

Ask HN: Company wants to aquire my website. Can you give me some advice? - maxlk

A company has been interested in acquiring my website and I'm looking for some advice from the HN community.<p>They turned down my initial offer, but expressed interest in negotiating a deal where they pay less up front and then continue to pay me based on growth. I would continue to work on the website and be paid as a contractor.<p>My website would become part of their large network of high traffic websites and through cross-promotion they say they could drive a lot of new users to my site, which I don't doubt, as my site fits in very nicely with their network of sites.<p>I'm looking for any examples of how a deal like this could/should be structured. Obviously I'm not going to be paid based on a percentage of pageviews, indefinitely. Should I propose we set up a number of traffic milestones and be paid when a milestone is hit? I understand it's hard to give advice without details, but some general advice and precautions would be very helpful. Has anyone here done a deal like this before?
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Towle_
This is a shit deal.

What they are essentially doing by tying your pay to the growth of the site is
_pushing all of the risk onto you_ , and you're getting NOTHING in return for
assuming the liabilities that come with. If they don't have the cash on hand
to pay your full asking price upfront and instead want to pay it in
installments (with interest, of course) then that's fine: they assume the risk
of their purchase and operations, as well they should. But that's NOT what
they're asking. They're asking you to do it.

edit: For example, say a month after they acquire your site, the company
decides your site and only your site is going to start running huge, 45-second
flash video ads for all incoming traffic. Why just you? Because they've
invested far less time and money in your brand than their others. You get to
be the guinea pig for their stupid business plan ideas because you're the most
expendable. Wham. You're fucked, they're not.

~~~
barmstrong
Agreed. Also why did you make an initial offer?

People have debated the merit of "he who says a number first loses" on HN
before, but in general there is a lot of truth to it. If they are interested
in purchasing, show them whatever info they need and let them make YOU an
offer. The final price can only go up from there.

~~~
electromagnetic
Agreed, if you make the first offer you should only be going big. You think
$10k is fair, offer $20k.

I remember my father-in-law was at a garage sale and saw a tub full of barely
used golf balls (better than the ones they sell in walmart at a stupid price
like $12 for 15). He asked 'how much?'; she offered $10, he countered with $5
and she took it. We counted them, it ended up being 300+ golf balls. He would
have been more than happy to pay $1 a dozen and consider it a steal ($25 for
all the balls - like $240 for worse condition balls in walmart) _without_ the
rubbermaid container; he got that for free.

You don't want to be the person selling your company for $50,000 when on the
straight market it would be going for $500,000.

~~~
vl
This example demonstrates value of asymmetry of information when making a
deal, but not "don't make first offer" principle. Obviously the lady was
ignorant to the true value of the balls, as any non-golfer would.

~~~
electromagnetic
It wasn't that she had a lack of access to the information (IE a non-golfer
randomly acquiring the balls), he husband was an avid golfer and she said her
son was semi-pro. She simply didn't care to get the information before selling
a product, which is another lesson entirely.

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staunch
Assume that any money that is contingent is not ever going to be paid. Get
enough upfront that you wouldn't feel ripped off if you never got another
dime. Shit happens and they'll be in more control than you.

To ensure the highest possible chance of getting the rest of the money have it
put in escrow. Structure it so that the escrow service pays out the money
according to a very simple metric. Using Google Analytics is probably a
reasonable method, as it's a third-party and not open to _direct_
manipulation.

If they're not willing to put the money in escrow that's a huge red flag that
they're expecting not to have to pay it out. Accept no excuses on this point,
increase the upfront payment accordingly, or don't accept the deal.

~~~
cperciva
_Using Google Analytics is probably a reasonable method, as it's a third-party
and not open to direct manipulation._

It's easy to manipulate Google Analytics numbers downwards (as the company
would want to do): Remove or break the javascript.

~~~
staunch
This is why you have a lawyer write the agreement. They're really good at
covering this kind of stuff.

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zaidf
It is very hard to give you any advice due to the vagueness in your post.
Personally, if its < 100K deal as it _sounds_ from your post, I'd just want
the cash without any future commitment. You say they want you to work as a
contractor - what if you quit the next day?

Bottomline: if it is a tiny deal, figure out a fair value for your site, get
the cash, work for them without any longterm commitment so you can quit
tomorrow if you'd like.

When I sold a site in high school for 5 figures, I was so over it the next
day. That would have been a problem if I'd made a commitment to stay and
maintain.

You say they turned down your initial offer. I was expecting the other way
around. I know when I got the initial lowball offer, I multiplied it by 5. I
sold it for 4x the initial offer.

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jlm382
Read "Bargaining for Advantage" as soon as you can - it'll give you incredible
ideas for how to frame your arguments, and how to creatively negotiate a
better deal for both you and the acquiring company.

Do you have a lawyer who understands internet companies / startups? I'd highly
recommend finding one to counsel you, because you run a high risk of having
the acquiring company's lawyers taking advantage of you without you realizing
it.

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jacquesm
Did they approach you or did you approach them?

If they approached you, you're in the drivers seat, set a good cash price up
front and do not rely on any money after the transfer has taken place. If they
don't take that walk away. They'll be back, or someone else will be or you'll
be left running your own business. Either of those are good.

If you approached them then maybe this is not the right party for you. Walk
and try elsewhere. If you keep getting shitty deals focus on improving your
product, grow the installed base and if you can start making inroads on the
companies that you looked at to buy you out.

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Lucro
They want your product!!!. You set the rules unless they see that you are
craving for a "little" money.

They want you website because they are going to earn profit from it (trust me
the company looking to acquire already analyzed the possibilities) Don't
forget that!!!

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kmfrk
This is about a company, but it sounds like something right up your alley:
<http://news.ycombinator.com/item?id=1639523>.

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gte910h
I think you're possibly getting taken for a ride here.

You can take either A> Convertible Debt or B> Non-convertible debt.

Convertible Debt would be you agree to some smaller payment, with an option to
convert the debt payments into a certain amount of revenue share if it does in
fact work out very well. Non-convertible debt would just be payments over
time. But in neither case should you take this currently offered deal.

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jogle
You really need to provide much more detail about the type of site you're
running, how/if it makes money, whether you're comfortable working as a
contractor for the larger company, etc.

Also, know that traffic milestones are way too easily taken advantage of
(inflation and deflation of numbers is very simple in practice) -- I would
suggest coming up with another way of tracking your growth than by pageviews.

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sroussey
I'd be a buyer in deals like this, where I get the seller to make the money
for me to buy them. Who wouldn't?

