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Ask HN: Sell my startup for $14M because I can't raise $2M?

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Re: Ask HN: Sell my startup for $14M because I can't raise $2M?

#201

Post by sjg007 »

karthikb wrote: post #187
dwaltrip wrote: post #175

Earlier quoted context omitted.

How much time does owning a jet actually save?

It's not just door to door time, but schedule flexibility. Not every route has a direct flight, multiple flights per day, etc. Many people schedule meetings to end right before they have to leave for the airport and catch the last flight back home for another important meeting the next day. Would prefer that someone making decisions impacting the livelihoods of thousands of people each day is focused on the issue at…

Because video conferencing is so 1990s

Re: Ask HN: Sell my startup for $14M because I can't raise $2M?

#202

Post by rdlecler1 »

mseebach wrote: post #137
rdlecler1 wrote: post #130

Earlier quoted context omitted.

He’s at a $14m acquisition number. How much of the company does he own? Does he have one or two other founders? Marching to a $400m valuation is going to dilute you around 20-30% each round to both investors and ESOP. I’m giving an approximation but what I’m pointing out is that you not going to own 100% of the company and you may see a <1x - 20x multiple on your current ownership.

But he's not "marching to a $400m valuation", that's what he believes he can grow the company to. If you get a 20x multiple on 14M for 400M, you have grown less than 50%, and raised a ton of money. You're not magically getting diluted into the ground because you raise a bit of money.

And to grow a company to that he’ll need multiple rounds of VC funding plus ESOP and so you need to estimate how much of the company he might own at the end of it all. It’s not going to be $400m. So if he has a 100% option to take $5-$14m off the table today vs a 20% possibility of taking $100m off the table, I’d be included to take the former Given the resistance he/she is getting raising a seed round.

Re: Ask HN: Sell my startup for $14M because I can't raise $2M?

#203

Post by john_moscow »

zupreme wrote: post #47

Learn from my mistake. Unless you're already financially secure (meaning you could stop working and live your current lifestyle for several years) then my advice is to take the money while you can OR to leverage that valuation to pocket a few million $ (by selling equity). I'm doing great with my current startups now but several years ago I founded a very promising startup which almost immediately got many acquisitio…

Curiosity question: why didn't you patent some key element of your value proposition to protect against someone copying it?

Re: Ask HN: Sell my startup for $14M because I can't raise $2M?

#204

Post by sokoloff »

sjg007 wrote: post #201
karthikb wrote: post #187

Earlier quoted context omitted.

It's not just door to door time, but schedule flexibility. Not every route has a direct flight, multiple flights per day, etc. Many people schedule meetings to end right before they have to leave for the airport and catch the last flight back home for another important meeting the next day. Would prefer that someone making decisions impacting the livelihoods of thousands of people each day is focused on the issue at…

Because video conferencing is so 1990s

I am a [piston-engine] pilot (only use mine for business a few times/year; most is personal/family travel). However, I spend a lot of time with other entrepreneur pilots and many believe that their airplane is instrumental in their business.

Being able to show up, in-person, walk around, shake hands, interview the customer, look them in the eye, walk their factory floor or otherwise see things first hand and then still make it home to put the kids in bed is far more impression setting than dialing into a video call.

What little I've used mine for business, being able to be out and back the same day, direct, makes it more likely that I'll bother to show up (vs call or visit annually). Video conferences are better than phone calls, but a poor substitute for an in-person visit.

Re: Ask HN: Sell my startup for $14M because I can't raise $2M?

#205

Post by sgs1370 »

sjg007 wrote: post #198
lnanek2 wrote: post #185

Earlier quoted context omitted.

Definitely. I've been at startups who got signed letters stating the acquisition will go through from the other company, the other company spends months in due diligence learning every secret we had, then they just stop working on it and leave the deal dead.

Do you add a break up clause to prevent this?

You should* also be working with a banker who sells companies for a living. They will take some % (10%? Who knows) of the deal, but in my limited experience it seems worth it, since they will also help you make introductions and give advice - maybe not perfect advice but it will be advice that will either raise the price of your sale, make it happen faster, or promote some corrupt agenda the banker has (i.e. work with a banker who comes to you from someone who can vouch for them)

There are obviously some things to be very careful in terms of shopping for a deal, but that's also how higher valuations occur. And, if the acquiring company doesn't want to deal with it they can give you a "no-shop" offer that is higher, in addition to the breakup/no-deal fee.

*This "should" in addition to everything else above is just an opinion. I've only been in a company once that was acquired successfully and heard stories about other situations, so take it for what it's worth which might be nothing :-)

Re: Ask HN: Sell my startup for $14M because I can't raise $2M?

#207

Post by sokoloff »

jonnathanson wrote: post #40
austenallred wrote: post #11

A few things, though it's hard without much info (re: revenue/growth). Regardless: 1. A $14m sale is a huuuge win. You'd be set for life. A 100% likelihood of $14m is something that is difficult to turn down in almost any scenario. Even if you'd eventually make $50m, your life wouldn't change much from a net worth of $14m to $50m. You could buy a nicer jet? Let's say you take the $14m. Your life would (presumably) ch…

"Even if you'd eventually make $50m, your life wouldn't change much from a net worth of $14m to $50m. You could buy a nicer jet?" I know you're kidding around here, but all kidding aside, whether your net worth is $14M or $50M, you can't afford a jet. (I mean, nominally speaking, you can front the sticker price -- but you'll get eaten alive on fuel and maintenance over the jet's useful lifespan, and the jet as an ass…

If you cleared $10MM on the sale, you could absolutely buy and operate a baby jet (a 501, 525, 510, Premiere, etc, maybe even a 560) without going broke.

I'm likely to buy one if I ever crack $7MM. $5MM is a bit too snug I think though to contemplate owning a jet personally (unless it's a business enabler).

Re: Ask HN: Sell my startup for $14M because I can't raise $2M?

#208

Post by bilbobagends »

goseeastarwar wrote: post #155
austenallred wrote: post #11

A few things, though it's hard without much info (re: revenue/growth). Regardless: 1. A $14m sale is a huuuge win. You'd be set for life. A 100% likelihood of $14m is something that is difficult to turn down in almost any scenario. Even if you'd eventually make $50m, your life wouldn't change much from a net worth of $14m to $50m. You could buy a nicer jet? Let's say you take the $14m. Your life would (presumably) ch…

+1 I think people don't recognize how "little" money you need to replicate a big salary. 14M at 3% is $420k/yr. And as long as you don't spend every last dollar, that number keeps going up...forever. Build whatever you want at that point.

First, a sale of $14M doesn't get you $14 - you'd get less than 10 - best case. Second, your after inflation return in the current environment may be quite ugly - $300K or $400K a year will not feel rich in any east or west coast city.

Re: Ask HN: Sell my startup for $14M because I can't raise $2M?

#209

Post by sgs1370 »

jasonlbaptiste wrote: post #46

Yes. You will now have a blank Check for the rest of your life: 1- you won’t need to work again. This lets you work on what you want next. 2- you’re very likely to get funded 2m for the next thing. This sale gives you a big stamp. In short, this game is never about just one company. Get the 14m, stay hungry, and go for the 400m sale on the next. Play the fucking long game and play it on your terms.

PS if you do a "next thing", don't spend very much of your own money on "it". Even though you don't "have" to get outside funding, do the angel/seed/VC thing based on your previous success and the strength of your idea & team... and if any stage fails, bail on "it" and go to the next thing. The investment you can make is not paying yourself a salary for a year while you figure out if the product succeeds during the angel round stage. Just my $0.02, your mileage may vary.

Re: Ask HN: Sell my startup for $14M because I can't raise $2M?

#210

Post by sokoloff »

bilbobagends wrote: post #208
goseeastarwar wrote: post #155

Earlier quoted context omitted.

+1 I think people don't recognize how "little" money you need to replicate a big salary. 14M at 3% is $420k/yr. And as long as you don't spend every last dollar, that number keeps going up...forever. Build whatever you want at that point.

First, a sale of $14M doesn't get you $14 - you'd get less than 10 - best case. Second, your after inflation return in the current environment may be quite ugly - $300K or $400K a year will not feel rich in any east or west coast city.

Disagree. $300K/yr with $10MM in the bank will absolutely feel rich.

The reason people with $300K household incomes in Boston/NYC/Silicon Valley don't feel rich is because out of that $300K, they're buying housing and saving for retirement/college/rainy day. Take that away, and $300K spendable is a fairly luxurious lifestyle.

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