Why are you always so bitter to people asking straight questions?
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.
You didn't really share anything someone would need to valuate the site publicly. You (well, Jason) posted an auction with no information about costs or profit, traffic sources or subscriber turnover, handover or whether the billing info of the customers would transfer, etc. These are the most basic pieces of information you'd expect to see in any listing of a site for sale there. Nobody responded to questions on the listing, and nobody accepted any of the pending bids (and people did try to bid on that auction).
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.
Did anyone who actually bid on the site take issue?
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.
For as many sales that exist behind closed doors with b/s valuations, here's a few guys who used standard metrics (sales, gasp!) for valuing their company and made multiple attempts to sell it properly.
How about this? Nice job guys. Congrats on sticking to your guns and getting the price you felt was fair.
FYI, I responded to select private Flippa messages from buyers I considered to be qualified. If someone was serious about spending $480,000, they should have gotten in touch privately and demonstrated that they were serious, qualified buyers.
Everyone had an equal chance to buy Sortfolio - one party stepped up and got it done.
I'm glad to hear about your attentive private responses.
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.
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.
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) ;)
Count me in on that theory (another member from the peanut gallery!).
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.
So you know the truth, we didn't have a buyer from the start. We didn't know if anyone would buy it. We'd never met or heard of the eventual buyers.
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.
At grave risk of sounding even more patronizing than I usually do, let me try to help you with something:
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.
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.
I think the easiest tack is to stop assuming that people are liars until they've exhibited behavior that would cast them as such.
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.
I really don't understand the negativity around here for this, is it really that hard to believe that somebody paid good money for a profitable business? Now clearly 27 Signals have moved slightly from the original flippa terms, they are not imposing that customers re-ender details which I imagine was a show stopper for any potential buyer.
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.
I don't know if they ended up being the acquiring party, but one of the people seriously considering the purchase reached out privately to my company (a Sortfolio customer), with a few short questions. It was a polite email that made it clear they were looking for opportunities to improve the service (as well as address the original concerns about credit card info not carrying over), so I was happy to provide my feedback. I'm happy Sortfolio has been acquired and plan to stick with the service.
Wow! From DHH in the comments, it appears it did sell for the full asking price. Very curious to know more about the new owners. Buying a business outright and then running it isn't a scenario that gets covered very often on the startup behind-the-scenes circuit.
Here's hoping we get some follow-up posts about how it goes for the new owners on SVN.
Yes, despite the HN peanut gallery's perception of the world, there is actually a market for profitable businesses. It's surely less exciting than selling your no-revenue photo service for a billion dollars, but that's ok.
We'll be sure to follow the life of Sortfolio after the sale.
uh, you are aware the majority of negativity and questioning about the asking price was because you did not at any point answer whether or not billing information (and subscriptions) would be kept, even when people on the Flippa auction requested this information?
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.
Anyone who was a qualified buyer, and asked privately, got the answer. Lots of people asked privately. We even put serious buyers in touch with our credit card processing company so they could get additional questions answered directly.
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)
When you get dozens and dozens and dozens of inquiries, it's pretty easy to tell which ones are serious. People who are prepared to spend $480,000 make it very clear they they're interested in moving forward and not just browsing.
I'd love a post on how the price was set at 480k and why specifically you weren't willing to sell for anything less than that figure. Why you drew that line in the sand. Must have been more going on here than meets the eye.
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).
You have no idea? You launched wild accusations that we were just playing everyone with our proposal and that we actually just had a buyer all along. If we had a buyer at $480K, we would not have bothered listing it again. We would just have sold it.
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.
"wild accusations that we were just playing everyone"
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.
Err, I think what he means is that you implied that 37Signals was lying, that they pretended not to have a buyer, and to be considering shuttering the site, when in fact they knew that they had a buyer. I can only speak for myself, but if that were proven, I would certainly frown upon it.
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.
He's a multi-millionaire and was able to do it while acting this way. Therefore his previous experience is that acting like that will continue making him exceedingly wealthy. Getting angry about it won't do any good, you might as well just ignore him. I'm trying to say this in the most neutral, scientific way possible.
Also note, he has a pretty well established disdain for the entire VC-funded startup model, and Hacker News in general. If you expect him to be polite here, I think you have some misplaced expectations. Not that I'm excusing it, just not losing any sleep over it.
I agree that it would affect the final number, and probably adjust short term revenue (and thus value). However, I also think it's a misplaced (but common) mindset that short term revenue determines valuation.
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.
I think 37s is well within their rights to do this however they wanted. But still feels lame, how it all went down.
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
I don't know why everyone thinks the company was overvalued. $480k seemed like a steal to me and if we weren't in the process of purchasing another business when I saw this deal come across the Internet, we would've submitted an offer too.
I'd like to see that too, just for curiosity. I expect that'll be up to the new owner though.
> 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.
Am I the only one here on HN that finds the whole 37Signals vs HN battle entertaining? DHH makes a direct (sometimes arrogant) comment, HN jumps all over him, Jason "clarifies", and HN hugs Jason. DHH and Jason seem to have contrasting personalities which is probably an important contributing factor to their success. DHH says what he thinks, whether we agree with him or not isn't the point. Jason calms the storm. I'm happy for the Sortfolio customers who see value in the service continuing. I'm also glad that 37Signals shared at least some of the details behind the sale and the process. But most of all, I'm entertained!
I'd still be interested to know the motivation for their process. If someone made a firm offer of $450K, it doesn't make any sense to shut down the service just because they didn't meet the $480K requirement. That would flush $450K down the toilet. The obvious solution is an auction, not an ultimatum.
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.
One should probably view this in context of 37's other businesses. Spending lots of time and effort to squeeze few extra dollars from website sale may not be worth it if your core business is something else and generating much higher profits.
Oh man. What's with all the conspiracy nonsense? 37 Signals have been nothing but transparent through this entire process. Hopefully these HN comments are not an accurate sample of what most people are thinking.