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I've bootstrapped everything I've ever built. Yet, I constantly get investor pitches from bootcamp/accelerators/etc. One of them I got just the other day put f

by eruci 8y ago

I've bootstrapped everything I've ever built. Yet, I constantly get investor pitches from bootcamp/accelerators/etc. One of them I got just the other day put forward this interesting offer: "$25K for 6% equity" on my current bootstrapped project which is earning about $20k per month in profit. Thanks, but no thanks!

tarr11 8y ago
$25K does seem somewhat pointless when you can wait a month and get that, with no dilution. Their offer was a bit low. However, it's not quite as insulting as you may think. Many bootstrapped SaaS businesses are valued at 3-6x profit (aka "discretionary earnings") [1]. At 3x, your business would be worth $720K, which makes 6% $43,200 At 6x, your business would be worth $1,440,000 which makes 6% equal to $86,400 [1] https://baremetrics.com/academy/how-to-value-a-saas-business https://baremetrics.com/academy/how-to-value-a-saas-business
- true_religion 8y ago
  That's a value for selling it to someone else in its entirety, but no one who runs a stable business is going to sell 6% of their company at those rates because it literally means that every share sale will turn a profit guaranteed in 6 months merely from dividends. Imagine what the stock price of a company who boasted such dividends would be.
- a13n 8y ago
  Lots of SaaS companies sell based on a multiple of their ARR, and it can get a lot bigger than 3-6x. https://www.quora.com/What-are-typical-exit-revenue-multiples-for-SaaS-companies-at-sub-5mm-5-10mm-10mm+ https://www.quora.com/What-are-typical-exit-revenue-multiple... Definitely depends on how much you're making, how fast you're growing, who the buyer is, and why they're buying. Sure, if some random person/business is buying you to just consume your existing profits, that's about the worst-case scenario you can find.
speeq 8y ago
> my current bootstrapped project Is that geocode.xyz?
- eruci 8y ago
  Yes.
  - speeq 8y ago
    Congrats! Your submission got almost no attention on HN. Just curious, how did you find your first customers?
    - eruci 8y ago
      My first customer found me before my showHN post ( publicsonar.com - they needed a geoparsing tool). I'm not entirely sure how they found me, perhaps from a talk I gave on my book scanning project. I also don't know how the other early customers found out, I'm not doing any marketing (other than conference presentations).
      - thundergolfer 8y ago
        Can you link that book scanning project? It may be a blog post I read on HN and really liked but subsequently lost the ability to find.
        eruci 8y ago
        https://books.geocode.xyz/ https://books.geocode.xyz/
        thundergolfer 8y ago
        Cheers mate!
ganeshkrishnan 8y ago
Incubators/Accelerators are the way forward. I have always been rabidly advocating for more public funded real accelerators (Not YC model but built like the college/university/ YC startup school model) which can take a risk on ideas. Entrepreneurship is a mentality. Even if you fail the first one with the accelerator, you grow your horizons and will eventually succeed with the next startup.

by eruci 8y ago

tarr11 8y ago

$25K does seem somewhat pointless when you can wait a month and get that, with no dilution. Their offer was a bit low. However, it's not quite as insulting as you may think. Many bootstrapped SaaS businesses are valued at 3-6x profit (aka "discretionary earnings") [1]. At 3x, your business would be worth $720K, which makes 6% $43,200 At 6x, your business would be worth $1,440,000 which makes 6% equal to $86,400 [1] https://baremetrics.com/academy/how-to-value-a-saas-business https://baremetrics.com/academy/how-to-value-a-saas-business

true_religion 8y ago
That's a value for selling it to someone else in its entirety, but no one who runs a stable business is going to sell 6% of their company at those rates because it literally means that every share sale will turn a profit guaranteed in 6 months merely from dividends. Imagine what the stock price of a company who boasted such dividends would be.
a13n 8y ago
Lots of SaaS companies sell based on a multiple of their ARR, and it can get a lot bigger than 3-6x. https://www.quora.com/What-are-typical-exit-revenue-multiples-for-SaaS-companies-at-sub-5mm-5-10mm-10mm+ https://www.quora.com/What-are-typical-exit-revenue-multiple... Definitely depends on how much you're making, how fast you're growing, who the buyer is, and why they're buying. Sure, if some random person/business is buying you to just consume your existing profits, that's about the worst-case scenario you can find.

speeq 8y ago

> my current bootstrapped project Is that geocode.xyz?

eruci 8y ago
Yes.
- speeq 8y ago
  Congrats! Your submission got almost no attention on HN. Just curious, how did you find your first customers?
  - eruci 8y ago
    My first customer found me before my showHN post ( publicsonar.com - they needed a geoparsing tool). I'm not entirely sure how they found me, perhaps from a talk I gave on my book scanning project. I also don't know how the other early customers found out, I'm not doing any marketing (other than conference presentations).
    - thundergolfer 8y ago
      Can you link that book scanning project? It may be a blog post I read on HN and really liked but subsequently lost the ability to find.
      - eruci 8y ago
        https://books.geocode.xyz/ https://books.geocode.xyz/
        thundergolfer 8y ago
        Cheers mate!

ganeshkrishnan 8y ago

Incubators/Accelerators are the way forward. I have always been rabidly advocating for more public funded real accelerators (Not YC model but built like the college/university/ YC startup school model) which can take a risk on ideas. Entrepreneurship is a mentality. Even if you fail the first one with the accelerator, you grow your horizons and will eventually succeed with the next startup.