Selling the startup - how to proceed

[forgotpassword]

The situation is the following:

I have started a startup in the Netherlands with two other guys from college. All students in Computer Science. The product is done - we have a website and we have a couple of customers.

The market is growing, but we suspect that some strong players will enter the field and crush our business. We don't have any patents (no software patents in Europe), so we can't really fight the larger companies.

So really, we have the technical expertise, but from a business point of view we can't proceed. So we're thinking that we should sell all our software (Windows client app + freebsd based server software). The money we raise this way we can invest in our future products. We believe that (larger) companies can greatly benefit from buying our product: that way they can enter the market with a head start.

We don't know how to proceed. We don't have any money.

- How do we get people interested? - How do we valuate our product? - What would you do? - How long does it take to sell a product?

Kiko sold itself via eBay (which is awesome), but is that really the way to get the most out of it?

[michael_dorfman]

Sorry to be a bit blunt, but if you don't have many paying customers, and the only users so far are friends and family, and you suspect that some strong players will enter the field and crush you, what makes you think you have something that somebody would want to buy? If you don't have a compelling answer to that question, you should consider this one a training exercise, and move on to your next idea.

If you do have a good answer to the first question, then the next question is: who would find this product valuable? Who are the companies that would get some strategic value out of offering your product? Find them, and contact them.

[meredydd]

The overall impression I'm getting from this post is that this product you've created works, but you don't believe in the business case for it. You seem to have at least one other project about which you're passionate, and which you would be pursuing all-out - you seem to be getting all hung up on the guilt involved in abandoning the first one.

I say this is a classic example of the "sunk costs" fallacy. You're holding onto something bad because you've already put effort into it, instead of doing what's best for you. I say drop it like it's hot, and throw yourself into the new project.

You're in a fortunate position, as students - rare is the startup that can afford to realise it's working on the wrong product, back up, and change direction. Don't waste the opportunity!

[jamess]

How much money are you making now? If the answer is nothing then you can pretty much forget about selling your business as a going concern, what you have is a pile of software not a business.

Kiko is a special case, essentially what they did was not build a company but rather an extended exercise in building consultingware. It's very easy to see how to fit a flashy calendar component in to any number of existing businesses (not that I've seen hide nor hair of it since the acquisition... does Kiko still exist in any meaningful form?) but that probably doesn't apply to what ever it is you've built.

The best way to sell your business is to not need to sell your business. If you just continue as you are, building a decent revenue stream then eventually you'll almost certainly start getting offers. Most of the time, though, acquisitions are made as much to acquire the talent as the technology. Not including the people who built a successful product in the deal substantially reduces your value.

[forgotpassword]

"The best way to sell your business is to not need to sell your business."

I agree. That would be the ideal scenario. But we think a different product would work out better for us. So selling the product and starting fresh is tempting.

As for the money we're making. Not much at all. Our customers are just friends and family at this point. We haven't really tried to sell the product. No marketing campaign to speak of - once again because we're a bit "inexperienced".

[jamess]

Well, the way to become experienced isn't by giving up at the first hurdle that's for sure. If you haven't tried to sell the product, then there's nothing anyone can do to pin a value to what you've created.

What you're trying to do is very difficult to begin with. Very few people will be interested in buying a piece of software without also having the people who built it continue to work on it. Added to that you're trying to foist the burden of marketing a completely untried product too. Purchasers are going to need at least some track record, people using it, revenue earned, that sort of thing. It's a completely unattractive proposition, to say the least.

You really have only two options, either make some effort to push the product in the marketplace and do at least one marketing, sales, feedback, improvement cycle or just forget about selling it, write it off and move on to the next thing you want to do.

If nothing else, writing it off as a commercial product gives you the opportunity to make it open source, and use it as a show piece for your talent.

[goofygrin]

Unless you want to sell, I think that you might be selling yourself short.

If you already have paying customers then you already are doing better than the suspected strong players that might enter the market.

My vote is to continue and see if the competition comes to you.

Unless you want to quit. You're not a quitter are you? ;-) (wink)

[forgotpassword]

We have paying customers, but only a few. Finding customers is harder than we thought it would be.

That's the thing. We want to sell. If we sell we have a little money we can use to grow our second product. Hire freelancers for graphic design, and so on.

Unfortunately, we picked a market where selling is pretty difficult for startups. It doesn't really sell via the web, so we need to call people for sales. If we could start again we would not make this mistake.

So basically, we picked the wrong market. We're still trying to graduate (MSc) and we think we can do a much better job when we try again.

[jkent]

Write it off or ebay exit - you are unlikely to recover significant money from this. If you aren't doing well, and don't want to do it, then get out!

[d00723]

get out of it....and side note why are customers hard to find...if its optimized at all or your running even a lame duck ppc campaign they find you...am i missing something here?

[forgotpassword]

Well, one part is that it's a Dutch startup - targeted primarily at Dutch customers.

300 million people in the USA. 16 million in the Netherlands. So ppc campaigns are far less effective here.

The obvious question is: so why aren't you targeting the global market then? We originally thought that a local approach would help us get off the ground more easily. Perhaps we made a mistake there.

[rutger]

This is all too hypothetical for me. You can only get good advice if you show a little more of yourself. Where can I see/buy the product?

[wlievens]

I second this. Everyone is too vague because we have no idea what the product is.

[interested]

how can I contact you to further discuss this?

[forgotpassword]

Drop us a line at [e-mail] and we can give you more details about our situation.

Thanks a bunch.

[ideas101]

you must continue doing what you are doing ... try growing your business even if its 0.01% a month - blog about your product as much as possible - avail all the avenues of free advertising and marketing - more the people know about your product the more you will be publicity and eventually someone will notice you and may be offer you to buyout.

[forgotpassword]

That makes sense, but I think the opportunity cost should not be ignored. If the opportunity cost of continuing on the current track is higher than the expected returns (both on the short and long term), then it might be better for us to either sell or cut our losses.

But yes... when somebody approaches us (instead of the other way around) we have a much stronger position during negotiation. So the problem is really in the "eventually" part.

[shiranaihito]

That's good advice, provided that the product is good, and something people would/will want to use.

[ideas101]

you should also try to contact m&a consultant - they may help u find the buyer .... one of them is http://www.burleyonline.com/index.htm