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Selling Kiko: How Justin Kan sold his first YC startup on eBay

98 points by randall 16y ago

jayzee 16y ago
Very well written and a lot of informative content! But I had a question about general solicitation in connection with a private placement? Wouldn't selling your startup (shares) on ebay be in violation of SEC regulations?
- justin 16y ago
  We actually sold all the assets (which was specified in the auction), not the actual company itself. The assets included the domain, code license and database.
- patarnello_fra 16y ago
  Why would it be in violation of SEC regulation? So I guess there is not any case of a start-up that got funding through ebay, right? Very interesting topic by the way...
aresant 16y ago
Practical question - if you guys sold assets only did that qualify you for capital gains on the sale or ordinary income tax?
- emmett 16y ago
  Technically, we didn't sell the assets. The company sold the assets (income), then distributed the resulting cash to shareholders (capital gains). So the money got taxed twice, once for corporate income tax and once as capital gains.
  - zone411 16y ago
    So you were structured as C-Corp?
deleted 16y ago
[deleted]
savrajsingh 16y ago
Awesome! Do you know if the kiko codebase is still in use?
- emmett 16y ago
  I don't know - they took down the kiko.com site a couple years ago and we haven't heard about it since.
deleted 16y ago
[deleted]
rorrr 16y ago
Would you guys be really happy to make $258K from a startup sale? I don't think I would be that excited. Once you subtract all the fees, taxes, investors share, you're left with maybe $150K. Then you split it among team members, and you end up with something you can make doing a regular job in like a year. Yes, it's fun and independent, but I think if you're taking a risk of creating a startup, it should be at least rewarded with a nice sum of money when you sell it.
- nickconfer 16y ago
  You have to keep in mind their situation. They wanted to go another route, knew they had good ideas, but also wanted to make sure they took care of their investors who supported them. I think its a very honorable thing. No one was likely too happy, but things had changed quickly. Google Calendar made that space very difficult.
- justin 16y ago
  Looking back, of course it isn't a lot of money, especially when you consider how well justin.tv is doing and that we have raised millions in VC since then. However, consider that we were thinking we would get nothing initially and would have been happy to get 50k. And that the whole thing jumped 200k in the course of a few hours. I think you'd be excited too ;)
PHPAdam 16y ago
If you dont mind me asking, what was eBay's cut of a seemingly large transaction? It sounds they deserve every penny, for the support and consideration they gave you. (/sarcasm)
- justin 16y ago
  I think it was around $3500 all told.
daniel-cussen 16y ago
Were Kiko's buyers ultimately happy with the acquisition?
- justin 16y ago
  I don't really know. They never asked for a refund :)
  - nickconfer 16y ago
    have you sold anything on eBay since, or was the rush gone after that :P Thanks for sharing your story.
flavio87 16y ago
do you know what the main reason was for them buying the assets? Traffic, Codebase, Domain, YC fame? did you post all your traffic stats on the auction at the time?
- justin 16y ago
  I asked them how they valued the auction. Response: - 50k for the domain name - 175k (or so) for two man-years of engineer time and the code - 25k for user base This is all a bit fuzzy and from memory, so I could be somewhat off.
bradya 16y ago
Congrats! This is inspiring and motivated my business partner and I to consider selling our mobile app business. We just hit 1 million users across our portfolio of relatively unknown apps. If we are able to sell our company, we would be able to use the cash to pay for living expenses so we can start another company.
- jonpaul 16y ago
  Awesome. We're in similar shoes. We should connect.
paulitex 16y ago
Great story, but I wonder if this is a situation where you 'only hear about the winners'? I'd love to know if anyone has tried something similar on eBay? I suppose the question is this: is eBay really a good market for fledging startups looking to liquidize or was this story one of those million-dollar homepage things?
- d_r 16y ago
  From the post: We posted the auction on Reddit and, with the help of a few friends, got to the front page. ... Pretty quickly the story was picked up by Techcrunch ... This part has got to be important. Getting significant visibility for the auction likely helped quite a bit, and eBay is just a medium that made the auction possible.
nbashaw 16y ago
Great story! Someone should make an eBay for startups. Does anyone know if one already exists?
- John212 16y ago
  Yup, flippa.com. It is more for sites than startups.
- thenbrent 16y ago
  If anyone wants to set it up, get in touch. I write a free auction/marketplace WordPress plugin (called Prospress) that could be used to set up a working prototype in a couple of hours.

98 points by randall 16y ago

Very well written and a lot of informative content! But I had a question about general solicitation in connection with a private placement? Wouldn't selling your startup (shares) on ebay be in violation of SEC regulations?

justin 16y ago
We actually sold all the assets (which was specified in the auction), not the actual company itself. The assets included the domain, code license and database.
patarnello_fra 16y ago
Why would it be in violation of SEC regulation? So I guess there is not any case of a start-up that got funding through ebay, right? Very interesting topic by the way...

aresant 16y ago

Practical question - if you guys sold assets only did that qualify you for capital gains on the sale or ordinary income tax?

emmett 16y ago
Technically, we didn't sell the assets. The company sold the assets (income), then distributed the resulting cash to shareholders (capital gains). So the money got taxed twice, once for corporate income tax and once as capital gains.
- zone411 16y ago
  So you were structured as C-Corp?

deleted 16y ago

[deleted]

savrajsingh 16y ago

Awesome! Do you know if the kiko codebase is still in use?

emmett 16y ago
I don't know - they took down the kiko.com site a couple years ago and we haven't heard about it since.

deleted 16y ago

[deleted]

rorrr 16y ago

Would you guys be really happy to make $258K from a startup sale? I don't think I would be that excited. Once you subtract all the fees, taxes, investors share, you're left with maybe $150K. Then you split it among team members, and you end up with something you can make doing a regular job in like a year. Yes, it's fun and independent, but I think if you're taking a risk of creating a startup, it should be at least rewarded with a nice sum of money when you sell it.

nickconfer 16y ago
You have to keep in mind their situation. They wanted to go another route, knew they had good ideas, but also wanted to make sure they took care of their investors who supported them. I think its a very honorable thing. No one was likely too happy, but things had changed quickly. Google Calendar made that space very difficult.
justin 16y ago
Looking back, of course it isn't a lot of money, especially when you consider how well justin.tv is doing and that we have raised millions in VC since then. However, consider that we were thinking we would get nothing initially and would have been happy to get 50k. And that the whole thing jumped 200k in the course of a few hours. I think you'd be excited too ;)

PHPAdam 16y ago

If you dont mind me asking, what was eBay's cut of a seemingly large transaction? It sounds they deserve every penny, for the support and consideration they gave you. (/sarcasm)

justin 16y ago
I think it was around $3500 all told.

daniel-cussen 16y ago

Were Kiko's buyers ultimately happy with the acquisition?

justin 16y ago
I don't really know. They never asked for a refund :)
- nickconfer 16y ago
  have you sold anything on eBay since, or was the rush gone after that :P Thanks for sharing your story.

flavio87 16y ago

do you know what the main reason was for them buying the assets? Traffic, Codebase, Domain, YC fame? did you post all your traffic stats on the auction at the time?

justin 16y ago
I asked them how they valued the auction. Response: - 50k for the domain name - 175k (or so) for two man-years of engineer time and the code - 25k for user base This is all a bit fuzzy and from memory, so I could be somewhat off.

bradya 16y ago

Congrats! This is inspiring and motivated my business partner and I to consider selling our mobile app business. We just hit 1 million users across our portfolio of relatively unknown apps. If we are able to sell our company, we would be able to use the cash to pay for living expenses so we can start another company.

jonpaul 16y ago
Awesome. We're in similar shoes. We should connect.

paulitex 16y ago

Great story, but I wonder if this is a situation where you 'only hear about the winners'? I'd love to know if anyone has tried something similar on eBay? I suppose the question is this: is eBay really a good market for fledging startups looking to liquidize or was this story one of those million-dollar homepage things?

d_r 16y ago
From the post: We posted the auction on Reddit and, with the help of a few friends, got to the front page. ... Pretty quickly the story was picked up by Techcrunch ... This part has got to be important. Getting significant visibility for the auction likely helped quite a bit, and eBay is just a medium that made the auction possible.

nbashaw 16y ago

Great story! Someone should make an eBay for startups. Does anyone know if one already exists?

John212 16y ago
Yup, flippa.com. It is more for sites than startups.
thenbrent 16y ago
If anyone wants to set it up, get in touch. I write a free auction/marketplace WordPress plugin (called Prospress) that could be used to set up a working prototype in a couple of hours.