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Camera+ turned down acquisition offers and says no to VC money

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Re: Camera+ turned down acquisition offers and says no to VC money

#11

Post by mseebach »

It seems to make sense to run the numbers here:

8 million sold $1 apps, less 30% to app stores, that's $5.6m. If all 17 people on the about page took $100k salaries for the full two years (which they probably haven't, they've likely grown to this size from a lower number over the two years), that leaves $2.2m for running costs and profit. Besides that, they have 7 other apps in their portfolio which must be expected to provide some revenue.

In other words, what would they possibly do with more cash?

Re: Camera+ turned down acquisition offers and says no to VC money

#12

Post by its_so_on »

muellerwolfram wrote: post #3

if you have a product thats selling so well, is growing organically, and is already build...why would you ever consider outside funding?

because there are six hundred million people worldwide in your target audience, you have convinced 10,000 of them to pay you, and all told you need to spend $5 on a new customer, and make $10 from a customer in a year.

What, do you expect to grow organically from 10k users one year to 40k, then 160k, then 640k, and so on, hoping the market stays EXACTLY THE SAME FOR THE NEXT 8 YEARS? (Oh and you can't spend anything on development because you're rolling all the gross profit into reaching new customers.)

Or, you know, do you want to speed up the process and try to get as much of the six hundred million this year as you can, while the iron is hot - and stay ahead of your competition, who will be vc-backed?

Re: Camera+ turned down acquisition offers and says no to VC money

#14

Post by clarky07 »

muellerwolfram wrote: post #3

if you have a product thats selling so well, is growing organically, and is already build...why would you ever consider outside funding?

Generally I wouldn't want to, but one possible reason is to take some money off the table. Just sell part (non-controlling) of your stake to have FU money personally. You don't want to sell the company, but you might want the life-changing amount of money that says you don't ever have to work again. That can be done by selling part of the company to another investor.

Re: Camera+ turned down acquisition offers and says no to VC money

#15

Post by lemming »

mseebach wrote: post #11

It seems to make sense to run the numbers here: 8 million sold $1 apps, less 30% to app stores, that's $5.6m. If all 17 people on the about page took $100k salaries for the full two years (which they probably haven't, they've likely grown to this size from a lower number over the two years), that leaves $2.2m for running costs and profit. Besides that, they have 7 other apps in their portfolio which must be expected…

$2.2MM is probably peanuts compared to what they would have made in an acquisition, you'd have to figure that any acquisition price would be far north of $8MM. I'm perversely glad they didn't take it, it's great to see people really dedicated to actually starting a viable business, but frankly I'm surprised. I'd like to think I'd make the same choice but I'm not sure, especially if I were the founder. Still, kudos to them.

Re: Camera+ turned down acquisition offers and says no to VC money

#16

Post by mseebach »

lemming wrote: post #15
mseebach wrote: post #11

It seems to make sense to run the numbers here: 8 million sold $1 apps, less 30% to app stores, that's $5.6m. If all 17 people on the about page took $100k salaries for the full two years (which they probably haven't, they've likely grown to this size from a lower number over the two years), that leaves $2.2m for running costs and profit. Besides that, they have 7 other apps in their portfolio which must be expected…

$2.2MM is probably peanuts compared to what they would have made in an acquisition, you'd have to figure that any acquisition price would be far north of $8MM. I'm perversely glad they didn't take it, it's great to see people really dedicated to actually starting a viable business, but frankly I'm surprised. I'd like to think I'd make the same choice but I'm not sure, especially if I were the founder. Still, kudos to…

See the chart here: http://blog.asmartbear.com/wp-content/ss-images/lifestyle-ve... from http://blog.asmartbear.com/rich-vs-king-sold-company.html

Re: Camera+ turned down acquisition offers and says no to VC money

#18

Post by pcopley »

clarky07 wrote: post #14
muellerwolfram wrote: post #3

if you have a product thats selling so well, is growing organically, and is already build...why would you ever consider outside funding?

Generally I wouldn't want to, but one possible reason is to take some money off the table. Just sell part (non-controlling) of your stake to have FU money personally. You don't want to sell the company, but you might want the life-changing amount of money that says you don't ever have to work again. That can be done by selling part of the company to another investor.

Can someone with VC experience (on either side of the table) explain what part of an investment goes into the founder's pocket? Does it change with each deal or is there a standard percentage?

Obviously a $10MM investment does not equate to a $10MM deposit in the founder's personal bank account, but at what point is the founder no longer expected to live on Ramen?

Re: Camera+ turned down acquisition offers and says no to VC money

#19

Post by joshuahedlund »

its_so_on wrote: post #12
muellerwolfram wrote: post #3

if you have a product thats selling so well, is growing organically, and is already build...why would you ever consider outside funding?

because there are six hundred million people worldwide in your target audience, you have convinced 10,000 of them to pay you, and all told you need to spend $5 on a new customer, and make $10 from a customer in a year. What, do you expect to grow organically from 10k users one year to 40k, then 160k, then 640k, and so on, hoping the market stays EXACTLY THE SAME FOR THE NEXT 8 YEARS? (Oh and you can't spend anything…

You may have a general point, but there's a couple orders of magnitude difference between 10,000 (your example) and 8 million (the company we're discussing).

Re: Camera+ turned down acquisition offers and says no to VC money

#20

Post by grellas »

Will the failure of the Facebook IPO change the climate here going forward? Possibly. But it doesn’t matter . . . we didn’t build this company with the intention to flip it. We’re in it for the long-haul and we’re committed to building a real business that makes great apps, not on selling-out.

The strongest position any founder can hold. It doesn't mean you can't consider and even take short-term options for funding or acquisition. It means you need not take them unless you can do so on your own terms. Entrepreneurs have come a long way in this most recent decade in being able to do rapid company development - historically, the scale at which this is happening is quite dramatic - but some things never change: to succeed, develop a sound business model and be very careful not to get yourself overextended financially in the process of building it out. Doing that is no guarantee of success but it is a sure-fire way to limit your risks of failure.

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