Ask HN: How much did you sell your startup for?
I have a small site (about ~10k active user) that lets users watch movie trailers and create watchlists to get alerts. A buyer is offering $50k for the site. I don't know if this is a good amount or not. Its a decent chunk of money for me but not life-changing or anything like that.
For all the folks who sold their startups or sideprojects, how much did you sell it for and what was the experience like? How did you value your startups?
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This sounds like an eminently fair deal for this site unless I’m greatly underestimating how lucrative your advertising is or you have subscription revenue you didn’t mention.
You’ve made something people like. Congratulations. Nothing I say about operating the site as a business detracts from that.
Playing the probabilities:
You probably do not have a defensible business. Your users are loyal to Marvel trailers, not to your site; it is merely a way they know to consume Marvel trailers. They would switch in an instant to a similar site if yours went away or was dissatisfying.
You likely do not have any durable advantage in marketing your site. A durable advantage at your scale is one that a smart person given a month and a $5k budget couldn’t duplicate.
The nature of your revenue is likely non-recurring. You have to claw your way up from $0 every month. A change in the advertising market or your biggest source of traffic is an existential risk to your business. Next month’s revenue might literally be half of this month’s without you doing anything wrong.
All of these factors are going to push down the market value of your site to people who want to buy it and operate it as a business. If you speak with a broker (I used FEInternational, twice), you will probably told that the value is ~2X the annualized cash flow you got from the site (revenue minus hard costs), when using the last six months average as a baseline. (i.e. 24X average of last 6 months)
If that calculation comes up with an answer well above $50k, and you want to sell, talk to a broker.
Otherwise, the offer reads (to someone with only educated guesses of revenues to go on) as generous. Many offers do not turn into transactions; sometimes they do.
Separately, do you want to sell? What are your goals for yourself and this business more broadly? Are they helped more by you continuing to run it or by having $35k or so in the bank?
You’ve made something people like. Congratulations. Nothing I say about operating the site as a business detracts from that.
Playing the probabilities:
You probably do not have a defensible business. Your users are loyal to Marvel trailers, not to your site; it is merely a way they know to consume Marvel trailers. They would switch in an instant to a similar site if yours went away or was dissatisfying.
You likely do not have any durable advantage in marketing your site. A durable advantage at your scale is one that a smart person given a month and a $5k budget couldn’t duplicate.
The nature of your revenue is likely non-recurring. You have to claw your way up from $0 every month. A change in the advertising market or your biggest source of traffic is an existential risk to your business. Next month’s revenue might literally be half of this month’s without you doing anything wrong.
All of these factors are going to push down the market value of your site to people who want to buy it and operate it as a business. If you speak with a broker (I used FEInternational, twice), you will probably told that the value is ~2X the annualized cash flow you got from the site (revenue minus hard costs), when using the last six months average as a baseline. (i.e. 24X average of last 6 months)
If that calculation comes up with an answer well above $50k, and you want to sell, talk to a broker.
Otherwise, the offer reads (to someone with only educated guesses of revenues to go on) as generous. Many offers do not turn into transactions; sometimes they do.
Separately, do you want to sell? What are your goals for yourself and this business more broadly? Are they helped more by you continuing to run it or by having $35k or so in the bank?
Note to OP: you just got several hundred dollars in quality advice from a very experienced source. Talk about lucky!
All good points. Thanks a lot for the reply.
I'm not sure i want to sell but $50k is a decent chunk of money. I'm emotionally invested in the site but don't think about it as a revenue-generating business (or at least haven't so far)
I'm not sure i want to sell but $50k is a decent chunk of money. I'm emotionally invested in the site but don't think about it as a revenue-generating business (or at least haven't so far)
>emotionally invested in the site.
Sorry but can you elaborate more?
Sorry but can you elaborate more?
Its something I built without much expectation and now there's thousands of people using it everyday. I get emails from them saying how much they love it. So in that sense, I really want to keep running it.
>I really want to keep running it.
Is the buyer planning to shut it down? Or you mean you enjoy running it.
Is the buyer planning to shut it down? Or you mean you enjoy running it.
Instead of asking is this price fair ask if you would pay that price to buy your site and ask yourself what you would do to make it worth more. If you don't take the offer you're essentially buying your site for that price.
>> If you don't take the offer you're essentially buying your site for that price.
a fantastic way to look at it and a great view on opportunity cost
a fantastic way to look at it and a great view on opportunity cost
I once sold a site with a similar setup. It was the kind of site that generated a lot of interest from a lot of people for a while. Some good interest, a fair amount of interest from certified crooks and every once in a while the type of interest you have.
Not going to go over the financials but I will say this:
If you care about the project, and specifically about its future, than $50k is bullshit. Opportunities are random and far between. It is extremely hard to envision, start and successfully grow something meaningful. So don't sell.
Else, if you just don't care anymore, $50k is fantastic amount of money. You can go on a trip around the word, get season tickets to a ski resort or just buy a made-to-order device that rocks your boat. It will allow you to care even less about that project, you didn't care about no more. So sell.
Not going to go over the financials but I will say this:
If you care about the project, and specifically about its future, than $50k is bullshit. Opportunities are random and far between. It is extremely hard to envision, start and successfully grow something meaningful. So don't sell.
Else, if you just don't care anymore, $50k is fantastic amount of money. You can go on a trip around the word, get season tickets to a ski resort or just buy a made-to-order device that rocks your boat. It will allow you to care even less about that project, you didn't care about no more. So sell.
Why not sell 75% ownership and stay on to assist with the continued development and growth of the site? That way you are still invested and you reduced your risk in a reasonably fair way. For a small site with limited revenues, valuation is somewhat subjective as you are projecting forward with many unknowns.
25% ownership doesnt appeal to me as much since I'd lose control over the direction and in that sense, I'd rather sell than work on it for someone else.
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Back of the envelope calculations ;)
Video pre roll ad rates ~$10 per 1000. Let's say you directly realize half of that. Or $50 per day. So $50K represents about 1000 days (3 years) of passive income, at zero growth. So its decent. Provided its offered in good faith. And you could use that capital to repeat your success in another related vertical. Say, popular music videos, that tend to get 10x viewership numbers.
Best of luck mattleblank!
Video pre roll ad rates ~$10 per 1000. Let's say you directly realize half of that. Or $50 per day. So $50K represents about 1000 days (3 years) of passive income, at zero growth. So its decent. Provided its offered in good faith. And you could use that capital to repeat your success in another related vertical. Say, popular music videos, that tend to get 10x viewership numbers.
Best of luck mattleblank!
Thomas Smale is a great guy. Glad to see his resource shared on here. Definitely worth connecting with him if you are interested in selling. I met him on Summit at Sea last year and have kept in touch. He’s a great resource for this.
I work in tech M&A and this is a very comprehensive way to understand how to value your business (especially the size of the business the OP is referring to).
I sold a tiny site that took me a weekend to build for $40k. It was rolled into another site a few years later, and sold for $25 Million :(
He approached me via email. Went smoothly. To be fair, it was probably only worth $10k, but the work and advertising he did to it really did value it at $25M.
He approached me via email. Went smoothly. To be fair, it was probably only worth $10k, but the work and advertising he did to it really did value it at $25M.
Which is why you shouldn't feel sad. You probably couldn't have realised that value anyway, unless you had those skills.
There's lots of room between "don't feel bad" and "zomg, I missed out on $12.5 million", room for, "hmm, how can I do better next time, how can I add value to something I own."
Can I ask how it went legally wise? Did you involve lawyers etc?
At least in the US, hiring lawyers for a transaction less than US$100K is very problematic and generally does not make sense.
There are some other legal options (like those express legal advice websites, or places where they proofread the agreement for US$200).
There are some other legal options (like those express legal advice websites, or places where they proofread the agreement for US$200).
Yes, that's why I asked if they used lawyers for this relatively small sum. But it's not minuscule, so I was interested if they used contacts/agreements, escrow or something like "you send me money I send you password for account". Would like to read about such small-scale legalities for small personal sites-startups if it's available anywhere.
Try negotiating a fixed sum for the drafting the agreement. I think under $3K - $5K it can be doable, but also do a lot of sanity checks, e.g. provisions that you get everything back if the money is not paid in full, etc.
Professional lawyers do make mistakes, no matter how much they are paid.
Professional lawyers do make mistakes, no matter how much they are paid.
Interesting. Are you allowed to tell us more about what the site did and what the buyer did after?
Ideas for things you can use to argue for a better valuation: multiple acquirers (this is the most important by far and can easily double valuation), better understanding of the buyer's position/motivations/alternatives, macro industry trends (usually easy to find), your continued involvement over the handover period, external audits and metrics (eg. security, deliverability, user growth, etc.), team or documentation maturity, best growth metric extended over the future income projection. We've just done the final week on acquisitions in the Venture Deals course[0]. I've posted my notes for you here.[1] While some of the stuff only applies to larger deals, it shows you how such deals are viewed by mature, larger scale investors and entrepreneurs experienced with larger exits.
[0] https://kfatechstars.novoed.com/#!/courses/kfa-venture-deals...
[1] https://gist.github.com/globalcitizen/9806cfc11bd10cac7cf68e...
[0] https://kfatechstars.novoed.com/#!/courses/kfa-venture-deals...
[1] https://gist.github.com/globalcitizen/9806cfc11bd10cac7cf68e...
Take a look at patio11's blog post describing his sale of bingo card creator. Iirc similar ballpark
How much effort have you put in to date? How much are you willing and able to do over say the next two years? Since you said you haven't tried to make money from the site, do you actually want to turn this into a business?
I think you might actually be asking "50k sounds okay, can I get more?". I'd suggest asking yourself "What's the lowest number I'd obviously say yes to?"
I think you might actually be asking "50k sounds okay, can I get more?". I'd suggest asking yourself "What's the lowest number I'd obviously say yes to?"
You were already given some solid advice.
If it generates no revenue and you don't want to be bothered by monetizing, the offer is definitely a no brainer and you should accept it!
There are two major advantages.
First, you will learn about selling a business.
Second, you will have money to bootstrap your next venture.
The amount you were offered is not a life changing amount aka fuck you money, but the entire experience is absolutely a gamechanger.
If it generates no revenue and you don't want to be bothered by monetizing, the offer is definitely a no brainer and you should accept it!
There are two major advantages.
First, you will learn about selling a business.
Second, you will have money to bootstrap your next venture.
The amount you were offered is not a life changing amount aka fuck you money, but the entire experience is absolutely a gamechanger.
Q is what do you want to do with the site.
If you think in your heart of hearts, you want to grow it, get that offer in writing and raise a seed round , or ask the guy to be an angel.
If you do want to sell it, ask your buyer how they came to that conclusion. $5/user is okay but on the low side if you are monetizing per user
If you do want to sell it, ask your buyer how they came to that conclusion. $5/user is okay but on the low side if you are monetizing per user
If you study a bit of corporate finance, you can learn the mechanics of valuation. At the end of the day, though, how do you determine the market value of any asset? You auction it off. If you keep it, you are saying it is worth more than $50K. If you sell it, you are agreeing that the market value is whatever the other party is offering you.
Rather than trying to calculate explicitly what it's worth, have you considered trying to find other buyers?
Edit: Another thing to consider is, if this isn't a life changing amount of money to you, you could treat this like an empirical experiment to learn the process of selling your company. This will be invaluable experience in your next start up/side project, or for any future business endeavor where you engage as an owner or potential owner of a company in a transaction like this.
Rather than trying to calculate explicitly what it's worth, have you considered trying to find other buyers?
Edit: Another thing to consider is, if this isn't a life changing amount of money to you, you could treat this like an empirical experiment to learn the process of selling your company. This will be invaluable experience in your next start up/side project, or for any future business endeavor where you engage as an owner or potential owner of a company in a transaction like this.
I did a similar price but for a bit more traction - we had about 3k MAU but they were all really obsessed with the product.
I had a lot of debt at the time and not a lot of options. Was burnt out. And I hated my target market (they were literally cultish).
I think I could have gotten more for it, but we'll never know. We calculated the value as the revenue but the acquriers looked at downloads, number of emails in the database, brand name.
The trick is don't talk about price if you don't want to sell. Just keep going, keep getting good growth until it hits a plateau where you'd like to stop.
http://www.paulgraham.com/corpdev.html
I had a lot of debt at the time and not a lot of options. Was burnt out. And I hated my target market (they were literally cultish).
I think I could have gotten more for it, but we'll never know. We calculated the value as the revenue but the acquriers looked at downloads, number of emails in the database, brand name.
The trick is don't talk about price if you don't want to sell. Just keep going, keep getting good growth until it hits a plateau where you'd like to stop.
http://www.paulgraham.com/corpdev.html
Hey, Matt
A lot of founders who are looking to sell their businesses can't estimate what their company is worth, mainly because they are too emotionally invested in the project. A good way to see what's a fair price in your case would be to let the market decide it. I made Soochi [1] so founders who are interested in selling their business can see how much can they get for their business, as well as find the right seller i.e. someone who can actually take the business forward. Let me know if you'd like to list your business on our site? We're running a $30 off promotion right now!
[1] https://soochi.co
A lot of founders who are looking to sell their businesses can't estimate what their company is worth, mainly because they are too emotionally invested in the project. A good way to see what's a fair price in your case would be to let the market decide it. I made Soochi [1] so founders who are interested in selling their business can see how much can they get for their business, as well as find the right seller i.e. someone who can actually take the business forward. Let me know if you'd like to list your business on our site? We're running a $30 off promotion right now!
[1] https://soochi.co
Try to frame it in terms of $/user/mo over the next n months.
So $50k up front is ~$4K/mo for 1 year (or $5/user/month).
If you monetize, what would be your expected $/user/month? Your buyer certainly has some figure in mind already, and they're no-doubt low-balling you.
Is user growth rate positive or negative? What percentage growth have you seen MoM or YoY?
I would spend some time modeling the various scenarios to put the $50K into perspective. For example, if you plan on running this site for the next 5 years and you make $x/user/month and you have positive user growth (say 1% net user growth each year), etc.
So $50k up front is ~$4K/mo for 1 year (or $5/user/month).
If you monetize, what would be your expected $/user/month? Your buyer certainly has some figure in mind already, and they're no-doubt low-balling you.
Is user growth rate positive or negative? What percentage growth have you seen MoM or YoY?
I would spend some time modeling the various scenarios to put the $50K into perspective. For example, if you plan on running this site for the next 5 years and you make $x/user/month and you have positive user growth (say 1% net user growth each year), etc.
Why not monetize it instead of selling it? That's probably what the buyer wants to do. right?
Monetization is a bit tricky without making the userbase feel like we're selling out. I was more focused on making the user experience better before I think about monetization.
Why not counter with ~100K USD or so? Squeeze more out of it, might settle negotations around 75K.
Then you can make another similar site, maybe for books or video games. :)
Then you can make another similar site, maybe for books or video games. :)
Do you have any revenues from the site?
No revenues but the opportunities are all there because they can buy movie tickets/etc.
I decided not to monetize it for other reasons.
I decided not to monetize it for other reasons.
Given that, it might be instructive to get a handle on what the buy values at $50,000. Could just be the domain name and/or the "host authority" (when a lot of other (legitimate) sites refer to your site on the web it is perceived by search engines has having a bit more 'authority' than other sites.
If it's the latter you might find they buy it and replace your content with a bunch of links to porn web sites. You'd want to be ok with that before you sold it.
If it's the latter you might find they buy it and replace your content with a bunch of links to porn web sites. You'd want to be ok with that before you sold it.
It's going to be pretty hard to estimate value without some idea of revenue potential. In the end, a valuation is going to come down to expected value: https://en.wikipedia.org/wiki/Discounted_cash_flow.
Apparently the buyer expects the value of your site to be >$50K for them. Question is, what's it worth to you?
Apparently the buyer expects the value of your site to be >$50K for them. Question is, what's it worth to you?
Why not build a model of your revenues over the next couple of years in excel and calculate their sum?
Obviously a model can only tell you as much as it can accurately predict and you’ll probably want to generate some best case/worst case scenarios but then you’ll at least have a set of numbers to work from and know whether the offer is high or low compared to what you could make.
Obviously a model can only tell you as much as it can accurately predict and you’ll probably want to generate some best case/worst case scenarios but then you’ll at least have a set of numbers to work from and know whether the offer is high or low compared to what you could make.
If there is no revenue, then the offer is likely a one-off opportunity. Don't expect a bunch of prospective buyers even if you hassle their CorpDev departments or potential decision makers.
$50K is likely a guesstimated amount, not based on some kind of calculations. It's basically "looks like it might be valuable, so let's give him some figure big enough for an independent developer but not too much".
Personally, I would haggle a bit (say, try to raise it $80K, then meet around $60K-$70K) and sell. Do not underestimate the uncertainty and the amount of money that needs to be poured to monetise the business. If it's coming from a small company or a person, they are more flexible.
$50K is likely a guesstimated amount, not based on some kind of calculations. It's basically "looks like it might be valuable, so let's give him some figure big enough for an independent developer but not too much".
Personally, I would haggle a bit (say, try to raise it $80K, then meet around $60K-$70K) and sell. Do not underestimate the uncertainty and the amount of money that needs to be poured to monetise the business. If it's coming from a small company or a person, they are more flexible.
Sell. Make something else.
42 million U.S. dollars.