
Sell Your Web App: Lessons I Learned From Selling DropSend - madmotive
http://www.thinkvitamin.com/features/webapps/sell-your-web-app-lessons-i-learned-from-selling-dropsend
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josefresco
Great ... I'll file this under my "stuff to remember if my wildest dreams come
true and someone buys my startup" folder.

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jacobscott
I a lot of interesting info that I haven't seen linked yet:

From 11/24/06, via Google cache: <http://is.gd/5cvU>

"How much profit does DropSend bring in each month?

    
    
        * Revenue: $9,041.81 per month (and growing by 8.6% per month)
    
        * Costs: $2,100 per month (Servers at 365main.com + maintenance)
    
        * Profit: $6,941.81 per month"

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shafqat
Interesting... 10X profit would make it an approximately 700K sale. I wouldn't
be surprised if that was close to the actual number because Carson wanted
around 1M, so after negotiations this seems likely.

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mseebach
I guess the "Cash not stock" advice is more true right now, in retrospect,
than in general?

I mean, since stock is riskier than cash, you can demand more of it? Of course
it depends what stock is on offer - but as the market looks now, and if I'm
able to sit on it for five years, I'd absolutely prefer 110 value-units of
GOOG over 100 value-units of cash.

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staunch
It definitely depends on the circumstances. Viaweb sold to Yahoo for stock
before it went up in a huge way. They probably would have had a much lower
price if it was straight cash.

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pchristensen
In one of the Startup School talks, someone said the $50 mil in Yahoo stock
turned into $750 mil. So getting stock worked out pretty well for Viawebbers.

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drusenko
there's a huge difference between public company stock and private company
stock. public company stock isn't necessarily bad: you can decide to do what
you want with it, since it's fairly liquid. if you hold on to it and the price
drops, that's a risk you assumed.

private company stock, however, is completely illiquid, and has a very high
probability of being worth $0, and that is usually what people mean when they
talk about accepting stock vs cash. agreeing to a stock buyout of your company
by another private company can be good, but you're essentially trading your
risk for theirs.

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ccx
"Expect staged payments The buyer will usually pay 50% on completion (signing)
of the contracts and 50% on successful transfer of the domain name(s). Make
sure to start the domain transfer process the moment the contract is signed."

This is not quite the normal way that it works. In the last 12 months I have
been involved in two major UK web acquisitions and, actually, the way it works
is that a couple of % of the transaction value is kept as a retention for a
full financial year after completion. This is in case of something going wrong
(whatever that might be), the buyers will have a pool of cash big enough to
sort out whatever is likely to happen. If everything checks out ok, then that
cash will be released.

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callmeed
Good article.

Interesting about the merchant account/billing stuff. I would think an
acquiring company would be willing to work things out over time–even after the
sale. After all, all the money is still going to them.

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pmjordan
Invoices have to be correct for filing your accounts. If they're issued by the
wrong company you're making life unnecessarily hard for yourself.

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prashantdesale
How do you find buyers though?

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webwright
Greatest quote I've heard on the subject: "Companies are bought, not sold."

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curiousgeorge
If you're selling someone a company, surely you would just sell them the
merchant account and company bank account as well, no? Did they sell the
application but not the company?

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run4yourlives
Yes, they did.

Dropsend was the application, and Carson Systems is the company.

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davidw
How common are the two scenarios? A lot of YC companies are created with one
and only one thing, so I guess you can sell the whole company. Other kinds of
companies might have more products, and sell the product off, rather than the
company. Does it really matter much one way or the other?

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run4yourlives
That's a fair point. I think it would matter only when the company in question
has decided to share common tasks (like a bank account, or even a user
database) across all of their projects.

Quick decoupling or forced encapsulation of projects seems to be a
consideration that should be built into a company with more than one product.

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matt1
Good article.

Does anyone know about how much DropSend sold for?

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ryancarson
Unfortunately the buyer wouldn't let me say. Needless to say, it was pretty
nice :)

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13ren
> [serious buyers] don’t want [the price] available to competitors

Anyone know why?

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mixmax
This is normal business practice. If you know, then the companys competitors
know too. From the price they can infer all kinds of things. If you paid above
market price maybe it is a strategic asset, if you paid below market price
maybe it isn't central to the core strategy but too good to pass over. Etc.

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staunch
It's normal business practice but that doesn't mean it's logical. The real
reason in most cases is just that most people and businesses consider anything
to do with money to be private.

