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My sixth year as a bootstrapped founder

mtlynch.io

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Re: My sixth year as a bootstrapped founder

#161

Post by csa »

danielmarkbruce wrote: post #151
csa wrote: post #140

Earlier quoted context omitted.

> right now the business has a profit, and therefore a valuation, closer to zero You’re thinking of this like an engineer rather than a business person. 1. When selling a business like this, the $236k would be called SDI or SDE (seller discretionary income/earnings). 2. The buyer determines what, if any, of that SDE will need to go to paying someone to do what the seller does. These duties could be assumed by the buy…

He's thinking about it like a business person who is looking at buying a business. It's worth close to zero. In it's current state this business is not an asset, it's a organization doing stuff. Breaking it out into SDE + adjustment is what the comment already does, albeit without using that terminology. One cannot hire a person who can do all the things this owner does. The person is a smart former google engineer.…

> It's worth close to zero.

Serious question… have you bought a business before?

It’s what I do.

This business is not worth close to zero, and the stuff that the current owner does (even if he’s some miracle worker, which xooglers aren’t guaranteed to be) can be handled any number of ways that cost less than $236k by some buyer. This may not mean you or the person that I replied to, but you two most likely aren’t a part (and certainly not a significant part) of the market of buyers for businesses like this.

I can’t tell if you’re circle jerking the owner, xooglers, or the (limiting) engineering way of thinking about businesses.

Re: My sixth year as a bootstrapped founder

#162

Post by holoduke »

titanomachy wrote: post #141
holoduke wrote: post #132

Earlier quoted context omitted.

No way that 7, 15x is realistic. From my previous 2 startups none were sold for more than 4x. And these were healthy growing +10m businesses. I am not sure where you got those numbers from. I am curious.

Why sell a healthy growing $10m business for 4x earnings? Did you have debt to service, or just wanted to do something different, or some other reason?

Because valuation is different than the actual yearly revenue. Company could be valued 10m, but revenue 1m. In our case because of legal permits we aquired to run our business and would normally take up to two years to get.

Re: My sixth year as a bootstrapped founder

#163

Post by danielmarkbruce »

csa wrote: post #161
danielmarkbruce wrote: post #151

Earlier quoted context omitted.

He's thinking about it like a business person who is looking at buying a business. It's worth close to zero. In it's current state this business is not an asset, it's a organization doing stuff. Breaking it out into SDE + adjustment is what the comment already does, albeit without using that terminology. One cannot hire a person who can do all the things this owner does. The person is a smart former google engineer.…

> It's worth close to zero. Serious question… have you bought a business before? It’s what I do. This business is not worth close to zero, and the stuff that the current owner does (even if he’s some miracle worker, which xooglers aren’t guaranteed to be) can be handled any number of ways that cost less than $236k by some buyer . This may not mean you or the person that I replied to, but you two most likely aren’t a…

Yes. Lots of them.

Who is the buyer? The logical buyer of this hardware business doing $1m per year and can backfill all the things this guy does at some low enough number that this business generates cash. And then, enough cash that it's worthwhile to go through diligence and paper up a deal and take on the risk that there isn't skeletons in the closet.

Re: My sixth year as a bootstrapped founder

#164

Post by JonChesterfield »

tgtweak wrote: post #127
JonChesterfield wrote: post #123

Their tinypilot kvm works. It's in the category of boring infrastructure - I leave it plugged into whatever machine is currently in need of attention and ` https://tinypilot/ ` connects to it. Little box hanging off the PoE switch, much less bother than plugging a keyboard and monitor in. Especially so when I'm away from the office. Recommended. Saved me a lot of hassle. Thanks for the product! I'd like to be able to…

It's a good idea for a feature - many other out-of-band solutions have this. I think the issue comes mostly in that you would need to unplug the server to add (and remove...) some kind of relay-controlled power interrupt. I would assume that most users of this are in a rack/datacenter/server environment and have switched PDUs they can remotely trigger power with, and it might make more sense to build in PDU managemen…

This thing https://www.audiophonics.fr/en/diy-kits-and-boards/audiophon... is a C13/C14 block with a 3.5mm control. AC power on if 12V minimal current applied via the 3.5mm, otherwise off. I haven't got around to it yet but my sketchy DIY idea is power-over-ethernet into a splitter into that. That'll power off the server when the switch port is turned off.

Strangely I haven't found a relay in the same packaging anywhere else.

Re: My sixth year as a bootstrapped founder

#165

Post by t_mann »

danielmarkbruce wrote: post #158
solumunus wrote: post #152

Earlier quoted context omitted.

Ouch. Businesses sell for more than 4x all the time. There are countless examples of that.

Give the examples. Businesses this size in this market have very few (/0) logical buyers.

I can't speak for valuations, but I don't see the 'no logical buyers' argument. This product has multiple competitor products, mostly at far higher price points, any of those manufacturers would seem like a logical buyer to me (if only to get rid of the competition). Can you elaborate?

Re: My sixth year as a bootstrapped founder

#166

Post by paulddraper »

tgtweak wrote: post #51

I think people (and the founder) are focusing on yearly profits as their remuneration and comparing it to a salary... but the reality is you're creating a company that should be valued (and eventually sell) for 7-15X Earnings - and you really should be looking at that increase in value vs your increase in profits. In reality your net worth went up by over $1.5 million in the last year, in addition to earning 236k - t…

> creating a company that should be valued (and eventually sell) for 7-15X Earnings

Only high-growth, high-margin businesses can get 7x+ earnings.

Creating a sufficient level of growth to garner 7x valuation is very tough to do bootstrapped.

---

EDIT: The only reason anyone gets a 10x etc valuation is because they're doubling+ year-over-year, and very likely they'll be 3x bigger in 18 months.

So basically, that's a 3-4x valuation...of your probable revenue in a year and a half.

Re: My sixth year as a bootstrapped founder

#167

Post by paulddraper »

solumunus wrote: post #152
holoduke wrote: post #132

Earlier quoted context omitted.

No way that 7, 15x is realistic. From my previous 2 startups none were sold for more than 4x. And these were healthy growing +10m businesses. I am not sure where you got those numbers from. I am curious.

Ouch. Businesses sell for more than 4x all the time. There are countless examples of that.

Businesses sell for 0x and Infinityx all the time. There are countless examples of that.

But bootstrapped business with growth rate for 7x+ (non-trivial) revenue are uncommon.

4x may be "ouch" for a VC but not a bootstrapper.

Re: My sixth year as a bootstrapped founder

#168

Post by danielmarkbruce »

t_mann wrote: post #165
danielmarkbruce wrote: post #158

Earlier quoted context omitted.

Give the examples. Businesses this size in this market have very few (/0) logical buyers.

I can't speak for valuations, but I don't see the 'no logical buyers' argument. This product has multiple competitor products, mostly at far higher price points, any of those manufacturers would seem like a logical buyer to me (if only to get rid of the competition). Can you elaborate?

It's small. There are very few logical buyers of technically complex small businesses. There are logical buyers of small businesses and logical buyers of technically complex businesses, but at the intersection there is not.

Even bog standard SAAS companies struggle to sell at a decent multiple when they are really small, and they aren't especially complex.

Re: My sixth year as a bootstrapped founder

#169

Post by yakito »

mtlynch wrote: post #130
yakito wrote: post #5

Very interesting, Michael, thanks for sharing! As a founder and bootstrapper myself, I really relate to parts of your post (well, not so much to that 2000% jump in profit... haha, maybe one day). I'd like to understand the steps leading up to these six years. What motivated you to create that particular product? was it simply something that interested you and that you believed had potential? What was the goal when yo…

Thanks for reading! > I'd like to understand the steps leading up to these six years. What motivated you to create that particular product? was it simply something that interested you and that you believed had potential? What was the goal when you created TinyPilot? Thanks! It was a "scratch my own itch" kind of path. I had a home VM server[0], and any time I messed up its network settings or wanted to install a new…

Thanks a lot! Also, nothing new, but I am new to your blog and I love how you document everything! You need to write about writing one day ;)

Re: My sixth year as a bootstrapped founder

#170

Post by JonChesterfield »

mtlynch wrote: post #142
JonChesterfield wrote: post #123

Their tinypilot kvm works. It's in the category of boring infrastructure - I leave it plugged into whatever machine is currently in need of attention and ` https://tinypilot/ ` connects to it. Little box hanging off the PoE switch, much less bother than plugging a keyboard and monitor in. Especially so when I'm away from the office. Recommended. Saved me a lot of hassle. Thanks for the product! I'd like to be able to…

Thanks for the kind words! Yeah, power cycling is one of our top requests and a feature I'd like to have personally. If we just plugged into the ATX pins on the motherboard, that would be technically pretty straightforward, but it increases the work and expertise that end-users have to have. I've looked into something like a smart plug, but then users need to configure their BIOS to always power on when power is avai…

The two ATX pins you short to turn the box on connected to the general purpose IO on the pi is probably the obvious play. The pikvm people suggest running all the ATX pins over another ethernet connection which is probably as neat as it'll get, though I'd inevitably connect the ATX-over-RJ45 thing to the switch PoE at some point and that's probably bad with all 8 wires connected.

Plus you'd want a ATX header to RJ45-or-whatever port per machine. Workable but not very elegant.

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