
Ask HN: Ask to be acquired? - MicahWedemeyer
I run Obsidian Portal ( http://www.obsidianportal.com ), a content management system for tabletop RPGs (ie. Dungeons &#38; Dragons).  We've been doing this for about 3 years now.<p>When I originally started, I (naively) believed that the publisher of D&#38;D would see the value of what we were doing and immediately acquire us. Back then, I just thought that's how things worked. Make a site, get bought out, go buy expensive car.<p>Fast forward 3 years, and they've never once contacted us. I actually met one of their web developers at a convention, and introduced myself. First thing he said: "Yeah, we know who you are..." So, they definitely have heard of us, and frankly at this point, it would be impossible for them not to know who we are.<p>Anyways, we instituted a freemium model about 1.5 years back and things have been great. We've got a lot of premium subscribers, and the ranks are swelling every day. We're not rich, but we're getting close to ramen profitable.<p>However, we've started to hear rumors that the publisher is getting ready to develop their own campaign management system. They tried once before and failed miserably, but their new team is very competent and I have every reason to believe they'll succeed this time around. With their exclusive access to all the copyrighted material, I'm pretty sure it will be a big hit, even if they lack some of the cool features we have. Plus, I fully expect them to borrow heavily from our feature-set. It's what I'd do in their place...<p>So, I'm frustrated and worried that they're about to enter the arena with a big advantage (ie. the brand and the exclusive content) and I won't be able to compete. Still, it seems that even after all this time, my site remains a perfect fit to be acquired. We could deliver exactly what they're looking for without all the risk of developing it from scratch.<p>Since they've never once tried to contact me all this time, is it time I put a foot forward? I've read the conventional wisdom that "companies are bought, not sold", but my shy-girl-at-the-dance stance of waiting to be asked so far hasn't generated any results.<p>How do I go about making that first contact? Who do I contact? Do I propose some kind of partnership in the hopes that the relationship grows from there?<p>Any advice here would be greatly appreciated.
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patio11
_frankly at this point, it would be impossible for them not to know who we
are._

That might be the view from your end of the equation, where you wake up every
day and check your analytics stats. However, if you are ramen profitable, your
current sales are probably roughly equivalent to the healthcare costs of the
night shift on the janitorial staff at one of their offices. They're a large,
publicly traded company -- they might not even know who you were _if you
worked for them_. (Far stranger things have happened.) Its not like my bosses
have ever come to me in the morning and said "Patrick! There might very well
be some young buck working in his kitchen on the next big thing in examination
management systems! Drop what you're doing and discover his identity so we can
prepare to squash him like a bug!"

 _We could deliver exactly what they're looking for without all the risk of
developing it from scratch._

I don't think you're thinking like a big company here. You see existing code
and think "Yay, working features!" They see integration headaches. You're not
tied into their accounting system -- that is going to take six figures to fix.
(You think you can do it cheaper? Wait until you start working in a large
organization that does everything in teams of highly paid people whose
salaries and healthcare benefits start running the second the first of three
planning meetings begins.) You aren't on brand yet, which is going to require
a redo of all your HTML -- including a turf war between marketing, their
product-side artists, and their web group. Oh, and you. You're a bit of a
problem, too -- they can't absorb your code without you, but you upset the
apple cart among multiple groups within their organization. Who do you report
to? Who can you boss around?

When you start thinking in these dimensions, you can see why they might say
"We'll do it in house, own it all, and not have to worry about any
complications."

~~~
MicahWedemeyer
I guess I should amend and say "they" who know about me are the web developers
and the people in the tech team. Perhaps they have no desire to buy someone
else's stuff and would rather build from scratch. That's what I'd do. So,
you're right, the people with the purse-strings probably don't know who I am.
Any advice on how to change that?

And I can definitely see the point about integration headaches. Technology
acquisitions seem like they'd be a nightmare to me.

~~~
patio11
_Any advice on how to change that?_

Stop acting like a programmer, start acting like corporate sales. Find a
contact within WotC. Ask to be introduced to the product manager of their
existing product which is closest to what you have to offer. Contact him and
sound him out on the possibility of being acquired. Be prepared to be told
"No, we have no intention of doing that at all." Also be prepared to be told
the same thing in a non-obvious manner that consumes several months of your
life.

Personally I'd be thinking more along the lines of "Take my existing business
to the next level" if I were you, since time spent on it will yield
predictable results. Start with the low-hanging fruit such as charging more,
optimizing conversion to the trial, and (biiiiiig subject coming up)
marketing. If you're making (pulling a number) $2,000 a month today with 10k
uniques a month then it is highly likely you'll make at least $4,000 a month
when you have 20k uniques. That really isn't that far away -- it is only a
single factor of two. (Multiplicative improvements make "factor of two" really
not that bad in our business.)

~~~
MicahWedemeyer
_Personally I'd be thinking more along the lines of "Take my existing business
to the next level"_

Thanks for this advice. That's how we've been operating all along, and it's
done well for us. I guess I'm mainly just scared of the increased competition.

Also, your pulling-a-number-from-the-hat estimates are quite good. You should
be a fortune teller :)

~~~
patio11
Compete.com + AdWords keyword data + reasonable guesstimations of your
conversion rate based on my own experience with a bit of a discount thrown in
because of the demographic = +13 attack bonus to guesstimating revenue.

------
petervandijck
Here's a thought: they are about to do 10s or 100s of thousands of dollars
worth of free marketing for YOU, if you can do these 2 things:

1\. Be clearly better than them.

2\. Make sure the people they market to know there's a better alternative
(you).

If you can pull that off, you'd be a fool to sell. They're about to validate
and promote your market.

~~~
mattmaroon
I don't think that's really true where IP is involved. It's pretty easy to
leverage the IP of those original games to make a more compelling alternative,
even if it is otherwise inferior.

He may not be able to be better than them legally. Niches like this don't get
validated, they get owned.

~~~
MicahWedemeyer
Exactly right. They don't need a lot of whiz-bang features as long as they
have access to the IP content. Imagine trying to make a site about Harry
Potter and then J.K. Rowling announces she's going to do the same. She'll be
able to give the fans a lot more of what they want, even if the presentation
is technically inferior.

I've got a few ideas that might allow us to get legal access to that content
as well, though. Still, I hate getting too specific on a particular RPG
system, as there's a whole universe of systems and settings out there, and D&D
is simply the most well known. Many of the others are much better, in my
opinion.

------
dazzawazza
Business is about making contacts with people in the industry you are in.

I would call the MD of the mega-corp and ask to have a meeting about potential
business overlap and how you could work together. All very informal, no money
talk or specifics. It's just to see if you could work with these people.

You've already got a lot in common (business wise) with them so you'll find it
a lot easier to talk to them then you imagine. If you arrange to meet for
lunch it will give them a clue that it's a more informal chat then three hours
around a board room table.

Worst case you leave the office with a contact in the industry, best case it
will lead to your fancy car.

Good luck.

~~~
staunch
Companies buy partners all the time. Any time it seems useful, strategic, or
cheaper in the long run. Become a partner.

------
jeromec
I'm not an expert, but I think you absolutely should approach them. When you
understand the rationality behind acquisitions you can see why I'd say that.
Take Google for example, who has been on a tear with acquisitions, along with
others. Look at their structure, at their company direction. Acquisitions for
them make sense for several reasons: access to the brainpower of the startup,
consolidation of power, more favorable reviews in the community. All that and
it costs peanuts from their perspective.

Contrast that with the publisher of D&D. How forward thinking, in terms of
having strategic technological positioning, is their management? Probably not
as much as Google. All they are concerned about is a 1 to 1 correlation with
profits. Action A yields profit B. If they see that they can build your
functionality in house, they may see a lot of advantages to that. They don't
care about the other stuff as Google might. I'd come up with a figure to be
happy with, yet highly enticing to them, and then sell it with rationality.
Point out all the benefits, of which access to you should be the biggest
selling point, as you've successfully built it up.

------
richardw
Their problem is a typical build-or-buy. There's likely a price at which it
just makes sense to buy you instead of building it out.

Do they have any competitors who might be interested in you? Maybe a smaller
game publisher?

Can you leverage your head start in any way?

Can you make your service more 'sticky'? If people have committed lots of time
to building up a profile on your site then they'd be less inclined to switch.
People still use Yahoo after a decade of Google being around.

One idea could be adding a Facebook app or link up with FB Connect - link
deeper into the users life, announce targets, scores, etc.

------
qeorge
As a general rule, your community is valuable, your tech is not. They can
reproduce your tech in-house, the user base is harder.

Why did their first attempt fail? Was the tech that bad or was it a marketing
problem? If its the latter, I like your chances better.

Either way, I think you should approach them directly. As you said, your
current approach hasn't worked, so it may be time to mix it up.

------
jlm382
From what you've described, there's a huge negotiation problem. You don't have
leverage, and you're starting to sound desperate - everything they can use
against you in the event that they contact you.

Lets say you asked them to acquire you. They're interested, they google around
for anything about you, and find this post. They know exactly what your fears
are, they know that you're not ramen profitable, and they know that you know
that they're coming after you.

Which means, they can negotiate you down to a point where they're buying your
company for pennies on the dollar. What's your BATNA? (best alternative to a
negotiated agreement) - right now, it's just to continue on, despite the fact
that you're losing money. Fix that BATNA, and you'll be in a much better
position to either sell this off, or to even just continue running with it.

But just asking HN for help is huge. Most people never get that far. :)

------
gsaines
This is a question I'd be interested in having answered as well. I run a small
educational website that has a comparative niche advantage and you're summary
of how you thought web startups worked sounds very familiar. So far no
expensive car. :)

~~~
MicahWedemeyer
I think it's a very common misconception, but we're all so embarrassed about
thinking that way that we don't admit it.

I also had similar misconceptions about VC funding. I used to think VCs would
just appear at my doorstep checkbook in hand, ready to invest in my great
idea. Still waiting on that one as well...

------
brianculler
I don't think you should be too worried about it. You've got a pretty loyal
(and decently sized) user base. Plus all your existing users have their
content tied to your site, so don't go writing any data export features that
would even allow them to jump ship.

Its probably a hard pill to swallow, but you said it yourself: they know who
you are, they've never approached you, and they are writing their own.
Conclusion: for whatever asinine reasons, they've determined consciously that
buying OP isn't in their best interests. You courting them isn't going to
change that scenario.

------
petervandijck
If you do decide to try for a buyout, do this:

\- increase your perceived value by adding something sexy tha looks hard to
do, ie. an iphone app.

\- increase your value by finding another potential buyer or two (real or
perceived) and make sure they know that the other buyer is in talks with you,
and that that worries them. Make sure there's some kind of deadline involved.

------
rozim
If you disrupt an existing business significantly then they can't help but be
interested in you and then ideally they decide: \- to reduce the number of
players in the market (by acquiring you) \- that it's cheaper and quicker to
market by acquiring you rather than develop inhouse

------
jeromec
I just had another idea. I still think approaching them for acquisition is an
option, mostly because I don't like businesses dependent on other businesses
(for precisely this reason). However, an alternative route may work better. I
wish I had a fuller understanding of text based RPGs like MobWars because they
are making an absolute killing. I tried one out once, but just couldn't
understand its draw, otherwise I'd create one in a heartbeat. But
obsidianportal.com seems similar to me, just based on D&D copyrighted
material. Try to brainstorm out a text based RPG that would appeal to D&D'ers
but with your own material. You already have a community to sell it to, and it
might grow to be worth far more, and you own all the IP.

------
Nischal
I've practically no experience in all this. I dream of owning a startup,
growing it and have it acquired by a bigger company and yeah buying expensive
cars after that.

So here's some amateur advice :

1\. If you are the one approaching then obviously chances of you getting a
good deal would be less 2\. If you do decide to approach, you should be able
to make the company's decision making team salivate at the prospects of buying
you out 3\. In case the other company comes out with its own version, it can
be a good thing for you because if the company fails again then they would
definitely think of acquiring you.

P.S. What if D&D officials read this query of yours? :P

------
vaksel
they are definitely developing a competing product, the reason they haven't
contacted you, is to avoid you raising stink later: "they talked to me, stole
all my ideas, then came out with their own product

what kind of money are we talking about here? $100K sale or $10M sale?

Also looking at your Alexa rank(150,890) it doesn't look like you are driving
a lot of traffic, and your forums don't appear to be all that active(~700
users)...

so I see 3 strategies for you:

a) tell the DoD guys, that your site is for sale for $XX thousand.

b) list the site for sale on eBay(made like $250K for that note taking site,
so you might find a "sucker" who'll spend more than the site is worth)

c) list the site for sale on Flippa

~~~
MicahWedemeyer
Thanks for the feedback. Here is some background info related to your
questions:

1) We're probably closer to the $100K mark than the $10M. Then again, I think
paired up with a strong brand it would be killer. We've got great features,
but not the branding or marketing.

2) The forums are a very sideline part of the site, and we have considerably
more users than 700. I don't like to give out the actual number, but it's
comparable to some of the larger D&D websites. We're not big overall, but
we're big in our niche (ie. tabletop RPGs). Surely that counts for something.
Plus, we have a proven revenue model and are approaching ramen profitability
with our current traffic.

To be honest, I don't think I could ever sell it on a place like eBay or
Flippa. I'm very attached to my site and handing it over to just somebody off
the street is out of the question. Plus, I have a reputation to maintain with
my userbase. They would understand me selling to a major player in the
community, but would be horrified if I just tossed it onto eBay.

~~~
eru
Though whoever wants to pay the most for something, should have the best use
for it. But I agree with your sentiment, that you users probably wouldn't like
to see the side on eBay.

------
veteran
this might be helpful [http://venturebeat.com/2007/06/22/sold-to-the-highest-
bidder...](http://venturebeat.com/2007/06/22/sold-to-the-highest-bidder/)

------
zandorg
Not really on topic, but this is a great D&D website.

------
MicahWedemeyer
Direct link: <http://www.obsidianportal.com>

------
pwnstigator
Do you only have one potential buyer? Are you tied to one role-playing system?
If so, that would be a problem. Support more role-playing systems and campaign
types.

If you have more than one potential buyer, and you want to get bought, then
start spreading rumors that someone is planning to acquire you. Put some time
pressure on your potential acquirers. Once the rumors have percolated, start
claiming it (without naming names, because some people are malevolent and will
call to confirm). Preselection: buyers (like women) want you only when others
do. If you're not wanted by the others, lie and say that you are. It is not
unethical to do this. If someone is going to make a judgment of you based on
anothers' opinion, you have every right to take advantage of that weakness
through any means possible.

If that fails, just follow the competing product and make sure to be a bit
better-- a few months ahead of the curve. They are following your feature set.
Follow theirs. Buy a subscription and see what they're doing right. (Don't
steal their ideas, but learn from them.) You still have a conceptual head
start; you've been doing this for 18 months, and the fact that you guys are
profitable at all (in gaming, in a recession) is a signal that you're very
smart. You're also in a desirable industry and you'll be able to get smart
college kids to work for you on the cheap (plus equity).

Once you can start paying high salaries, make sure that key players--
developers and story-writers-- are treated like kings (remember: you're not a
big business, and your competitors are, and as a business gets larger the
status of key creators declines) with 20% higher salaries and 500% more
artistic/creative freedom than they would have at the big company. Become the
boutique out of which all the best ideas come. You'll still have competitors
chasing you, a few months behind you, but if you can develop the status of
being where all the best ideas are developed, the best people will want to
work for you. The "very competent" team that your competitors have? Those guys
will be talking to you. Once you're established and have 10x as much artistic
freedom as VP of Campaign Development at BigGameCorp, you might not want to be
acquired.

By the way, the fact that D&D's publisher is trying to build a competitor is a
good sign, not a bad one. That means you're working on something _worth doing_
, which puts you ahead of all the pie-in-the-sky gaming startups. It's a
signal, and remember that, although they're a competitor, you can learn from
them and what they're doing.

Good luck. Why don't you send me an email? I have some ideas I want to discuss
with you. pwnstigator at gmail dot com

~~~
steveklabnik
> By the way, the fact that D&D's publisher is trying to build a competitor is
> a good sign, not a bad one. That means you're working on something worth
> doing, which puts you ahead of all the pie-in-the-sky gaming startups. It's
> a signal, and remember that, although they're a competitor, you can learn
> from them and what they're doing.

I think that this is really good advice. It's a mistake that I would have made
just a few months ago, as well. Programmers tend to think of economics as a
zero-sum game. It's just as likely that their entry into the market will grow
the pie, and you'll benefit, as it will squeezing you out.

