14-year-old startup founder turned down a $30M buyout offer | Hacker News Reader

14-year-old startup founder turned down a $30M buyout offer

money.cnn.com

55 pointslxm83 comments

"14 year old CLAIMS to have rejected $30m offer for startup that has yet to launch. But can't share details because of an NDA." is the actual story.

And a follow on story a few weeks later is that he would "accept $50m" and wants to buy a "Bentley with a chauffeur".

Keep hustling kid.

(1) http://www.cnbc.com/2016/05/11/the-14-year-old-who-turned-do...

If that is true, I believe that falls under fraud when a company is publicly traded. No idea when privately owned!

I believe that falls somewhere between 'clever marketing' and 'exploiting gullible journalists who publish anything related to teenagers and entrepeneurship'.

That is an extremely easily replicated technology. Turning down a buyout was a horrible idea, but good for him for making it that far.

Apparently he has a patent, although its not clear what he has actually patented. If the patent is sufficiently effective to keep other players out of the market that would explain the high price tag.

Or someone will just copy his idea and use the 30M to fight him in the court...

I don't doubt the unscrupulousness of trolls out there, but imagine the optics, stealing from a 14 year old and suing him in court...

On Quora a vending machine operator commented: "It’s a design, not a utility, patent which have less stringent requirements for granting.

His idea is not new, things like aspirin and bandaids have been sold through vending machines for decades. What is unique about his system is that its dedicated to first aid and medical supplies and its interface with the customer is exclusively via a touchscreen. You can’t see the product through a window." [1]

Maybe there's something unique to the interface, though I see nothing in this little video interview that strikes me as earth-shattering [2].

It is also entirely likely that this is another case of 'child genius myth-makery' like we've seen so many times before. Remember the 72MM high school kid trading hoax? [3]

[1] https://www.quora.com/How-did-Taylor-Rosenthal-get-a-patent-...

[2] https://www.youtube.com/watch?v=lmxkUxEr81w

[3] http://observer.com/2014/12/exclusive-new-york-mags-boy-geni...

As it is, such products already exist, in physical form:

https://www.amazon.com/gp/product/B003JQL2HM

is a first aid kit that has pre-packaged pouches for "bleeding", "spine", "burns", "bites and stings" such that the individual pouch can be replaced upon use.

Is anyone able to find the patent?

I looked for the patent on Google Patents and the USPTO site unsuccessfully. I am extremely suspicious; the article says, "By December, he had a working prototype and had acquired a patent." There's no way you acquire a patent in a few months - it takes years. Maybe the article is wrong and he just filed a patent?

How real was that 30m offer though? No names named here.

Probably fake, even $300k is too much for 0 ip

I've seen machines like that in Spain and France.

He has a patent, yet a brief Google search shows plenty of companies offering similar machines.

Here's a record of a machine in Germany in 2007: http://www.toytowngermany.com/forum/topic/59813-first-aid-ve...

Having a patent is very easy in the U.S.

Getting one that can have its claims stand in court is the hard part - of course, you can play chicken with would-be claimants, and it's usually cheaper to just pay and avoid expensive lawsuits. Even here in Uruguay, lawyers are advised to always settle instead of going all the way.

Vending machines in Japan already sell much more, variety of goods seems only culturally limited in the west. With recent push to automation you'll expect more of this: http://kotaku.com/5988536/the-wild-and-wonderful-world-of-ja... http://www.hongkiat.com/blog/bizarre-vending-machines/ https://www.dramafever.com/news/25-things-youll-only-find-in...

I'm a little more disappointed that someone didn't provide him a bit more guidance on this. I, like many here, find the rejection crazy. But you can't go and blame a 14 year-old for it, it's the adults surrounding him.

His parents are really to blame for that rejection. Hell he must have a patent attorney, who at some point mentioned this would probably be easily challenged. This has a ton of risk with what upside?

I'd have a very hard time turning down anything over $10m at any age. Even if I thought my product might be worth billions.

Even if you don't think specifically about how much money it is, you basically could fund any idea you ever want to do for the rest of your life. Instead you get to have one idea that your stuck with whether or not it makes 100k even.

At $1m I might think twice. It may not be enough for me to live on for another 50 years. At $10m I could probably try all kinds of new ideas and still have enough money to live if they all failed.

If you weren't a serial entrepreneur I think $1m is more than enough to invest and live off of for almost all your life.

Depends where you want to live and what kinds of things you want to eat. And how much risk you are comfortable with. My desired lifestyle requires $5 million to retire comfortably.

At 2% return a million is 20k/yr.

That's nice but not "set you for life" nice.

It's not. At a conservative safe withdrawal rate of 4% you'l only be living off $40K per year. And that 4% figure is safe but not bulletproof; a lot of people go lower. Most people who plan on retiring early are working on banking multiple millions. See /r/financialindependence for details.

Worth noting that $40k is greater than the median income in the UK, so this would be enough for an awful lot of people.

The US is about $52K for a household. $40k would probably be enough for a lot of people. That's at 4% return on $1m. Where are people getting that consistently and without too much risk of losing a bunch of that money? Then how to you keep up with inflation?

In my mind I would still risk it at $1m because $40k isn't enough for me to live the kind of lifestyle I would want to live and ensure I could do it until I die.

but at 14 you could still do other things. It isn't like they give you $1M and say you can never make money ever again.

4% is the withdrawal rate, not the return rate. You want the return rate to be higher, ideally at around 7% real returns. You accomplish that by investing most of it in the stock market. You have to withdraw less than the return rate in order to manage risk so that you survive periods of bad returns.

40k would get you a nice house and a decent living for the rest of your life in my State/Country. On top of that you could still work, so this math is already suspect depending on your needs.

Whats to say the idea they would be stuck with wasn't there favorite, number 1 idea?

> Instead you get to have one idea that your stuck with whether or not it makes 100k even.

Six Flags ordered 100 machines putting him at 550,000 revenue for a single customer. As more momentum picks up and they pull in more customers, he'll be well over 30m revenue in a few years time. Smart move from this kid. Bill Gates didn't get his wealth by selling out at the first offer, regardless of his age.

"As more momentum picks up"

This is the crux of what is being discussed, as with the risks involved in that.

There's nothing unique about his business. He's providing a commodity service that hundreds of people will replicate in short-order.

I think taking the money and using it to fund another business in a few years is the best course of action.

Agreed. I think an interesting expose of this is Drew Houston's YC application where I believe he says he'd be okay with selling for $1M at that time (about a year's worth of work). I'm sure he had buyouts for $10M shortly after YC.

I'm pretty sure this is the rational, utility-maximising preference for anyone who isn't already a multi-millionaire. The diminishing marginal utility of wealth means that $1 billion generates way, way less than 100x as much utility as $10 million for the vast majority of people. And if you need another reason (I wouldn't), there's the time aspect as well - how much is $1 billion in ten years time worth today? A lot less than $1 billion to me.

I hope his parents are already loaded, otherwise they have done a VERY poor job of guiding him down the appropriate path. At $30 million you can live a VERY comfortable life unless you're a complete idiot with it.

I get "chasing your dream" - but I struggle to believe an idea he came up with for a school science fair at the age of 14 was any kind of lifelong dream.

Perhaps it's not purely about the money to him. If he's spending every minute outside of school working on this business, there's a great chance that he just likes the work and doesn't want to have to find something new to work on.

Then take the $30million and make sure there's a job for you in the new company. Maybe it's not that easy, but it seems like there could be options like that.

Maybe they let him decide for himself how he wanted to approach it?

He's 14. Your job as a parent is to guide your child into adulthood. If you let a child make a life changing decision like accepting $30 million without a backup plan at the age of 14, you're failing as a parent.

I don't know. There are three ways this could go:

Life proceeds normally

The child learns a lot from the experience of raising money for this invention, along the way gathering all sorts of experiences that are valuable in the working world.

The child (Well, parents until $age-of-majority) get 30$m with which to improve the child's life.

Either of the secondary options are useful. You're viewing the value of money and survival as the primary goal. The child could already be set for life with that depending on the earning of the parents and their pensions, etc. Either of the two latter options provide unknown gains and losses to the child, depending on what you value more.

Note that this excludes negotiating a better bid with another company.

He may not have had a concept of what $30 million really is. I know I don’t, even at my age.

If he has his needs met, what does it mean to him to have his needs met more? I know logically this can be worked out that lots of money buys lots of comfort, but thinking back at that age, I personally didn’t know squat about the value of a dollar. I grew up with less money than most of my peers (not “food insecure poor”, but “all I got for Christmas was cloths and 1 small toy poor”) but never thought about it. I just thought my parents were careful spenders.

However, to your point; where were the adults in the equation?

>He may not have had a concept of what $30 million really is. I know I don’t, even at my age.

I would be shocked if he had any concept at all. Most adults have no concept of what it means to have that kind of money which is why most lottery winners are broke within 5 years of winning the lottery. You literally can live an upper middle-class/lower upper-class lifestyle without working another day in your life off that interest alone.

Point taken, and I'm not trying to pick apart your post with pedantry, just curious how the numbers come out. 2% gives you 600K/year. If you go with the retirement fund concept of spending "only" 4%/year, that's 1.2M/year. I don't know how you're defining "upper middle-class", but I'll bet most would define it much lower than that.

Finally, a money market fund at 0.5% has an annual yield pretty close to what I make working 40 hours/week. And in my opinion, we live pretty well on what I make in an expensive city like Seattle.

All that, of course, assumes that one does not lapse into lottery winner syndrome because one doesn't have a concept of how much money $30 million is, therefore views it as a bottomless pit of cash, and blows it all on velvet Elvis paintings, bad business ideas from your cousin, and "helping" out your meth-head sister.

All of that assuming assumes the $30 million dollar offer is real. And I'm convinced a vending machine idea is worth a couple of orders of magnitude less than what is claimed.

I'd normally roll my eyes at this if this were a teen in the Valley, but a 14-year-old from small-town Alabama? That's pretty gutsy, good for him.

This is stereotyping.

How so

You're generalizing a group of individuals. Not everybody in Alabama is backward (whatever the negative stereotype is, I'm not American). Which state a person is from is a weak estimator of their socioeconomic status.

Where in my statement did I say that Alabama is backward? If you're not from America, perhaps you're not familiar with the geographical and geopolitical distance Alabama has from the entrepreneurial strongholds of Silicon Valley and New York. I'm from a small town in the Midwest myself and can attest to how far removed you can be from what happens on the costal big cities.

don't feed the troll!

Anybody know if this buyout offer has been verified? Who made the offer? Are we sure this is not just a PR stunt?

> Rosenthal is the youngest CEO at Round House, where he has an office and access to mentors in exchange for a 20% stake and a $50,000 investment.

Exploitative local incubator strikes again.

Looks like he took the deal at 250K.

Who made the 30 million dollar offer?

Sounds fishy.

Mom and Dad, probably.

His stuffed bear, Jimmy. Dave the Dolphin was working at the Pillowsville investment bank and brokered the deal.

20% for $50,000 (aka seed), but shortly after with no improvements buyout for $30M? Sounds more like a marketing stunt.

The idea of charging someone for a plaster when they need it feels totally alien to me.

This is a bit of a slippery slope -- food, water, almost anything you could suggest "ought" to be give away for free.

If all people felt that way no one would run drugstores, and there'd be ZERO plasters / bandaids available on the market.

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." --Adam Smith

...and thank goodness for that!

While it does seem weird that coaches and organizers of these events - and even the parents - don't carry first-aid stuff with them... do your local pharmacies/chemists' just hand out medical supplies if you walk in off the street?

Any business is required to have a first aid kit on site and render help when asked to. If you organize any sort of event it's even doubly true. Not to mention that any car is legally required to have first aid kit to pass its yearly technical inspection(this is in Poland). So in an emergency you can run into any shop or stop any car on the road and you should get whatever first aid kits come with.

Wow, that's pretty awesome. The car first aid kit is not a thing in America (at least, I've never heard of it - there may be regional regulations in the colder parts of the country), and I think that while businesses are required to have first aid kits, they only have to render aid in severe cases (e.g., I can't walk in and ask for a bandaid because I got a papercut.)

I could be wrong about that, though.

Well yes, when I said they have to help I meant more like an emergency, not a papercut - but I guess most people would be happy to give you a plaster(bandaid) anyway.

A 14 year old can't sign a contract, so how does he own a business? I don't doubt he's done all the work, and I've nothing but admiration for him, but there's no way this is the complete picture.

Press coverage of the offer:

Miss America inteview: http://www.oanow.com/news/opelika/opelika-s-mallory-hagan-in...

August 2015: http://www.wltz.com/story/29846919/13-year-old-opelika-entre...

> The 14-year-old is exhibiting his startup idea -- a vending machine that dispenses first aid products -- at TechCrunch Disrupt this week in Brooklyn.

How long before we see articles decrying him for being a profiteer?

(N.b.: I think that this is actually a great idea, but I also think it's difficult to underestimate the economic illiteracy of the general populace and journalists in particular.)

We don't have enough information to really say if the $30mm buyout was a good offer. Maybe there were some ridiculous strings attached to it. It could be a very good decision his parents helped him on.

The question is: how a 14 yo kids have the knowledge and capability to build such a company?

PS:looking at their website it seems to be a school project rather than something more.

Both of his parents are in the medical profession. I think that if you have a child with the right temperament you can coach them into something like this. I've been asking my daughter (who would make someone a good COO) about her thoughts in business.

The $30MM if real is probably just skewed for marketing.

It might just be a royalty deal on the patent, and the dollar figure is based on potential over the patent's lifetime

First aid vending machine? Should've taken it kid

We also didn't see the terms of the offer which could have had significant clawback provisions and performance expectations.

If that is indeed true then both the fact that someone offered 30M for this and was turned down is mind boggling :)

A vending machine? I don't understand how its new at all.

> Rosenthal sketched a design and consulted with his parents, both of whom work in the medical industry.

> By December, he had a working prototype and had acquired a patent.

Parents did all of the work, and are using their kid for marketing purposes. Look at all this free press! Buyout offer doesn't exist. Pretty good marketing plan but I think the business idea is stupid.

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