

Irish teenagers make dotcom millions - papersmith
http://www.guardian.co.uk/business/2008/mar/28/technology

======
Harj
unfortunately the press have sensationalized things here, we never claimed to
have made "millions" and we know this deal isn't the "we've made it" one it's
being portrayed as. i'll blog about our thinking behind the sale in more
detail. here's the nutshell version:

\- we were at an inflection point. our initial launch went well, we were
getting traction. we had three choices: angel, vc or acquisition.

\- this particular acquisition gave us a cash component that made us each very
happy (i worked out that it'd have been almost 7 years before i'd have seen
this much liquid cash working as a corporate attorney at one of the world's
largest law firms).

\- our upside hasn't been capped. if we deliver the value we think we can,
we'll make at least the same (if not more) than if we'd kept growing
auctomatic independently and sold for tens of millions - not many early exits
keep that potential upside while substantially derisking the downside (stock
of a public co will always have some value, unlike a startup where it's all or
nothing).

\- the Live Current guys are fundamentally great guys. they've given us
freedom to go away and build things how we want. of course we're going to be
held accountable if we don't deliver but there's no issue of "9 - 5 hours" or
"office politics". we're still working essentially as an independent company.
we're not being exiled to vancouver - we'll be back in the valley after a few
months to build out the teams we want to work with.

given all this we felt this was the right decision. we can only deal with the
situation in the present and right now, we're ecstatic about the deal and the
future.

~~~
vlad
Cool. Congrats! So, once again, you're missing Startup School. :/

I saw a few problems with auctomatic. Number one, I was never sure how this
would work out considering eBay PowerSellers, your target market, would almost
entirely be in their 40's, with auctomatic's team below drinking age. When I
was 22, I enjoyed having customers 30-50 years old relying on me for my eBay
software, but at 24, after Startup School, I realized that it was okay to be
around, as well as to design, new software for people my age--and maybe you
were beginning to feel that same way, as well. (Just like the Beatles could
have probably tried to make more money by targeting older adults of their
parents' age since an average teenager doesn't have nearly as much money as a
40 year old; yet, the Beatles became famous by creating music that was great
for their own peers at the time.)

The other problem I found with eBay is that a startup based around another
company's technology and users, at it's best, is tied down to another company,
and eBay is not the most technically advanced, consistent, or stable parent to
deal with (in my experience) even if they were one of the first web apps to
come out with an API.

My third worry was that I believed that it would be better to do something for
free to attract tons of buyers, and then convert them to sellers, than vice
versa, because sellers will go to where the buyers are, from the tons of
research I did, and not vice versa. That's why I concentrated on software for
buyers this entire time.

The fourth is that such a startup targeting older adults would need to have
older employees targeting forums where such sellers hang out, and I'm not sure
any of that was being done other than visiting the eBay's annual conference. I
believed you were focusing on creating killer technology and getting funding,
but not the boring stuff like talking to older customers who couldn't care
less about technology or social networking, nor did I believe you were asking
them to tell their friends, etc, in places where older adults might be.

This move seems to make tons of sense. You're decoupling yourself from a being
dependent on another company, you're focusing on the buyer aspect, and between
the many different "properties" you may be developing, there are plenty of
youthful opportunities like boxing.com and call.com to keep one excited and
relative to others our age (just for the psychological benefits.) Oh, and you
get paid as part of the process, and stay with the same great team, too.

~~~
Harj
we didn't find any of this a problem. I spent a lot of time on ebay forums, we
had plenty of meetings with people much older than us that went v well and our
seller focused strategy gave us the understanding of the ecommerce landscape
that we wanted.

~~~
vlad
Cool. That makes sense; I didn't account for the fact that auctomatic has 6
smart people to get things done. :)

~~~
kul
we were at startup school last year

~~~
vlad
I was thinking of the event the day before, sorry!

------
jsteele
Dotcom Millions for everyone! All you have to do is startup your own web
company and you too can retire at 17 or 19 years old and party like it's 1999.

These guys did very well for a years worth of work and deserve every penny.
But don't for a second think these guys are gonna go out and buy Aston Martins
or live in the Four Seasons with their "millions".

Funding: yCombinator: $25,000 - $35,000 (Some articles say there were 4
founders ($25k) but their own website show 6 people ($35k)) Angels: $400,000
From Paul Buchheit and Chris Sacca

Ownership: yCombinator: 2-10% (Typically 6%) Angels: Unknown but split among 2
people Founders: Unknown but split among 4 to 6 people

Exit: $5 Million Composed of: \- $2 Million Cash \- $3 Million Stock in
CMNN.OB

So YC's take is $100,000 (2%) to $500,000 (10%) (Typically $300,000 (6%))
Angels take is unknown but if they made no return it would be $400,000.
However its likely that they made at least 1x return.

This would leave about $4 million to be split among the 4-6 founders. So they
each made a little ONE million or less. Of course a large portion ($3 million)
of their earnings are stock, so their actual earnings could be a lot more
(multiple millions) in the future than what they are now. However, they are in
effect paper millionaires as none of them have $1 million in cash.

The deal was announced around 12:00am PST March 26, 2008. March 25, 2008 close
of CMNN.OB was $2.69. Friday's close was $2.62. So its possible that 2.6% has
already been shaved off that $3 Million. The actual amount obviously depends
on what price they obtained the stock at.

Let's also not forget that these guys are leaving the valley, moving to
Vancover and will likely be settling into their 9-5 jobs with bosses, office
politics and other employees at Live Current in a few weeks.

It will be interesting to see how everything turns out in a few years time.
However, by that time the media will move on to hyping another startup and
we'll probably never hear about these guys again. Unless they quit and start
an new startup.

~~~
pg
A million dollars may not seem like a giant fortune, but it's a lot to most
people, especially to someone young. In fact, it's life-changing if you get it
that young, because it probably means you're done saving for retirement. If
you can get a 10% return (a reasonable estimate considering the asset
allocation you'd use at that age), getting $1 million at age 20 is like
getting $2.6 million at 30.

Plus I know the Auctomatics are personally planning on doing things to
increase LC's value. They negotiated for a lot of autonomy in order to make
that happen, and it's a small enough company that they could.

They turned down some very famous companies to do this deal. Why? Because
being bought by a public company with a small market cap is in effect a quick
way to go public.

~~~
jsteele
It is true that a million dollars is a lot to probably 99% of the worlds
population. But those 99% don't live in the valley where "The median price of
previously owned houses is $716,500" and the "median price for previously
owned condominiums and townhouses is $475,000" even in this housing slump. So
basically that enough to buy a house, furniture and a car in the valley.

They'll be a bit better off in Vancouver but not too much. The USD and CAD are
near par these days and Vancouver is the most expensive city to live in
Canada.

Also, since only $2 million of the exit was cash, none of the founders even
have a million dollars in cash to invest. At most they have $500k if there
were 4 founders with each owning 25%. However since there were 6 people there,
2 angels and yc, they probably got much less than $500k cash.

It is quite interesting how you view this exit as sort of an IPO for
Auctomatic. I think that is a first for yc? This gives everyone on news.yc and
the yc alumni to put their money where there mouth is and invest in a yc
company.

Will the stock price rocket turning everyone into multi-millionaires? Only
time will tell.

None the less, these guys have done a great job and I wish them all the best.

~~~
colinplamondon
I might be misinterpreting your comment, and if that's so, my apologies, but
that would seem to assume that they're dipping into savings to pay month to
month expenses and will be buying houses on top of it. Which is completely
possible, I don't know any of these guys, so that's one way to look at the
situation.

But, the other way to look at it is that they suddenly have a million dollars
(per the article) accruing interest every year as their salaries at Live
Current (now I'm making assumptions :) ) cover basic expenses and then some,
leaving a security blanket that lets them do most anything they want in the
future without worrying about the financial hit.

They can travel off to Africa and spend three years learning Swahili, then
surf and learn guitar on a Brasilian beach.

They can build up Live Current per the plan and shape the company.

They can start a new company and bootstrap it, no investors, no worries.

They can do small-scale angel funding, even.

Or not.

But they have options.

And, those options were gathered over the course of a year, putting them in a
position that 90% of retirees can only dream of- financial independence. That
is huge leverage, and that is huge success.

Also, keep in mind that those are prices in two very expensive places- they
could just as easily move to a country where the exchange rate is more
favorable and increase their relative savings by a goodly amount.

So, yeah, they didn't cash out for a billion- but they now have a million
dollars at 17 and 19. Because of that, they're completely financially
independent, and, thus, free- forever, barring any catastrophic financial
meltdowns.

So congratulations to them- I can't wait to see what they have coming down the
pipe.

------
laktek
Does YC accepts projects from any part of the world ? In fact I'm from Sri
Lanka, story like this was always in my dreams

~~~
pg
<http://ycombinator.com/faq.html>

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antirez
> It owns internet addresses such as perfume.com, cricket.com and brazil.com.

Is this supposed to be a good meter of a company?

------
pius
I love it.

