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"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 c

"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 ago
Yes, 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 ago
  Yes 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 ago
  Does 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 ago
    In 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.
neycoda 2y ago
They don't walk away with nothing. All of the documents they made and experience they got from the first proposal can be used for other proposals. I hate how people see all of that effort as wasted just because they didn't get they want from it. They're taking for granted all of things they gained from it which will be used in the future (at the very minimum, education and experience, which could be monetized).
- lukan 2y ago
  Do you want to work for free for me? It won't be for nothing, you will be paid with experience!
  - Etherlord87 2y ago
    Imagine I say my house burned down and I lost everything, and someone (here: neycoda) points out I haven't lost everything because I still own the land underneath the house. Pedantic? Maybe, but still correct. At no point would neycoda state it wasn't a negative outcome, just that "left with nothing" was not true. So in the analogy, it doesn't make sense to ask him if he would like you to put his house on fire... https://en.wikipedia.org/wiki/False_dilemma https://en.wikipedia.org/wiki/False_dilemma
    - lukan 2y ago
      I am pedantic, when I think it helps clarity and understanding. Here it does not. The goal of a sale is to make money, if there was no deal, than it was no success by that metric.
      - Etherlord87 2y ago
        But what is the purpose of saying the sides walk away with nothing? What kind of information does it convey? Obviously if the deal wasn't closed, then it was no success, but it seems to me to say anyone walked away with nothing tries to really communicate that there was no upside whatsoever - and so it's perfectly valid for neycoda to point out it's not actually true.
precompute 2y ago
Adobe paid Figma $1Bn in termination fees!
- rexreed 2y ago
  That sort of termination fee would never be applicable to a small business like this, and it's often the small business that gets screwed, not a company that has raised a ton of money from VC with valuations in the billions, with a lot of vested interest from both investors and shareholders.

mtlynch 2y ago

Yes, 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 ago
Yes 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 ago
Does 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 ago
  In 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.

neycoda 2y ago

They don't walk away with nothing. All of the documents they made and experience they got from the first proposal can be used for other proposals. I hate how people see all of that effort as wasted just because they didn't get they want from it. They're taking for granted all of things they gained from it which will be used in the future (at the very minimum, education and experience, which could be monetized).

lukan 2y ago
Do you want to work for free for me? It won't be for nothing, you will be paid with experience!
- Etherlord87 2y ago
  Imagine I say my house burned down and I lost everything, and someone (here: neycoda) points out I haven't lost everything because I still own the land underneath the house. Pedantic? Maybe, but still correct. At no point would neycoda state it wasn't a negative outcome, just that "left with nothing" was not true. So in the analogy, it doesn't make sense to ask him if he would like you to put his house on fire... https://en.wikipedia.org/wiki/False_dilemma https://en.wikipedia.org/wiki/False_dilemma
  - lukan 2y ago
    I am pedantic, when I think it helps clarity and understanding. Here it does not. The goal of a sale is to make money, if there was no deal, than it was no success by that metric.
    - Etherlord87 2y ago
      But what is the purpose of saying the sides walk away with nothing? What kind of information does it convey? Obviously if the deal wasn't closed, then it was no success, but it seems to me to say anyone walked away with nothing tries to really communicate that there was no upside whatsoever - and so it's perfectly valid for neycoda to point out it's not actually true.

precompute 2y ago

Adobe paid Figma $1Bn in termination fees!

rexreed 2y ago
That sort of termination fee would never be applicable to a small business like this, and it's often the small business that gets screwed, not a company that has raised a ton of money from VC with valuations in the billions, with a lot of vested interest from both investors and shareholders.