Our product is often recognized as a feature, not a whole solution. We could make this "feature" shine, but for that we needed to spread our solution to millions and millions of website.
Besides that, I saw my co-founders getting tired as well. I could cheer them up and show the vision, goals and etc (like a good CEO, right?), like I did in the past, but how can I make that again if I am feeling tired (depressed, maybe?).
It really sucks, I enjoy entrepreneurship but it's been more than a year bootstrapping without many customers and real money.
I'm thinking now to sum-up what we have in a document and try to sell to other startup who operates in the same field, is well funded and has open positions.
So, the questions:
1) How to evaluate the system that we developed (lines of code + time on it?).
2) Should I also sell the 10 .com domains that I bought?
and
3) A word document. Is this the best approach? What should it contain more in the document??
2) yes, if they're any good.
You need to figure out who might get value out of what you built. Those are the people that might by it.
Once you've done that, you need to build competition for the buy.
Why not tell us what the product is, so we can give better advice? It doesn't sound like you're going anywhere with it in any case.
For me it means that you (or anyone who give those short-answers) do not care so much about the matter.... am I correct?
But I'm thinking about tell what is the product.... I can tell that we're making a script to add to any website and we have a handful number of customers.
We've been thinking of getting revenues by advertisement, but in order to get significant revenues we need to spread to many websites.
sorry to sound rude, but you were the one who asked for advice here ... if i were you, i'd be grateful that people chime in with any thoughts at all, regardless of length. you can't expect people to write an entire inspired essay based on your (very short) question
Also reread your post. Notice how you are describing depressive symptoms (fatigue and you even mentioned depression). Only you know if you are depressed. But if you are, then be careful about making a big decision. Depressive thinking skews your judgment. Problems seem more permanent and intractable. Your intuition for evaluating costs, benefits, and risks gets distorted.
Do you value an ounce of gold based on the hours that went into mining and refining it, or a Picasso based on the quantity of paint that went into it?
It's worth the value the buyer can get out of it, not what you put into it. Typically that's the expected values of future cash flows, discounted to the present using an appropriate risk-adjusted discount rate.
You can estimate how much cash it might generate under various scenarios, and estimate the probability of those scenarios transpiring, to come up with a value.
If you can persuade someone there is future cash flow, you can sell it. Otherwise, you can get a dime for it if you throw in a couple of nickels.
(disregarding strategic, humanitarian reasons to buy it, or the possibility someone is planning to spend X hours to build the exact same thing.)
If so than you have a viable business model. If not, than stick to your current 'sell it to them' plan.
Give away, and ad support, things that everyone needs or wants. Charge for niche content. It's the way of the internet, currently.
Really though more info is necessary. For instance if it's a certain type of SaaS you may be able to make a living on paid support without either option, or if it's a cool webapp than perhaps a freemium model should be embraced.
Petervandijck actually replied and made me see that was a good answer.
I blogged saying the site is going to shut down, and I started making plans about what would happen in terms of data export and keeping the URLs working. The community responded VERY loudly: we like it, don't shut it down, at least give it back to us or sell it. This told me something very important that I didn't realize: no matter how fed up you are, no matter if you hate it or like it, there are people out there that value your work. You just don't it yet.
So I wrote up a brief post about the vital stats with vague ballpark figures, and gave an email address for serious bidders to get in touch. A lot did. Some were not serious at all (easy to tell) and some were very professional and clearly serious about wanting the site. In the end more than one bid was on the table from people that not only wanted the site, but really cared about the users.
How it was valued: an auction. Best bid wins. I kept it anonymous (under the trust that I don't inflate the price, and I never did). If I were to do this again, I would put it up on flippa or sitepoint or ebay or elsewhere.
The biggest problem you'll have is people knowing about the sale. Like anything, market it. Your users are the most likely group to produce the buyer.
The second biggest problem is spurious bids.
And sell everything related to the site. You need to sit down and make a very thorough inventory, and be very careful not to include things you cannot sell (check the licenses) and be sure to include everything you can sell. Included in my sale was a handful of domains, full source code and the whole database.
People will want proof of whatever numbers you give them. Screenshots are OK to a certain extent. Eventually they'll need full access to verify things, like to Google Analytics or your site's admin area. A good way to do this is show them screenshots and agree the sale. Get paid 1/2 or 1/3 upfront, give them access, they verify everything and then you get the rest of the money. Even better, use an escrow service.
Drop me a line if you want more help. Details in my profile.
Was it worth it? Absoultely beyond the shadow of a doubt. Two things made it worth it: financially it was good, and more importantly, the friends I made and lessons learned are priceless.
Except the fact that I only have a handful number of customers, what makes a big difference....
I have the 50K number in my mind for the price, based on the code, domains and possible patent that we might get.
Tks also for sharing your contact, I'll be in touch!
The value of a business is directly related to the bottom line. Companies with no sales are a dime a dozen. They're one step ahead of "ideas", and may even be worse off. A company with no sales is a idea that has proven its ability to fail.
$50k is a pipe dream.
What usually happens is that people get happy and excited, because I seem to get it and I'm not interested in knocking them down. How did I become so wise that I can give great advice?
It's simple, really: I just take all of the key/values they give me, eval() it in my brain, then pretty print it out to them as a JSON hash of logic. Then I tell them what I think they should actually do.
This works wonders because obvious I am not an oracle, I can only spit what they tell me back in a different order. And then I'm confident and opinionated.
Sorry dude, your start-up has already died and you haven't realized it yet. It's not worth anything to you or anyone else; time spent trying to get $50k (absurd!) is you being in denial about the time and effort you've put in so far. It's a distraction from making a clean break to try your next big idea.
Hard to hear? Yes! Harsh? Possibly, but it's because I want you to feel that this is real.
I forgot to say that this is great news! You are free, if you let forgive yourself and let go.
Also concur with petervandijck earler. Might be interesting to just post your company name here. You might find a taker.
As to valuation, I wish there was a magic formula. I know from my own experience that the seemingly harsh valuation of a suitor will NEVER equal the company's value in your heart. Don't allow yourself to be insulted by an offer, at least publicly; you will almost certainly be angry, insulted, and frustrated at the value others will assign to your baby.
Move on.
Startups rarely succeed in a year. I've done 3 so far (the first 2 went for 5 years before they sold. I'm currently 5 years into my existing company - and we've got another 3-5 years ahead of us.
Expect "no money" for 2-3 years (minimum).
1) Code means virtually nothing in an acquisition. 2) Yes, sell all of the "assets" as a package. 3) Word Doc Summary that tells the story to the acquiring company. A PPT deck won't be as compelling.
Firesales are about details - not "top line story pitches."
The first thing I did after making my decision was inventory every salable asset -- the product, domain names (absolutely, sell those!), databases, intellectual property. The second was to write up a five-page prospectus that covered the basics -- what was for sale, the product's history, the product's numbers (how it was doing with users, etc.), revenue, and potential revenue. Armed with that, I approached companies I believed might be interested in acquiring (and let others in my industry know that I was planning to sell, if possible, or close, if not). If a company indicated it was interested, I sent the prospectus and answered follow-up questions. I am now in discussions with one serious potential buyer.
Re: Question #1, you have to forget how much time you've put into the product. Unfortunately, no sale price is going to recoup your hours. Depending on your product, its potential, and your industry, a sale price will likely be based on the value of your assets and/or multiples of income.
If you think the market is there keep at it. If you've learned the market isn't really there, sit down with your cofounders and hash this out with them. They will see through any attempt to keep them enthusiastic if you aren't enthusiastic. I think this is a key example of how PG is wrong on the cofounder issue (at least for bootstrapped startups). It's a lot easier to grow a small business to the point where it supports the expectations of one person than to the point where it supports the expectations of several.
If you want to sell, try making a phone call to the other CEO and arrange lunch if you can get it. Casual contact humanizes you and gives you a chance to learn more about their plans than you would otherwise.
If your company could actually be worth something, where 'something' has seven digits in it, find someone with experience who's successfully shopped companies before. They will want a retainer plus a percentage of the total. Assuming they know what they are doing, they will be well worth it.
If your company has no chance of being worth a large sum to anyone, put together a list of parties who might potentially be interested, e-mail their CEOs or 'corporate development' executives (if they're large enough to have such things), and just be open with them. They will take you to the cleaners, but if your company isn't worth enough to hire a professional this is hard to avoid.
Ultimately your startup is worth what the market will pay. Lines of code don't mean much and time spent on it means nothing. Let another party make the first offer if you manage to get any nibbles.
There is no ONE approach to sell whatever website / company / solution. The strategy will depend on the nature of the assets you want to "sell" (your expertise, employees, code, customers, etc.), your potential customers (an entrepreneur, a medium company, a Fortune 500 company, ...), your balance sheet, etc.
So my advice would be to analyze your situation and try to identify someone who already sold his company with a similare situation and contact him. For sure (s)he will be happy to share his/her experience. Also, you could find some VC or investor and just invite him/her for a lunch and have a productive talk (it worked amazingly well for me).
