[HN Gopher] I sold TinyPilot, my first successful business
___________________________________________________________________
I sold TinyPilot, my first successful business
Author : mtlynch
Score : 519 points
Date : 2024-05-29 14:42 UTC (8 hours ago)
(HTM) web link (mtlynch.io)
(TXT) w3m dump (mtlynch.io)
| mtlynch wrote:
| Author here.
|
| I'm happy to answer any questions about this post, the sale
| process, or my time running TinyPilot.
| mik3y wrote:
| Lovely read, and great to see a happy ending - I remember your
| previous blogs here.
|
| As a sometime-bootstrapper and having failed at a previous
| hardware startup, I can relate to many of the emotions you
| narrated through. It may be too early, but my biggest curiosity
| is whether you think you will bootstrap something again?
|
| (In my case, after the hardware business and some time off, I
| found that taking a swing at a "pure software" idea was the
| right balance for me, after the considerable challenges and
| occasional joys of building physical things..)
| mtlynch wrote:
| Thanks for reading!
|
| > _you think you will bootstrap something again?_
|
| Yes, definitely. Not hardware again because I think getting
| to the scale where you can use external vendors is so
| difficult and risky that it requires more specialized
| hardware expertise or VC backing.
|
| I'm going to start with educational products because I liked
| my brief experience with that and never had time during
| TinyPilot, but I'd eventually like to build a SaaS that I can
| grow in a calm, sustainable way.
| scripper wrote:
| Hey there, loved the post. What do you think is next for you?
| Would you do it all over?
|
| Thanks for all of the content!
| mtlynch wrote:
| Thanks for reading!
|
| > _What do you think is next for you?_
|
| Next is either an educational product or a SaaS business I
| can build either fully solo or with 1-2 teammates in customer
| support roles.
|
| > _Would you do it all over?_
|
| No, not knowing what I know now about how difficult it is to
| succeed in hardware.
|
| I'm grateful that TinyPilot worked, but there's definitely a
| reason why there are so few bootstrapped hardware companies.
|
| In the first few years, there were so many things that could
| have clobbered the business, like supply shortages,
| manufacturing errors, lost shipments, design mistakes. I did
| a lot of things to mitigate these risks, but a lot of it just
| came down to being lucky enough to avoid random disasters.
|
| For example, there were definitely times in the business
| where a critical part could have been lost in shipping, and
| we would have been dead in the water for months if it went
| missing or got delayed.
|
| As the business matured, we were able to mitigate those risks
| better, but I wouldn't want to go through those first two
| years again unless I had a huge amount of investment or co-
| founders with more specialized hardware/manufacturing
| expertise.
| scripper wrote:
| Great to know, thanks so much for the info!
| kohanz wrote:
| Congratulations on building something of value and successfully
| selling it. It's quite the achievement and most don't get to
| this level.
|
| I do have to say, I was somewhat surprised by the low multiple
| on the valuation, but perhaps that's just what the range is for
| a business of this nature. We're spoiled in the world of
| software and recurring revenue.
|
| What about the tax implications of the sale. Have you figured
| out how much of the sale you'll be able to put in your pocket?
| mtlynch wrote:
| Thanks!
|
| > _I do have to say, I was somewhat surprised by the low
| multiple on the valuation, but perhaps that 's just what the
| range is for a business of this nature. We're spoiled in the
| world of software and recurring revenue._
|
| Yeah, from what I've heard, SaaS businesses sell for a much
| higher multiple, often selling as a multiple of revenue
| rather than earnings.
|
| The other thing that's really reduced valuations is interest
| rates. When interest rates were <1%, private equity was
| bidding up prices of businesses because it was a decent place
| to park money, but now that you can get 5.3% from a money
| market, the additional return from buying a business isn't
| worth the risk.
|
| > _What about the tax implications of the sale. Have you
| figured out how much of the sale you 'll be able to put in
| your pocket?_
|
| Still working out the exact figure with my accountant. His
| expectation was that I'll keep a pretty large percentage
| after taxes because of Section 174. I had a large amount of
| expenses each year in software development from overseas
| contractors, and with Section 174 changes that went into
| effect in 2022, I had to amortize them over 15 years.[0] But
| with the liquidation of the company, I can count those
| expenses immediately, and they offset the income from the
| sale. So Section 174 is still a bad deal for software
| founders, but at least when you liquidate the company, you
| don't have to wait out the full 15 years of amortized
| expenses.
|
| [0] https://blog.pragmaticengineer.com/section-174/
| actionfromafar wrote:
| I can only assume there must spring up an industry around
| liquidating software companies in some kind of shell
| scheme!
| runako wrote:
| Congratulations!
|
| > Yeah, from what I've heard, SaaS businesses sell for a
| much higher multiple, often selling as a multiple of
| revenue rather than earnings.
|
| Adding some color as I have been through the process of
| selling a SaaS. Based on what you have written, at that
| stage of development, multiple on SDE is most common. 2.4x
| is on the low side for growing SaaS businesses, but this
| business is hardware with real COGS so the economics and
| buyers will be different. We also don't know the growth
| rate of the business, which is important in assigning a
| multiple.
|
| Additionally, full cash payment at closing is a reasonable
| ask but can lower the overall sale price. (I don't know if
| it did in this case.)
|
| Again, congratulations in taking this big step on your
| journey!
| cpncrunch wrote:
| From the Quiet Light site, the SaaS multiples are in the
| 4 to 4.5x income range, which is still incredibly low.
| They have one for sale that involves 5 hr a week work for
| just over 4x multiple. Not really worth selling for that
| amount unless desperate or wanting to retire.
| duckmysick wrote:
| Well done on the sale and congratulations to you and your wife.
| Best of luck to both of you.
|
| I have a question about this part:
|
| > I'd also risk TinyPilot's sales slipping after so many months
| being distracted from the business.
|
| What was the time split between the sale process and running
| day-to-day operations? I know bigger companies have dedicated
| teams for that, but I'm curious how does it look like in
| smaller ones.
| mtlynch wrote:
| Thanks for reading!
|
| > _What was the time split between the sale process and
| running day-to-day operations? I know bigger companies have
| dedicated teams for that, but I 'm curious how does it look
| like in smaller ones._
|
| It varied from week to week, but I was spending 10-25 hours
| per week on the sale for about five months.
|
| But beyond wall time, the time I spent on the sale was often
| much more stressful than anything else and left me mentally
| drained for anything else. The sale involved preparing
| reports that I'd never created before, and it was extremely
| important for me not to make any mistakes because I didn't
| want the buyer to think I'd provided fraudulent information.
|
| I also had to focus much more on short-term results than
| normal. Part of this was a lack of time to oversee complex
| projects, but the other part was that it's to my detriment to
| invest in something that pays off in six months if I sell the
| company at month three. But I can't run that way forever, so
| I knew if I tried to run the company like that indefinitely,
| I'd pay the penalty for always focusing on the short-term at
| the expense of long-term.
| xiphias2 wrote:
| I would be interesting in reading the ,,buying process'' part
| of the same deal from the buyers.
|
| BTW tinypilot.com is down:
| https://www.isitdownrightnow.com/tinypilot.com.html
| 1-more wrote:
| https://tinypilotkvm.com/
| 2c2c wrote:
| did you have a salary?
| mtlynch wrote:
| No, I didn't pay myself a salary. TinyPilot was a single-
| member LLC, so all the profits were pass-through income on my
| personal taxes.
|
| I share more about the finances in my annual review posts:
|
| https://mtlynch.io/solo-developer-year-6/#tinypilot-
| became-2...
| everial wrote:
| Congrats on the upcoming little one! As someone who also had
| first infant late last year, consider dialing back your
| productivity expectations with a newborn (both because it's a
| wonderful time and because oh-heaven it's so much work).
| mtlynch wrote:
| Thanks so much! Yes, I'm definitely planning to spend less
| time on work over the coming years.
| ativzzz wrote:
| > and we received pre-qualification for an SBA loan
|
| What does this mean? How does this work? Shouldn't the buyer
| take out the loan? Or does it look something like
|
| - tinypilot takes out 600k, which you pocket
|
| - you transfer ownership
|
| - tinypilot is in debt, not the buyer
|
| ?
| mtlynch wrote:
| Thanks for reading!
|
| Yes, you're correct. The buyer takes out the loan. This was
| an asset sale, so assets transferred over but not any debts.
|
| The seller (me) can approach a loan broker and show their
| financials, and the loan broker can say, "I think it's likely
| that the SBA would approve this loan, and I can connect you
| with lenders I think would offer the SBA loan for acquiring
| this business."
|
| The SBA pre-qualification isn't binding or official, but I
| guess the loan broker's prediction is accurate enough that
| the brokerage will list businesses as SBA pre-qualified based
| on the loan broker's assessment.
| ativzzz wrote:
| Ah I see, it just makes it easier for potential buyers to
| get a loan. Thanks for the response and the cool blog!
| berkanunal wrote:
| Congratulations. I have been following the retrospectives for
| more than 2 years now. I hope to keep enjoying your monthly
| posts.
|
| My question is, did you change anything on your strategy after
| you were set on selling? Or the goal was still the same,
| optimize earnings?
| mtlynch wrote:
| Thanks for reading!
|
| > _My question is, did you change anything on your strategy
| after you were set on selling? Or the goal was still the
| same, optimize earnings?_
|
| Once I started the process of preparing the company for sale,
| it did change a lot of the strategy.
|
| For example, one of the things I'd been thinking about was
| how to allow users to purchase recurring subscriptions to
| their TinyPilot Pro software licenses rather than having to
| remember to re-purchase every year. But once I started the
| sales process, that basically became non-viable because it
| meant I'd be investing thousands in software development, but
| it wouldn't pay off for another year or so, so it would
| weaken our profit and loss statements and result in a lower
| valuation.
|
| There were a lot of things like that, where I had to reject
| any investment that wouldn't pay off in three months or less.
|
| The other thing that was a bummer about preparing to sell was
| realizing that everything effectively becomes so much more
| expensive. Normally, if I want to give someone a $5k bonus,
| it costs me $5k. When I knew I was about to sell and wanted a
| 3x multiple, the $5k bonus effectively costs me $20k because
| it's $5k for the bonus itself and then -$15k for the sale
| price on a 3x multiple. I could try to argue that the $5k is
| "discretionary" and therefore not part of SDE, but I think
| the buyer would be in their right to argue that it's not
| discretionary, as it sets bonus expectations for future
| years.
|
| [0] https://mtlynch.io/retrospectives/2023/08/#what-would-
| make-r...
| abtinf wrote:
| Everything was always that expensive, it was just less
| obvious.
|
| What if you had moved to outsource the office tasks sooner?
| Could you have better invested that time and stress
| elsewhere?
|
| The $100k per year improving hardware? Was that the best
| way to spend the money? Maybe it would have been better
| spent on marketing, or investing in reducing production
| costs with better tooling. Whatever the differential from
| what you spent was lost at 3x.
|
| Gains often compound over time too. Cost reduction begets
| cost reduction.
|
| Of course, thinking like this results in madness and moral
| hazard. I've seen companies do crazy, catastrophic things
| gearing up for sale.
| axus wrote:
| Hopefully your buyer gets a nice sales boost from this article!
|
| Why wouldn't you go back to a corporation and try to make a
| software product there, as an employee?
| mtlynch wrote:
| Thanks for reading!
|
| > _Why wouldn 't you go back to a corporation and try to make
| a software product there, as an employee?_
|
| Oh, boy. So many reasons!
|
| The thing I really love about running a company of my own is
| that I don't have to get anyone's approval to do things. If I
| have an idea, I can work on it, and I don't have to convince
| anyone or justify the time or money.
|
| I also really love being able to choose my own hours, tools,
| and schedule. At Google, I found real-time chat distracting
| and net negative (I get that they bring value to some people,
| just not me), and I found that most meetings were a waste of
| time. At TinyPilot, we never used real-time chat, and we were
| deliberate and efficient about meetings.
|
| At Google, I often found that things that were good for the
| company or my team or our customers were often not aligned
| with incentives for me (e.g., it was easier to get promoted
| for launching a complex feature than for a trivial feature
| that solved the problem elegantly). With my own small
| company, it's much easier to align incentives between me, my
| teammates, and our customers.
|
| I could go on and on, but I guess the underlying issue is
| that I place a high value on independence and autonomy, and
| no employer can match what I get on my own.
| beambot wrote:
| $249k revenue & 6 people => $41.5k per person + yourself. How
| does this math work out...?
| Sylarr wrote:
| 249k earnings, not revenue.
| beambot wrote:
| Ah, gotcha! Thanks.
| eric-hu wrote:
| Congratulations on your sale Michael. I've been following your
| blog over the years and have learned a lot. Really happy for
| you that you could find a buyer and wrap things up with
| TinyPilot. Looking forward to seeing what you work on in the
| future!
| hermitcrab wrote:
| Congratulations on the sale. Thanks for including real numbers,
| that will be helpful if I ever sell one of my products.
| hermitcrab wrote:
| Also, one of the things that no-one tells you about
| parenthood is just how much effort you spend entertaining
| them. So maybe bookmark this, it might come in useful in a
| few years!: https://successfulsoftware.net/2014/01/31/fun-
| and-geeky-thin...
| jonathanyc wrote:
| Congratulations on the sale!! I love your blog and have really
| appreciated your retrospectives.
| pyb wrote:
| Congrats! Bootstrapping a HW business to good profitability and
| acquisition is a remarkable achievement, particularly outside of
| China.
| djeastm wrote:
| I remember seeing your blog posts. Glad to see you ended up in
| the black with this business!
| akudha wrote:
| Wow, 15% broker fee! Didn't know brokers charge that much
| mritchie712 wrote:
| If they bring you the buyer, that feels fair.
|
| But in this case, it seems the buyer found him thru his own
| content, which is wild.
| mtlynch wrote:
| No, the broker found the buyer.
|
| I see how it's confusing because I say in the post that the
| buyer read my retrospectives, but that was after he had
| discovered the company through Quiet Light.
|
| I've just edited the article to clarify that the buyer
| discovered my blog from Quiet Light.
| influx wrote:
| Do you ever calculate your GOOG salary and multiply it by the
| number of years you've been bootstrapping and have any regrets?
| ksplicer wrote:
| His full compensation was probably between 300k-500k at Google,
| so I don't think money was what motivated him...
| prakhar897 wrote:
| OP learned the skill of starting up, running and selling a
| business while taking 30% paycut (and a huge risk tbh). He now
| has much bigger career paths open to him than "Senior Software
| Engineer".
| mtlynch wrote:
| Thanks for reading!
|
| > _Do you ever calculate your GOOG salary and multiply it by
| the number of years you 've been bootstrapping and have any
| regrets?_
|
| I've definitely thought about the number, but no, honestly no
| regrets at this point.
|
| I got an email from a Google recruiter a few weeks ago offering
| to rehire me back at my old level with no interview or
| interview for a higher level, and it wasn't tempting at all.
|
| I miss things about Google, and there are things I hate about
| bootstrapping, but overall, I definitely prefer the autonomy of
| running my own company.
| simonswords82 wrote:
| Congratulations. I've been through the DD process and it is a
| seemingly infinite loop of Q & A that is so exhausting it's
| almost difficult to celebrate the funds finally hitting! Glad you
| made time for plenty of desserts.
|
| All the best to you and your pending addition to the family.
| ppbjj wrote:
| This was such an enjoyable read, thank you for taking us through
| your process. And congrats!!
| wcedmisten wrote:
| Congrats Michael!
| mtlynch wrote:
| Thanks so much, William! Great to hear from you.
| pavel_lishin wrote:
| > _I wanted a buyer who would keep investing in the company, not
| a competitor who would just axe the product or bleed it dry._
|
| God, I hope the buyer lives up to your expectations.
| actionfromafar wrote:
| The buyer is small, so at least they can't let the product
| languish out of apathy.
| djtriptych wrote:
| Kinda scary the lifetime profit is less than what a sr developer
| might expect at a big tech firm.
|
| I agree this was successful and assume it's rewarding in many
| other ways!
|
| But still...
| jpollock wrote:
| I haven't gotten that far in the post, but won't owners usually
| take a salary?
| alex_lav wrote:
| What's scary about it?
| Difwif wrote:
| If the only metric you care about is average lifetime earnings
| then starting a business makes no sense.
|
| There's a lot to it that has nothing to do with earnings though
| and of course there's a lottery ticket that's correlated to how
| hard you work.
| Mgtyalx wrote:
| I understand wanting to move on, but... from an outsider it looks
| like you sold just as the company started getting big enough to
| be interesting.
| cdiamand wrote:
| Digestively, how did you handle all that dessert in such a short
| timeframe?
| mtlynch wrote:
| Haha, great question, Cory!
|
| It was over three days (dinner, dinner, lunch), and I was
| splitting them with friends. Although, I do love dessert and
| probably could have eaten those all solo.
| cdiamand wrote:
| Haha! That's great! Selling the company - also incredible.
| Congratulations my dude.
| jcalabro wrote:
| Congrats! Extremely impressive and inspiring. I always enjoy your
| posts.
| alberth wrote:
| Broker commission: $88,900 Legal fees: $18,297
|
| This equates to ~18% of total sale price.
|
| Most people don't realize how much get eaten up in deal/closing
| costs.
|
| Congrats to him for the successful exit. Reading his blog post
| over the years should be eye opening to anyone just how hard
| starting/running a business is.
| xyst wrote:
| A broker is just a middleman between the seller and buyer.
| What's the value add for sales like this?
| robszumski wrote:
| The broker was advising him on price point, strategy and
| fielding the interested parties for further discussion.
| Pretty important for this type of transaction.
| not-my-account wrote:
| How much of this can be learned by reading a couple books?
| I wonder how much higher profit he actually made compared
| to if one could self teach these skills.
| ativzzz wrote:
| I imagine the broker he used is fairly experienced and
| well compensated, so he'd have to learn a totally
| different profession from the ground up without any
| mentors or experienced people helping him, on top of
| continuing to run the business, which you can easily
| argue is worth $90k
| bruce511 wrote:
| You can learn a lot of information from books. What upu
| can't get from a book is experience.
|
| In this case you have a seller with no experience, and
| ultimately a buyer with no experience. In either
| situation a broker is valuable. In the case of both its
| an enormously important moderator who can keep both
| parties on track to a successful conclusion.
|
| Book learning in such cases only gets you so far.
| macintux wrote:
| Also, LLMs not withstanding, you can't pose questions to
| a book. Or even necessarily know when you _should_ be
| asking a question you haven't considered.
| SkyPuncher wrote:
| Practical knowledge, very little.
|
| Most of this value is in the soft areas, like how hard to
| push and how to manage expectations with the buyer.
| brk wrote:
| Having dabbled in some deals like this, books can give
| you some general ideas, but by nature they won't be
| current. A lot of things change quickly in the market,
| especially for smaller deals like this. A company or
| market segment that was getting a 5x valuation last year
| could be at 8x now, or 2x. Also, in many cases the buyers
| are more experienced than the sellers, though that
| doesn't seem like it was the case here. Your broker can
| help inform you, and prop you up. They can also act as
| the go-between for many communications, which can help
| mask feelings, worries, urgency, and other things that
| don't always help your position in a face to face
| conversation.
| groby_b wrote:
| About 80%. Which is great, if everything goes well. But
| if you're in the 20% that get to learn via failure, the
| cost is _much_ higher to you.
|
| One of the core skills of being a founder is learning
| when to delegate.
| talldatethrow wrote:
| If we trust the founder is smart enough to build a business
| worth x, he's smart enough to decide a fair commission for
| selling it.
| mtlynch wrote:
| Author here.
|
| For me, the value of the broker was just someone to guide me
| through the whole process because I'd never done it before.
| It was good to have someone whose interests were pretty
| aligned with mine and who answered questions quickly and
| thoroughly without me having to pay by the hour.
|
| Another big part of the value was finding the buyer, as I
| probably couldn't do that on my own. I could have thrown a
| hail mary and listed the business for sale on the TinyPilot
| website and my blog, but the person who ultimately acquired
| the business definitely wouldn't have found me that way.
|
| Having gone through it, I would consider foregoing a broker
| in the future if I had some way of finding my own buyer, but
| I have no regrets about the broker for this sale.
| elevatedastalt wrote:
| In what way were their interests aligned with yours? (this
| is not a snarky question. usually in real estate their
| interest is to make the deal happen asap, which doesn't
| align fully with your interests)
| ilamont wrote:
| I used to listen to the Quiet Light podcast. One thing that
| the Quiet Light founder mentioned a couple times is they
| are always working on dealflow, lining up buyers and
| sellers sometimes years in advance of an actual sale.
| paulddraper wrote:
| Depends on the seller.
|
| If you're already knowledgable, experience, and well-
| networked, there is less value.
|
| If you're not...well, have you ever sold a business?
| ignoramous wrote:
| > _how hard starting /running a business is_
|
| That it is, but here Michael is explicit that most of the pain
| [0] was from doing hardware, software, and e-commerce all at
| once. Surely, there are other relatively easier businesses in
| tech?
|
| [0] Reminds me of Avery Pennarun's _A profitable, growing,
| useful, legal, well-loved... failure_ (2012),
| https://news.ycombinator.com/item?id=3754531
| CodeWriter23 wrote:
| If it's easy, everyone would do it.
| WJW wrote:
| ... by which time all the competition no longer makes it
| easy?
| CodeWriter23 wrote:
| Nah the person/company willing to do the thing for the
| lowest margin wins out.
| SCUSKU wrote:
| Thanks for posting that article, quite a throwback -- but
| first I've ever encountered it. Really great piece. I do
| think we've all been sold on the entrepreneur
| vision/lifestyle, but the unsexy reality is it's an insane
| slog that might not even pay off.
|
| It's always good to get these reality checks from time to
| time.
| DowagerDave wrote:
| >> Most people don't realize how much get eaten up in
| deal/closing costs.
|
| They do if they've sold a house :)
| gnicholas wrote:
| I thought the broker fee was relatively high given the revenue
| multiple. I imagine hardware businesses have different
| multiples that what I hear about (mostly software), but this
| strikes me as pretty modest. If correct, that means the
| broker's fee is mostly based on the price that the seller could
| have negotiated himself, rather than on the added value that
| the broker brought.
|
| OTOH, it's possible the work a broker does doesn't scale down
| with small deals, and he wasn't willing to work for less.
| Honestly, I'd rather accept $50k less and leave the broker out
| of it if that's the case.
| codegeek wrote:
| And don't forget that a buyer spends a decent amount on their
| own lawyers, CPA etc during due diligence. I recently spent 10K
| on a deal.
| surfingdino wrote:
| Don't forget tax.
| Aurornis wrote:
| Common fallacy is to imagine that the exact same deal at the
| same price would have happened without a broker. A lot of
| people are going to look at this and imagine that if they just
| eliminated the broker, they'd get an additional $88,900 in
| their pocket.
|
| That's not how it works, though. Without a broker you may not
| find a buyer at all. If you do, you might not know how to price
| the business. Even if you could find the same buyer at the same
| price, they might be uncomfortable dealing with someone who
| doesn't know how to navigate the sale of a business and end up
| backing out.
|
| For some very small web businesses, you can usually get away
| with a broker. Nobody is dropping $90K on a broker to sell
| their $50K side project on one of those business buy/sell
| websites, obviously. However, once you get into the territory
| of niche hardware businesses, it's very helpful to have someone
| on your side who can help navigate the situation.
| xyst wrote:
| Wild. I vaguely remember this founder spending an obscene amount
| of money on some boutique firm to give homepage a small update.
|
| Seems he exited the Google grind about 6 years ago. I guess
| salaries were between $180-250K during that time frame.
|
| Google grinder for 6 years: $1,080,000-$1,500,000
|
| Entrepreneur: "$920k over four years (with sale)", but doesn't
| include the 2 bombs he had prior to successful exit.
|
| (None of these figures taken into account taxes or benefits)
|
| Seems like he took an L, but in the end at least he didn't end up
| in the salt mines. The education of learning as you go is truly
| underrated though.
| shooker435 wrote:
| This mindset assumes that the only measure of success is
| monetary. If he left Google to try and get richer than staying
| at Google, then sure, he probably lost.
|
| However, he kept trying again before job hunting or returning
| to big tech. This tells me the monetary factor was smaller than
| something else.
|
| You mention the underrated educational experience in your last
| sentence, but there's so much more than that. He was probably
| never worried about his autonomy, being laid off, working with
| (or for) people he didn't want to work with, corporate
| politics, or anything else corporate bureaucracy introduces.
| This likely freed up his brain to be more creative and actually
| be used to 100% of its capacity.
|
| I believe the obsession with TC in tech is highly problematic
| and there are a lot of talented folks optimizing for promotions
| via internal politics, rather than solving real problems for
| real people.
|
| I also wish healthcare wasn't tied to employment, but that's a
| post for another time.
| talldatethrow wrote:
| How is healthcare tied to employment? Isn't it available to
| buy on the open market?
| riku_iki wrote:
| I think it will be (much) more expensive, but I am not an
| expert.
| sesm wrote:
| In US buying medical services without insurance is very
| expensive. You choices are:
|
| - get health insurance from your employer
|
| - get covered by insurance of your spouse
|
| - buy insurance from your own pocket
|
| - don't buy insurance and risk loosing a lot of money in
| case of health emergency
| yojo wrote:
| My wife runs her own consulting business, I'm taking a
| break from tech work. This means we buy insurance on the
| federal marketplace (healthcare.gov).
|
| It is expensive, but not insanely so. Family of four,
| living in Oregon, non-smoking, our premium is ~$1k/month.
| Granted it's a high deductible ($12k), but it protects us
| from the kind of catastrophic emergency that could wipe
| out our savings. We are fortunate to not have expensive,
| ongoing conditions.
|
| Granted, $12k/year is a lot for less affluent families,
| but government subsidies can bring the premium down
| considerably if your income is low enough.
|
| And while the coverage is far inferior to my old FAANG
| luxury health plans, it still works well enough.
| ThePowerOfFuet wrote:
| > Family of four, living in Oregon, non-smoking, our
| premium is ~$1k/month. Granted it's a high deductible
| ($12k), but it protects us from the kind of catastrophic
| emergency that could wipe out our savings. We are
| fortunate to not have expensive, ongoing conditions.
|
| Family of two, living in the EU, non-smoking, our premium
| is ~EUR0/month. Granted it's a EUR0 deductible, but it
| protects us from the kind of catastrophic emergency that
| could wipe out our savings.
| codegeek wrote:
| :). If only people in America understood how they are
| being scammed by the Health Insurance Mafia.
| dhosek wrote:
| Healthcare delivery in the US is -- not good.
| groby_b wrote:
| Your premium is paid by your employer. Please revisit the
| statement when you are self-employed.
|
| Also, turns out there is a deductible if you don't want
| to pay a fortune for self-insurance.
|
| Well, at least there is in Germany. And the premium ends
| up being ~$1k/month.
|
| US health insurance is crappy in many ways, but EU health
| insurance isn't a magic fairy unicorn either.
| PKop wrote:
| But after taxes and lower salary, I bet you're more than
| $12k/yr behind an equivalent US employee's net earnings
| yes?
| nkmnz wrote:
| Are you unemployed? Otherwise, this is just not true.
| Assuming OP and his wife earn average incomes for
| academics in the US, they'd pay 2x ~920 USD per month in
| Germany, totaling 80% more than the premium and only 9%
| less than the worst case scenario of OP having to pay the
| full deductible.
| talldatethrow wrote:
| Taxes you pay pay for this, or your employer pays it
| instead of paying you.
|
| Now you can argue that health care costs less on a per
| basis, or even per productive taxpayer basis, but that's
| a different matter. Maybe the US could recreate your
| healthcare COST system, but it doesn't have to also take
| on your payment system (tax instead of direct)
| nativeit wrote:
| I had the misfortune of suffering through a multiple
| sclerosis diagnosis when I was just 18-years-old, and the
| bottom line cost for that (only outpatient care) was
| approaching $50k in 2001. I imagine that price has more
| than doubled since. It caused my financial condition and
| professional development to crash and stall just as it
| was beginning. It's impossible to know what might have
| been, but I sincerely believe that my circumstances, and
| the limited options for mitigating their long term
| effects, cost me (and by extension, society) at least 10x
| that initial bottom line cost in missed opportunities,
| and lost productivity/wages.
|
| What makes the issue so terribly entrenched, apart from
| our peculiar association between health insurance and
| employment, is how utterly opaque everything about
| healthcare costs are. Both systemically, in that it's
| much more difficult to craft policy, as well as
| practically, in that for many (most?) individuals it can
| be impossible to know in advance how much any given
| course of treatment might cost, and no opportunities for
| "shopping around" or price comparisons.
|
| For most Americans, and companies, I think our healthcare
| system is essentially a very short-sighted and
| inefficient tax. For others--people in situations such as
| mine, and very probably for a meaningful portion of the
| ~30M-50M Americans still uninsured/underinsured--it's an
| unreasonably high burden that accounts for so much more
| than just the money spent, and a constant specter
| clouding their lives in uncertainty and risks. For the
| self-employed and entrepreneurs, it's a crucial
| consideration that defies simple calculations, and just
| by the averages will have prevented a significant number
| of potential endeavors from ever leaving the initial
| planning stage and/or denied startups access to otherwise
| valuable talent. We should be pursuing bigger picture
| policies, and while I'm not arguing that the federal
| government is a good answer to everything, it's clearly
| the answer to this kind of management of universal needs
| with clear societal benefits.
|
| Sorry for the lengthy comment, my hamster brain was
| apparently restless. For anyone who did, thanks for
| taking the time to read.
| jonas21 wrote:
| > _buy insurance from your own pocket_
|
| In other words, buy it on the market, like the GP said.
|
| With ACA subsidies, you'll never have to pay more than
| 8.5% of your income in premiums for a mid-range plan. And
| that's in the worst case -- it'll typically be less (if
| you make less, you'll qualify for larger subsidies or
| free healthcare, and if you make more, the proportional
| cost of insurance premiums will be lower).
| floating-io wrote:
| Employer-offered plans tend to be extremely good value, so
| the vast majority take advantage of them.
|
| I was paying <~$300/mo on that plan. I now pay over $700 on
| a directly-acquired plan. So that's problem one.
|
| The bigger problem, IMHO, is that quitting means changing
| your insurance, which isn't just a financial change. It can
| also end up requiring you to change medical providers,
| which is no small deal!
|
| This adds massive friction and stress to the act of
| quitting/changing jobs, a major source of leverage on the
| employer's side.
|
| And that's to say nothing of the fact that it's effectively
| an overly burdensome tax on new entrepreneurs. It's a
| reinforcement of the concept, "you have to have money to
| make money".
|
| JMHO on the topic; for reference, I'm a new entrepreneur
| very early in the process. I'm just lucky enough to be able
| to risk the attempt.
| lotsofpulp wrote:
| > I was paying <~$300/mo on that plan. I now pay over
| $700 on a directly-acquired plan. So that's problem one.
|
| This is relatively small pickles. Your employer paying a
| few hundred, maybe a thousand dollars on your behalf if
| you are old, per month. You can buy the same on
| healthcare.gov
| demondemidi wrote:
| In the US there is the affordable care act from ~2013,
| where anyone can purchase insurance from a pooled market
| subsidized by the government up to a certain income (50k I
| think). But that is also impacted by the state you live in,
| as the states negotiate the contracts paid by federal
| dollars (I know it's effed up). So the ACA is cheaper on
| the west coast than it is in Alabama. Today, a "gold"
| policy for a single man in his 40's is about $900/month
| through the ACA. The cheaper "emergency" plans (aka "trash"
| plans) appended by Trump are still a few hundred dollars,
| but cover almost nothing.
|
| I now pay $120 for me and my wife for a plan that is better
| than the $1000 plan through the ACA in Oregon because I'm
| no longer self employed.
|
| That's almost a 10x difference.
|
| After working for myself for 12 years, hustling consulting
| and contracting gigs, I'm way happier working for a company
| that pays well, has great benefits, and I always know I
| have a paycheck coming.
| talldatethrow wrote:
| I have a feeling your employer is paying the difference,
| so basically you're paying one way or another.
| runako wrote:
| Exactly this. People feel like wages have not been
| increasing. In reality wages have been increasing, but
| employers are passing most of the increase over to health
| insurers.
| lotsofpulp wrote:
| > I now pay $120 for me and my wife for a plan that is
| better than the $1000 plan through the ACA in Oregon
| because I'm no longer self employed.
|
| Look at box 12 code DD on your W-2. That is the total
| amount you are paying for your health insurance (it's
| just that your employer is paying it directly). It's
| still counted in the cost of employing you though,
| obviously.
|
| Assuming you have a silver or gold level plan, total cost
| to insure you and your wife is the same on healthcare.gov
| or if your employer buys it.
|
| The only broad savings are if your employer is self
| insuring and their risk pool (employees and their
| families) are disproportionately low risk (young and
| single).
| astura wrote:
| Your employer typically pays the major of the premium.
| j45 wrote:
| Money is time, and time that is free to choose is more
| freedom to spend your time how you please, and work on things
| that may not need to have a financial half.
| logifail wrote:
| > more freedom to spend your time how you please
|
| "More freedom" sounds amazing right up until the point you
| remember that you aren't getting a salary every month but
| still need to pay rent and buy food and stuff...
| nativeit wrote:
| Pro-tip: use a portion of your freedom to exchange goods
| and services for money to pay rent and purchase
| provisions from Food & Stuff(r).
|
| "...it's where I buy my food, and most of my stuff." ~
| Ron Swanson
| blehn wrote:
| With promotions, equity, and stock price growth (+220% over the
| last 5 years), probably closer to 2 or 2.5M of Google income.
| tills13 wrote:
| Holy hell the pessimism in this thread over a life-changing
| amount of money for 99% of people.
|
| > should have stayed at Google
|
| You should feel privileged that you've never been "stuck" at a
| job that you don't find personally interesting and stimulating.
| Wasting your life to see the number in your bank account
| increase.
| ThrowawayTestr wrote:
| Half a million isn't really that much.
| demondemidi wrote:
| less then quarter mill after taxes.
| wallawe wrote:
| This is capital gains, meaning 15-20% in taxes. Nowhere
| near half.
| bagels wrote:
| 20% + 10% state income tax for many here
| ageyfman wrote:
| might have been QSBS, so no taxes < $10m
| jejeyyy77 wrote:
| spoken like an employee ;)
|
| welcome to the world of capital gains and QSBS!
| lp0_on_fire wrote:
| Half a million dollars would be a life-changing amount to
| the vast majority of the American population.
| hiddencost wrote:
| Assuming he was a senior SWE, he would have made around $400k /
| yr staying at Google.
|
| I suppose if he can parlay this outcome into an L7 role at
| Google, E.G, then in another 6 years he would break even
| (compared to staying at L5)
| mattgreenrocks wrote:
| It's goofy to see people talking numbers and completely
| disregarding the mess that is Google's culture right now from
| the mass layoffs.
|
| Everything has non-monetary costs associated with it. Chasing
| L7 means more politicking and less actually making things if
| I understand it correctly. Maybe that's invigorating to some
| people (am convinced people get off on fighting over
| artificially scarce resources), but I don't understand them
| one bit.
| DaiPlusPlus wrote:
| $400k for Senior is an outlier.
|
| According to Levels.fyi - and my personal contacts -
| https://www.levels.fyi/t/software-engineer/locations/san-
| fra... Median TC - something just-south of $300k TC (not
| salary) is more likely.
|
| Furthermore, the higher you go, a greater proportion comes as
| RSUs, not cash - even if it was $400k TC, a good chunk of
| that is money you literally can't spend for a couple of
| years.
| blehn wrote:
| Vesting for each grant starts at one year and is monthly
| after that. So you're really only waiting one year for the
| first big chunk of stock to be liquid. 400k TC at Google
| means that you have 400k (pre-tax) liquid at the end of the
| year (depending on the stock price, which has historically
| gone up).
| Aurornis wrote:
| RSUs aren't really a big deal due to the way it vests.
|
| But you're right that the TC of the average Google (or even
| FAANG) job has become somewhat mythical on the internet
| lately. I'm in a Slack where people have been asking about
| offers and TC for a long time. There are a lot of
| disappointed people who think they're walking into
| $500-600K job offers only to realize that they're "only"
| getting $300K from multiple companies.
|
| Honestly quite frustrating, given that $300K with excellent
| benefits is an incredible job offer, but these people have
| been primed for disappointment due to unrealistic
| expectations.
| brk wrote:
| I don't think he took an L at all. He now has successfully
| built, and sold a company. While being a dev at Google is
| somewhat elite, the number of people who have executed a
| successful sale is a tiny fraction of the number of FANG devs
| (or whatever we're calling FANG now).
|
| There is a very high probability he gets offered a CEO position
| at some company that is looking for an exit path. That type of
| thing will usually come with a nice salary and a minimum 7
| figure payout on exit.
|
| As of this specific date, his bank account might be slightly
| lower than had he stayed at Google. 5 years from now it will
| almost certainly be significantly higher, and if it is not, it
| is more likely because he chose a path that he preferred.
| abtinf wrote:
| > grinder
|
| That's the hint you aren't comparing like kinds.
| chubot wrote:
| What's really wild is when people assume that everyone shares
| their value system
|
| It also appears you haven't met anyone truly wealthy, because I
| can tell you they don't share your point of view
| drubio wrote:
| I also remembered his post about dropping $50k on the site
| redesign*
|
| I actually thought it was a big W for him when I saw this post.
| But I guess, if you consider the opportunity cost of Google
| employment, it's a financial L.
|
| * https://mtlynch.io/tinypilot-redesign/
| steve_adams_86 wrote:
| This is so strange to read.
|
| He learned and experienced so much more than he could have at
| Google. He actually built and sold a profitable company.
|
| What's life if we reduce it to how much money we _could_ have
| earned?
| JohnCClarke wrote:
| Well congratulations! That's awesome!
| markusw wrote:
| Really interesting read, thank you for sharing!
|
| You mentioned that building tinypilot suddenly sparked way more
| interest than your other attempts. Do you have a plan for your
| next product? Try out different things and hope you find
| something that gains similar traction? Or do you have some sort
| of evaluation criteria for your ideas?
| mtlynch wrote:
| Thanks for reading!
|
| > _You mentioned that building tinypilot suddenly sparked way
| more interest than your other attempts. Do you have a plan for
| your next product? Try out different things and hope you find
| something that gains similar traction? Or do you have some sort
| of evaluation criteria for your ideas?_
|
| Yes, the market's reaction to TinyPilot will definitely impact
| how I evaluate future businesses in the early stages. That
| said, I don't want to overindex on this one experience, as I
| know other founders who found product-market fit more
| gradually.
|
| But my experience with TinyPilot does support lessons I've been
| taught that you should launch early, potentially without even a
| working product ready. In previous projects, I'd gotten too
| excited about the engineering and convinced myself I needed it
| first, but TinyPilot was a really small amount of engineering
| before I started selling.
|
| My other takeaway from TinyPilot was how much of a difference
| it makes to sell a product that's aligned with my blog
| audience. I'm not really an IT blogger, but a lot of my readers
| are IT people and enthusiasts, so my blog was a huge advantage
| in finding early customers. My other products were things that
| had nothing to do with my blog like parsing recipe ingredients
| or finding live comedy.
|
| I don't have a strict plan for my next product, but I want to
| focus on things that I can test quickly and drop if I can't
| find paying customers within the first two or three months.
| nickjj wrote:
| You know it must have been stressful when you were compelled to
| list your desserts in order.
|
| Now that we're almost in June, does it feel like the deal
| happened a million years ago? I know when stressful things happen
| and time passes, it always feels like it was so long ago even
| when it was only a month or 2 back.
|
| It was a pleasure having you on a few years ago in the Running in
| Production podcast:
| https://runninginproduction.com/podcast/105-tinypilotkvm-let...
| mtlynch wrote:
| Hey Nick, good to hear from you again!
|
| > _You know it must have been stressful when you were compelled
| to list your desserts in order._
|
| Haha, that's true, but I also get more excited than the average
| person about desserts.
|
| > _Now that we 're almost in June, does it feel like the deal
| happened a million years ago? I know when stressful things
| happen and time passes, it always feels like it was so long ago
| even when it was only a month or 2 back._
|
| Yeah, I hadn't thought about it, but you're right. We're only
| about six weeks out, but it feels like it happened six months
| ago.
|
| It was funny during due diligence, I was really stressed out,
| but I could already tell that I'd look back on it and wonder
| why it was so stressful. At the end of the day, it's mostly
| just preparing reports and answering questions.
|
| I think the feeling that's hard to recall is that even though
| the reports I was creating weren't that complicated, they were
| stressful because the stakes always felt so high. I was always
| so worried about making errors and messing up the deal or
| opening up myself to liability claims after closing.
|
| > _It was a pleasure having you on a few years ago in the
| Running in Production podcast_
|
| For me as well! It was fun to chat about TinyPilot's stack and
| tooling.
| cypherpunks01 wrote:
| I must have missed this product, it seems incredibly useful,
| especially for providing remote access to legacy devices like
| NVRs, or random other gear that is a big hassle to remotely
| administer.
| makk wrote:
| "I immediately knew I was onto something."
|
| Every successful bootstrapper who I know personally says this.
|
| The ultimate success didn't happen instantly but the
| product/market fit was obvious on day one.
|
| And they didn't iterate their way to that point. They walked away
| from whatever they were doing before, restarted with a blank
| sheet a paper, and the new thing immediately resonated.
| flawn wrote:
| Watch out for survivorship bias though, everybody might think
| that but a lot more still fail.
| j45 wrote:
| The issue is too many startups can be solutions in search of
| a problem.
|
| It's not uncommon to become attached to something.
|
| I've done a lot of B2B tooling and the percentage and risk of
| failure goes down significantly if you are ruthlessly focused
| on only solving problems that cost time or money for a
| business, and being flexible to pivot.
|
| In the B2B space, there are absolutely 100% instant revenue
| generating needs and solutions. I'm packaging a rather boring
| one right now. Getting out of the building before writing any
| code, what so ever is critical.
|
| Building before learning is the cart before the horse and
| limits shelf life, runway, and ability to learn. One could
| easily cowboy code or over architect something that prevents
| you from trying the very thing that will take off because
| it's too difficult to now implement in your formerly simple
| codebase of patch work that is now too complex.
|
| They often can get discovered while doing a bout of
| consulting (aka paid market research and customer discovery),
| or solving one problem sheds a light on something near by
| that look subtle but critical and a no brainer.
|
| My personal experience has been people will actually say the
| phrase "I'm trying to find a way to give you money to use
| this" when you may show them a prototype. This didn't seem
| like it actually happened, until it did.
| teaearlgraycold wrote:
| There is a whole category of people that just try to brute
| force finding both a problem and then an accompanying
| solution. And I'm sure that can work. But what I'm saying is
| it's definitely not "everybody" that thinks that.
| mattgreenrocks wrote:
| Business is rife with survivorship bias, and indie hacking,
| doubly so.
|
| The really honest ones will tell you how much of a role luck
| played. Most, however, will be quick to take credit for
| luck's role, often deluding themselves.
| DaiPlusPlus wrote:
| > Business is rife with survivorship bias, and indie
| hacking, doubly so.
|
| Indie-hacking-projects have the benefit of a dignified exit
| by open-sourcing - a lot of whatever value in any
| technology/code/designs was created will be preserved -
| which is a good thing.
|
| It's a shame that oftentimes the "best" outcome for a
| startup or small software/tech company (where they get
| acquihired by Apple specifically) is not only their
| product/service gets shut-down, but all traces of it are
| systematically removed from the Internet and everything the
| company's founders do is effectively memory-hole'd - the
| _Dark Sky_ app is the textbook example of this.
|
| -----
|
| Separately, when a company is small, stable and profitable
| it isn't a failure as far as the bank is concerned, but not
| exactly a hyperscaling unicorn - so when the
| founders/owners want to exit their only real option is to
| sell-out to either their competition for a managed wind-
| down-and-migration - or worse: an M&A firm (which will only
| make a lowball offer, then replace staff eng with a
| skeleton maintenance crew, and mis-manage the company's
| products/services for a decade as they hemorrhage-out loyal
| customers due to declining product quality).
|
| Required reading: https://pivotal.substack.com/p/the-worst-
| outcome-is-a-medioc...
| hermitcrab wrote:
| IIRC PayPal started off as an encryption library and went
| through more than 10 iterations before it became what it is
| now.
| bittwiddle wrote:
| Thanks for sharing! I'm currently trying out a bootstrapped hw
| project myself, and have enjoyed following along with your
| progress.
|
| You mentioned having trouble working with vendors, was this for
| ex: having boards assembled? I guess I've probably gotten "lucky"
| with relatively low scale so far, but been happy with the
| assorted online PCBA services.
| mtlynch wrote:
| Thanks so much for reading!
|
| > _You mentioned having trouble working with vendors, was this
| for ex: having boards assembled? I guess I 've probably gotten
| "lucky" with relatively low scale so far, but been happy with
| the assorted online PCBA services._
|
| Oh, it was a challenge to find vendors for pretty much
| everything. The cost of switching vendors in hardware is pretty
| high once you've built a pipeline around a particular vendor,
| so it's important to have reliable vendors. But we had trouble
| finding vendors for PCB design, PCB assembly, third-party
| logistics, and packaging. We eventually found vendors that
| worked well, but even the good ones would have occasional
| wrinkles that needed smoothing out.
|
| I wrote previously about how poorly I chose a vendor to do a
| redesign of TinyPilot's website:
|
| https://mtlynch.io/tinypilot-redesign/
| gigel82 wrote:
| This is interesting. Once manufacturing (and other tedium) was
| outsourced, I'd have thought that's "making it". More or less
| "passive income" presuming the employees took care of everything
| else. If the revenue truly was 208k, you'd just need to "hang in
| there" for 2.5 years and you'd make whatever you got in the sale,
| then everything else coming in later would be just "extra".
| mtlynch wrote:
| Thanks for reading!
|
| > _Once manufacturing (and other tedium) was outsourced, I 'd
| have thought that's "making it". More or less "passive income"
| presuming the employees took care of everything else. If the
| revenue truly was 208k, you'd just need to "hang in there" for
| 2.5 years and you'd make whatever you got in the sale, then
| everything else coming in later would be just "extra"._
|
| Yeah, I definitely understand that expectation, but I don't
| think I could have gotten it to 100% passive income.
|
| Even if everything ran perfectly, everyone still needs a
| manager. So at the bare minimum, someone has to check in with
| the team, make sure everyone's being paid, etc.
|
| But with so many moving parts in a hardware company, things are
| never running perfectly. There's always something going on like
| some part is no longer available or some process has changed
| with our vendors or one of our vendors has made a mistake and
| we have to work with them to fix it.
|
| I theoretically could have hired a COO to manage operations,
| but that person would have to be comfortable managing a dev
| team, support teams, and making hardware/logistics decisions.
| So even if I could find a qualified COO willing to work for a
| $150k salary, the full cost after payroll taxes and benefits
| would likely exceed any profits the company was making.
| bufferoverflow wrote:
| He would make a lot more money by staying at Google.
|
| If it's not about money, I would understand. But then why sell a
| growing business?
| ajford wrote:
| There's an entire section titled `Why Sell`.
|
| > I missed writing code....
|
| and
|
| > My wife and I also wanted to start a family. TinyPilot only
| occupied about 20% of my time, but it occupied 90% of my
| stress. I would have done a terrible job juggling founder
| stress with new parent stress.
|
| Changes in life circumstances changed his priorities. It
| wouldn't be the first or last person I've heard of that wanted
| to go back to coding after ending up in mgmt/founding
| something.
| gwd wrote:
| It sounded like it wasn't really the kind of business he wanted
| to be in. What do you do if you've poured two years of your
| life into something, and it's starting to be profitable, but
| you realize it's not really your thing? Options are:
|
| 1. Press on making OK money doing something you're not that
| enthusiastic about
|
| 2. Just pull the plug
|
| 3. Sell it
|
| I mean, obviously #3 is the least bad of all the options. You
| don't know what something's going to be like until you try it.
| This is a "negative result" from the "what kind of business do
| I want to run", but now he has a better idea what might not
| work for him. It's probably a break-even result from a
| financial perspective, and a positive result from an experience
| gained perspective.
| kuschkufan wrote:
| Congrats, you outed yourself as not having read the article.
| Because it's in there.
| rglover wrote:
| Congratulations, Michael! Still remember being an early
| tester/customer and getting the Ziploc bag of components :)
|
| Cool to see the full lifecycle from launch to sale.
| wuiheerfoj wrote:
| Great post - I love these candid insights into founder life.
|
| It's hard to learn a lot of these lessons without going through
| it, so I really appreciate you sharing
| CodeWriter23 wrote:
| @mtlynch I'm trying something new and with a different approach
| this time. I realized reading your post today, my "new" approach
| borrows a lot from your prior post on optimizing and
| externalizing ops at TinyPilot.
|
| Just wanted to say Thanks for that. Best wishes in becoming a new
| parent.
| mtlynch wrote:
| Oh, awesome! Glad to hear it was helpful.
| dheera wrote:
| The enshittification begins. Fork this repo now!
| https://github.com/tiny-pilot/tinypilot
| kstrauser wrote:
| Good for you, Michael. Congratulations on a successful product, a
| successful exit, and an approaching baby!
| panstromek wrote:
| I always enjoyed your annual reports (and the website redesign
| story). This looks like a happy ending to that whole saga.
| Arch-TK wrote:
| > ServerCo would email me a list of detailed questions about
| TinyPilot's finances and risks, I'd answer in a day or two, and
| then there'd be weeks of silence. Finally, they'd respond with a
| new round of questions, and we'd start the cycle again.
|
| Wow, I've done technical due diligence for a number of large
| acquisitions in the past few years (quite a few big enough that
| most people on HN would have heard of them) and the usual
| timescales are in the order of a couple of weeks and involve
| constant and in some cases daily question rounds.
|
| Taking what sounds like months and months of time to handle the
| process sounds super laid back. Certainly seems far more
| stressful than anything I've ever seen.
| mtlynch wrote:
| Yeah, a bit of extra context is that the four months that I was
| talking to ServerCo also overlapped with my wedding and
| honeymoon last year. I would have pushed for a quicker
| decision, but I didn't want to be in serious negotiations about
| an acquisition at the same time as my wedding.
|
| That said, when I talked to Chris at Quiet Light about how it
| played out with ServerCo, he said it was rare to see strategic
| acquisitions come together successfully at TinyPilot's scale.
| He suspected that because I approached ServerCo and
| acquisitions weren't on their mind at all, it just wasn't a
| priority for them, so that's why everything went so slowly.
| nickca wrote:
| Congrats and thanks for being so open in the write up!
| codegeek wrote:
| "When you sell a business at TinyPilot's scale, there's no
| deposit. You can invest hundreds of hours into preparing reports
| for due diligence, reveal all your confidential business secrets,
| and spend thousands of dollars negotiating legal documents and
| still walk away with nothing if the buyer backs out."
|
| Great write up overall but as someone who has bought a couple of
| businesses, it is not just the seller who loses out if a buyer
| backs out. The buyer can also spend lot of time/money vetting the
| business including legal fee etc during due diligence. On a
| recent deal, I spent over 10k as a buyer until we finalized the
| APA. If the deal fell through after that (possible), I would have
| lost that money and the months of time of course.
| mtlynch wrote:
| Yes, definitely agree. I didn't mean to say that the buyer has
| no skin in the game, just that the seller receives no
| compensation if the buyer pulls out of the deal.
|
| In this case, the buyer probably spent more on the deal than I
| did, but that wouldn't really comfort me if they had backed out
| last minute.
| codegeek wrote:
| Yes of course. Basically when a deal falls through after
| spending weeks or months on it, both sides lose big. That's
| why you want to do it with professionals and have a good
| Lawyer and CPA on your side.
| Waterluvian wrote:
| Does it also feel like you showed your hand and all they had
| to do was ante to see it? I'd be very anxious about getting
| screwed by unsavoury actors.
| lloydatkinson wrote:
| > $1M in annual revenue.
|
| > A month ago, I sold the company for $600k.
|
| ?????
| mtlynch wrote:
| It's a hardware product, so profit is much lower than revenue.
| SaaS businesses can often sell as a multiple of revenue because
| they have relatively low costs, but with hardware, there's a
| lot of overhead.
| andrethegiant wrote:
| > Sale price: $598,000 (2.4x annual earnings)
|
| Also confused here, the math doesn't seem to be mathing up
| runako wrote:
| Revenue is $1m. Earnings are less than revenue, because you
| have to pay for salaries & stuff to generate the $1m in
| revenue. After expenses of ~$750k, the business earned
| roughly $250k in profit. Thats' real money the owner(s) could
| put into their personal accounts.
|
| Businesses are typically valued as a multiple of their
| earnings (in the stock market, this is the P/E ratio). For
| hardware/e-commerce companies, 2.4x is in the range of fair
| value.
|
| Again, you multiply by the earnings and not the revenue. That
| gives you the actual sale price.
| stevoski wrote:
| Revenue, not profit.
| gnicholas wrote:
| Congratulations, and good luck with your next phase of life (baby
| and whatever else it brings). It's been interesting watching your
| journey via your blog that pops up here every year.
| mmmlinux wrote:
| How did you get people to trust your product? If I see something
| like this from a small outfit for a cheap price, I will assume
| that the price is being made up some where else. How did you
| assure you customers you cant access their machines when you
| want. Or that your service will offer the reliability they will
| need?
| mtlynch wrote:
| Thanks for reading!
|
| > _How did you get people to trust your product? If I see
| something like this from a small outfit for a cheap price, I
| will assume that the price is being made up some where else.
| How did you assure you customers you cant access their machines
| when you want. Or that your service will offer the reliability
| they will need?_
|
| Good question!
|
| Customers didn't express concern to me about me accessing their
| machines. I don't know if I did something special to engender
| trust or the average customer isn't so worried about that
| threat. I could imagine that there was some trust in the fact
| that my face was on the website, and I was clear about who I
| was and that I was located in the US. For a lot of customers,
| I'd imagine that I'm less likely to have backdoored the product
| than a faceless corporation who operates from overseas.
|
| I also found that many of our customers found us through word
| of mouth. So there was trust that the product worked well
| because they heard recommendations from friends, co-workers, or
| bloggers that they liked.
| kristianp wrote:
| > Sale price: $598,000 (2.4x annual earnings)
|
| I don't want to offend, but 2.4x earnings is disappointing to me.
| I dream of selling a business for 5-10 times earnings and
| retiring. The assumption being the 5x earnings assumes the
| business will grow, perhaps doubling every 5 years?
| ezekg wrote:
| > My wife and I also wanted to start a family. TinyPilot only
| occupied about 20% of my time, but it occupied 90% of my stress.
| I would have done a terrible job juggling founder stress with new
| parent stress.
|
| I feel this. Being a founder is hard, and raising kids is very
| hard. I was a little bit sad when I saw this headline show up on
| HN, because I've been following you for years, ever since the
| beginning. I always admired your hardware business, and the
| yearly retros, and I was sad to see it all end. But after reading
| the post, I do understand. Congrats on the sale, and on the
| child. I hope you can find some relief from the stress of being a
| founder, and I hope your new family will bring you as much joy as
| my 2 kids have (with +1 on the way for me as well).
|
| Would you build another hardware business, or are you going to
| try for a software business next?
| mtlynch wrote:
| Thanks, Zeke!
|
| > _Would you build another hardware business, or are you going
| to try for a software business next?_
|
| No, I don't think I'd try hardware again.
|
| It's a shame because I learned so much about hardware and
| selling a physical product, so I do have an edge if I wanted to
| do something else that involves both hardware and software, but
| bootstrapping hardware from zero is just so risky. I caught a
| lot of lucky breaks for it to work out with TinyPilot; but
| simple one-time events like a manufacturing error or a lost
| shipments could have sunk the entire company in the first two
| years.
|
| I'd like to try another educational product. I released a
| blogging course at the end of 2020. I didn't have time to
| promote it much because TinyPilot swallowed all my time, but it
| still has made $10k of profit. I'd like to try something like
| that again.
|
| But I would also like to build some kind of pure software
| business if I land on the right idea and the right market for
| it.
| willsmith72 wrote:
| When they ask, "how do I know if I have product-market fit?", i
| will point them here
|
| > With every other project, I had to beg and plead with people
| even to try my product. With TinyPilot, there was so much demand
| that I struggled for months to keep the product stocked.
| holografix wrote:
| A brokerage fee of roughly 20% sounds _wild_. Can anyone comment
| on whether he was ripped off or whether it's normal?
| balls187 wrote:
| 1) Congrats on your exit.
|
| 2) Congrats on expecting.
|
| 3) Thank you for sharing. I found this insightful, and hopefully
| throughout the journey you found more fulfillment than you would
| have had you stayed working at Google making software for such
| amazing product manager decisions like a $240 smart watch for 8
| year olds...
| tadeegan wrote:
| How much tax did you pay? Long term cap gains?
| mtlynch wrote:
| I'm still working with my accountant on that, so I don't have
| the final figure. I'm expecting the taxes to be relatively low
| due to expenses that I had to amortize in the last couple of
| years:
|
| https://news.ycombinator.com/item?id=40513450
| ttcbj wrote:
| Congratulations! And thank you for sharing your story over the
| years. You are an excellent writer and thoughtful founder. I am
| really glad you found this graceful and economically rewarding
| exit.
|
| I also own a small bootstrapped company (pure software), and I am
| now on year 21 (!). Someday, my business will run its course.
| When it does, I will probably write a blog post about the entire
| experience of starting and owning it, and if I do I will have
| been inspired by your posts.
|
| Best wishes.
| mtlynch wrote:
| Thanks for reading and for the kind words!
|
| And 21 years is amazing! With everything that's changed in the
| last two decades, it's awesome that you've continued adapting
| and kept competitive all these years later.
| fitsumbelay wrote:
| thanks for posting this
| mountain_peak wrote:
| First off, congratulations on the sale - sounds like the right
| time and the right reasons for you, and you're 100% right on the
| seemingly 'backwards' nature of incentives and rewards when
| working for a large org. I was somewhat saddened when the logo
| changed (I suggested an alternate), but completely understand
| your rationale.
|
| As a side project, I'm currently working with a hardware founder
| (I'm primarily software) who exited twice before having his
| "clock cleaned" by overseas competition steal and undercut his
| patented products on his third venture, which caused him to all
| but close shop and retire early. He's back I think due to
| boredom, but I'm seeing just how difficult hardware is. Why do
| you think hardware doesn't generally have the same level of
| 'respect' as software? From what I can see, it should be held in
| much higher regard with a correspondingly higher level of
| compensation. Is it literally just the current ability for
| hardware to be reverse-engineered and undercut?
| mtlynch wrote:
| Thanks!
|
| > _Why do you think hardware doesn 't generally have the same
| level of 'respect' as software? From what I can see, it should
| be held in much higher regard with a correspondingly higher
| level of compensation. Is it literally just the current ability
| for hardware to be reverse-engineered and undercut?_
|
| Oh, my perception of hardware engineers is that they are held
| in similar regard to software developers.
|
| If they do get less prestige, my guess is that it just comes
| down to money. The margins on pure software products are so
| high, so software businesses can afford to pay their software
| engineers really well. I've heard that typically hardware
| products sell for about 3-4x their bill of materials, so that
| eats up a huge chunk of your profits. And then there are all
| the other costs like storage, shipping, fulfillment that are
| nearly zero for a software business but significant for a
| hardware business.
|
| I think for similar reasons, we don't see a lot of successful
| hardware startups. The VC money is probably flowing much more
| heavily toward software, so we hear of fewer hardware unicorn
| companies.
| ilamont wrote:
| _without an office and custom in-house manufacturing, a
| prospective owner could run TinyPilot from anywhere in the
| world._
|
| Questions business brokers ask is how many hours the owner spends
| each week, and if it needs to be on site.
|
| _Lifetime profit from business_
|
| Thanks for including this. Startup hype always demands a focus on
| the size of the exit, ignoring the other funds extracted from the
| venture in the form of salary and covering other costs.
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