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I sold TinyPilot, my first successful business
- sjducb 2y agoThere is no discussion of hiring/internally promoting a manger, then stepping back from running the company. Did you consider that option?
- mtlynch 2y agoAuthor here. I'm happy to answer any questions about this post, the sale process, or my time running TinyPilot.
- mik3y 2y agoLovely read, and great to see a happy ending - I remember your previous blogs here. As a sometime-bootstrapper and having failed at a previous hardware startup, I can relate to many of the emotions you narrated through. It may be too early, but my biggest curiosity is whether you think you will bootstrap something again? (In my case, after the hardware business and some time off, I found that taking a swing at a “pure software” idea was the right balance for me, after the considerable challenges and occasional joys of building physical things..)
- mtlynch 2y agoThanks for reading! >you think you will bootstrap something again? Yes, definitely. Not hardware again because I think getting to the scale where you can use external vendors is so difficult and risky that it requires more specialized hardware expertise or VC backing. I'm going to start with educational products because I liked my brief experience with that and never had time during TinyPilot, but I'd eventually like to build a SaaS that I can grow in a calm, sustainable way.
- scripper 2y agoHey there, loved the post. What do you think is next for you? Would you do it all over? Thanks for all of the content!
- mtlynch 2y agoThanks for reading! >What do you think is next for you? Next is either an educational product or a SaaS business I can build either fully solo or with 1-2 teammates in customer support roles. >Would you do it all over? No, not knowing what I know now about how difficult it is to succeed in hardware. I'm grateful that TinyPilot worked, but there's definitely a reason why there are so few bootstrapped hardware companies. In the first few years, there were so many things that could have clobbered the business, like supply shortages, manufacturing errors, lost shipments, design mistakes. I did a lot of things to mitigate these risks, but a lot of it just came down to being lucky enough to avoid random disasters. For example, there were definitely times in the business where a critical part could have been lost in shipping, and we would have been dead in the water for months if it went missing or got delayed. As the business matured, we were able to mitigate those risks better, but I wouldn't want to go through those first two years again unless I had a huge amount of investment or co-founders with more specialized hardware/manufacturing expertise.
- scripper 2y agoGreat to know, thanks so much for the info!
- kohanz 2y agoCongratulations on building something of value and successfully selling it. It's quite the achievement and most don't get to this level. I do have to say, I was somewhat surprised by the low multiple on the valuation, but perhaps that's just what the range is for a business of this nature. We're spoiled in the world of software and recurring revenue. What about the tax implications of the sale. Have you figured out how much of the sale you'll be able to put in your pocket?
- mtlynch 2y agoThanks! >I do have to say, I was somewhat surprised by the low multiple on the valuation, but perhaps that's just what the range is for a business of this nature. We're spoiled in the world of software and recurring revenue. Yeah, from what I've heard, SaaS businesses sell for a much higher multiple, often selling as a multiple of revenue rather than earnings. The other thing that's really reduced valuations is interest rates. When interest rates were <1%, private equity was bidding up prices of businesses because it was a decent place to park money, but now that you can get 5.3% from a money market, the additional return from buying a business isn't worth the risk. >What about the tax implications of the sale. Have you figured out how much of the sale you'll be able to put in your pocket? Still working out the exact figure with my accountant. His expectation was that I'll keep a pretty large percentage after taxes because of Section 174. I had a large amount of expenses each year in software development from overseas contractors, and with Section 174 changes that went into effect in 2022, I had to amortize them over 15 years.[0] But with the liquidation of the company, I can count those expenses immediately, and they offset the income from the sale. So Section 174 is still a bad deal for software founders, but at least when you liquidate the company, you don't have to wait out the full 15 years of amortized expenses. [0] https://blog.pragmaticengineer.com/section-174/ https://blog.pragmaticengineer.com/section-174/
- actionfromafar 2y agoI can only assume there must spring up an industry around liquidating software companies in some kind of shell scheme!
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- duckmysick 2y agoWell done on the sale and congratulations to you and your wife. Best of luck to both of you. I have a question about this part: > I’d also risk TinyPilot’s sales slipping after so many months being distracted from the business. What was the time split between the sale process and running day-to-day operations? I know bigger companies have dedicated teams for that, but I'm curious how does it look like in smaller ones.
- mtlynch 2y agoThanks for reading! >What was the time split between the sale process and running day-to-day operations? I know bigger companies have dedicated teams for that, but I'm curious how does it look like in smaller ones. It varied from week to week, but I was spending 10-25 hours per week on the sale for about five months. But beyond wall time, the time I spent on the sale was often much more stressful than anything else and left me mentally drained for anything else. The sale involved preparing reports that I'd never created before, and it was extremely important for me not to make any mistakes because I didn't want the buyer to think I'd provided fraudulent information. I also had to focus much more on short-term results than normal. Part of this was a lack of time to oversee complex projects, but the other part was that it's to my detriment to invest in something that pays off in six months if I sell the company at month three. But I can't run that way forever, so I knew if I tried to run the company like that indefinitely, I'd pay the penalty for always focusing on the short-term at the expense of long-term.
- xiphias2 2y agoI would be interesting in reading the ,,buying process'' part of the same deal from the buyers. BTW tinypilot.com is down: https://www.isitdownrightnow.com/tinypilot.com.html https://www.isitdownrightnow.com/tinypilot.com.html
- 1-more 2y agohttps://tinypilotkvm.com/ https://tinypilotkvm.com/
- jimbobthrowawy 2y agoThank you. The URL near the start of the blogpost is incorrect, and I was wondering if it was hugged to death or if the buyer took it down for some reason.
- 2c2c 2y agodid you have a salary?
- mtlynch 2y agoNo, I didn't pay myself a salary. TinyPilot was a single-member LLC, so all the profits were pass-through income on my personal taxes. I share more about the finances in my annual review posts: https://mtlynch.io/solo-developer-year-6/#tinypilot-became-20x-more-profitable https://mtlynch.io/solo-developer-year-6/#tinypilot-became-2...
- DougN7 2y agoSo your personal net income in 2022 was $10,447? That’s not enough to live on so I must be misreading it.
- everial 2y agoCongrats on the upcoming little one! As someone who also had first infant late last year, consider dialing back your productivity expectations with a newborn (both because it's a wonderful time and because oh-heaven it's so much work).
- mtlynch 2y agoThanks so much! Yes, I'm definitely planning to spend less time on work over the coming years.
- ativzzz 2y ago> and we received pre-qualification for an SBA loan What does this mean? How does this work? Shouldn't the buyer take out the loan? Or does it look something like - tinypilot takes out 600k, which you pocket - you transfer ownership - tinypilot is in debt, not the buyer ?
- mtlynch 2y agoThanks for reading! Yes, you're correct. The buyer takes out the loan. This was an asset sale, so assets transferred over but not any debts. The seller (me) can approach a loan broker and show their financials, and the loan broker can say, "I think it's likely that the SBA would approve this loan, and I can connect you with lenders I think would offer the SBA loan for acquiring this business." The SBA pre-qualification isn't binding or official, but I guess the loan broker's prediction is accurate enough that the brokerage will list businesses as SBA pre-qualified based on the loan broker's assessment.
- ativzzz 2y agoAh I see, it just makes it easier for potential buyers to get a loan. Thanks for the response and the cool blog!
- berkanunal 2y agoCongratulations. I have been following the retrospectives for more than 2 years now. I hope to keep enjoying your monthly posts. My question is, did you change anything on your strategy after you were set on selling? Or the goal was still the same, optimize earnings?
- mtlynch 2y agoThanks for reading! >My question is, did you change anything on your strategy after you were set on selling? Or the goal was still the same, optimize earnings? Once I started the process of preparing the company for sale, it did change a lot of the strategy. For example, one of the things I'd been thinking about was how to allow users to purchase recurring subscriptions to their TinyPilot Pro software licenses rather than having to remember to re-purchase every year. But once I started the sales process, that basically became non-viable because it meant I'd be investing thousands in software development, but it wouldn't pay off for another year or so, so it would weaken our profit and loss statements and result in a lower valuation. There were a lot of things like that, where I had to reject any investment that wouldn't pay off in three months or less. The other thing that was a bummer about preparing to sell was realizing that everything effectively becomes so much more expensive. Normally, if I want to give someone a $5k bonus, it costs me $5k. When I knew I was about to sell and wanted a 3x multiple, the $5k bonus effectively costs me $20k because it's $5k for the bonus itself and then -$15k for the sale price on a 3x multiple. I could try to argue that the $5k is "discretionary" and therefore not part of SDE, but I think the buyer would be in their right to argue that it's not discretionary, as it sets bonus expectations for future years. [0] https://mtlynch.io/retrospectives/2023/08/#what-would-make-recurring-subscriptions-worth-the-effort https://mtlynch.io/retrospectives/2023/08/#what-would-make-r...
- abtinf 2y agoEverything was always that expensive, it was just less obvious. What if you had moved to outsource the office tasks sooner? Could you have better invested that time and stress elsewhere? The $100k per year improving hardware? Was that the best way to spend the money? Maybe it would have been better spent on marketing, or investing in reducing production costs with better tooling. Whatever the differential from what you spent was lost at 3x. Gains often compound over time too. Cost reduction begets cost reduction. Of course, thinking like this results in madness and moral hazard. I’ve seen companies do crazy, catastrophic things gearing up for sale.
- axus 2y agoHopefully your buyer gets a nice sales boost from this article! Why wouldn't you go back to a corporation and try to make a software product there, as an employee?
- mtlynch 2y agoThanks for reading! >Why wouldn't you go back to a corporation and try to make a software product there, as an employee? Oh, boy. So many reasons! The thing I really love about running a company of my own is that I don't have to get anyone's approval to do things. If I have an idea, I can work on it, and I don't have to convince anyone or justify the time or money. I also really love being able to choose my own hours, tools, and schedule. At Google, I found real-time chat distracting and net negative (I get that they bring value to some people, just not me), and I found that most meetings were a waste of time. At TinyPilot, we never used real-time chat, and we were deliberate and efficient about meetings. At Google, I often found that things that were good for the company or my team or our customers were often not aligned with incentives for me (e.g., it was easier to get promoted for launching a complex feature than for a trivial feature that solved the problem elegantly). With my own small company, it's much easier to align incentives between me, my teammates, and our customers. I could go on and on, but I guess the underlying issue is that I place a high value on independence and autonomy, and no employer can match what I get on my own.
- beambot 2y ago$249k revenue & 6 people => $41.5k per person + yourself. How does this math work out...?
- eric-hu 2y agoCongratulations on your sale Michael. I've been following your blog over the years and have learned a lot. Really happy for you that you could find a buyer and wrap things up with TinyPilot. Looking forward to seeing what you work on in the future!
- hermitcrab 2y agoCongratulations on the sale. Thanks for including real numbers, that will be helpful if I ever sell one of my products.
- hermitcrab 2y agoAlso, one of the things that no-one tells you about parenthood is just how much effort you spend entertaining them. So maybe bookmark this, it might come in useful in a few years!: https://successfulsoftware.net/2014/01/31/fun-and-geeky-things-to-do-with-kids/ https://successfulsoftware.net/2014/01/31/fun-and-geeky-thin...
- sgallant 2y agoCongratulations on the sale and the upcoming baby! There are a lot of comments here comparing the financial outcome of your TinyPilot journey Vs what could have been had you remained at Google. Can you share your perspective on that? Are you happy you chose the path you did? If so, why? Thank you
- sgraz 2y agoNo questions, just sharing that I was smiling like an idiot when I saw the wire transfer email screenshot. Maybe I felt emotionally invested since I remember reading your previous posts about the less-than-ideal design studio collaborations. What a feeling! Congrats.
- rexreed 2y agoThere's some question as to whether the acquisition payment is taxed as income as per an Asset Purchase Agreement or as capital gains as per a sale of company ownership. Which was it for you? Also, can you recommend or refer the law firm that you used for the transaction paperwork?
- garrettc1 2y agoWhat escrow service did you choose? Why did you choose them? For context, I'm going through a similar process as you right now.
- jonathanyc 2y agoCongratulations on the sale!! I love your blog and have really appreciated your retrospectives.
- pyb 2y agoCongrats! Bootstrapping a HW business to good profitability and acquisition is a remarkable achievement, particularly outside of China.
- djeastm 2y agoI remember seeing your blog posts. Glad to see you ended up in the black with this business!
- akudha 2y agoWow, 15% broker fee! Didn’t know brokers charge that much
- mritchie712 2y agoIf they bring you the buyer, that feels fair. But in this case, it seems the buyer found him thru his own content, which is wild.
- mtlynch 2y agoNo, the broker found the buyer. I see how it's confusing because I say in the post that the buyer read my retrospectives, but that was after he had discovered the company through Quiet Light. I've just edited the article to clarify that the buyer discovered my blog from Quiet Light.
- influx 2y agoDo you ever calculate your GOOG salary and multiply it by the number of years you've been bootstrapping and have any regrets?
- ksplicer 2y agoHis full compensation was probably between 300k-500k at Google, so I don't think money was what motivated him...
- prakhar897 2y agoOP learned the skill of starting up, running and selling a business while taking 30% paycut (and a huge risk tbh). He now has much bigger career paths open to him than "Senior Software Engineer".
- mtlynch 2y agoThanks for reading! >Do you ever calculate your GOOG salary and multiply it by the number of years you've been bootstrapping and have any regrets? I've definitely thought about the number, but no, honestly no regrets at this point. I got an email from a Google recruiter a few weeks ago offering to rehire me back at my old level with no interview or interview for a higher level, and it wasn't tempting at all. I miss things about Google, and there are things I hate about bootstrapping, but overall, I definitely prefer the autonomy of running my own company.
- zem 2y ago> I got an email from a Google recruiter a few weeks ago offering to rehire me back at my old level with no interview that's pretty impressive! as a recent ex googler i cannot imagine them ever offering me that deal
- simonswords82 2y agoCongratulations. I've been through the DD process and it is a seemingly infinite loop of Q & A that is so exhausting it's almost difficult to celebrate the funds finally hitting! Glad you made time for plenty of desserts. All the best to you and your pending addition to the family.
- ppbjj 2y agoThis was such an enjoyable read, thank you for taking us through your process. And congrats!!
- wcedmisten 2y agoCongrats Michael!
- mtlynch 2y agoThanks so much, William! Great to hear from you.
- pavel_lishin 2y ago> I wanted a buyer who would keep investing in the company, not a competitor who would just axe the product or bleed it dry. God, I hope the buyer lives up to your expectations.
- actionfromafar 2y agoThe buyer is small, so at least they can’t let the product languish out of apathy.
- djtriptych 2y agoKinda scary the lifetime profit is less than what a sr developer might expect at a big tech firm. I agree this was successful and assume it's rewarding in many other ways! But still...
- jpollock 2y agoI haven't gotten that far in the post, but won't owners usually take a salary?
- alex_lav 2y agoWhat's scary about it?
- Difwif 2y agoIf the only metric you care about is average lifetime earnings then starting a business makes no sense. There's a lot to it that has nothing to do with earnings though and of course there's a lottery ticket that's correlated to how hard you work.
- Mgtyalx 2y agoI understand wanting to move on, but... from an outsider it looks like you sold just as the company started getting big enough to be interesting.
- cdiamand 2y agoDigestively, how did you handle all that dessert in such a short timeframe?
- mtlynch 2y agoHaha, great question, Cory! It was over three days (dinner, dinner, lunch), and I was splitting them with friends. Although, I do love dessert and probably could have eaten those all solo.
- cdiamand 2y agoHaha! That's great! Selling the company - also incredible. Congratulations my dude.
- jcalabro 2y agoCongrats! Extremely impressive and inspiring. I always enjoy your posts.
- alberth 2y agoBroker commission: $88,900 Legal fees: $18,297 This equates to ~18% of total sale price. Most people don't realize how much get eaten up in deal/closing costs. Congrats to him for the successful exit. Reading his blog post over the years should be eye opening to anyone just how hard starting/running a business is.
- xyst 2y agoA broker is just a middleman between the seller and buyer. What’s the value add for sales like this?
- robszumski 2y agoThe broker was advising him on price point, strategy and fielding the interested parties for further discussion. Pretty important for this type of transaction.
- not-my-account 2y agoHow much of this can be learned by reading a couple books? I wonder how much higher profit he actually made compared to if one could self teach these skills.
- ativzzz 2y agoI imagine the broker he used is fairly experienced and well compensated, so he'd have to learn a totally different profession from the ground up without any mentors or experienced people helping him, on top of continuing to run the business, which you can easily argue is worth $90k
- bruce511 2y agoYou can learn a lot of information from books. What upu can't get from a book is experience. In this case you have a seller with no experience, and ultimately a buyer with no experience. In either situation a broker is valuable. In the case of both its an enormously important moderator who can keep both parties on track to a successful conclusion. Book learning in such cases only gets you so far.
- xyst 2y agoWild. I vaguely remember this founder spending an obscene amount of money on some boutique firm to give homepage a small update. Seems he exited the Google grind about 6 years ago. I guess salaries were between $180-250K during that time frame. Google grinder for 6 years: $1,080,000-$1,500,000 Entrepreneur: “$920k over four years (with sale)”, but doesn’t include the 2 bombs he had prior to successful exit. (None of these figures taken into account taxes or benefits) Seems like he took an L, but in the end at least he didn’t end up in the salt mines. The education of learning as you go is truly underrated though.
- shooker435 2y agoThis mindset assumes that the only measure of success is monetary. If he left Google to try and get richer than staying at Google, then sure, he probably lost. However, he kept trying again before job hunting or returning to big tech. This tells me the monetary factor was smaller than something else. You mention the underrated educational experience in your last sentence, but there's so much more than that. He was probably never worried about his autonomy, being laid off, working with (or for) people he didn't want to work with, corporate politics, or anything else corporate bureaucracy introduces. This likely freed up his brain to be more creative and actually be used to 100% of its capacity. I believe the obsession with TC in tech is highly problematic and there are a lot of talented folks optimizing for promotions via internal politics, rather than solving real problems for real people. I also wish healthcare wasn't tied to employment, but that's a post for another time.
- talldatethrow 2y agoHow is healthcare tied to employment? Isn't it available to buy on the open market?
- JohnCClarke 2y agoWell congratulations! That's awesome!
- markusw 2y agoReally interesting read, thank you for sharing! You mentioned that building tinypilot suddenly sparked way more interest than your other attempts. Do you have a plan for your next product? Try out different things and hope you find something that gains similar traction? Or do you have some sort of evaluation criteria for your ideas?
- mtlynch 2y agoThanks for reading! >You mentioned that building tinypilot suddenly sparked way more interest than your other attempts. Do you have a plan for your next product? Try out different things and hope you find something that gains similar traction? Or do you have some sort of evaluation criteria for your ideas? Yes, the market's reaction to TinyPilot will definitely impact how I evaluate future businesses in the early stages. That said, I don't want to overindex on this one experience, as I know other founders who found product-market fit more gradually. But my experience with TinyPilot does support lessons I've been taught that you should launch early, potentially without even a working product ready. In previous projects, I'd gotten too excited about the engineering and convinced myself I needed it first, but TinyPilot was a really small amount of engineering before I started selling. My other takeaway from TinyPilot was how much of a difference it makes to sell a product that's aligned with my blog audience. I'm not really an IT blogger, but a lot of my readers are IT people and enthusiasts, so my blog was a huge advantage in finding early customers. My other products were things that had nothing to do with my blog like parsing recipe ingredients or finding live comedy. I don't have a strict plan for my next product, but I want to focus on things that I can test quickly and drop if I can't find paying customers within the first two or three months.
- nickjj 2y agoYou know it must have been stressful when you were compelled to list your desserts in order. Now that we're almost in June, does it feel like the deal happened a million years ago? I know when stressful things happen and time passes, it always feels like it was so long ago even when it was only a month or 2 back. It was a pleasure having you on a few years ago in the Running in Production podcast: https://runninginproduction.com/podcast/105-tinypilotkvm-lets-you-remote-control-your-server-from-your-browser https://runninginproduction.com/podcast/105-tinypilotkvm-let...
- mtlynch 2y agoHey Nick, good to hear from you again! >You know it must have been stressful when you were compelled to list your desserts in order. Haha, that's true, but I also get more excited than the average person about desserts. >Now that we're almost in June, does it feel like the deal happened a million years ago? I know when stressful things happen and time passes, it always feels like it was so long ago even when it was only a month or 2 back. Yeah, I hadn't thought about it, but you're right. We're only about six weeks out, but it feels like it happened six months ago. It was funny during due diligence, I was really stressed out, but I could already tell that I'd look back on it and wonder why it was so stressful. At the end of the day, it's mostly just preparing reports and answering questions. I think the feeling that's hard to recall is that even though the reports I was creating weren't that complicated, they were stressful because the stakes always felt so high. I was always so worried about making errors and messing up the deal or opening up myself to liability claims after closing. >It was a pleasure having you on a few years ago in the Running in Production podcast For me as well! It was fun to chat about TinyPilot's stack and tooling.
- amanzi 2y agoI loved your Running in Production podcast. Any chance of a return in the future?
- mtlynch 2y agoI'd be happy to, but the podcast is on indefinite hiatus: https://news.ycombinator.com/item?id=33945360 https://news.ycombinator.com/item?id=33945360 https://nickjanetakis.com/blog/taking-an-indefinite-break-from-the-running-in-production-podcast https://nickjanetakis.com/blog/taking-an-indefinite-break-fr...
- cypherpunks01 2y agoI must have missed this product, it seems incredibly useful, especially for providing remote access to legacy devices like NVRs, or random other gear that is a big hassle to remotely administer.
- makk 2y ago“I immediately knew I was onto something.” Every successful bootstrapper who I know personally says this. The ultimate success didn’t happen instantly but the product/market fit was obvious on day one. And they didn’t iterate their way to that point. They walked away from whatever they were doing before, restarted with a blank sheet a paper, and the new thing immediately resonated.
- flawn 2y agoWatch out for survivorship bias though, everybody might think that but a lot more still fail.
- j45 2y agoThe issue is too many startups can be solutions in search of a problem. It's not uncommon to become attached to something. I've done a lot of B2B tooling and the percentage and risk of failure goes down significantly if you are ruthlessly focused on only solving problems that cost time or money for a business, and being flexible to pivot. In the B2B space, there are absolutely 100% instant revenue generating needs and solutions. I'm packaging a rather boring one right now. Getting out of the building before writing any code, what so ever is critical. Building before learning is the cart before the horse and limits shelf life, runway, and ability to learn. One could easily cowboy code or over architect something that prevents you from trying the very thing that will take off because it's too difficult to now implement in your formerly simple codebase of patch work that is now too complex. They often can get discovered while doing a bout of consulting (aka paid market research and customer discovery), or solving one problem sheds a light on something near by that look subtle but critical and a no brainer. My personal experience has been people will actually say the phrase "I'm trying to find a way to give you money to use this" when you may show them a prototype. This didn't seem like it actually happened, until it did.
- flawn 2y agoWhat do you mean with building before learning?
- bittwiddle 2y agoThanks for sharing! I'm currently trying out a bootstrapped hw project myself, and have enjoyed following along with your progress. You mentioned having trouble working with vendors, was this for ex: having boards assembled? I guess I've probably gotten "lucky" with relatively low scale so far, but been happy with the assorted online PCBA services.
- mtlynch 2y agoThanks so much for reading! >You mentioned having trouble working with vendors, was this for ex: having boards assembled? I guess I've probably gotten "lucky" with relatively low scale so far, but been happy with the assorted online PCBA services. Oh, it was a challenge to find vendors for pretty much everything. The cost of switching vendors in hardware is pretty high once you've built a pipeline around a particular vendor, so it's important to have reliable vendors. But we had trouble finding vendors for PCB design, PCB assembly, third-party logistics, and packaging. We eventually found vendors that worked well, but even the good ones would have occasional wrinkles that needed smoothing out. I wrote previously about how poorly I chose a vendor to do a redesign of TinyPilot's website: https://mtlynch.io/tinypilot-redesign/ https://mtlynch.io/tinypilot-redesign/
- gigel82 2y agoThis is interesting. Once manufacturing (and other tedium) was outsourced, I'd have thought that's "making it". More or less "passive income" presuming the employees took care of everything else. If the revenue truly was 208k, you'd just need to "hang in there" for 2.5 years and you'd make whatever you got in the sale, then everything else coming in later would be just "extra".
- mtlynch 2y agoThanks for reading! >Once manufacturing (and other tedium) was outsourced, I'd have thought that's "making it". More or less "passive income" presuming the employees took care of everything else. If the revenue truly was 208k, you'd just need to "hang in there" for 2.5 years and you'd make whatever you got in the sale, then everything else coming in later would be just "extra". Yeah, I definitely understand that expectation, but I don't think I could have gotten it to 100% passive income. Even if everything ran perfectly, everyone still needs a manager. So at the bare minimum, someone has to check in with the team, make sure everyone's being paid, etc. But with so many moving parts in a hardware company, things are never running perfectly. There's always something going on like some part is no longer available or some process has changed with our vendors or one of our vendors has made a mistake and we have to work with them to fix it. I theoretically could have hired a COO to manage operations, but that person would have to be comfortable managing a dev team, support teams, and making hardware/logistics decisions. So even if I could find a qualified COO willing to work for a $150k salary, the full cost after payroll taxes and benefits would likely exceed any profits the company was making.
- bufferoverflow 2y agoHe would make a lot more money by staying at Google. If it's not about money, I would understand. But then why sell a growing business?
- ajford 2y agoThere's an entire section titled `Why Sell`. > I missed writing code.... and > My wife and I also wanted to start a family. TinyPilot only occupied about 20% of my time, but it occupied 90% of my stress. I would have done a terrible job juggling founder stress with new parent stress. Changes in life circumstances changed his priorities. It wouldn't be the first or last person I've heard of that wanted to go back to coding after ending up in mgmt/founding something.
- gwd 2y agoIt sounded like it wasn't really the kind of business he wanted to be in. What do you do if you've poured two years of your life into something, and it's starting to be profitable, but you realize it's not really your thing? Options are: 1. Press on making OK money doing something you're not that enthusiastic about 2. Just pull the plug 3. Sell it I mean, obviously #3 is the least bad of all the options. You don't know what something's going to be like until you try it. This is a "negative result" from the "what kind of business do I want to run", but now he has a better idea what might not work for him. It's probably a break-even result from a financial perspective, and a positive result from an experience gained perspective.
- kuschkufan 2y agoCongrats, you outed yourself as not having read the article. Because it's in there.
- rglover 2y agoCongratulations, Michael! Still remember being an early tester/customer and getting the Ziploc bag of components :) Cool to see the full lifecycle from launch to sale.
- mtlynch 2y agoThanks for reading! And thanks for giving us a chance in those early days!
- wuiheerfoj 2y agoGreat post - I love these candid insights into founder life. It’s hard to learn a lot of these lessons without going through it, so I really appreciate you sharing
- CodeWriter23 2y ago@mtlynch I’m trying something new and with a different approach this time. I realized reading your post today, my “new” approach borrows a lot from your prior post on optimizing and externalizing ops at TinyPilot. Just wanted to say Thanks for that. Best wishes in becoming a new parent.
- mtlynch 2y agoOh, awesome! Glad to hear it was helpful.
- dheera 2y agoThe enshittification begins. Fork this repo now! https://github.com/tiny-pilot/tinypilot https://github.com/tiny-pilot/tinypilot
- deleted 2y ago[deleted]
- kstrauser 2y agoGood for you, Michael. Congratulations on a successful product, a successful exit, and an approaching baby!
- panstromek 2y agoI always enjoyed your annual reports (and the website redesign story). This looks like a happy ending to that whole saga.
- Arch-TK 2y ago> ServerCo would email me a list of detailed questions about TinyPilot’s finances and risks, I’d answer in a day or two, and then there’d be weeks of silence. Finally, they’d respond with a new round of questions, and we’d start the cycle again. Wow, I've done technical due diligence for a number of large acquisitions in the past few years (quite a few big enough that most people on HN would have heard of them) and the usual timescales are in the order of a couple of weeks and involve constant and in some cases daily question rounds. Taking what sounds like months and months of time to handle the process sounds super laid back. Certainly seems far more stressful than anything I've ever seen.
- mtlynch 2y agoYeah, a bit of extra context is that the four months that I was talking to ServerCo also overlapped with my wedding and honeymoon last year. I would have pushed for a quicker decision, but I didn't want to be in serious negotiations about an acquisition at the same time as my wedding. That said, when I talked to Chris at Quiet Light about how it played out with ServerCo, he said it was rare to see strategic acquisitions come together successfully at TinyPilot's scale. He suspected that because I approached ServerCo and acquisitions weren't on their mind at all, it just wasn't a priority for them, so that's why everything went so slowly.
- nickca 2y agoCongrats and thanks for being so open in the write up!
- codegeek 2y ago"When you sell a business at TinyPilot’s scale, there’s no deposit. You can invest hundreds of hours into preparing reports for due diligence, reveal all your confidential business secrets, and spend thousands of dollars negotiating legal documents and still walk away with nothing if the buyer backs out." Great write up overall but as someone who has bought a couple of businesses, it is not just the seller who loses out if a buyer backs out. The buyer can also spend lot of time/money vetting the business including legal fee etc during due diligence. On a recent deal, I spent over 10k as a buyer until we finalized the APA. If the deal fell through after that (possible), I would have lost that money and the months of time of course.
- mtlynch 2y agoYes, definitely agree. I didn't mean to say that the buyer has no skin in the game, just that the seller receives no compensation if the buyer pulls out of the deal. In this case, the buyer probably spent more on the deal than I did, but that wouldn't really comfort me if they had backed out last minute.
- codegeek 2y agoYes of course. Basically when a deal falls through after spending weeks or months on it, both sides lose big. That's why you want to do it with professionals and have a good Lawyer and CPA on your side.
- Waterluvian 2y agoDoes it also feel like you showed your hand and all they had to do was ante to see it? I’d be very anxious about getting screwed by unsavoury actors.
- mtlynch 2y agoIn this case, that wasn't that much of a concern. I felt like the buyer had the skills to grow TinyPilot from $1M to $10M+, but he didn't have a technical background, so he'd have a hard time recreating the business from scratch even if he had access to a lot of our secret sauce. If I were selling to a direct competitor, I would have had to be a lot more protective about trade secrets. I could make them sign contracts saying that they wouldn't use the information against me if the deal falls through, but I'd have a hard time enforcing it, and the cost of suing them would probably be higher than anything I'd hope to extract for a contract breach.
- lloydatkinson 2y ago> $1M in annual revenue. > A month ago, I sold the company for $600k. ?????
- mtlynch 2y agoIt's a hardware product, so profit is much lower than revenue. SaaS businesses can often sell as a multiple of revenue because they have relatively low costs, but with hardware, there's a lot of overhead.
- andrethegiant 2y ago> Sale price: $598,000 (2.4x annual earnings) Also confused here, the math doesn’t seem to be mathing up
- runako 2y agoRevenue is $1m. Earnings are less than revenue, because you have to pay for salaries & stuff to generate the $1m in revenue. After expenses of ~$750k, the business earned roughly $250k in profit. Thats' real money the owner(s) could put into their personal accounts. Businesses are typically valued as a multiple of their earnings (in the stock market, this is the P/E ratio). For hardware/e-commerce companies, 2.4x is in the range of fair value. Again, you multiply by the earnings and not the revenue. That gives you the actual sale price.
- stevoski 2y agoRevenue, not profit.
- gnicholas 2y agoCongratulations, and good luck with your next phase of life (baby and whatever else it brings). It's been interesting watching your journey via your blog that pops up here every year.
- mmmlinux 2y agoHow did you get people to trust your product? If I see something like this from a small outfit for a cheap price, I will assume that the price is being made up some where else. How did you assure you customers you cant access their machines when you want. Or that your service will offer the reliability they will need?
- mtlynch 2y agoThanks for reading! >How did you get people to trust your product? If I see something like this from a small outfit for a cheap price, I will assume that the price is being made up some where else. How did you assure you customers you cant access their machines when you want. Or that your service will offer the reliability they will need? Good question! Customers didn't express concern to me about me accessing their machines. I don't know if I did something special to engender trust or the average customer isn't so worried about that threat. I could imagine that there was some trust in the fact that my face was on the website, and I was clear about who I was and that I was located in the US. For a lot of customers, I'd imagine that I'm less likely to have backdoored the product than a faceless corporation who operates from overseas. I also found that many of our customers found us through word of mouth. So there was trust that the product worked well because they heard recommendations from friends, co-workers, or bloggers that they liked.
- deleted 2y ago[deleted]
- kristianp 2y ago> Sale price: $598,000 (2.4x annual earnings) I don't want to offend, but 2.4x earnings is disappointing to me. I dream of selling a business for 5-10 times earnings and retiring. The assumption being the 5x earnings assumes the business will grow, perhaps doubling every 5 years?
- ezekg 2y ago> My wife and I also wanted to start a family. TinyPilot only occupied about 20% of my time, but it occupied 90% of my stress. I would have done a terrible job juggling founder stress with new parent stress. I feel this. Being a founder is hard, and raising kids is very hard. I was a little bit sad when I saw this headline show up on HN, because I've been following you for years, ever since the beginning. I always admired your hardware business, and the yearly retros, and I was sad to see it all end. But after reading the post, I do understand. Congrats on the sale, and on the child. I hope you can find some relief from the stress of being a founder, and I hope your new family will bring you as much joy as my 2 kids have (with +1 on the way for me as well). Would you build another hardware business, or are you going to try for a software business next?
- mtlynch 2y agoThanks, Zeke! >Would you build another hardware business, or are you going to try for a software business next? No, I don't think I'd try hardware again. It's a shame because I learned so much about hardware and selling a physical product, so I do have an edge if I wanted to do something else that involves both hardware and software, but bootstrapping hardware from zero is just so risky. I caught a lot of lucky breaks for it to work out with TinyPilot; but simple one-time events like a manufacturing error or a lost shipments could have sunk the entire company in the first two years. I'd like to try another educational product. I released a blogging course at the end of 2020. I didn't have time to promote it much because TinyPilot swallowed all my time, but it still has made $10k of profit. I'd like to try something like that again. But I would also like to build some kind of pure software business if I land on the right idea and the right market for it.
- willsmith72 2y agoWhen they ask, "how do I know if I have product-market fit?", i will point them here > With every other project, I had to beg and plead with people even to try my product. With TinyPilot, there was so much demand that I struggled for months to keep the product stocked.
- holografix 2y agoA brokerage fee of roughly 20% sounds wild. Can anyone comment on whether he was ripped off or whether it’s normal?
- balls187 2y ago1) Congrats on your exit. 2) Congrats on expecting. 3) Thank you for sharing. I found this insightful, and hopefully throughout the journey you found more fulfillment than you would have had you stayed working at Google making software for such amazing product manager decisions like a $240 smart watch for 8 year olds...
- tadeegan 2y agoHow much tax did you pay? Long term cap gains?
- mtlynch 2y agoI'm still working with my accountant on that, so I don't have the final figure. I'm expecting the taxes to be relatively low due to expenses that I had to amortize in the last couple of years: https://news.ycombinator.com/item?id=40513450 https://news.ycombinator.com/item?id=40513450
- ttcbj 2y agoCongratulations! And thank you for sharing your story over the years. You are an excellent writer and thoughtful founder. I am really glad you found this graceful and economically rewarding exit. I also own a small bootstrapped company (pure software), and I am now on year 21 (!). Someday, my business will run its course. When it does, I will probably write a blog post about the entire experience of starting and owning it, and if I do I will have been inspired by your posts. Best wishes.
- mtlynch 2y agoThanks for reading and for the kind words! And 21 years is amazing! With everything that's changed in the last two decades, it's awesome that you've continued adapting and kept competitive all these years later.
- fitsumbelay 2y agothanks for posting this
- mountain_peak 2y agoFirst off, congratulations on the sale - sounds like the right time and the right reasons for you, and you're 100% right on the seemingly 'backwards' nature of incentives and rewards when working for a large org. I was somewhat saddened when the logo changed (I suggested an alternate), but completely understand your rationale. As a side project, I'm currently working with a hardware founder (I'm primarily software) who exited twice before having his "clock cleaned" by overseas competition steal and undercut his patented products on his third venture, which caused him to all but close shop and retire early. He's back I think due to boredom, but I'm seeing just how difficult hardware is. Why do you think hardware doesn't generally have the same level of 'respect' as software? From what I can see, it should be held in much higher regard with a correspondingly higher level of compensation. Is it literally just the current ability for hardware to be reverse-engineered and undercut?
- mtlynch 2y agoThanks! >Why do you think hardware doesn't generally have the same level of 'respect' as software? From what I can see, it should be held in much higher regard with a correspondingly higher level of compensation. Is it literally just the current ability for hardware to be reverse-engineered and undercut? Oh, my perception of hardware engineers is that they are held in similar regard to software developers. If they do get less prestige, my guess is that it just comes down to money. The margins on pure software products are so high, so software businesses can afford to pay their software engineers really well. I've heard that typically hardware products sell for about 3-4x their bill of materials, so that eats up a huge chunk of your profits. And then there are all the other costs like storage, shipping, fulfillment that are nearly zero for a software business but significant for a hardware business. I think for similar reasons, we don't see a lot of successful hardware startups. The VC money is probably flowing much more heavily toward software, so we hear of fewer hardware unicorn companies.
- pvo50555 2y agoMy findings are the same - having spoken to a founder working in robotics, with a successful product and a sizable customer base, he has spent a very long time looking for funding.
- ilamont 2y agowithout an office and custom in-house manufacturing, a prospective owner could run TinyPilot from anywhere in the world. Questions business brokers ask is how many hours the owner spends each week, and if it needs to be on site. Lifetime profit from business Thanks for including this. Startup hype always demands a focus on the size of the exit, ignoring the other funds extracted from the venture in the form of salary and covering other costs.
- paulddraper 2y agoSold it for less than 1X rev? I understand it's hardware, but that's a bit rough.
- mickael-kerjean 2y agoNot sure why you're getting downvoted, I had the same reaction. If you have a sustainable and healthy business that is growing year per year, 3 years of today's profit and under 1x the revenue might as well be paid off in under a year 3 years from now if you got PMF and work torward scaling your business. It becomes an opportunity cost calculation which in the case of the author might be ok but definitly not ok for many of us indie hacker who are spending their heart and soul building a sustainable business.
- paulddraper 2y agoI'm guessing either the author had a very strong personal reason (i.e. really wanted out), or the business was not particularly sustainable/growth-favorable for one reason or another.
- jealousgelatin 2y agoHuge congrats man. I’m still posting retrospectives because of you. Excited to see your next project!
- tinyhouse 2y agoThe sad part of all of this is that he both lost money and was more stressed than if he stayed at Google. He did gain many things too, including getting freed from a job he didn't like, learning a lot and gaining an audience. But it's not a success story yet as far as money and well being go.
- syntaxing 2y agoHuge kudos to Michael on bringing us through his journey, including the selling. I remember starting reading his blog during the pandemic, the expensive website upgrade that got him lower sales is something I think about every once in a while. Huge congrats on the exit!
- Ahmd72 2y agoBeen following your story from the beginning Michael, as around the time your tinypilot/KVM came out, I was having the same issues but never occurred to me or had the energy to tackle it. So glad you did and gave an insight to your journey, truly shows the amount of grit it requires to run a business and happy that you finally were able to close.
- ctrlGsysop 2y agoGreat story. And congrats to Scott.
- forgingahead 2y agoCongrats on the sale, and on your wife expecting! Been following you for a few years, and glad to see you got a decent exit and have some nice life events to look forward to this year. Fascinating that you had such a poor experience with FEI, but good to hear Quiet Light was a better fit. I also thought about potentially selling my business a while ago, and the broker, while nice, was just not interested in conducting anything more than a commodity transaction. So obviously we paused, but good for folks to know this is quite common, and if you're selling, always make sure your broker is aligned with you, otherwise find another. I also want to point out, for posterity, that the HN commenters are often amazingly confidently wrong in their strong assertions. For Michael's 2023 retrospective post which got shared here, someone blithely wrote off TinyPilot as being worth "close to zero"[0]. Obviously that was not the case then, and this deal shows it. Congrats Michael! All the best with next steps. [0]https://news.ycombinator.com/item?id=39401974 https://news.ycombinator.com/item?id=39401974
- bredren 2y agoI had my SaaS rejected by FE international, wrote them back and told them they were wrong and to take another look. They did, took it on and we sold it within 90 days on similar terms. It may have turned out better for this founder that they didn’t go with FE, but I urge people to not always take a single no for an answer.
- m463 2y agoI have a tinypilot kvm. It's a nice network kvm that's pretty easy to get going. For example, it does 1920x1080 resolution immediately. I would use it more often, but it is loud - louder than the servers I hook it to. I switched to pikvm which has a little less polish, but you can put together much cheaper. It is even more hackable. For example, connect to 4-port kvms that have RS232 and you can run 4 systems. tinypilot seems to have some serial or order number that you need to download an update. pikvm seems to reserve some features for hardware they sell (for example, they don't seem to want to support HD resolution, even though you can just move an edid file and support 1080p at less than 60hz). Both of them are or at least started as raspberry pi kvms with an HDMI-in digitizer (either csi or usb) and hardware hacks to use the usb power port to emulate usb devices (keyboard/mouse/drive)
- 20after4 2y agoThis seems like a pretty good conclusion for the seller, all things considered. That is, with the exception of all the stress. I'm sure mtlynch won't miss all that stress. Anyway, to mylynch: Congrats on the sale and on starting a family. Also: Thanks for documenting everything so thoroughly. It's a rare behind the scenes view into how a bootstrapped startup works in the real world. Very valuable for others to learn from your experience!
- xarope 2y agoCan I just say, it's nice to see a "small" business owner succeed, in a sea of desperate wanna-be-unicorns? And my interest is piqued by the Pizookie Trio, whatever that may be...!
- Crier1002 2y agoive always enjoyed reading about your inspiring TinyPilot journey over the past few years. i hope you won’t stop writing! congrats and all the best!
- saxelsen 2y agoCongratulations! Thanks for sharing your story with such transparency.
- bArray 2y ago> As for the salary, $100k/year is roughly what a software developer makes fresh out of college in the US. And that’s without a 12-month commitment Fresh out of collage? The average appears to be $100k [1], but this would include senior developers too. I think their sense of wealth is warped by Google... [1] https://www.glassdoor.co.uk/Salaries/us-software-developer-salary-SRCH_IL.0,2_IN1_KO3,21.htm https://www.glassdoor.co.uk/Salaries/us-software-developer-s...
- ryandrake 2y agoYou get that kind of exaggeration here on HN all the time when the topic of salary comes up. People will casually say things like "Oh, most tech employees make $500K/year and drive Ferraris." or "Developers can easily make seven figures!" when they're actually just talking about a few specific senior FAANG developers they know who live exactly in the Bay Area and got their equity grants at just the right time...
- khaki54 2y agoMichael, initially I thought it was kind of a naive idea that wouldn't take off because there are so many tried and true and enterprise class alternatives. They are pretty clunky though. The immense care and diligence you have put into setting this up means the new buyers will have a great launching point with few surprises. Suffice to say, I would have liked to buy this thing for $600k, but I guess you dropped off my radar for the past year and I didn't realize it was up for sale. Congrats!
- rexreed 2y agoWhat terms would you have offered, including any seller financing, required lock-in or employment from Michael, etc? What would you have done with the product after acquisition?
- khaki54 2y agoI think the terms they came to were pretty generous to the buyer. Michael brings a lot of value to the deal as a seller, there isn't going to be a hidden gotcha, more likely hidden benefits of forward thinking you'd uncover over time. Lock-in or additional hours from Michael wouldn't be needed, the product isn't awfully complex, and I'm sure everything is more documented than you would expect. What I would have liked to do would be to use the company as a scaffold to develop a larger mid-market offering. I don't like mid-market that much, but they are much more willing to cobble together a better, cheaper solution, rather than just buy whatever package that HP or Dell is offering. I would also try to sign up and train some government focused resellers to see if we can make progress in that segment. USG is very favorable to small businesses. Control over the supply chain would be a selling point to USG as well. I would also try to partner with someone like System76 or a similar US manufacturer to make the existing TinyPilot product be a recommended KVM component for their server and small compute offerings.
- gopher_space 2y ago> I would also try to sign up and train some government focused resellers to see if we can make progress in that segment. USG is very favorable to small businesses. Control over the supply chain would be a selling point to USG as well. You have a procurement onboarding process that's just sitting around right now? I've been looking at small, local companies that will be closing due to lack of staff/interest once the owner calls it quits.
- observer987 2y agoWhat are the tax implications of selling a bootstrapped business?
- garyhbutton 2y agoCongrats!
- huhtenberg 2y agoFantastic product, super well executed. Well done and congrats!
- yencabulator 2y agoThe mere existence of the product category of KVMs is sad and frustrating. I wish IP-only servers had won: https://www.usenix.org/legacy/events/usenix06/tech/ben-yehuda.html https://www.usenix.org/legacy/events/usenix06/tech/ben-yehud...
- kentt 2y agoYou likely dodged a bullet by getting rejected by FE International. I went through a couple of acquisition processes with them. Almost every person I dealt with there was dishonest and unprofessional.
- cynicalsecurity 2y agoThat feels like a super low price.