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I sold TinyPilot, my first successful business

mtlynch.io

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Re: I sold TinyPilot, my first successful business

#91

Post by hiddencost »

xyst wrote: post #35

Wild. I vaguely remember this founder spending an obscene amount of money on some boutique firm to give homepage a small update. Seems he exited the Google grind about 6 years ago. I guess salaries were between $180-250K during that time frame. Google grinder for 6 years: $1,080,000-$1,500,000 Entrepreneur: “$920k over four years (with sale)”, but doesn’t include the 2 bombs he had prior to successful exit. (None of…

Assuming he was a senior SWE, he would have made around $400k / yr staying at Google.

I suppose if he can parlay this outcome into an L7 role at Google, E.G, then in another 6 years he would break even (compared to staying at L5)

Re: I sold TinyPilot, my first successful business

#92

Post by Arch-TK »

> ServerCo would email me a list of detailed questions about TinyPilot’s finances and risks, I’d answer in a day or two, and then there’d be weeks of silence. Finally, they’d respond with a new round of questions, and we’d start the cycle again.

Wow, I've done technical due diligence for a number of large acquisitions in the past few years (quite a few big enough that most people on HN would have heard of them) and the usual timescales are in the order of a couple of weeks and involve constant and in some cases daily question rounds.

Taking what sounds like months and months of time to handle the process sounds super laid back. Certainly seems far more stressful than anything I've ever seen.

Re: I sold TinyPilot, my first successful business

#93

Post by demondemidi »

talldatethrow wrote: post #51
shooker435 wrote: post #41

Earlier quoted context omitted.

This mindset assumes that the only measure of success is monetary. If he left Google to try and get richer than staying at Google, then sure, he probably lost. However, he kept trying again before job hunting or returning to big tech. This tells me the monetary factor was smaller than something else. You mention the underrated educational experience in your last sentence, but there's so much more than that. He was pr…

How is healthcare tied to employment? Isn't it available to buy on the open market?

In the US there is the affordable care act from ~2013, where anyone can purchase insurance from a pooled market subsidized by the government up to a certain income (50k I think). But that is also impacted by the state you live in, as the states negotiate the contracts paid by federal dollars (I know it's effed up). So the ACA is cheaper on the west coast than it is in Alabama. Today, a "gold" policy for a single man in his 40's is about $900/month through the ACA. The cheaper "emergency" plans (aka "trash" plans) appended by Trump are still a few hundred dollars, but cover almost nothing.

I now pay $120 for me and my wife for a plan that is better than the $1000 plan through the ACA in Oregon because I'm no longer self employed.

That's almost a 10x difference.

After working for myself for 12 years, hustling consulting and contracting gigs, I'm way happier working for a company that pays well, has great benefits, and I always know I have a paycheck coming.

Re: I sold TinyPilot, my first successful business

#94

Post by DowagerDave »

alberth wrote: post #34

Broker commission: $88,900 Legal fees: $18,297 This equates to ~18% of total sale price. Most people don't realize how much get eaten up in deal/closing costs. Congrats to him for the successful exit. Reading his blog post over the years should be eye opening to anyone just how hard starting/running a business is.

>> Most people don't realize how much get eaten up in deal/closing costs.

They do if they've sold a house :)

Re: I sold TinyPilot, my first successful business

#95

Post by paulddraper »

xyst wrote: post #36
alberth wrote: post #34

Broker commission: $88,900 Legal fees: $18,297 This equates to ~18% of total sale price. Most people don't realize how much get eaten up in deal/closing costs. Congrats to him for the successful exit. Reading his blog post over the years should be eye opening to anyone just how hard starting/running a business is.

A broker is just a middleman between the seller and buyer. What’s the value add for sales like this?

Depends on the seller.

If you're already knowledgable, experience, and well-networked, there is less value.

If you're not...well, have you ever sold a business?

Re: I sold TinyPilot, my first successful business

#96

Post by mtlynch »

axus wrote: post #89
mtlynch wrote: post #2

Author here. I'm happy to answer any questions about this post, the sale process, or my time running TinyPilot.

Hopefully your buyer gets a nice sales boost from this article! Why wouldn't you go back to a corporation and try to make a software product there, as an employee?

Thanks for reading!

>Why wouldn't you go back to a corporation and try to make a software product there, as an employee?

Oh, boy. So many reasons!

The thing I really love about running a company of my own is that I don't have to get anyone's approval to do things. If I have an idea, I can work on it, and I don't have to convince anyone or justify the time or money.

I also really love being able to choose my own hours, tools, and schedule. At Google, I found real-time chat distracting and net negative (I get that they bring value to some people, just not me), and I found that most meetings were a waste of time. At TinyPilot, we never used real-time chat, and we were deliberate and efficient about meetings.

At Google, I often found that things that were good for the company or my team or our customers were often not aligned with incentives for me (e.g., it was easier to get promoted for launching a complex feature than for a trivial feature that solved the problem elegantly). With my own small company, it's much easier to align incentives between me, my teammates, and our customers.

I could go on and on, but I guess the underlying issue is that I place a high value on independence and autonomy, and no employer can match what I get on my own.

Re: I sold TinyPilot, my first successful business

#99

Post by mtlynch »

berkanunal wrote: post #82
mtlynch wrote: post #2

Author here. I'm happy to answer any questions about this post, the sale process, or my time running TinyPilot.

Congratulations. I have been following the retrospectives for more than 2 years now. I hope to keep enjoying your monthly posts. My question is, did you change anything on your strategy after you were set on selling? Or the goal was still the same, optimize earnings?

Thanks for reading!

>My question is, did you change anything on your strategy after you were set on selling? Or the goal was still the same, optimize earnings?

Once I started the process of preparing the company for sale, it did change a lot of the strategy.

For example, one of the things I'd been thinking about was how to allow users to purchase recurring subscriptions to their TinyPilot Pro software licenses rather than having to remember to re-purchase every year. But once I started the sales process, that basically became non-viable because it meant I'd be investing thousands in software development, but it wouldn't pay off for another year or so, so it would weaken our profit and loss statements and result in a lower valuation.

There were a lot of things like that, where I had to reject any investment that wouldn't pay off in three months or less.

The other thing that was a bummer about preparing to sell was realizing that everything effectively becomes so much more expensive. Normally, if I want to give someone a $5k bonus, it costs me $5k. When I knew I was about to sell and wanted a 3x multiple, the $5k bonus effectively costs me $20k because it's $5k for the bonus itself and then -$15k for the sale price on a 3x multiple. I could try to argue that the $5k is "discretionary" and therefore not part of SDE, but I think the buyer would be in their right to argue that it's not discretionary, as it sets bonus expectations for future years.

[0] https://mtlynch.io/retrospectives/2023/08/#what-would-make-r...

Re: I sold TinyPilot, my first successful business

#100

Post by codegeek »

"When you sell a business at TinyPilot’s scale, there’s no deposit. You can invest hundreds of hours into preparing reports for due diligence, reveal all your confidential business secrets, and spend thousands of dollars negotiating legal documents and still walk away with nothing if the buyer backs out."

Great write up overall but as someone who has bought a couple of businesses, it is not just the seller who loses out if a buyer backs out. The buyer can also spend lot of time/money vetting the business including legal fee etc during due diligence. On a recent deal, I spent over 10k as a buyer until we finalized the APA. If the deal fell through after that (possible), I would have lost that money and the months of time of course.

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