Many here on HN are working on companies/apps/projects in the hopes of having a successful exit once their project "takes off". If a project is successful in the marketplace and growing exponentially, making a good exit should be feasible, and the options and recommendations have been discussed here before. And if the project is a failure, it seems obvious that it should be discontinued sooner rather than later.
However, what to do if a project has been successful from a technical perspective, has attracted a modest but enthusiastic fanbase, but has never been properly monetized? How to convince potential buyers of the financial merits of the project if the past revenue has been mediocre?
Concretely, we've been working with a small team on a project for 7 years now, and a huge amount of work went into creating good technical solutions for all the problems in the field. Recreating even parts of the solution would take other companies years even with a dozen people. However, due to a lack of marketing and an unsustainable sales- and ridiculously cheap pricing-model, our past revenue has been minimal. How could we possibly get a fair price when selling the app if the past sales have not been great?
The obvious solution would be to properly monetize the project ourselves to be able to get a fair price in an exit. But this would at least take another one full year with crunch time, and no one on the team can take it anymore. We need a rest from this project, permanently.
We've been floating ideas around:
• don't sell to a competitor or someone continuing the project, but sell the technology to those that would actually benefit the most from it. E.g. 'Jamf' could certainly increase their revenue with our stack by at least a few dozen million per year, but how could we ever convince them of this fact?
• Write up detailed documentation of each part of the technology, which is a lot more complex than one would assume without having worked on those problems for years. But would it fundamentally change anything?
• Write up financial extrapolations on how the app could be monetized: even with a pessimistic scenario (only 2/3 of the user base would be willing to go for a subscription for $20 per year), revenue would be $ 400k per year. With actual marketing, the user base could be increased tenfold, 100fold, the sky is the limit :)
• Try to drastically increase the user base by making the product free. If we had 10x more users, at least we would have something to show, right?
Does the HN crowd have any comments or better ideas?
Is it fundamentally impossible to get a fair price for a project if the financial numbers are not rosy?
You missed the obvious next step -- Raise prices.
If you have a loyal customer base who have been enjoying a "ridiculously cheap pricing-model", then there should be no pushback to this. You immediately fix your monetization and have value.
Or, you do get push back, and then you know that that your product is loved because it is cheap, not because it has found PMF. In which case, your desire for a high valuation is not reasonable and you need to chase that PMF just like everyone else.
Either way, raise prices and find out where you really stand.
Thanks for your idea! You touch on an important part of the problem: the product does not 'just work', it only works as long as we keep working on it. Apart from the obvious (keep the server running), it requires an elaborate daily maintenance routine that has been performed since mid-2018 literally each and every day.
Generation 3.x of the app is sold with a remaining promised support for the next 12 months.
How can we increase prices if the lifespan of the product is reduced with every passing day?
Basically it was insanity to ever sell such a type of product without 'subscription'...
I'm skeptical that your product is so amazingly good and literally years ahead of anyone else but requires elaborate daily intervention and isn't able to generate revenue.
If you think you can single handedly make someone many millions of new dollars simply by using your software then why are you not pursuing that from every angle? That seems like an easy win AND acquisition channel; I expect any business would happily acquire you for a few million if you actually did make them 10x that.
How can you prove (to yourself, to the market) that your product is really as amazing as you say it is? Normally that's by selling it but you said people aren't paying much for it. What's missing from this story? My advice is to figure out the answer to that because the answer will help you figure out what to do next.
> literally years ahead of anyone
its easy, there is no one else in that market anymore. :-/
> and isn't able to generate revenue.
i just said we never seriously monetized it ourselves and don't have energy left to do it.
since it hasn't been done, any projection about possible profits is just speculation.
> why are you not pursuing that from every angle?
how can you convince a publicly-listed company like Jamf that they absolutely need your tech? even if it is obviously true, i wouldn't even know about one angle, let alone every angle.
> What's missing from this story?
well yeah, thats the question i posed :)
Wait, you don't have recurring revenue from your customers? And you do have servers and maintenance tasks? "Insanity" is right, that is not sustainable.
That changes my answer - this is not about pricing optimization, and it is not about selling. You have a non-viable company right now. You need a fundamental change to either convert to recurring revenue at a level that supports the maintenance, or... a change to the product to be run without back-end support, on local devices only, no support.
I have no idea what your daily process is, but I'd be looking hard at automation. Unless there is some level of human judgment required every day, automate all the things. Once that is done, you can do the arithmetic on actual server costs, number of customers, and determine recurring pricing levels that customer will accept and that keep you alive. Only when you get to that point does it make sense to even start thinking about selling.
Gosh, I'm actually intrigued, though. I love efforts like that. Maybe I'm the insane one, but making a big change like that actually sounds like fun.
I'll copy and old comment for a somewhat similar case:
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> I recommend to read an old post by patio11 about selling his project https://training.kalzumeus.com/newsletters/archive/selling_s... (https://news.ycombinator.com/item?id=11347006 | 439 points | March 2016 | 84 comments)
> tl;dr: A small multiplier of last year net gains.
> That in this case is 0. I'd like to give a more optimistic reply, and hope you find one.
---
But IIUC you have some costumers and some revenue, so there may be a hope. Take a look at https://www.kalzumeus.com/greatest-hits/ in case you can find something useful. Perhaps
https://www.kalzumeus.com/2006/08/14/you-can-probably-stand-...
Or for a bunch of comments: https://www.google.com/search?q=patio11+charge+more
Hire a DevOps guy.