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Need advice - takeover by global player

Discussion in 'General Business' started by wynn, Mar 6, 2006.

  1. #1
    Hello everybody,

    I'm running a very promising online business (not in US) which has just started getting interesting and very likely will be of great interest in the next years.

    In the last few weeks I had several requests by different companies that wanted to cooperate with me. My site has been on TV and newspapers (consumer guide stuff etc.). Users/clients do already exist and revenue can be obtained by taking commission and/or advertising (affiliates, whatever) etc. (deals made by clients using my site may sum up to about $1k-$10k a day at this time).
    But due to limited possibilities (I am still a student) traffic (advertising) could be better of course.

    I coded this site all by myself (computer science university degree soon) which took me +100hrs (I guess) a year ago.

    Today I got this call from a real global player (I won't mention the name here) and they told me they want to buy my business. I didn't make a killing (revenue) yet since this site just got a push (tv etc.) since dec 2005 (online since june 2005) and I need to focus on other things, but:

    As this big company (everybody knows) could drive traffic like crazy to this site, revenue could increase like hell (and they even told me my commission being very low for this business).
    Now they want me to tell them my asking price and I have no clue how to calculate this price.

    Any suggestions where to get more info (comparable sites sold etc.) or do you have any ideas how to calculate such a price (coding, users, sales,
    future, etc.)?
    Any advice would be appreciated. I'm a coder not a business guy.

    But I repeat: it is a real global player ;-).
    SEMrush
     
    wynn, Mar 6, 2006 IP
    SEMrush
  2. briandunning

    briandunning Active Member

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    #2
    Do NOT mess around trying to handle this yourself. If this is actually a real opportunity to make some serious cash, you need a corporate finance expert to run this deal for you.

    Immediately run an ad for a "VP Corporate Development" and briefly describe the situation. Expect to offer him up to 50% equity. Typically you'd give him a long cliff with full acceleration upon liquidity - this is the type of deal I've done on several occasions and it is (a) very attractive to the right guy, and (b) very beneficial to you.

    You should also get yourself a crash course in corporate finance. Find someone who knows this stuff and take them to lunch. You need to understand the basics of stock. At a minimum you should understand everything I suggested above.

    Important - don't make any attempt to "get back to them with an asking price" yourself. It's not as simple as "an asking price": they're just hoping you're naive and can be easily suckered out of your company. All first contacts are like this.
     
    briandunning, Mar 6, 2006 IP
    TheHoff and (deleted member) like this.
  3. wynn

    wynn Peon

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    #3
    Thank you very much. But what should I actually do right now?
    I'm not from the US, so I don't know whom to contact. They want me to call them back this week.
     
    wynn, Mar 6, 2006 IP
  4. mad4

    mad4 Peon

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    #4
    Whatever you do try to keep a percentage share in the site. If they make loads of cash then even a 5% share would be great in 5 years time.
     
    mad4, Mar 6, 2006 IP
  5. briandunning

    briandunning Active Member

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    #5
    Don't worry about the time frame. If they're actually interested, it's not going to make any difference whether you call them back this week or not.

    Spend all your effort trying to find a corporate finance person. I would approach this on three fronts (spend time on all three):

    1. Advertise for someone like I suggested above.

    2. Talk to people you know - lawyers or business owners, and ask if they know anyone who does corporate development for equity.

    3. There are a number of companies like this: http://www.cfo-for-hire.com/ who provide financial experts on an outsource basis. I've never worked with one so I can't give a recommendation. You could talk to several of these companies and ask if they'll work on your specific deal for equity.
     
    briandunning, Mar 6, 2006 IP
  6. T0PS3O

    T0PS3O Feel Good PLC

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    #6
    I agree on getting an expert in. You will be bought out for cheap if you don't know what you are doing.
     
    T0PS3O, Mar 6, 2006 IP
  7. wynn

    wynn Peon

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    #7
    This is what I'm afraid of.

    My problem is: I didn't make a fortune with this site myself yet, but there is big chance (esp. for them) to create big revenue.
    As far a I understood CF is mainly focusing on venture capital?!
    My business (so far) is a very small one (for I'm a student) but got very much attention the past weeks and is very promising in the near future.
    So I'm not holding any stocks nor did I need some venture capital to start with ;-).

    Aren't there any lawyers focusing such things?
     
    wynn, Mar 6, 2006 IP
  8. dsm56

    dsm56 Active Member

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    #8
    You say you are a student?
    I really recommend speaking to some high up people in your business school (if there is one), advice from them can be extremely valuable (and free)

    Its a really good start to getting to know what is around and how to deal with a situation like this.
     
    dsm56, Mar 6, 2006 IP
  9. demonsnakeyes

    demonsnakeyes Guest

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    #9
    it seems that good fortune comes your way! try to look for a business expert in some top colleges in your country... im sure there are experts regarding this kind business opportunities... good luck!
     
    demonsnakeyes, Mar 6, 2006 IP
  10. noppid

    noppid gunnin' for the quota

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    #10
    Low ball it and ask for lifetime commission. But as said before, hire an attorney to do the deal. Also, IMO, if you pay 50% to get the deal done, you are a fool.
     
    noppid, Mar 6, 2006 IP
  11. dsm56

    dsm56 Active Member

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    #11
    Not necessarily true.
    Lets say you get $10m for your site with just a lawyer.

    I proper VC can asses your site and negotiate properly, maybe you would get $50m for the site, and have to give up 50% of it.

    Now if my complex calculations are correct, the second deal is better (and I think there is truth in it)
     
    dsm56, Mar 6, 2006 IP
  12. wynn

    wynn Peon

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    #12
    Hell again.

    Well, I'm not talking about millions here, of course.
    They called me again and it seemed as if my asking price does not match with their ideas.

    But only 5 mins after the phone call I got an email where they offered me about 20% of what I was expecting (BIN) and some commission for their sales for the next three years (decreasing).

    Of course I do have an attorney for such a deal.

    As you told me, I just sent an email to one of my professors (areas: computer science and startups etc.).
     
    wynn, Mar 7, 2006 IP
  13. dsm56

    dsm56 Active Member

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    #13
    Another thing is....
    you know someone offered to buy google in the early days for about $100m
    Thats a hell of a lot, but they decided not to sell.

    My point is, why not hang on to the website? It might be worth millions in a few years...
     
    dsm56, Mar 7, 2006 IP
  14. wynn

    wynn Peon

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    #14
    You're definately right. I've heard of different calculations for this market and there is of course some serious money to earn.
    But I'd actually prefer some other kind of business as far as this is not "my area".
     
    wynn, Mar 7, 2006 IP
  15. dsm56

    dsm56 Active Member

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    #15
    What is your BIN? Maybe Ill put in an offer :)
     
    dsm56, Mar 7, 2006 IP
  16. T0PS3O

    T0PS3O Feel Good PLC

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    #16
    Your commission clause sounds like a good deal but it will cost you a good lawyer to make sure they don't screw you over with a loophole in the contract.
     
    T0PS3O, Mar 7, 2006 IP
  17. nuttymarketer

    nuttymarketer Peon

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    #17
    First of all. If you see tat your site is really something interesting never sell. Selling is not a great Idea when Business is going to be great. You see when you start seeing some revenue the worth of site would be many fold.

    My advice would be, as a student if you have cash problem. Sell some part of it and keep the rest with a part in sales per month. This will fund your study in a very comfortable way and still keep the business in long run.

    But if it is not your BIN then sell and sell well. Never sell for visitors today, for coding for anything which you can see. DotCom business worth is never imaginable, it could be Zero one day and Next day you have Google in 6 year beating Biggies like Microsoft, a 25 years old companies. It is all in your guts, how much you can hold. Read the story of Hotmail sale to Microsoft and Sabber Bhatia Sweating and still smiling with a offer never imagined before.

    But again Keep in mind that you can not sell it like year 1999. DotCom bust has put that thing out of mind.

    So it is pretty complex. No one can advice you on this in this forum as we do not know your personal liking and goal for life. It is you who have to battle it out with some hired help.

    Arvind Kumar
     
    nuttymarketer, Mar 8, 2006 IP
  18. nuttymarketer

    nuttymarketer Peon

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    #18
    Someone said aobe that Google was offered $100m in early days. Mind bogling number for two college student.

    But they hold it.

    Now Google Revenue is $6.6 Billion and Capitalization is $115 Billion. Can anyone pay you so much money today.

    No penny for Guessing.

    Arvind
     
    nuttymarketer, Mar 8, 2006 IP