Founder Sold His Startup for $575M in Cash and Gets to Keep Every Penny (2015) | Hacker News Reader

Founder Sold His Startup for $575M in Cash and Gets to Keep Every Penny (2015)

entrepreneur.com

62 pointsMz47 comments

The most impressive thing about Markus Frind is that for years and years his startup was just one person working a few hours a day to manage a few servers. At one point he managed to become a top-20-in-traffic website while still running doing everything except customer support by himself:

https://blog.codinghorror.com/my-scaling-hero/

https://plentyoffish.wordpress.com/2012/10/

https://plentyoffish.wordpress.com/2011/12/27/32-billion-ima...

http://www.inc.com/magazine/20090101/and-the-money-comes-rol...

https://plentyoffish.wordpress.com/2008/12/20/2008-was-a-goo...

https://plentyoffish.wordpress.com/2006/06/14/how-i-started-...

As the title implies, it is rare to read about a multi-million dollar exit these days without VC's getting their claws in the majority of the spoils. Good for him. And a personal thanks to him for helping me find my spouse.

Mine too!

That type of exit is incredible and really goes to show the potential for companies who take no, or very little, money. There simply is no need for a billion dollar exit if you own the vast majority of the company, so you can focus on more sustainable business models and smaller markets.

Saw the clickbait-y headline and thought, "ok, so how did he escape paying taxes? some clever trick"?

I assume the tax on the deal was hefty so while nice payout it certainly isn't "every penny".

Well tax is applied anyways, whether it all goes to a single person or is split among multiple founders. Every penny is hyperbole, but gets the point across; he didn't have to split the profit with anyone else.

OP was just pointing out that the title is inaccurate/misleading. He didn't get to keep every penny as he will have to pay about $137M in tax if my calculations are correct.

It seems reasonable to assume anyone receiving cash from acquisition would have to pay taxes on it...

Which is why it would be news if they got to keep every penny...

If nothing else, he held his equity for long enough to only get hit by long-term capital gains taxes. (per wikipedia, in canada, that's half your typical tax rate).

Microsoft loved Plenty of fish. I remember there wasn't a single Microsoft sponsored ASP .NET talk that didn't mentioned POF in some shape or form.

That's called "earned media", and it's very effective when used correctly.

http://en.wikipedia.org/wiki/Earned_media

Is that because there aren't a whole ton of serious .NET backend sites out there? I can only name two, POF and SO.

Presumably. For example, people in the Python community are proud to say that it's behind sites like Instagram, Pinterst, and Reddit, for volume of traffic if nothing else. It helps make the credible case that their language / framework scales.

LinkedIn I think?

Nope. Just checked with a bud there. They're 99pct linux and java and 1pct solaris. They might have some .net on internal desktop apps.

Does anyone else happen to have a link/data on people that took little to no VC funding <1MM and exited for > 100M ? the number has to be tiny .

Not quite in that range -- but Veeva Systems took a single, $4M round[0] and went public. Current market cap is $5.2B (and was about 15% higher immediately after their IPO). The founder's shares were worth north of $500M at that time. [1]

[0] https://www.crunchbase.com/organization/veeva#/entity [1] http://www.forbes.com/sites/alexmorrell/2013/10/19/who-got-r...

Not on the same scale, but I remember reading an article a while back that compared the sales of TechCrunch & the Huffington Post. IIRC the founder of TechCrunch retained majority ownership so he made more than Arianna despite the Huffington Post selling for 10x as much.

You could run this query crudely on CrunchBase, I think on the free dev tier.

I wonder if employees got any equity, and the article just leaves that out since "every penny" is more engaging than "every penny except for options/stock granted to employees".

> He has retained complete ownership of the company

From the article it sounds like no.

When they say in cash, they mean a bank transfer? or is it literally cash?

When "cash" is mentioned in the context of selling a company, it means it was a straight money payment as opposed to "stock" ownership.

For example, when Instagram was sold to Facebook, the founders got some "cash" but most of the 1 $billion payment was in the form of "Facebook stock" that vests over some set # of years and/or has restrictions from selling it immediately.

And yes, the "cash" portion of a huge multi-million dollar transaction would be a bank wire.

Context of buying companies: pay by "cash" or "stock"

Context of buying groceries: pay by "cash" or "check" or "credit card"

> Founder Sold His Startup for $575M in Cash and Gets to Keep Every Penny

Clearly it was paid in pennies.

There was a funny rumour along those lines a while back in relation to Samsung/Apple.

http://www.snopes.com/politics/satire/samsung.asp

Cash here means "money" as opposed to stocks and other financial instruments, which also have an estimated value, but can't be used immediately for most purchases.

I'm sure it's a wire transfer of some type. No one but the gov't deals with that much cash.

Can we amend the title rule to allow replacing clickbait headlines with concise, detailed titles instead? Fuck these clickbait headlines.

"Founder Sold Plenty Of Fish to Match for $575m Cash, No VCs Involved [2015]"

Needs a 2015, too.

I feel like click baity titles need to intentionally withhold information to be evil. Get's to keep every penny is kind of assumed to be No VCs involved as well as there were no other founders employees with a large equity stake, which your title does not allude to.

But it does withhold information: he's not keeping every penny because he'll have to pay taxes. No VCs involved != keep every penny.

I think on this site it's understood by most.

The guidelines already say that: Otherwise please use the original title, unless it is misleading or linkbait.

I guess it can be tricky to have the same taste as the mods when it comes to deciding what is link or clickbait.

I was going to say, isn't this old news? I thought IAC owned them for a while... and they did. Dang old story.

> Frind, who was a developer before he founded Plenty of Fish, built the site without any venture-capital funding. He has retained complete ownership of the company, which has 75 employees.

So he gets rich while his employees get nothing. Good for him, I guess.

Way to assume the worst of someone without knowing anything about him, or any details of the situation.

I have good friends who work there, and they received generous bonuses when the acquisition happened last year, as well as having been treated well all along previous to that.

Just out of curiosity, what is a "generous bonus?" Competitive equity for an early employee on a $600m acquisition would have been, at a minimum, $600k. Did the employees receive even 5 figures?

I'm not sure what was shared with me should be public knowledge or not, but based on how the numbers were come up with, I think most employees would've received high 5's to 6's. Not sure about early employees, or if there really are any. Marcus had already made it quite big already (millions per month in ad revenue) when he was just a one man show.

If he paid a fair market wage and the employees didn't have the expectation that they were being compensated in equity, I see nothing wrong with this.

It's called risk/reward. Leaving salary on the table in exchange for ownership is common, but I presume his employees received fair market salaries and were paid on-time.

I'm sure their checks all cleared every two weeks.

Except for the salary and benefits they negotiated for.

Technically speaking, they got their salary.

Sounds like entitlement.

He doesn't get to "keep every penny". There is such a thing as personal income tax, and in Canada is going to be over 50%.

Hopefully, the deal was structured with some stock, or paid to a corporate entity. Because if he received a cheque made out for $575M, most of that money went to tax. If it was made out to his personal corporation, he'd just have to pay corporate tax on it, which is about half as much. But would still be over $100M.

Nobody pays a marginal rate > 50% in Canada. However, this will be counted as a capital gain, since Match almost certainly bought his shares in the company. That means 50% of the proceeds will be added to his taxable income. He'll pay around 25% of his total proceeds in tax.

His employees probably owned ~10% of the company, so let's say he sold his shares for $500M. He probably walked away with around $375M after tax.

This would count as capital gains, so (33% federal + 14.7% provincial) / 2 would be closer to 23.85%.

That's not counting the portions that fall under lower tax rates, or the lifetime capital gains exemption of $750,000.

If he did structure it under a holding company, he could better spread out the payments over a number of years so that more of it could fall under lower tax rates.

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