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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?

#11

Post by Alex3917 »

sethjohn wrote: post #10
Alex3917 wrote: post #7

To 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!

Alex3917 threw his shoe at sethjohn, and sethjohn was then enlightened.

Re: What's the lowest offer you'd take?

#13

Post by dfranke »

Alex3917 wrote: post #11
sethjohn wrote: post #10

Earlier quoted context omitted.

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!

Alex3917 threw his shoe at sethjohn, and sethjohn was then enlightened.

Five pounds of AJAX!

Re: What's the lowest offer you'd take?

#14

Post by pg »

zkinion wrote: post #6

Why 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?

Enough, obviously, because we've had several startups that got acquisition offers after three months.

Re: What's the lowest offer you'd take?

#15

Post by pg »

bhb wrote: post #2

We'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…

"Approaching the question?" How about just answering truthfully? What would someone have to offer, assuming nothing else about the deal?

If you put some high number no one would offer, you're not really answering the question, are you? If you say you'd need 20 million, I'm going to ask: so if someone offered 19, you'd say no?

Re: What's the lowest offer you'd take?

#16

Post by pg »

sethjohn wrote: post #4
bhb wrote: post #2

We'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…

Honestly, this is not a hard question. We're not asking you what you think we want as a return. We're asking what you'd take.

So if you think 3 million is a fantastic deal, then you haven't answered the question correctly. We're not asking what you think would be a fantastic deal, but what would be the worst deal you'd still accept. Would you really turn down 2 million for three months' work?

Incidentally, we don't even think about what we want as a return. Some VCs may, but we don't. We just fund anyone who seems good, and assume the returns will take care of themselves.

Re: What's the lowest offer you'd take?

#17

Post by imperator »

The figure you give depends on your feelings which are created from your internal and external circumstances. I immidiately asked myself the question, "What do I want?"

This was my answer: $2,000,000 for property, $1,000,000 for the house (I live in Silicon Valley), $2,000,000 for traditional reinvestment, $1,000,000 to start the next company, $6,000,000 total for each partner,

After three months, it depends on where the software is. However, the purchasing company will be the one evaluating that aspect. For me, it is a question of what I want versus what they are willing to give in return.

Re: What's the lowest offer you'd take?

#18

Post by herdrick »

jadams wrote: post #5
sethjohn wrote: post #4

Earlier 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.

"Taking a $1M lump-sum means never having to work again."

Sorry, no.

Re: What's the lowest offer you'd take?

#19

Post by pistoriusp »

The lowest, R4,000,000 (ZAR), it's about $540,000.

Invested month-to-month at a fixed interest rate of 8% gives you more than R26,000 ($3,500). After taxes it's roughly R19,000.

I don't know about the USA but in South Africa this is a fairly decent amount of money to receive each month.

I would use the money to purchase a home and a car (required in RSA) and focus on my next startup.

Aaagh. No stress. Just fun.

Re: What's the lowest offer you'd take?

#20

Post by python_kiss »

pg wrote: post #16
sethjohn wrote: post #4

Earlier 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…

Honestly, this is not a hard question. We're not asking you what you think we want as a return. We're asking what you'd take. So if you think 3 million is a fantastic deal, then you haven't answered the question correctly. We're not asking what you think would be a fantastic deal, but what would be the worst deal you'd still accept. Would you really turn down 2 million for three months' work? Incidentally, we don't e…

What a relief! Thank you for sharing that. After watching everyone talk in millions here, I was concerned my "absolute worst" deal that stretched below $100k might hurt our chances of being accepted to YC. I am going to go ahead and put in an honest estimate :) thanks,
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