Blogging about the deal seems dumb. He comes off as naive (although it certainly has generated some good conversation) and it’s obvious he’s not talking to anyone really interesting. You can see the same thing with inexperienced CEOs blogging about “all of the unsolicited VC interest”. Yeah right, if you have VC interest you get a term sheet or stay quite, you don’t slap it on your blog.

DropSend isn’t worth the asking price. Period.

If it was (or if it was a good deal) don’t you think someone would have bought it?

Ryan had (has) a saled problem, and it’s common with ISV’s like his.

His sales are small, but growing. But his product has no secret sauce - no patent pending technology, no sizzle. It’s easy to replicate - and by easy, I mean CHEAP.

So, the question becomes, “Do you buy, or build?”

With his sales so low, getting to his current (back then - heck, even now) sales numbers would be trivial at best. So, why pay? What if you stuck a million bucks into your copy project? Say you budgeted $30k to develop the app, get some hosting, etc. and then left $200k for marketing for a 6 month period (which I think is a heck of a lot more than Ryan is spending … probably $199,999 more actually) and then pocketed the rest. See the problem?

Sure, buying Dropsend gets you up and running NOW, but since he put it up for sale, had you started a copy project of DropSend, I’d bet you would be up and running now. right? (Ryan, how long did it take you to develop DeopSend?)

So, back to the sales problem. Ryan put the price at $1 million, and there were a few sniffers, myself included. My thought process was that this was an asking price and he would negotiate down to a realistic price. He indicated that this wasn’t the case and since he had more than one person interested in DropSend, he rationalized that the asking price was spot on.

I think I even said to Ryan that he should just milk it for all its worth and he’d probably get WAY more than the asking price in terms of ongoing cash flow.

We’re in a similar situation with one of our hosted email products, and while I’d like to sell it, I can’t imagine anyone buying it for a price that would be worth my time to sell for. So, we milk the cow. And we smile.

So, we have the combination of an easily replicated product, low (but growing) sales and a high asking price combined with a seller who talked WAY TOO MUCH to potential buyers and didn’t realize what was really going on around him. No harm there - since what did it really cost him? He didn’t sell DropSend, but he’s still got the cashflow/profits and I think/hope he’s learned a lesson here.

David

The person that did have the authority to make the buy/no buy decision didn’t see a product compelling enough to pay $1MM for.

I’m sorry. not seeing much insight here at all. I see a guy that didn’t do his homework and didn’t ask the right questions before thinking he had a deal. I guess that is some type of takeaway. But I would hope even a Bryman School graduate would have that much common sense before assuming anything.

My belief is that it is important to remember that a potential buyer may not want stats and so forth in the public eye. But they lose that ability when the seller puts it all out there.

That said, I think Ryan is one of the most trusted and well respected people out there and I am sure whomever buys it will have made a good purchase. I enjoy Ryan’s posts and sure wish I could get my schedule as tight as his!

I think the real key to his posts is in the education for the readers. That education is worth a lot overall for others trying to sell their web apps in the future.

Ryan is also one of the bloggers I have competing in BloggerMania:
http://www.centernetworks.com/.....-announced

Still, discussing money in public is pretty vulgar and akin to tossing off in public places

He goes about his business like one of those people who expose themselves in public places. There’s an old Hebrew word for him: onanist.

Long list of potential acquirers: 200-250
Short list of qualified acquirers: 70-100
Initial discussions and signed confidentiality agreements: 30-50
Indications of interest/offer with an acceptable valuation: 3-5

So the fact that Ryan was 0 for 1 (or maybe 0 for 3 - I couldn’t follow how many interested parties he talked to) with a company that didn’t get much past an initial exploration shouldn’t be that surprising.

I think that the motivation is completely admirable and honest.

But what concerns me about the general trend to talk about things openly …is talking before there is a deal. (Carson is a look back at what happened) I have noticed this in a couple of instances. I am not sure if it is inadvertent or planned but it has ruined a few deals.

If a company is in talks with a large company for a take over …. the last place either party should read about it is in techcrunch. There seems to be a notion that if some one has shown interest in you then there must be others that should be interested and if there is a bidding war it is better. Sure sounds great in theory ….to the shareholders. But that doesn’t sit well with the company looking to buy your company.

I can’t help but think about the rumours of a bubbleshare / myspace deal …..much rumored but in the end it ended up as a post on techcrunch aptly named “BubbleShare, Counting Unhatched Chickens”

So thanks to Carson for letting me into the anatomy of a deal that never was ….

Great insight.

cheers
scott

The reason why I wrote that post is because I thought it would be very helpful to small companies like us who have never sold a company/product. If you’ve never tried to sell your web app or company, it’s a very scary and confusing process. We wanted to throw some light on the whole process for everyone else.

Also, I emailed their team before I posted it, just to make sure everything was OK and they didn’t bother to respond. As I didn’t write anything defamatory or reveal any of their vital information, I see nothing wrong with the post I wrote.

Now I’m going to respond to the various comments. Here we go:

Carson may have made an unethical move by writing about this, but the information is very valuable to anybody who wants to know how such deals are made.

Not sure why my post was unethical at all. I let them know I was going to blog about it (which they didn’t bother to respond to). We didn’t sign any NDAs so we broke no confidentiality agreements and finally, the deal fell through! So what’s the problem with talking about it?

I talked to him about acquiring DropSend, but the manner in which he was working the various interested parties against eachother rubbed us the wrong way.

Hey David - I’m sorry that it bothered you the way we conducted the negotiations. I don’t actually know what you mean by “working the various parties against each other”. I simply said “We’re in serious talks with two current buyers, at $1M. Are you still interested?”

From what I gathered, he exchanged only a couple of words with the CEO of the company he wanted to buy his business; there was never an offer from the company; and basically one guy in the company was interested.

Hi Sally. I guess I didn’t explain the negotiations with YouSendIt very well. I had one long phone call with the CEO and then another long meeting with him and five other people. It was more than “one guys in the company”.

Well an NDA is legal document so maybe it was already broken by the other party

None of us signed an NDA. That’s besides the point though. I would never share sensitive information - NDA or no NDA. I’m not out to hurt YouSendIt at all. I’m simply trying to help small companies like us understand how these negotiations take place.

Take care everybody and happy new year

I can’t speak for how he handled conversations with other parties, but I’d suspect that he was the same to everyone else as he was to us.

Actually, I think he would have been better off to put it on ebay rather than handle it the way that he did.