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I sold Baremetrics

baremetrics.com

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Re: I sold Baremetrics

#421

Post by Jochim »

fairity wrote: post #417
Jochim wrote: post #380

Earlier quoted context omitted.

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…

> 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).

I don't expect him to engage at all. I do think he should be able to handle dissenting opinions without merely dismissing the whole site as toxic on twitter.

Re: I sold Baremetrics

#422

Post by mbesto »

ccmcarey wrote: post #5

I've always loved the transparency and frank writings by Baremetrics. > As part of the structure of the deal, Xenon guaranteed I’d take home $3.7m, regardless of what came up during due diligence Interesting, I wonder how this is structured - surely there are items that can come up during due diligence that are deal-breakers for Xenon, and surely due-diligence is performed before the contract is closed? > But they we…

I do due diligence for a living.

> Interesting, I wonder how this is structured - surely there are items that can come up during due diligence that are deal-breakers for Xenon, and surely due-diligence is performed before the contract is closed?

The company was inherently transparent with everything. A big part of DD is QoE and there wasn't much to audit there. This was a deal term that reduced any walkaway risk.

> I have no idea how they managed to get the investors to walk with nothing, when the founders walked away with so much.

Deal flow and it's not worth their time. Be nice to successfully exited founders and they'll speak your praises for eternity. General Catalyst wants $1B exits. If the founder leads to dealflow that brings that in, the $800k will be an easy ROI.

Re: I sold Baremetrics

#423

Post by fairity »

Jochim wrote: post #228
caffeine wrote: post #210

Earlier quoted context omitted.

In this case, charity would distort incentives by softening the outcome of bad decision-making. Each of those employees signed up for a salary and equity. That equity turned out to be of very little value to them in the end, probably less than they were hoping for. If they all got paid out anyway, they would not have learned that small equity stakes can turn out meaningless, and that exits are way less profitable for…

A counterexample I'd offer is that upon being treated charitably those employees could then be incentivised to use that windfall to pursue their own ideas, seeing the success of their founder benefactor and being empowered with a financial cushion they would not have otherwise had. They might then go on to create something of massive value which the world never would have had if they simply did not have the financial…

> Personally I'd like to see it move towards a point where taking everything just because you can isn't viewed as acceptable.

It's not clear to me what you're actually suggesting.

You think that when someone takes more than they need, they deserve to be shamed? How do you determine how much one can take?

We all want the world to be more loving and compassionate, but rules and financial incentives drive productivity in our economy. If the financial incentive to start a company is reduced, there will necessarily be a cost to innovation.

Imo, the goal should be creating a system where the rules are fair and clearly outlined. The rules and incentives for employment were very clearly outlined in the employment contract these people signed. And, the founder does not seem to be the type of person who over-promises. So, I see nothing wrong here.

Re: I sold Baremetrics

#424

Post by tehlike »

jariel wrote: post #369
kjksf wrote: post #362

Earlier quoted context omitted.

Reading between the lines, this deal wouldn't happen if investors didn't agree to write off their investment. So their choice was between nothing today or nothing later. Tax-wise it was probably better to write it off now than carry a zombie investment into the future. Like you said: their investment was a transaction and they made rational choice. It's the emotional "we can't loose money" or "how dare the founder se…

Either way he's definitely ended his entrepreneurial career. Nobody is going to put a dime into a guy who does that - the risk that he'd do something much grander when the stakes are much higher is obviously there. He should have sold the company, honoured the terms of his agreement.

People are downvoting you, mostly because you are making a big deal out of a very simple situation. As one commenter said above, they would either get nothing, or nothing, and the VC firm, through the publicity they are getting now, will very likely profit from this sign of good will.

Re: I sold Baremetrics

#425

Post by philjr »

abuehrle wrote: post #419

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…

The revenue multiple is probably not the metric they used to arrive at the valuation, but it's certainly a normalizer that people use to compare outcomes.

Multiples of trailing 12 months net profit would be more common for a smaller entity.

Re: I sold Baremetrics

#426

Post by dman7 »

mbesto wrote: post #422
ccmcarey wrote: post #5

I've always loved the transparency and frank writings by Baremetrics. > As part of the structure of the deal, Xenon guaranteed I’d take home $3.7m, regardless of what came up during due diligence Interesting, I wonder how this is structured - surely there are items that can come up during due diligence that are deal-breakers for Xenon, and surely due-diligence is performed before the contract is closed? > But they we…

I do due diligence for a living. > Interesting, I wonder how this is structured - surely there are items that can come up during due diligence that are deal-breakers for Xenon, and surely due-diligence is performed before the contract is closed? The company was inherently transparent with everything. A big part of DD is QoE and there wasn't much to audit there. This was a deal term that reduced any walkaway risk. > I…

Re General Catalyst: precisely what you said and the brand building they just did. Just ctrl+f in this article to see people's reaction to General Catalyst. This will indirectly help them with even more dealflow.

Re: I sold Baremetrics

#427

Post by exolymph »

sonofaragorn wrote: post #420
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?

10k+ people will read the post, probably more. HN alone can send that much traffic (I speak from personal experience). And it's more about who than how many.

Re: I sold Baremetrics

#428

Post by exolymph »

cj wrote: post #322
pier25 wrote: post #143

> But they were incredibly gracious and both agreed to write off their investment. So the investors just accepted to lose $800k while the founder was getting $3.7M? Can someone explain the logic here?

> So the investors just accepted to lose $800k $500k came from a fund General Catalyst set up specifically to encourage startups to build new businesses that integrate with Stripe. [0] The goal for the money was to enrich the Stripe ecosystem. Not generating returns for investors. If the money came from a regular fund without the Stripe affiliation, General Catalyst 100% would not have accepted the $800k loss. [0] ht…

> If the money came from a regular fund without the Stripe affiliation, General Catalyst 100% would not have accepted the $800k loss.

Doubt it. $800k is not a lot of money in the investment ecosystem.

Re: I sold Baremetrics

#429

Post by ska »

treis wrote: post #370
relaunched wrote: post #346

Earlier quoted context omitted.

It's hard to understand, when taken at face value. But, when you add a little context, VCs can do much worse. They can refuse to sell (through approval rights) and let company die on a the vine. They can force out existing leadership and bring in new leadership. They can force an acquisition. They can kill a company in a million different ways. For a fund to realize that the company can live on, even if it's not the…

>VCs can do much worse. It's, more or less, impossible for them to do worse than $0. I get that there's some scenarios where they're not going to make money but the business can be viable as a lifestyle type business. But someone is buying this one for $4 million cash. So this isn't giving someone a company worth 0. This is handing out 800k+ in cash.

  > It's, more or less, impossible for them to do worse than $0.
Far from that being true, it's not even difficult to end up net negative.

Re: I sold Baremetrics

#430

Post by fairity »

sonofaragorn wrote: post #420
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?

If they do this 10 times, they will establish a well-known reputation for being founder friendly. This would cost $8M.

They are investing $1B over all their funds.

Will the impact a founder-friendly reputation has on deal flow and close rate increase their fund's ROI by 0.8%? Almost certainly.

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