What I learnt from selling my Indian tech startup |#shyamisby Commentary |
I started InBoundio in January 2013. After doing a lot of freelancing, services and building casual hobby products, this was my first serious attempt at building a web product and business.
This also made me dive into core technology. Earlier, I only had surface knowledge of technology.
It did well and got reasonable success. We did plenty of iterations with product feature and pricing, and we got a good number of inquiries about our white-label marketing software.
But since I'm was building another company, AeroLeads, too, it became difficult to focus on two products. So, after six months of talks with several businesses, I sold InBoundio to an Australian media company, c9.
The last two years were fun in terms of learning and experience. Now, I have both as well as some cash, and I'll be using all this to grow my current product much faster.
Learning and experience
- It was a little tiring since I did all the work of talking and communicating with people. It was rewarding, too, since I now understand the complete business cycle, technology and marketing stack of any business. I was also able to understand the metrics that buyers look for. Saying this, I am very sure I am done selling businesses for a long time since that doesn’t excite me. Building businesses to sell them is also not a good business model.
- It is not easy to sell your startup sitting in India to someone in another country. Trust is a major problem as they don't know you, and you don't know them. This also means you will only appeal to buyers who are looking to buy in a certain price range to minimise the risk for them.
- I have seen many Indian businesses who go under the radar getting sold in the $1 million range through business brokers. If you think you can sell your business in this range, you should look to engage with brokers who have the right network. Do note that you will get valuation in multipliers of 2x-5x range, which is the industry standard for web businesses. It can be 10x if the buyer sees real growth potential. But do not expect 20x or such valuation as that rarely happens. Being realistic is important.
- You can get much higher valuation if you are willing to work with the new buyer for few years, do partnerships or take some money now and the rest later. At the end of the day, everyone wants to mitigate risk. I had few such proposals, but for me, it wasn’t about the money. I knew it could get messy as it isn't easy to partner with someone in a different country. So I went with an outright sale.
- The whole process is time-consuming and can take between three and six months. Make sure you don’t rush and cover the legal aspect of transferring ownership and assets.
- Prospective buyers will always look for these three parameters: growth potential, minimum liability, and existing revenue. If your startup has them, you should be fine. If not, you will find it difficult to make the calls.
Where to find buyers for your startups and businesses
- LinkedIn: I contacted several founders on LinkedIn using InMail, and got good responses. Few of them showed interest, but it was also the issue of “not having enough paying customers.” If you want businesses in a similar vertical to acquire you, remember that most of them only look for paying customers—and not for technology.
- Business brokers: There are plenty of business brokers and firms who help you sell businesses in the $50,000 to $10 million range. They take about 10-15% fees. And for someone in India, if you think you have the above three (growth, minimum liability and revenue), you should talk to them as this reduces risk, cuts down your time and effort and speeds up communication.
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