We'll be doing a more formal announcement and proper introductions soon, but there are a couple of things we wanted to add to this discussion.
First, we are thrilled to be at the helm of Sortfolio. We have a lot of experience in the area and are excited about the plans we have for it.
Second, the guys at 37signals were a pleasure to work with. They were open, transparent, and are committed to the success of Sortfolio.
We'll be doing the full transition in the weeks to come. Once we are all done, we'll post a proper retrospective and fill everyone in on the details.
We can't wait to share more!
Perhaps they already had a buyer in mind and just needed some negotiation leverage or wanted some free publicity.
I imagine people who were genuinely interested in bidding for Sortfolio feel a bit cheated with this announcement coming out of the blue.
Also, this is not out of the blue. We lost interest in considering all sorts of complicated deals a while back. So we told everyone that the price was $480K and that the deadline for closing a deal was July 1st: http://37signals.com/svn/posts/3172-sortfolio-going-once-goi...
So there was really no "bidding" after that point. It was quite simple: Give us $480K and the site is yours. The new buyer's did just that. End of story.
If you didn't want people to draw their own conclusions then you should have acted responsibly and made some attempt to answer and respond to the questions posted on sale page.
If you had no intention of providing this additional information because it was not worth your time, then you should have made it clear to people that no additional information would be forthcoming.
Instead, all the "chinese whispers" of people throwing ideas around seems to have really got you disgruntled, when you only have yourself to blame, and then you take your arrogance out on people asking straight and to point questions.
Do I think you got the $480k asking price? shrugs
What was the point of a public auction if you were only going to answer questions to private bidders contacting you directly? And why list it at all when you were trying to sell outside Flippa, in violation of their listing terms? Assuming that you were acting in bad faith, abusing Flippa as a mere marketing tool for a private sale, would be uncharacteristic for 37S.
Flippa contacted us after we posted Sortfolio for sale on our blog (http://37signals.com/svn/posts/3172-sortfolio-going-once-goi...). They asked us to list on Flippa too. So I said, sure, we'll list it on Flippa too. I couldn't include specific information the way I wanted to include it, so I didn't include everything in that listing. I got a few private inquiries, they didn't go anywhere, and they seemed lower quality than the leads we were getting from our blog. So we turned most of our attention to leads generated on our blog since they were of higher quality and better qualified (fielding qualified leads properly is time consuming).
Flippa may not have been a great fit for Sortfolio, or we may not have been a good fit for Flippa. I could have tried harder on Flippa, but I have limited time and when one source generates significantly better leads than another source, you have to make a decision where to spend most of your time.
The people behind Flippa were great - they were helpful and kind. I don't have anything bad to say about the experience. If nothing else, we didn't give it enough of our attention. Lesson learned.
I hope that was helpful.
Your comments on buyers needing to qualify themselves to get a response is right on. Professional buyers pitch themselves to sellers as much as the other way around.
I'd think that anyone ready to spend $400k on a site would have the willingness to get in direct contact with the seller, and that this "Rise of the White Knights" episode on HN is not based in reality.
Success to you!
This is answered in the comments on the post.
That's the only thing that irked me - having the property on Flippa but ignoring the questions submitted there. Other than that, the price was openly disclosed and the operators interacted on HN, etc.
Would be nice if it was an actual update in the original thread instead of leaving us to speculate, though.
Edit: Thanks for this update at least. Congrats on the sale.
How about this? Nice job guys. Congrats on sticking to your guns and getting the price you felt was fair.
I would have sold for less.
Everyone had an equal chance to buy Sortfolio - one party stepped up and got it done.
HN has this culture of entrepreneurial voyeurism. When a unique scenario like Sortfolio gets posted, we like to watch how it unfolds and learn from the process. When dozens of interesting questions piled on without any response from you guys, I was disappointed.
Clearly you're well within your rights to do what you did, but I hope this sheds some light on some of the negativity and speculation. I am grateful for these last few updates you guys have given and I hope you'll consider writing a more detailed report once the dust settles.
A number of serious buyers got in touch, asked a variety of different questions, and we got them direct answers.
While we may say we want to learn the from the process, the vast majority really just want to see what was done and then tell everybody how they would have done it differently (and implicitly more correctly) ;)
The whole story just sounded so contrived from the start and didn't play out much better.
I mean, we know 37signals and reality are not best friends, but just throwing away 220k/yr in nearly passive income if it doesn't sell for the desired price, seemed a little far out there to begin with...
With that kind of money at stake I'd have expected at least a little more enthusiasm in the flippa-auction from their end. No least given how much DHH likes to bash the VC-gambling - how does that jive with playing russian roulette on a product raking in that kind of money, for no plausible reason?
My pet theory is similar to yours; I think they simply had a buyer from the start, and offered to throw in some "37signals original flavor media spin" as a bonus.
Whichever the truth is, it obviously worked out for them.
We tried to sell Sortfolio a year earlier and nothing came through. We decided to try again this time with a deadline and a public price.
This deal materialized because the buyers were interested in what we were selling, we liked their enthusiasm for the product, and we reached an agreement. The deal came together towards the end of the deadline.
It would have been a lot easier and less stressful for all involved had we had the buyer up front. We of course would have taken the up front easy way had it presented itself.
And partly because this all snaps together way too snug. Short of the fortuitous hero riding into the sunset as the exit-credits scroll by. On his Louis Vuitton designer-pony.
But it doesn't matter what I believe. You're the guys with the sportscars.
HN people spend a lot of time arguing with each other, often about nonsense or trivia (hey, myself included). In those arguments, it is very normal to say "I have trouble believing X is true" or "I have a hard time believing Y". And while it's not the most polite way to express disagreement, it's more annoying than rude. (It is in fact a cardinal example of what my spouse Erin would say makes disagreeing with me annoying).
It is on the other hand incredibly rude to respond to someone who just made a categorical statement about something material ("We did not have a buyer from the beginning of the sale of Sortfolio", for instance) with the words "I have trouble believing you". Unbelievably rude. I think it might even be more rude than directly saying "I think you're a liar", since it's so recklessly casual.
Noticing this, I quickly searched over my old comments, horrified that I might have made the same error, perhaps even repeatedly. It is the kind of obnoxiousness to which I am prone. I am very relieved that I was not quickly able to come up with a comment here where I casually called someone else a liar.
Honestly, I just wrote what I had on my mind that moment, without much meta-thinking. You are probably right, in hindsight should at least have phrased it less direct.
However, without disregarding your concern: Should I refrain from posting at all when what I have to say boils down to "I don't believe your story"?
Would you also have reacted to a politely phrased comment saying the same thing?
It is not anyone's job to cure you of your misconceptions. "Prove it!" are the two most ignorant and wasteful words we have. When someone actually involved with a situation tries to assuage your irrational fears anyway, and all you have to say is "I don't believe you, even though I have nothing pertinent to offer except the speculation I rode in on," you're being stubborn, ignorant, and an ass. If you have something to add, some tangible counter, then by all means, offer it up for review. But otherwise, you should remain silent or gracious.
For the record, I disclaim any interest in this actual story, beyond the fact that people are getting so damn riled up about it. The metastory is riveting.
Not everybody here is the biggest fan of DHH or the 37Signals crew. That's perfectly fine. I don't know anybody here that would consider anything they've done as untruthful or as deliberately misleading. At the most critical extreme, you could maybe consider some of their sales copy as overzealous, but that's a far cry from outright dishonesty.
That said, you're of course welcome to say whatever you feel. However, I agree with Thomas that it is bad form. Different wording may well have helped the situation.
Finally, sometimes we post what's on our mind. I know that I'm guilty of it, and there are a ton of posts that I'd love to take back, either because I reacted inappropriately or made myself look stupid. Happens to the best of us.
Yes, that's exactly what you should. That sort of comment contributes exactly nothing to the discussion.
Also, you never know if they needed the sale proceeds to pay for something. Maybe some ambitious project that requires a high upfront capital cost.
Too many things that are unknown to us to just call them liars.
The subtext to some of the comments here suggesting that its all made up, is really odd! Why would 37 Signals even need to waste ours or their time making this up? They run Basecamp!! they really don't need to impress us with selling a relatively small business! its completely beneath them!
Instead of poking holes in this story, we really should be celebrating it. Building a business of this size is not that hard, a few hundred customers and a solid model and by solid model i mean, Charging for your product is all it takes. If this doesn't serve as inspiration to us all then i don't know what will.
Here's hoping we get some follow-up posts about how it goes for the new owners on SVN.
We'll be sure to follow the life of Sortfolio after the sale.
If you'd said from the start this was the case you'd have got many more bids, on HN alone I saw many comments from people stating they would bid if this was the case.
Maybe I missed something big or I'm not aware of something, but this was what the negativity was about, not the fact that the site is worthless and can't sell.
What criteria did you use to determine a "qualified" buyer?
As someone who frequently deals in transactions over the web for large dollar amounts it is not always clear who is qualified and who isn't. Especially if you aren't doing a high volume of transactions so you don't have a pattern established. One recent transaction we handled for someone started off with an insulting offer of $1000 (from a gmail type account in China (qq.com) and ended up at $38,000 USD)
If I had to guess I'd would say that the people who bought the site had offered 480k but you didn't want to say that you had a solid offer for a certain amount. Speculating that you told them you would sell to them at that price if a better offer didn't come in. This seems to dovetail with the somewhat cavalier attitude of previous posts and 37signals principals HN comments.
"despite the HN peanut gallery's perception of the world, there is actually a market for profitable businesses."
I've bought and sold several businesses both as the business owner and as a go between (collecting a commission for the sale of a business).
Or, of course, the simpler explanation: We thought the site was worth at least 2x the previous year's take. And if we didn't get that, it wasn't worth our time to deal with the transaction.
There is nothing wrong with what I proposed as a reason and it certainly doesn't rise to the level of "played the world for a fool." in any way.
"We thought the site was worth at least 2x the previous year's take. And if we didn't get that, it wasn't worth our time to deal with the transaction."
"it wasn't worth our time to deal with the transaction."
Your attitude is a total outlier. Enjoy your arrogance. You've got plenty of years to go to see how that works going forward.
I think the only reason why you consider my attitude an outlier is because I state it. Every business have a cut off point where a potential return is not worth the hassle. $480K was that number for us. I'll guarantee you that it's much, much higher for most other businesses.
Do you think Apple is going to fiddle through $200K purchase negotiations if they want to diverse themselves of a product? Of course not. Just not worth their time.
I'm happy how things have worked out for me so far, but thanks for caring.
You are 100% incorrect as to what I actually did and why. In business what I had suggested as a possibility is not something that would be frowned upon at all. It's the way business is done quite frequently. Do you think games aren't played in business and especially in negotiation? Consequently I wasn't being critical at all according to the way I viewed what you did. I looked at it in a positive way.
I've been negotiating for about 37 years and think about it every day and even as a hobby study the actions of a wide variety of individuals and companies. I don't claim to know what you know about programming or rise to your level of proficiency since it's what you do and I would never challenge you on that. But I do know about negotiating and business.
The "speculation" that I had was based on my experience. I even called it "speculation" and started my statement by saying "I'd love a post on how the price was set". That hardly sounds like it is coming from someone making "wild accusations".
As an aside I don't think that it supports your point to compare your situation to Apple and use the number 200k. Obviously.
I think a lot of 37Signals' brand, and a lot of its relationship with its audience, comes from their transparency and straightforwardness. I think that context also adds to the sensitivity. If it came out that they were lying to the public, it would be detrimental to them for sure.
Not saying DHH answered in the best way possible, or that you did anything "wrong," but you are squirming around the fact that you speculated publicly about them doing something untoward.
Seriously, how much of the hate is from folks that will never have this opportunity, wouldn't do it the same way even if they did, and just want to complain?
What research went into discovering that there is a market for profitable businesses?
This really shatters the idea that the point of business is not to make money.
The Inside Story of a Small Startup Acquisition -
This is good. Sortfolio may not have been worth the $480,000 otherwise. I imagine that requiring customers to re-enter their info would cause an immediate drop in the number of paying customers.
If Sortfolio provides significant value to its paying users (customers), they won't lose a great proportion of their revenue on CC re-entry. Those who don't re-enter billing info are the people no longer getting regular value from the product.
Folks, this is a huge success! It's a company that bootstrapped themselves (and get some credit for many other bootstrappers, myself included) and found an exit strategy that's a win for all parties: they make money. The buyer has a business that provides real world value to its customers. And the customers will continue to receive their value for dollars spent. (How many articles bemoan buyouts that are "bad for original customers/early adopters/etc."?)
Let's just take a moment and appreciate a successful exit. Everyone wins -- the founders, the buyers, AND the customers.
Current sortfolio customers got told clearly, 37s doesn't care about their business. Users of other ones of 37s' 'second-tier' products got a warning shot: your tool could be shut down or sold off any day. 37s hasn't revealed the new buyer, and appear to be hands off from here on out.
Just seems like a lot of value has been lost here. I think a better way to go would have been trying to find a strategic partner, and taking a longterm equity stake. Or bundling up Sortfolio, the 37s Job Board and The Deck into a new advertising company, with a CEO who will grow it. Something where the handoff can grow the legacy, instead of 37s washing their hands.
Instead Sortfolio lives, 37s got their money, but the whole thing feels icky. my 2 cents, no conspiracy theory
When I first read their blog post I was quite interested. I mean, here was a profitable business built by a well known company.
The only really unanswered question was whether or not existing customers would need to re-enter their payment information. I asked the question and recieved a prompt response.
I'm sure I would have had more questions if I could have convinced my partners to pony up their share of cash. But in the end, the deal wasn't for us.
Congratulations on the sale and congratulations to the new buyers!
According to Compete.com, in the last 12 months Sortfolio traffic decreased more than 75% (4 times):
> It seemed improbable back then.
Naw. You have to keep in mind that the HN community has gathered around a very specific way of doing business. Where people start to make a mistake is in thinking that this is how the rest of the world works too, and that there isn't any other way to do business.
There is still a huge amount of activity in the business world that revolves around long-term, sustainable, profitable businesses, especially those coming from people with the kind of reputation that 37Signals has. It's just that all those people don't have their own little online community where they share notes.
(If 37Signals offered such a community, I'd sign up in a heartbeat and my HN activity would finally finish it's long descent to 0.)
I didn't think it was improbable. 37Signals knows what they're doing.
Now we'll see how the site does once it is no longer associated with 37s. Maybe we'll be surprised again. it would be great to see Sortfolio thrive in the long-term.
I'm generally a defender of 37signals' methods, but it seems they didn't think this one through. They're lucky they found a buyer—it saved them a lot of embarrassment.
37S gets to sell Sortfolio in whatever fashion and to whomever they want. Oh man... you guys should try to rent an apt in NYC.
Buyer: Umm ok, how about we pay your $480K publicly and you quietly give us $430K in 37 Signal's stock?
In all seriousness I'm a big admirer of 37 Signal's and I like their equity grants concept for employees. This above is meant as a joke.