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What's the lowest offer you'd take?
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Re: What's the lowest offer you'd take?
#2We're working hard on finishing up our YC application, and we're having a lot of problems with this one:
"If one wanted to buy you three months in (August 2007), what's the lowest offer you'd take?"
First of all, what if we're not particularly interested in selling the company that fast? Should we just put some ridiculously high number that no one would actually pay?
Also, the numbers would seem to vary significantly depending on the details of the acquisition. Are we getting jobs at the purchasing company with good salaries, stock, and creative freedom? Or are we getting some lump sum? Should we put different numbers for different situations?
But assuming we knew we wanted to sell and knew some specifics of the deal, it's still hard for me to come up with hard numbers. Should I base it on how much money we think the product will make? Or perhaps how much money we want to have in the bank to fund future startups? Or on the estimated value of our assets after three months?
How are you approaching this question? What factors are you considering? Any help is appreciated.
Re: What's the lowest offer you'd take?
#3We're working hard on finishing up our YC application, and we're having a lot of problems with this one: "If one wanted to buy you three months in (August 2007), what's the lowest offer you'd take?" First of all, what if we're not particularly interested in selling the company that fast? Should we just put some ridiculously high number that no one would actually pay? Also, the numbers would seem to vary significantly…
I think that question, like the question about stock, is largely to make you think about the problem, and see how you react to it. Obviously, it's not possible to produce a number with any real meaning; just discuss potentialities, grand strategy, basically the conceptual framework you'd use for producing that number.
NB: As usual, this is me, guessing. Only pg knows for sure. :)
Re: What's the lowest offer you'd take?
#4We're working hard on finishing up our YC application, and we're having a lot of problems with this one: "If one wanted to buy you three months in (August 2007), what's the lowest offer you'd take?" First of all, what if we're not particularly interested in selling the company that fast? Should we just put some ridiculously high number that no one would actually pay? Also, the numbers would seem to vary significantly…
A good way to start might be the rule of thumb that startup investors typically want a 10x return on their money (for companies that succeed). If YC invests $20K in your company in return for 6% of the company, and the company sells for 3.3 million, they get 200K.
Our three founders came up with a number in our own heads, then we agreed on something in the middle...which turned out to be pretty close to 3 million.
As to the question of whether to sell so soon, my personal feeling is that selling soon in a case like this would be a fantastic deal. Each founder would walk away with $1M, and the experience of being a successful entrepeneur. Next, take 100K and throw a tremendous party, take another 100K on go on a ridiculous vacation...then get back to work with the $800K you have left over and start up your next company!
Re: What's the lowest offer you'd take?
#5We're working hard on finishing up our YC application, and we're having a lot of problems with this one: "If one wanted to buy you three months in (August 2007), what's the lowest offer you'd take?" First of all, what if we're not particularly interested in selling the company that fast? Should we just put some ridiculously high number that no one would actually pay? Also, the numbers would seem to vary significantly…
A good way to start might be the rule of thumb that startup investors typically want a 10x return on their money (for companies that succeed). If YC invests $20K in your company in return for 6% of the company, and the company sells for 3.3 million, they get 200K. Our three founders came up with a number in our own heads, then we agreed on something in the middle...which turned out to be pretty close to 3 million. As…
Er. I recommend not immediately pissing away $200K, but that's just me. If you're in your early 20's, a $200K investment could easily be $1M by your thirties.
Taking a $1M lump-sum means never having to work again. That's not to say you won't work again, or won't be productive again. But I'd feel really stupid if at some later date I had to take a job, just because I pissed away my capital.
Re: What's the lowest offer you'd take?
#6Why do you have to take an offer at all? It normally takes anywhere from 1-2 years to make a site successful enough to justify selling for a gargantuan amount. In 3 months, how much growth can you get to show enough promise of future growth/monetization?
Re: What's the lowest offer you'd take?
#7To valuate your company after three months you have to take two things into account:
A) How much value will you have created be the end of three months?
B) How much value will you still be able to create?
If you only have enough talent and ideas to last you for three months, you don't get funded. And if you think you'll have nothing done by the end of three months (but will still have talent and ideas), you also don't get funded.
And if you're able to create something of great value after three months but you'll still have lots of value left to add, then just unask the question because the answer is irrelevant.
Re: What's the lowest offer you'd take?
#8just my opinion but i'd approach this question more from the angle, what is the $X I need to have financial freedom. do the math based on the % of the company you own to work out how much you'd need to sell the company for to make that amount. $X is going to vary for everyone.
Re: What's the lowest offer you'd take?
#9Earlier quoted context omitted.
A good way to start might be the rule of thumb that startup investors typically want a 10x return on their money (for companies that succeed). If YC invests $20K in your company in return for 6% of the company, and the company sells for 3.3 million, they get 200K. Our three founders came up with a number in our own heads, then we agreed on something in the middle...which turned out to be pretty close to 3 million. As…
Er. I recommend not immediately pissing away $200K, but that's just me. If you're in your early 20's, a $200K investment could easily be $1M by your thirties. Taking a $1M lump-sum means never having to work again. That's not to say you won't work again, or won't be productive again. But I'd feel really stupid if at some later date I had to take a job, just because I pissed away my capital.
That comment was intended to be read somewhat tongue in cheek, but for the sake of argument:
1) What's the point of having money if you aren't going to spend it and have fun? I suppose you could throw a smaller party and write a big check to the Google Philanthropy...but either way money is meant to be used.
2) If you actually had the skills and personality to turn $20K from YC into $3M in three months...you've clearly got entrepeneurism in the blood and shouldn't ever have trouble finding a lucrative job that you enjoy.
Re: What's the lowest offer you'd take?
#10To valuate your company after three months you have to take two things into account: A) How much value will you have created be the end of three months? B) How much value will you still be able to create? If you only have enough talent and ideas to last you for three months, you don't get funded. And if you think you'll have nothing done by the end of three months (but will still have talent and ideas), you also don'…
Perhaps the question is meant to be read as sort of a Zen Koan.
You are asked to present a rational analysis of a situation that, if you think rationally about it, cannot occur!