I almost sold Baremetrics for $5M
baremetrics.com
I almost sold Baremetrics for $5M
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Re: I almost sold Baremetrics for $5M
#2Hearing many horror stories over backing out at last minute, I wonder why breakup fees and escrow are not more popular in startup world.
E.g. if you would like to acquire for $5mln you need to deposit $100k. If you walk out, this is a breakup fee. If startup bails it also have to pay same amount to the acquire.
Re: I almost sold Baremetrics for $5M
#3Two quick thoughts on this.
1) The amount of transparency that this company shows is insane. I have a hard time imagining any one else in this situation sharing the way they do. I hope it works out for them long term.
2) The due diligence work they did for this deal was absolutely not a waste (even if they never sell the company). Having gone through this process once will make it orders of magnitude easier if they sell in the future (especially gathering and organizing documents from the very early stages). Even if they don't sell, the process would have shown light on potential liabilities and issues they hadn't even been thinking about. This is helpful regardless of who owns the company. Maybe not worth the time and money; but definitely not a waste.
Re: I almost sold Baremetrics for $5M
#4"In many ways, I feel like my job as CEO and Founder is to absorb all of the insane parts of running a business so my team can focus on building, learning and enjoying their jobs."
This is spot on. I would extend to senior leadership in general.
Re: I almost sold Baremetrics for $5M
#5Hearing many horror stories over backing out at last minute, I wonder why breakup fees and escrow are not more popular in startup world. E.g. if you would like to acquire for $5mln you need to deposit $100k. If you walk out, this is a breakup fee. If startup bails it also have to pay same amount to the acquire.
At least something to pay the lawyers . . .
Re: I almost sold Baremetrics for $5M
#6Due diligence works both ways and it pays to do your homework on potential buyers and to ask them to prove their claims, or even ask them to put some money down, before proceeding.
I don't know the company or what they do but cynical me can also imagine a third party pretending to want to acquire in order to gain inside knowledge.
Re: I almost sold Baremetrics for $5M
#7Hearing many horror stories over backing out at last minute, I wonder why breakup fees and escrow are not more popular in startup world. E.g. if you would like to acquire for $5mln you need to deposit $100k. If you walk out, this is a breakup fee. If startup bails it also have to pay same amount to the acquire.
I've seen million dollar deposits get forfeited, people are insane! It might honestly be a good business model on its own.
Re: I almost sold Baremetrics for $5M
#8Hearing many horror stories over backing out at last minute, I wonder why breakup fees and escrow are not more popular in startup world. E.g. if you would like to acquire for $5mln you need to deposit $100k. If you walk out, this is a breakup fee. If startup bails it also have to pay same amount to the acquire.
A company sales can go wrong for many reasons, how do you differentiate between a legitimate reason to not proceed to the sale and a "last minute backing out"?
I assume that's what a LOI (which is all that the founder had) is for: it comes before any legally binding agreements and allows both parties to be sure they get what they want without bad surprises.
Re: I almost sold Baremetrics for $5M
#9Hearing many horror stories over backing out at last minute, I wonder why breakup fees and escrow are not more popular in startup world. E.g. if you would like to acquire for $5mln you need to deposit $100k. If you walk out, this is a breakup fee. If startup bails it also have to pay same amount to the acquire.
The companies getting purchased usually don't have enough leverage to get a breakup fee.
Re: I almost sold Baremetrics for $5M
#10Hearing many horror stories over backing out at last minute, I wonder why breakup fees and escrow are not more popular in startup world. E.g. if you would like to acquire for $5mln you need to deposit $100k. If you walk out, this is a breakup fee. If startup bails it also have to pay same amount to the acquire.
The typical terms sheet has an 'out' in that any surprises during DD are grounds for annulment without compensation.