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YC Help: I need Acquisition Advice

news.ycombinator.com

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Re: YC Help: I need Acquisition Advice

#21

Post by jdavid »

sounds like the offer is 6M-9M

to put things in perspective.

@ 10M and 3% you earn $300k a year in interest. @ 10M and a good money market you earn 8-12% or $800k-$1.2M a year. If you only spend 250k a year you will grow your money very fast.

in Wisconsin 1.5-2.5M and 150K a year in income qualifies you as an angel investor, and you can invest 100k and get 25k off of your taxes.

i think the guys are right, 10x is standard for tech growth.

you might consider a few options to the deal, like a payout bonus if the company performs better than X a percentage payout of lifetime earnings of 1% annually (which will keep you from being broke) technology licenses are normal. *the buyout price is for control, but not for all of the ownership, you might retain some shares which could be sold later.

Re: YC Help: I need Acquisition Advice

#23

Post by jorgeortiz85 »

dfranke wrote: post #2

That sounds like a very low offer. A 4:1 P/E ratio is what you expect from a steel company, not a tech startup showing exponential growth.

Right. If your growth really is exponential, then drag out the deal a month or two, at which point their valuation is so outdated they have to make a new one.

Re: YC Help: I need Acquisition Advice

#24

Post by dkokelley »

Hmm. At your current position I would seriously consider the lifestyle options you currently have. How much are you earning currently from this? Are you the only founder? If you can take a 6 figure salary from this and still pay all business expenses and be profitable then I would reconsider selling, especially at such a low valuation.*

*Quick note/question: You're saying that you hit 160K net profit last month, and that you're being offered 3-4 times earnings. Depending on your gross margins you're being offered at least $7.7M (assuming no change in monthly net profit). What are your earnings, might we ask?

If you have very tight margins (50%) then it probably isn't such a great deal.

Things to consider:

- How much of the buyout goes to you?

- How much are you personally making now?

- The average American (depending on education) earns about $3M in his/her entire lifetime. Will you have this or more after the deal? (This is a little test I apply to see if I would do or not do something).

- How risky is your company?

- How much risk are you willing to take?

Good luck with this. Congratulations for getting this far!

Re: YC Help: I need Acquisition Advice

#25

Post by bijan »

I agree with the above comments. 10x is standard for tech companies. And if you have seen such phenomenal growth, why sell now? Do you feel you cannot sustain such growth? I would say take those profits re-invest in yourself and try to reach targets that will warrant a better buyout.

Re: YC Help: I need Acquisition Advice

#26

Post by omnipath »

nextmoveone wrote: post #22
Flemlord wrote: post #19

Earlier quoted context omitted.

Peak, or level off?

Peak, and level off.

Why level off? Is it because of resources (lack of) that'll limit growth, or something about the market you're in? That may have a factor in the price you could ask for.

Re: YC Help: I need Acquisition Advice

#27

Post by ash »

nextmoveone wrote: post #7
fendi wrote: post #6

http://news.ycombinator.com/user?id=nextmoveone nextmoveone how do i reach u?

trying to keep company names off the net as well as my name... so do ycnewsid456[at]mailinator(dot)com

It's strange to use Mailinator for contact... Everybody can check your box there!

Re: YC Help: I need Acquisition Advice

#28

Post by kingnothing »

ash wrote: post #27
nextmoveone wrote: post #7

Earlier quoted context omitted.

trying to keep company names off the net as well as my name... so do ycnewsid456[at]mailinator(dot)com

It's strange to use Mailinator for contact... Everybody can check your box there!

Agreed. You should look in to Hushmail, or even something as plebian as Gmail.

Re: YC Help: I need Acquisition Advice

#29

Post by jey »

nextmoveone wrote: post #14
webwright wrote: post #11

As a guy who sold his last business to the first offer (which was a good one, but not a great one), I would encourage you to think VERY hard about what happens after the sale. Are they hiring you? If so, how are you going to like that? I hated it. If they're NOT going to hire you, what are you going to do next? It doesn't sound like you'll have enough money to retire, which means you get a job or start something new.…

I'm 21! Retirement!? Points taken. Very much appreciated.

Yeah! Since once you retire you can work on whatever you want, instead of only working on things that produce money.
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