Great outcome for both sides.
Josh gets the exit he really seems to need for his personal and financial well-being.
Xenon gets one heck of a product for honestly quite cheap. Better marketing will actually go a long way here.
I sold Baremetrics
461–470 of 521 posts
Re: I sold Baremetrics
#462Earlier quoted context omitted.
I assume they also got paid in that time? You're making it sound like they've made a big sacrifice to (only) receive $80K at the end.
So was the founder. SV level salary, per their words. And, as I've said elsewhere, startup salaries are rarely on par with the industry average. Working at a startup is typically sold as "you'll be paid less, but if we sell you'll get a payout to make up for it".
It is pretty simple though, either they negotiated some stock based component to their compensation when they started and would be getting payout, or they didn't and they have been fully compensated by their salary.
Re: I sold Baremetrics
#463> No time-based or performance-based earnout... Everyone on the team stays…or goes
Curious about this one; are the acquirers not bothered about the possibility of everyone jumping ship? They have a new CEO and generalists on hand to take over the business immediately? And/or the business is basically in “runs itself” mode, with most of the work being done on growth opportunities?
Normally I think of the golden handcuffs as a necessity to stop the business from imploding and being worth zero, but interested to know why this wouldn’t apply.
Re: I sold Baremetrics
#464> "We recognize the work that’s gone into the past 7 years and it sounds like this is a great landing spot for the team. We’re grateful for the opportunity to have supported you along the way."
That is incredible and, as the author says, classy. If I ever find myself actually doing the investment rounds for anything I create or help create, I hope that people like General Catalyst take an interest.
Re: I sold Baremetrics
#465I'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…
Can you re-use the due-diligence of the previous failed acquisition?
Re: I sold Baremetrics
#466Earlier quoted context omitted.
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.
> higher tax rate
Isn't this only if the distributions are immediate? Forgive me, not an expert in LLC v. corp structures but I have an LLC so I'm curious to hear your expanded thoughts. Thanks in advance.
Re: I sold Baremetrics
#467Earlier quoted context omitted.
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.
> higher tax rate Isn't this only if the distributions are immediate? Forgive me, not an expert in LLC v. corp structures but I have an LLC so I'm curious to hear your expanded thoughts. Thanks in advance.
Income tax rates are usually higher than capital gain tax rates.
Re: I sold Baremetrics
#468Earlier quoted context omitted.
> The real choice was likely this deal where we let the 800k go, or future uncertainty And not just "future uncertainty", but "the future of a company that's spent 7 years trying and doesn't look any closer to launching the rocketship, who's founder is onto his second attempt to sell out, and clearly is out of enthusiasm and ideas". There was no 3x or even 2x future here for them, certainly no 100x - there was just a…
No, the 'spin' of the founder puts on this makes no sense - by your very own logic. >>>> If there was 'no future good outcome' for the company then in what way is the founder's 'threat' to 'not sell' credible in any way? Why would he 'march on for 5 more years with little hope of exit' (by your very own projection?) He's threatening to 'not sell' and therefore probably end up with $0? That's an empty threat - and it'…
> He basically told the investors to bugger off and that's that.
No, He asked, they agreed. There’s clearly something they both know that we don’t, and the outcome that happened happened. I guess it’s just as easy and valid for you to interpret it as being a bad thing, as it is for me to interpret it as a good thing. Only the VCs really know, I guess.
Re: I sold Baremetrics
#469> 2.65x ARR
What about gross profit (or more precisely, EBIDTA)?
Re: I sold Baremetrics
#470Earlier quoted context omitted.
It wasn't $800k for nothing. Every VC investment is a speculative bet on the future success of the company. If Baremetrics sold for $800 million, they would have made 1000x their money. If it was their only investment, then it would be a major fail but VC business model works by making 100 bets. Few bets deliver 1000x return but many of them are 100% loss. The VC knew what they were doing and their $800k got them exa…
>an option to make a lot of money in case of a big future success. That's why they gave Baremetrics $800k 5 years ago. Why they are giving the founder $800k today is far less clear.
They invested $800K in Baremetrics.
> Why they are giving the founder $800k today is far less clear.
They aren't. They are just writing off their initial investment.
They lose $800K (which is less than that because it can be offset for tax purposes), not $1.6M.