[HN Gopher] We were a few days away from being settled for life
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We were a few days away from being settled for life
Author : daolf
Score : 106 points
Date : 2022-03-28 14:31 UTC (8 hours ago)
(HTM) web link (twitter.com)
(TXT) w3m dump (twitter.com)
| ckdarby wrote:
| They're already settled for life with the existing business. The
| feedback they got from the potential buyer is what is missing,
| the business is too dependent on them and if they're able to
| remove themselves from the equation more and more it'll be a
| great lifestyle business where they're set for life.
|
| The other factor is the buyer probably looked around at
| competitors and noticed there was another business less valued
| that they could pump the same capital into and outgrow this
| business.
| happyhardcore wrote:
| Agreed. If I ran a SaaS startup with a team of three and $1m
| ARR I'd feel pretty confident that things are gonna be alright
| for me.
| _old_dude_ wrote:
| Or, less charitably, they have provided a trove of documents to
| the buyer so the buyer can outgrow their business using a
| competitor.
| Rufhfhs3747rhe7 wrote:
| Is it a common practice to provide that level of detail to a
| potential buyer who can just walk away with no penalty? How
| is this position not abused? Reputation damage?
| tedmiston wrote:
| Yes. See Silicon Valley, Season 2, Episode 2.
|
| https://m.youtube.com/watch?v=JlwwVuSUUfc
|
| https://www.quora.com/Silicon-Valley-
| Season-2-Episode-2-Runa...
|
| https://en.m.wikipedia.org/wiki/Silicon_Valley_(season_2)
| gojomo wrote:
| I don't recall those episodes, but I would say that in
| real life, yes, larger companies can 'kick the tires' for
| a long time, costing the target immense amounts of
| focus/time, then walk away.
|
| Older incumbent companies, especially, may have giant
| 'business development' teams who almost recreationally do
| deep x-rays of emerging threats/opportunities. All their
| staffing/trips/flirtatious-discussions/legally-drafted-
| non-binding-letters-of-intent may be a rounding error in
| their bottom line, a cheap research expense. They can go
| through all the motions of an acquisition, appearing
| serious to the hopeful founders, with a negligible
| interest in actually completing the deal.
|
| I mean sure, they'd bite if they saw a can't-lose bonanza
| - their talks are panning for gold in your stream, before
| buying or even renting your land. Even if 99/100
| envisioned deals eventually fall-through, they're just
| happy to learn all the proprietary business internals.
|
| See also: ~pg's 'Don't Talk To Corp Dev':
| http://www.paulgraham.com/corpdev.html
| tempnow987 wrote:
| Great write-up, and I see PG also had a separate post
| that overlaps with my other comment here:
|
| "When a sufficiently high-up decision maker decides
| he/she wants to buy your startup, he/she will attempt to
| meet with you constantly and put time pressure on you, so
| as to prevent you from shopping the deal and getting a
| better offer. The absence of this behavior indicates the
| other company is not serious about acquiring your
| business."
| WinterMount223 wrote:
| That's why you also do due diligence on your prospective buyer.
| Also when talks are reasonably advanced, ask for a non-refundable
| advance as a proof of love.
| tempnow987 wrote:
| A bit of a flag are the timelines here? 6 months? 7 LOI's?
|
| This of course depends on your options, if you must raise funds
| and have no one else talking with you, take all the time in the
| world of course.
|
| GREAT that the investor provider feedback. Fantastic to take it
| and improve product (of course, investor could have done this
| when they had a board seat as well).
|
| Not clear that they couldn't have ID'd these issues a LOT
| earlier.
|
| That said, going through this once will have given you HUGE
| insight into what it will take to go through it again. And you
| will almost certainly get a better price if the metrics / ARR etc
| all are going the right way, and your docs are in order.
|
| But deals that someone really wants to have happen tend to move a
| bit quicker (Facebook buying Instagram might be an example?)
|
| That said, until the wires hit, nothing is solid.
| Simon_O_Rourke wrote:
| I really like the guys from ScrapingBee, they're completely
| transparent, how they got to where they are is there for all to
| see, and the product is quite good too. It's a pity that deal
| didn't work out for them, but I'm sure a big exit is on the cards
| for them soon.
| daolf wrote:
| Thank you very much! That is very nice of you :)
| nunez wrote:
| Yeah, I would never tell my family about a potential windfall
| until well after it settles within my bank account.
| cjlars wrote:
| I've been on the other side as a buyer. Although I work with
| 'main street' companies, not high tech, I think there's a lot of
| generalizable lessons. One thing to keep in mind is that some
| buyers have substantially all of their eggs in your basket and
| others will constantly have multiple deals in the pipeline. When
| you enter into the LOI phase with someone, you want them to be
| very motivated to close in order to make the time / disclosure /
| trade secrets risk worth it, so I would encourage sellers to
| attempt to enter LOI only with motivated buyers that have a high
| likelihood of closing the deal. A few hallmarks of motivated
| buyers per my experience:
|
| - The buyer will also be the CEO: the more the buyer looks like
| he/she will package your business up and pass it along, the lower
| the likelihood that they close (and the worse your earn out is
| likely to perform)
|
| - Good buyer / company fit: similar to point one, do not let
| people tell you they can run this company. Grill them just like
| you would if you were hiring a CEO to replace yourself. Buyer /
| company fit is huge and when they say 'the owner is too important
| to the company' what they often mean is 'I don't think I can run
| this well'. Someone who knows and is building a portfolio in your
| space will often be a better buyer than someone looking for
| 'diversification'.
|
| - Avoid tire kickers: Background in your space is good, but being
| a competitor to you is bad. If they could potentially gain
| valuable insider information as part of diligence, be wary of
| moving forward.
|
| - Small team size: smaller firms have less in the pipeline and
| more motivation to close on the deal in front of them. Remember
| that they have the same KPI (IRR primarily) and runway problems
| that startups have. For them, no company = no ROI.
|
| - Ensure they're well funded: The caveat to the above is that
| small teams or solo buyers may not have the funds lined up, so be
| very sure that they actually have the investors / NW to buy the
| business before moving forward.
| paxys wrote:
| A deal which stretches on for this long (6+ months) in limbo is
| almost never getting closed. If you are the party with greater
| interest (whether buyer or seller), you need to focus on getting
| a _public_ commitment ASAP. Due diligence, audits and all other
| details can be worked on after that.
| jbluepolarbear wrote:
| Twitter is the worst way to deliver this kind of information.
| happyhardcore wrote:
| > Please don't complain about tangential annoyances--things
| like article or website formats, name collisions, or back-
| button breakage. They're too common to be interesting. [0]
|
| e: in any case, there are a number of ways of telling this
| story I can think of that'd be far worse than Twitter, even if
| I do agree that a series of tweets doesn't feel like the best
| way of communincating a small blog post. Plus, I feel like you
| end up with more engagement between the author and commenters
| on Twitter, such as in [1]
|
| [0] https://news.ycombinator.com/newsguidelines.html
|
| [1] https://twitter.com/PierreDeWulf/status/1508476780583206918
| jbluepolarbear wrote:
| This isn't tangential annoyance. This is a social media post
| that was to be treated as an article. If there was a link to
| a single article that's what should have been posted.
| Taylor_OD wrote:
| He added a link at the end which puts it all in one post.
| psyc wrote:
| > at the end
| Taylor_OD wrote:
| It's pretty common on Twitter for anyone making long posts
| to do this. Scroll to the end if you are looking for that.
|
| There are also dozens of services that roll out tweets and
| will present them in another format for you. You can see
| them mentioned in any long tech tweet replies.
| criddell wrote:
| Here's the same text in a single post:
|
| https://typefully.com/PierreDeWulf/mN1NgeKp1r6I
| tacker2000 wrote:
| I agree completly. And i dont think it should be "wrong" to
| point this out!
|
| Its getting worse nowadays for people who dont have an account.
| They are adding more "register now!" popups that cannot be
| closed, etc... Soon you probably will be forced to register to
| read the linked tweets
| paulpauper wrote:
| Require money upfront. If someone is going to spend high 7figure,
| what is $10-20k for your time, especially if they are serious.
| tima101 wrote:
| No evidence for this particular case but can investors or
| competitors just gain private information about a company by
| pretending to buy it? It's free and the info is very detailed.
| wahnfrieden wrote:
| Yes it happens
| peppertree wrote:
| I agree the reason for backing out was total fluff. A likely
| scenario is financing on buyer side fell through.
| geocrasher wrote:
| Correction: "How we _thought_ wewere a few days away from being
| settled from life "
|
| A healthy dose of pessimism helps a lot in cases like this.
| Getting your hopes up does nobody any good. Leave the money out
| of it, and treat it like any other customer transaction. When the
| money actually comes, then you have something to talk about :)
| Dylan16807 wrote:
| > Correction
|
| That depends on whether you view "a few days" as a schedule or
| a distance, doesn't it?
| [deleted]
| alberth wrote:
| This happens way more often than you'd expect.
|
| Think of it like dating. How any people did you date before you
| actually got married. For most, it wasn't the first person.
|
| Seller beware.
| TedShiller wrote:
| "Hey are you available for a quick chat tomorrow?"
|
| Only Americans know how to wrap horrible news into such a casual
| statement
| supertofu wrote:
| "Quick chat" is definitely a euphemism for "very bad news,"
| especially if it must be done in person or over the phone.
| nunez wrote:
| Some job offers I've gotten were introduced this way; it's
| not universally bad, but it's usually bad lol
| marban wrote:
| Undervalued comment
| IMTDb wrote:
| > The buyers were nice enough to give us the precise reason for
| their drawback: - churn - business too dependant on us
|
| > About the second point, I was also surprised because we already
| talked about it a lot.
|
| > And this is why we agreed to stay as long as 18 months to train
| a new team.
|
| Wow, that sound so short. When acquiring a business for multiples
| of the ARR, you _need_ long term success to break even. If the
| founding team wishes to leave ASAP after selling, barley giving
| enough time to find a train a replacement, I can understand that
| the buyer has cold feet. Especially if churn is a concern.
|
| I wasn't in the discussion, but I bet you could have closed the
| deal, by negotiating (potentially bigger) earn outs on a longer
| period (3 to 5 years), showing confidence in the long term
| success of the company. But to me, 18 month sounds like a bare
| minimum where objective can be achieved by aggressively pushing
| the company potentially even hurting it on the long term.
| mchusma wrote:
| Re: Earn out.
|
| 1. My understanding is the earn out was discussed upfront, so
| not a reason to back out of a LOI.
|
| 2. I've been through an acquisition (different circumstances).
| IMO 1 year is critical to a good transition and honestly, weird
| but fun. Year 2 the main integration stuff is done, and you
| should be out, so things start to get akward. Year 3 you
| probably shouldn't be involved, you want the business to be
| sustainable on its own. Situations vary, but I think all
| parties would be better off with a "1 year full time then 1
| hour/week for another 2 years." 1 hour/week should be easy to
| give, even if you take another gig, and is enough time to help
| continuity.
| dredmorbius wrote:
| https://threadreaderapp.com/thread/1508450449745096709.html
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