipline that enabled us to assign them the management of SEOButler, and towards the end of 2024, Contentellect. This was the beginning of some huge operational improvements across the portfolio throughout the year.

In addition, RZ is a great company and is proving to be an excellent acquisition. We funded the deal with a combination of promissory notes, preferred shares, and seller notes. This also led to the belief we could close acquisitions with little out of pocket capital, a theme for the year.

Every time we make an acquisition, it adds profit to the bottom line of the company, which is our primary business model. The limiting factor is that we need cash to acquire those companies. By developing strategies to make acquisitions with limited, or no cash up front, we were able to make accretive business purchases, grow the company profits, and avoid deploying large sums of capital in the process.

Given that we started the year with a low cash balance and large losses, we needed to find a way to reduce those losses without using much capital, while avoiding an equity raise and shareholder dilution.

In July we acquired DDSRank, a smaller agency focused on SEO for Dentists. Despite its size ($500k revenue, $200k net profit), we like DDSRank for both its low hanging fruit, which I’ll detail further down this letter, and for its ability to be “tucked-in” to the SEO portfolio.

This was also funded with little out of pocket capital. We used $200k from our SPV (more on this below), $200k from preferred shares, and a $200k seller note. The only cash we put into the deal were the legal and due diligence fees, and finder’s fees.

Finally, in October we acquired Eastern Standard (ES), our largest acquisition to date in terms of revenue ($4M), and second largest EV ($2.4M) – Proofread Anywhere remains the largest at $4.5M EV.

Like DDSRank, the ES acquisition was able to happen because our SPV put in the up front cash, in exchange for a minority stake in the business. We offered the sellers preferred shares and a seller note in exchange for our majority stake in the business.

As with RZ, the ES team stayed on post-acquisition and have added even more depth to our portfolio.

2. We enhanced our operational expertise because of bringing new, highly competent teams into the portfolio via the above acquisitions, and our own compounded experience.

Acquisitions are often valued on the performance of the target company in the period before the deal closes. Of course, they’re only actually good deals if the business maintains, or better yet grows, its profits post acquisition. The reason many of the businesses we’re looking at are “undervalued” is because of the very real risk that they do not perform well post-acquisition, and our challenge is to make sure that we not only acquire the right ones, but also run them well afterwards.

2023 and 2024 were periods of evolution and iteration for us. We already knew how to operate online businesses before going public, but the post-IPO portfolio has changed and does not exactly mirror the types of businesses we historically owned. As well as an evolution in the types of companies we acquire, we’ve also worked hard on refining how we are structured and how we actually operate.

Our job as a holding company involves building operational expertise that will allow us to make sure the businesses we’re acquiring do indeed maintain and then grow their revenues and profits.

We made a lot of headway in 2024 around this area.

From 2019 to 2021, we were a centralized company, with one team operating all the portfolio companies. By 2022, we had transitioned to a decentralized structure, with each company fully separate and left to work out its own strategy.

In 2024, we started walking some of that back, and have landed on a structure we refer to internally as “centralized strategy, decentralized execution.” It’s a hybrid approach that has the central parent company a lot more hands on in supporting each company, sometimes making hiring and firing decisions, and acting as a board of advisors for the individual companies.

It allows each portfolio company CEO to achieve more as part of the portfolio than they could if they were separate, and allows us to benefit from the shared Onfolio brain and rapidly growing playbook of best practices. Yet, it still allows individual teams to get things done and focus on their area of expertise.

I will include examples of some of the ways a centralized strategy creates value further down this report, when I go into more specifics in our portfolio makeup.

3. Our SPV raise helped us to do these acquisitions.

Back in March we launched our SPVs – a couple of funds for accredited retail investors to co-invest in our acquisitions.

For us this was a game-changer, as it allowed us to close both the DDSRank and Eastern Standard deals, and likely several more in the future, without the need to put in any of our own cash, something that is important when you are trying to preserve your capital – as mentioned earlier.

For DDSRank, the SPV funded 33% of the deal, allowing us to use preferred shares and a seller note for the other 67%. For ES, the SPV funded 30% allowing us to take 60% ownership using pref shares and seller notes again.

The cost of capital was high given that we sold equity in these businesses, but where Onfolio was at the time, we didn’t have access to debt on good terms, so this was the solution we found that still allowed us to acquire accretive, quality businesses.

For SPV investors, it allows them a way to invest in specific  online businesses with a clearer return profile. There’s less diversification in the SPV and therefore much higher risk, so we don’t plan to offer this long term.

For Onfolio and $ONFO shareholders, it’s a way for us to fund accretive acquisitions while limiting cash expense. We believe that, over time, the benefits of diversifying across our broad portfolio will be superior.

We don’t necessarily plan to use the SPV long term, as bringing equity investors into our deals is a high cost of capital, but we do think it’ll be part of our acquisition playbook in 2025, along with preferred shares.

Fundamentally the SPV was a massive success. We are in the business of acquiring cashflow, and the SPV allowed us to acquire cashflow without using our own money.

4. We quoted our Preferred Shares on OTCQB.

While the SPV has been a massive success, another development has been quoting our preferred shares on the OTCQB – a public market tier in the US. Previously, we raised capital in 2022 and ‘23 selling preferred shares privately to accredited investors. Those investors can now exit their investments if they wish, and anyone, accredited or not, can buy them via OTCQB in a similar way to how they’d buy shares on NASDAQ or NYSE. Each share pays a $3/year dividend, which should make a compelling investment for income-focused investors.

Over the coming months, we hope to see strong demand for these shares on the OTC, which will likely create demand for us to do another private issuance for pref shares, and raise more money at a cheaper cost of capital (12%) than the SPV.

For investors, the $3/dividend may be lower than investing in the SPV, but will come with compliance, liquidity, and far greater diversification.

Since 2022, we’ve raised around $1.5M selling preferred shares to accredited investors, and have issued around $3M worth of preferred shares directly to business owners as partial consideration for acquisitions.

We think that number could be substantially higher in 2025 simply because the shares are now publicly traded and liquid, and Onfolio itself is in much better financial shape. The pool of potential investors will be larger too. The preferred share market is worth hundreds of billions of dollars in the United States, but the vast majority of investors only participate in publicly traded preferred stock.

Even though investors can buy the shares on the OTC, we still think a private offering will attract demand because there may not be sufficient shares for sale at any given time on OTC, making it harder for someone to purchase at size on the open-market.

We are therefore confident there will be sufficient demand for the preferred shares in 2025, and this will unlock another huge source of capital for us. We can then continue with acquisitions in the year ahead, at a cheaper cost of capital than the SPV provides – though we will also pursue acquisitions via the SPV too.

Side note: We are currently raising $1m via preferred shares. If you are interested in investing, go here.

On the Verge of Profitability

Throughout 2024, we have significantly reduced our losses and are now essentially at profitability. We’ve reached a position where we can continue operations without requiring additional fundraising or acquisitions to achieve profitability, yet we will continue to pursue both because they accelerate our growth and long-term value creation.

With this foundation, we expect to move firmly into sustained profitability in the near term.

We will continue with our thesis and aim to make further gains in all areas in 2025.

As we head into 2025, our focus will be to continue to focus on these key areas and build the Onfolio flywheel.

Find profitable businesses, acquire them, improve their operations and grow them, use those earnings, plus additional capital, to acquire more and repeat.

We believe the progress in the year ahead could be even more pronounced than 2024. Our deal pipeline is strong, we’ve proven our current deal structures work, and we have much more of a playbook in place. We also have far, far less uncertainty around our financial future.

Our goals for the year are quite simple:

  1. Continue to acquire attractive businesses, ideally where 1+1=3.
  2. Continue raising capital to fund those acquisitions, via the SPV and preferred shares.
  3. Continue improving current and future acquisitions via our growing playbook.

If we continue to execute well, we’ll reach significant profitability in no time, which should ultimately make all of the above even more impactful.

If you just want to get a high level understanding of Onfolio and our 2024 progress, you can stop here. However, if you want to dig deeper, keep reading for some of our thoughts on the key topics.

How To Think About The Business Model

As we spoke to more and more people after going public, a common theme was how little understood holding companies really are.

At an abstract level, everybody can understand one, but when it comes to really understanding what SEC filings mean, or how the parentco really interacts with the portfolio, and how that shows up in the financials, it became clear to us that viewing a holding company the same way you’d view any other company is impossible, as it isn’t really legible that way.

We want to take the time to explain how to really understand what exactly it is you’re looking at when you view our financials.

A common question we had in 2023, and thankfully have had less in 2024: “If you acquire profitable businesses, why are you losing money?”

The short answer is that the companies we acquire are profitable, and at the portfolio level we are profitable, but we have relatively high fixed costs on top of the portfolio. Once the portfolio has grown beyond those costs, which is broadly where we are at now, Onfolio as a consolidated entity will be profitable too.

People mostly understand that concept, but struggle with how high those fixed costs could be. What also muddies the water is how things like SG+A are all consolidated upwards, so when we acquire a new company (which again, is profitable), all the SG+A from that company increases our consolidated SG+A, making us look even more bloated.

You really need to dig into the weeds to understand the actual financials and how everything plays together when viewing a 10Q or K.

Essentially though, the main thing to understand is that when we make a new acquisition, and that acquisition is accretive, providing profitable cashflow even after financing costs, then the gap between our pubco expenses and portfolio level profits decreases. That’s the real story of 2024.

We reduced expenses at the parent level, acquired three companies at the portfolio level, and grew the existing portfolio’s profit as well.

The trifactor.

Being a public company involves additional costs, but we believe the advantages outweigh these expenses in the long run because our status as a public company offers:

  1. Lower cost of capital
    • Ability to structure deals using company stock
    • Access to SPV financing options
    • More flexible funding arrangements
  2. Enhanced deal flow
    • Higher visibility in the market
    • Increased credibility with potential partners
    • Broader network of opportunities
  3. Better talent acquisition
    • Ability to offer equity compensation
    • Enhanced company profile attracts better candidates
    • Clear market valuation of stock options

While private alternatives like investing in funds or buying private businesses might seem cheaper initially, the public structure provides strategic advantages that we believe will deliver superior long-term value. The market may not be fully pricing in these benefits yet, creating an opportunity for investors who recognize this potential.

Summer bodies are built in winter, and 2023 taught us how to get skinny, which is ultimately why we made so much progress in 2024.

As the market starts to appreciate our efforts, and our stock price rises to a level where ONFOW warrants start to exercise, we will find ourselves with tens of millions of dollars to deploy.

As a management team, we will continue to adopt that winter body mindset, and operate as leanly as it makes sense to do so, deploying that capital prudently.

Current Portfolio In Review

Now that you understand the interplay between the portfolio and the pubco, I wanted to talk a bit more about the highlights of the portfolio.

A few weeks ago, somebody asked me how GenAI was going to impact content sites, and whether or not I was worried.

Frankly, we haven’t thought about acquiring “content websites” since 2021, so this comment took me aback, and made me realize it isn’t really clear from the outside what our portfolio is.

Let’s add some clarity.

We do still have some content sites, but they’re a tiny part of our portfolio and virtually irrelevant.

Our portfolio is really made up of a few key businesses:

Only two of these were in our portfolio prior to going public, and one of those was incubated a few months before the IPO and essentially grew after we went public.

This was always the intention – to raise money via the IPO for acquisitions and to transform the portfolio.

Let me talk about what the big pieces of the portfolio look like.

I’ll give a brief overview of a few of the companies mentioned above, and how we think about them.

Proofread Anywhere (PA)

Think of this like a career re-training course, teaching people how to become a proofreader.

Despite the dawn of AI, demand for the course is strong, with anywhere from 500-800 new students signing up every month for a few hundred dollars a pop.

January 2025 was the best month we’ve had since early 2023. It is very much in growth-mode.

Now, people don’t necessarily take the course because they’re passionate about correcting other people’s grammar, but because of what a remote proofreading job gives them; freedom, income, location independence, flexibility.

We’ve added a few additional modules to the course which are not strictly proofreading related, and seen a path where we can acquire more courses to both add into the PA ecosystem but also grow independently with the playbook we’ve used and honed with PA itself.

If you think about this as the first acquisition in the “Learn to make money online” industry rather than a proofreading business, you’ll get a better understanding of our aims in this space, and see how far we can take it.

The Agency Group

While each individual agency has its own merits and deserves its own attention, the real shareholder value for our agency group is going to come from what they can achieve collectively.

The easiest way to understand this is to imagine how each agency can cross-promote one other’s services, share some back end services, and develop mutual playbooks to help each other grow.

To give a couple of more detailed examples, let’s look at it this way.

RevenueZen (a B2B SEO agency) is currently working closely with Contentellect (a B2B content agency) to improve the quality of Contentellect’s content offering. Doing this will allow RevenueZen to replace their existing content subcontractors. This will save RevenueZen around $15k per month, and give that revenue directly to Contentellect. Plus, Contentellect will have a better service to offer to its existing clients.

Similarly, Eastern Standard (a digital marketing and web design agency) has a lot of clients that need SEO services, and they’re working closely with RevenueZen on building out an SEO offering.

Equally, every agency could benefit from more of a sales pipeline, so we’re working with a high quality company to set appointments for all our agencies to get on the phone with, and early results are promising. Doing all of these things with just one agency is possible, but each time we acquire a new one, the results become exponential.

What we’re developing here is a repeatable process to acquire an agency, improve its sales pipeline, reduce its expenses, and drive more agency work to our existing portfolio. There are so many agencies for sale that lack these things, that solving it means we are off to the races.

Agencies make a great backbone for the portfolio and we’ve put a lot of effort into growing our agency playbook in 2024, but we’re still very bullish on digital courses and info product businesses (and agencies give us a lot of tools to grow them).

In 2025 we’re targeting several new course acquisitions as well as continuing to build out the agency group.

What we’ve built so far is a platform for more growth both organically and through acquisitions.

Management’s goals and incentives are based on both ebitda growth of the overall company, which is going to be largely impacted by acquisitions, and ebitda growth of the current portfolio, which is going to be organic.

When 1+1=3 (or 4)

The ideal acquisition for us is one where 1+1=3. It’s a strategic acquisition that either fills a hole in our org chart, allows an existing portfolio company to grow, or where our existing portfolio can grow the target company.

Up until RevenueZen, we didn’t have as many opportunities for 1+1=3 acquisitions. The truth is that until you have enough critical mass, you can’t really know what type of acquisition is really strategic. Many acquisitions feel strategic, or seem to be that way on paper, until you actually bring them into your portfolio and realize you were wrong.

I believe this is where a lot of Amazon FBA aggregators struggled. In theory their plan made at least some sense, but the reality was different.

What changed for us in 2024 was having enough high quality businesses in our portfolio to increase the surface area of what constitutes a strategic acquisition.

In other words, we actually have opportunities to buy businesses where 1+1=3 now, and we understand those opportunities more deeply.

You get enough reps in, you get better at the exercise.

The following types of business would make great 1+1=3 acquisitions for us in 2025:

A. Online courses that have some overlap with the Proofread Anywhere audience.

An ideal acquisition here would be a high quality course that we can upsell to Proofread Anywhere customers, or downsell to PA prospects who didn’t buy the main course.

Improving the Average Order Value (AOV) of PA customers would be huge and easily justify any acquisition.

On top of that, we can run the playbook for growing courses that we’ve fine tuned over the past 18 months and has led to PA finishing 2024 and starting 2025 in a strong position.

Growing both the acquired course and the PA course with one acquisition is the definition of 1+1=3.

What’s good about this opportunity as well is that the course doesn’t need to be doing millions of dollars in revenue like PA is. It just needs to have enough sales volume and proof of concept from paid ads to validate that the course is good quality and has a reasonable TAM. Many course creators either can’t quite figure out paid traffic, or have figured it out but are loath to invest in scaling ads, but have otherwise built excellent courses. We believe there are a lot of opportunities here.

B. Agencies that fulfill the needs of our existing agency portfolio or their clients.

Right now we have a half dozen agencies fulfilling various services to their clients. We have room to add more services and more clients to that bucket. Acquiring a paid media agency, or an email marketing agency for example, would be beneficial to the existing portfolio (not just our agencies, but companies like PA too).

In addition, our growing expertise with operating agencies, and our access to new clients and revenues for the acquired company would likely lead to growth of the target company as well.

One plus one, is three.

I do want to go on the record here and say we might not always buy a 1+1=3 business. Sometimes we’ll be targeting something because it makes sense as a standalone acquisition, or because it could form the platform for a future 1+1=3 situation.

The main takeaway here is that we can and will be much more strategic in our acquisitions now.

This is also partly why we sold our BWPS wordpress plugins. We no longer see much opportunity for strategically building out a WordPress plugin focused portfolio, so decided to divest and use the capital for better opportunities.

Our Thoughts On AI

We first spoke about AI in June 2023 when we announced our AI strategy, and I wanted to give an update.

Perhaps stating the obvious, AI continues to be an important and rapidly growing technology for all businesses, but in particular digital ones. In many ways the innovation that has been accelerating since the dawn of LLMs, has been breathtaking. In other ways, it’s been surprising that adoption has actually been fairly thin.

Outside of the easy to use content and image generators, a lot of real world applications of AI, especially AI agents, have not been implemented as widely as people expected them to have been by now.

That does not mean by any stretch that widespread adoption and implementation will not happen though.

A lot of the rails, tools, and frameworks are still being built, and 2025 will likely see more practical use cases become part of Onfolio’s playbook.

We have already implemented AI in many ways though. Here are a few of the more interesting implementations:

Ultimately we want to acquire businesses, and use better knowledge, better processes, better delegation, and better automation and technology to improve those businesses. AI allows us to do all of those things, faster, and significantly cheaper. It is not quite there yet, but it is coming.

To capitalize more on this, in 2025 we will launch a dedicated division focused on researching, developing, licensing, and white-labeling AI implementations and agents to not only improve our own processes, but sell solutions to our agency clients, and to new clients, which can then feed into more agency work.

We believe that a lot of the AI opportunities will naturally fall to the incumbents, but as with the Saas boom that started in 2005 and accelerated in the 2010s, there is a lot of space for vertical AI to succeed. As a company with skills in online business, and a growing ability to distribute new businesses, it makes sense for us to devote attention to these opportunities, without causing a distraction to existing business operations.

While some of our companies have started doing this anyway, we want to force it at the corporate level by building a small but dedicated team, capable of generating significant revenues for Onfolio, and keeping us a cutting edge company, more than just a collection of agencies.

As such, a dedicated division focusing on this makes more sense. Of course, as a company with small revenues and limited cash, we will not pivot and go “all in on AI”, but the beauty is we don’t need to.

In Summary

2024 really built a strong platform.  We would like to see an acceleration of the progress we’ve made over the past 18 months.

I recently said to Adam Trainor, Onfolio CFO, “We aren’t out of the woods yet, but we can see the meadow through a clearing. We just have to take a few more steps and make sure we don’t trip on a tree root as we go”.

Somebody else once told me that people think of building a business like climbing a mountain, and it’s a daunting task. Instead, they should flip the narrative and imagine themselves already at the top of the mountain. Now all they have to do is ski down it, a much more enjoyable experience, but to watch out for trees as they go.

Whichever metaphor we use, the key is that we know where we need to go, the path is there, and we just have to keep going. Good times await, as long as we don’t hit a tree, (a possibility of which we are very aware and working every day to mitigate).

Perhaps in 2026 I’ll be writing about how beautiful the meadow is.

But for now, we have a job to do.

If you want to evaluate Onfolio or any micro-cap holding company, I put together two free guides: How to Evaluate a Micro-Cap Holding Company covers the 7 criteria most investors miss, and The Math of Serial Acquisition explains why buying at 3x compounds differently than buying at 15x.

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