At the time of its sale to Amazon, I remember wondering how twitch could only be worth 1 billion compared to something like WhatsApp being worth 20 billion. It was purely from an engineering standpoint that I considered what twitch was doing to be vastly more impressive. It's three years later and Amazon hasn't been too overbearing with the changes they've made, but I wonder if JKan believes he got fair value for his company?
The Founder’s Guide To Selling Your Company (2014)
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Re: The Founder’s Guide To Selling Your Company (2014)
#12At the time of its sale to Amazon, I remember wondering how twitch could only be worth 1 billion compared to something like WhatsApp being worth 20 billion. It was purely from an engineering standpoint that I considered what twitch was doing to be vastly more impressive. It's three years later and Amazon hasn't been too overbearing with the changes they've made, but I wonder if JKan believes he got fair value for his…
Life is what you negotiate :)
Taking $970mm seemed like a good deal given the level of risk. So from an expected value perspective it was a fair trade. Twitch has grown much since then, but you can't have regrets when it comes to trades.
Re: The Founder’s Guide To Selling Your Company (2014)
#13Great article and insight into a somewhat opaque process. I sold my company in 2014 and the biggest surprise to me was how long and time consuming the process was. It really impaired my ability to run the company as efficiently as I would have liked during the transition process. And the stress of having to meet with buyers, but not being able to fully communicate the scope of the meetings to the team until the appro…
Yup! Don't engage in the acquisition process unless you want to commit to it -- it will suck out all your time.
Re: The Founder’s Guide To Selling Your Company (2014)
#14> A company’s financial value hinges on its profits and model of its future cash flows. For the vast majority of startups in tech, this will be zero. I’m not sure just how true that is today. In my YC batch probably 30%? of companies were profitable or at least eying profitability. I’d actually be very curious to know what those numbers are.
"Ramen Profitable" ≠ Profitable for most public companies, and even if they did, would be immaterial. I'm sure most of the 30% referenced above are barely profitable.
At Cisco, I operate at a roughly 20% profit margin on a roughly $50,000,000,000 annual business. Most acquisitions are immaterial from a profitability standpoint.
Re: The Founder’s Guide To Selling Your Company (2014)
#15I've read this a few times and having been through up and down periods it's clear that the most important part of this, is the following: The best time to sell your startup is when you have many options. It needs to be really emphasized that this is a very rare place for the vast majority of startups. That means this advice isn't generally applicable. Which brings up the implicit question, why would you decide to sel…
Interesting point. I could also write "The Founder's Guide to Selling Your Company When You Have Few Options" based on my experiences. It is a much more horrible process.
Re: why sell? 970 million reasons. Biggest one was that it seemed like good value for what we had.
Another reason: from my perspective (it may be different for other people involved) we were also at an inflection point where there was a steep power law distribution of people who owned content (game studios) and therefore a relatively small number of people had a lot of power over Twitch. Similar to Netflix pre-Netflix originals. That's not a good long term position to be in (hence Netflix originals). I think that's changed now for Twitch.
Re: The Founder’s Guide To Selling Your Company (2014)
#16Hey HN, Justin here (the post's original author). Didn't expect this to get posted again. I'm happy to answer any questions here about selling your company.
I recently started a new company, Atrium, aiming to make legal services (such as M&A) for startups and tech companies easier as well.
Re: The Founder’s Guide To Selling Your Company (2014)
#17This is great, but I'd love to see a post on selling a side business (no outside investment) and less than $10,000 a month in MRR.
Buying small websites is a hard business, because you have to maintain them. If one engineer can maintain 10 sites, it costs $2k/mo to maintain each, so the gross profit has to be well above that to make a business out of it. Maintaining 10 sites, each written independently with their own tooling choices, requires an engineer with a very large cranium.
It can be done if you pair it with an agency model. You keep multiple devs on hand who treat the sites as internal clients. Over time if you keep making acquisitions, you have less and less need to keep the external client pipeline full.
Example - http://www.simplefocus.com/
Re: The Founder’s Guide To Selling Your Company (2014)
#18This is great, but I'd love to see a post on selling a side business (no outside investment) and less than $10,000 a month in MRR.
Find a couple of your competitors and set up a bidding process, that is probably the best way to get the maximum out of a company like that. Aim for 10 years net or so, and be sure to stipulate that you reserve the right to refuse all offers.
I've written up a HN thread about this subject a long time ago:
Re: The Founder’s Guide To Selling Your Company (2014)
#19Justin - you mentioned that investments bankers take 1-2% of the selling price. What percentage do all the rest of the closing costs take up (lawyers, etc)? What are these other closing costs?
Re: The Founder’s Guide To Selling Your Company (2014)
#20> A company’s financial value hinges on its profits and model of its future cash flows. For the vast majority of startups in tech, this will be zero. I’m not sure just how true that is today. In my YC batch probably 30%? of companies were profitable or at least eying profitability. I’d actually be very curious to know what those numbers are.
"Ramen Profitable" ≠ Profitable for most public companies, and even if they did, would be immaterial. I'm sure most of the 30% referenced above are barely profitable. At Cisco, I operate at a roughly 20% profit margin on a roughly $50,000,000,000 annual business. Most acquisitions are immaterial from a profitability standpoint.
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