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Comment by cellis | Hacker News Reader

4x valuation or do i remember less from accounting than i thought?

Their annual revenue is estimated to be around $5 million, with $2 million in profit.

Doesn't make sense to me.

That's a completely normal offer in the world of regular business, in fact, it's pretty good considering some of the particulars.

When non-outlandish deals and realistic valuations stop making sense to you, it's a clear sign that it's time to explore life outside the valley a bit!

I think it's worth less because the founders aren't vesting in the new company or anything; they're quitting.

3x revenue is pretty standard for businesses that aren't really growing anymore. Seems like a pretty solid deal to me.

Businesses that aren't growing anymore usually get valued based on earnings. The P/E of the S&P 500 is about 20 (perhaps a little less after the recent market turbulence), which means that HotOrNot's price would be about half the average publicly-traded corporation, including all the old-line manufacturing businesses and companies in decline.

P/E ignores a lot of things, too. Old-line manufacturing businesses usually have a ton of assets (machinery, land, etc) that boost their valuations.

I doubt HotOrNot has much more than the brand name and domain, as far as assets are concerned.

Yea i don't see the point of selling for 20 mill when you are generating that much revenue. It shouldn't take that much of their time to run that thing, I would just let it ride.

I don't see hot or not still pulling in 5M anually four years from now. Hot or Not seems like it's probably going to have a shelf life. While I think you do have an argument, taking the money is probably the best option.

Not only that, but the founders tried to turn it into something huge and failed.

It's been going for over seven years so far, without much in the way of marketing. I don't see why it couldn't last four more years with a little more attention.

Last year they converted to a C Corp so they can't really pay themselves through the same way anymore.

http://james.hotornot.com/2007/02/on-having-balls-part-ii-st...

4x valuation would be small, i.e. not expecting too much growth.

It's not small, it's realistic.

All the other valuations are retarded, that's all.

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