Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

I sold Baremetrics

baremetrics.com

Post reply on HN
Print view View original

411–420 of 521 posts

Re: I sold Baremetrics

#411

Post by ignoramous »

lubos wrote: post #403

> We’re also a company that has purposefully operated right around breakeven for years. And here is the problem. Take VC money and now you are forced to run company at breakeven point. This company would be perfectly fine operating with half the staff and generating for the CEO half a million in profits per year - every year. He could have met his family financial goals long ago and still keep the company. This is wh…

Thankfully lifestyle-business focused "VCs" are a thing: https://tinyseed.com, https://earnestcapital.com, https://indie.vc

Re: I sold Baremetrics

#412

Post by alooPotato »

lubos wrote: post #403

> We’re also a company that has purposefully operated right around breakeven for years. And here is the problem. Take VC money and now you are forced to run company at breakeven point. This company would be perfectly fine operating with half the staff and generating for the CEO half a million in profits per year - every year. He could have met his family financial goals long ago and still keep the company. This is wh…

ha no. do the math on it and you'll see that a sale is far more profitable for equity holders than cashflowing profits for the same nominal amount. I.e. distributing $3.7M in profits yields you personally a lot less than having your equity purchased for $3.7M.

You're comparing apples and oranges - 500K/year of profits first needs to get taxed. Then distributed to shareholders pro-rata, then taxed again at the personal level. Also, you're assuming he could have made 500K year in profit from the very beginning.

Re: I sold Baremetrics

#413

Post by pwinnski »

FireBeyond wrote: post #277
pwinnski wrote: post #158

Earlier quoted context omitted.

All indications are that they were operating on a profit basis, not a growth basis, so I think it's a poor assumption that anybody was being paid a half-salary. As the post states, they're keeping their same compensation going forward, and all are choosing to stay, suggesting it's very satisfactory, and has been all along.

> All indications are that they were operating on a profit basis, not a growth basis From the founder himself: > We've had carryover losses for years, so from a tax perspective, there was no hit on either side. I realize that tax losses can differ from cash losses, but are you so sure about that?

I mean, that's somewhat my point? They were not pursuing rapid growth. From the post:

We’re also a company that has purposefully operated right around breakeven for years. So, unless you’re a “strategic acquistion” that throws acquistion multiples out the window, a slow-growth software company without lots of profits and a product that’s technically quite complex is ultimately just not going to get a huge multiple.

Re: I sold Baremetrics

#414

Post by GoRudy »

alooPotato wrote: post #412
lubos wrote: post #403

> We’re also a company that has purposefully operated right around breakeven for years. And here is the problem. Take VC money and now you are forced to run company at breakeven point. This company would be perfectly fine operating with half the staff and generating for the CEO half a million in profits per year - every year. He could have met his family financial goals long ago and still keep the company. This is wh…

ha no. do the math on it and you'll see that a sale is far more profitable for equity holders than cashflowing profits for the same nominal amount. I.e. distributing $3.7M in profits yields you personally a lot less than having your equity purchased for $3.7M. You're comparing apples and oranges - 500K/year of profits first needs to get taxed. Then distributed to shareholders pro-rata, then taxed again at the persona…

Pass through entities wouldn't be subjected to the double taxation.

Re: I sold Baremetrics

#415

Post by alooPotato »

GoRudy wrote: post #414
alooPotato wrote: post #412

Earlier quoted context omitted.

ha no. do the math on it and you'll see that a sale is far more profitable for equity holders than cashflowing profits for the same nominal amount. I.e. distributing $3.7M in profits yields you personally a lot less than having your equity purchased for $3.7M. You're comparing apples and oranges - 500K/year of profits first needs to get taxed. Then distributed to shareholders pro-rata, then taxed again at the persona…

Pass through entities wouldn't be subjected to the double taxation.

Yeah but you pay a higher tax rate and get no benefits of QSBS. Generally there is a lot more opportunity for tax optimization on sales than on income.

Re: I sold Baremetrics

#416

Post by GoRudy »

fairity wrote: post #374

Everyone's talking about how the founder got lucky that his investors let go of their $800K liquid preference. My guess is that this wasn't all luck. The VC's in this case knew how transparent this founder was being in reporting his startup journey. They knew that this decision would get publicity. With this knowledge, the VC firm probably made a calculated decision to forego their liquid pref in return for the good…

yep and good chance these two VCs are the first check in his next business in 24 months.

Re: I sold Baremetrics

#417

Post by fairity »

Jochim wrote: post #380
Sodman wrote: post #265

Earlier quoted context omitted.

I see this "HN is toxic" sentiment on tech twitter a lot, particularly from tech folks on twitter with a lot of followers and fans. My own experience on HN has been that folks may be more cynical than average, and sometimes lacking empathy, but I've found most arguments are at least made based on reality, facts and good faith. Those that aren't usually get downvoted and/or flagged pretty quickly. Meanwhile twitter th…

HN had the audacity to do something other than shower the subject with unapologetic praise. An actual discussion occurred rather than a congratulatory twitter echo chamber. I'm actually a really disappointed in Josh's response. I thought that his open stance on what he'd been doing would mean he'd being open to people criticising what he'd done. He doesn't need to agree with that criticism, but dismissing the whole s…

> I thought that his open stance on what he'd been doing would mean he'd being open to people criticising what he'd done

His goal in publishing this information seems to be to foster a community of transparency. To that end, his actions appear entirely consistent.

Put another way, what additional information do you want him to convey? His goal is to accurately and openly convey information, and he's basically laid it all out on the table.

You're free to have an opinion on whether his actions were right or wrong, but don't expect him to engage with your criticism when that takes a lot of time and effort (and is not part of his goal).

Re: I sold Baremetrics

#418

Post by Scottymeuk »

high_derivative wrote: post #24
Shpigford wrote: post #16

Earlier quoted context omitted.

You're making a veritable crap-ton of assumptions here. Happy to talk about specific concerns, but not if you're going in to this with guns blazing looking for a witch to burn.

So what did employees get?

I got an incredible place to work for over 5 years, for an amazing company, and an even more amazing boss. I got paid well for it, and I also got a nice payout when the company sold. Don't worry about the employees :)

Re: I sold Baremetrics

#419

Post by abuehrle »

Congrats! Sounds like a good outcome. From what I've read (my understanding may be wrong), using a revenue multiple at all for valuation is surprising for companies A) under $5M total valuation and B) with lower growth rates (looks like Baremetrics grew ~11% in the last 12 months). Can someone who knows better than I weigh in on the valuation math here (in general -- no one knows the exact details of this transaction, obviously). I'm not questioning it, but I am curious to get perspectives on this real world example.

Re: I sold Baremetrics

#420

Post by sonofaragorn »

fairity wrote: post #374

Everyone's talking about how the founder got lucky that his investors let go of their $800K liquid preference. My guess is that this wasn't all luck. The VC's in this case knew how transparent this founder was being in reporting his startup journey. They knew that this decision would get publicity. With this knowledge, the VC firm probably made a calculated decision to forego their liquid pref in return for the good…

If letting go the $800k was purely PR, then that's some expensive PR. Who reads these blogs, a couple thousand people maybe?
Post reply on HN