Irish teenagers make dotcom millions | Hacker News Reader

Irish teenagers make dotcom millions

guardian.co.uk

21 pointspapersmith20 comments

unfortunately the press have sensationalized things here, we never claimed to have made "millions" and we know this deal isn't the "we've made it" one it's being portrayed as. i'll blog about our thinking behind the sale in more detail. here's the nutshell version:

- we were at an inflection point. our initial launch went well, we were getting traction. we had three choices: angel, vc or acquisition.

- this particular acquisition gave us a cash component that made us each very happy (i worked out that it'd have been almost 7 years before i'd have seen this much liquid cash working as a corporate attorney at one of the world's largest law firms).

- our upside hasn't been capped. if we deliver the value we think we can, we'll make at least the same (if not more) than if we'd kept growing auctomatic independently and sold for tens of millions - not many early exits keep that potential upside while substantially derisking the downside (stock of a public co will always have some value, unlike a startup where it's all or nothing).

- the Live Current guys are fundamentally great guys. they've given us freedom to go away and build things how we want. of course we're going to be held accountable if we don't deliver but there's no issue of "9 - 5 hours" or "office politics". we're still working essentially as an independent company. we're not being exiled to vancouver - we'll be back in the valley after a few months to build out the teams we want to work with.

given all this we felt this was the right decision. we can only deal with the situation in the present and right now, we're ecstatic about the deal and the future.

Cool. Congrats! So, once again, you're missing Startup School. :/

I saw a few problems with auctomatic. Number one, I was never sure how this would work out considering eBay PowerSellers, your target market, would almost entirely be in their 40's, with auctomatic's team below drinking age. When I was 22, I enjoyed having customers 30-50 years old relying on me for my eBay software, but at 24, after Startup School, I realized that it was okay to be around, as well as to design, new software for people my age--and maybe you were beginning to feel that same way, as well. (Just like the Beatles could have probably tried to make more money by targeting older adults of their parents' age since an average teenager doesn't have nearly as much money as a 40 year old; yet, the Beatles became famous by creating music that was great for their own peers at the time.)

The other problem I found with eBay is that a startup based around another company's technology and users, at it's best, is tied down to another company, and eBay is not the most technically advanced, consistent, or stable parent to deal with (in my experience) even if they were one of the first web apps to come out with an API.

My third worry was that I believed that it would be better to do something for free to attract tons of buyers, and then convert them to sellers, than vice versa, because sellers will go to where the buyers are, from the tons of research I did, and not vice versa. That's why I concentrated on software for buyers this entire time.

The fourth is that such a startup targeting older adults would need to have older employees targeting forums where such sellers hang out, and I'm not sure any of that was being done other than visiting the eBay's annual conference. I believed you were focusing on creating killer technology and getting funding, but not the boring stuff like talking to older customers who couldn't care less about technology or social networking, nor did I believe you were asking them to tell their friends, etc, in places where older adults might be.

This move seems to make tons of sense. You're decoupling yourself from a being dependent on another company, you're focusing on the buyer aspect, and between the many different "properties" you may be developing, there are plenty of youthful opportunities like boxing.com and call.com to keep one excited and relative to others our age (just for the psychological benefits.) Oh, and you get paid as part of the process, and stay with the same great team, too.

we didn't find any of this a problem. I spent a lot of time on ebay forums, we had plenty of meetings with people much older than us that went v well and our seller focused strategy gave us the understanding of the ecommerce landscape that we wanted.

Cool. That makes sense; I didn't account for the fact that auctomatic has 6 smart people to get things done. :)

we were at startup school last year

I was thinking of the event the day before, sorry!

"our initial launch went well, we were getting traction. we had three choices: angel, vc or acquisition."

Call me absolutely insane, but isn't there also a 4th choice - "Make money"? :)

As things stood, #4 would have required #1 or #2 for starters.

Dotcom Millions for everyone! All you have to do is startup your own web company and you too can retire at 17 or 19 years old and party like it's 1999.

These guys did very well for a years worth of work and deserve every penny. But don't for a second think these guys are gonna go out and buy Aston Martins or live in the Four Seasons with their "millions".

Funding: yCombinator: $25,000 - $35,000 (Some articles say there were 4 founders ($25k) but their own website show 6 people ($35k)) Angels: $400,000 From Paul Buchheit and Chris Sacca

Ownership: yCombinator: 2-10% (Typically 6%) Angels: Unknown but split among 2 people Founders: Unknown but split among 4 to 6 people

Exit: $5 Million Composed of: - $2 Million Cash - $3 Million Stock in CMNN.OB

So YC's take is $100,000 (2%) to $500,000 (10%) (Typically $300,000 (6%)) Angels take is unknown but if they made no return it would be $400,000. However its likely that they made at least 1x return.

This would leave about $4 million to be split among the 4-6 founders. So they each made a little ONE million or less. Of course a large portion ($3 million) of their earnings are stock, so their actual earnings could be a lot more (multiple millions) in the future than what they are now. However, they are in effect paper millionaires as none of them have $1 million in cash.

The deal was announced around 12:00am PST March 26, 2008. March 25, 2008 close of CMNN.OB was $2.69. Friday's close was $2.62. So its possible that 2.6% has already been shaved off that $3 Million. The actual amount obviously depends on what price they obtained the stock at.

Let's also not forget that these guys are leaving the valley, moving to Vancover and will likely be settling into their 9-5 jobs with bosses, office politics and other employees at Live Current in a few weeks.

It will be interesting to see how everything turns out in a few years time. However, by that time the media will move on to hyping another startup and we'll probably never hear about these guys again. Unless they quit and start an new startup.

A million dollars may not seem like a giant fortune, but it's a lot to most people, especially to someone young. In fact, it's life-changing if you get it that young, because it probably means you're done saving for retirement. If you can get a 10% return (a reasonable estimate considering the asset allocation you'd use at that age), getting $1 million at age 20 is like getting $2.6 million at 30.

Plus I know the Auctomatics are personally planning on doing things to increase LC's value. They negotiated for a lot of autonomy in order to make that happen, and it's a small enough company that they could.

They turned down some very famous companies to do this deal. Why? Because being bought by a public company with a small market cap is in effect a quick way to go public.

It is true that a million dollars is a lot to probably 99% of the worlds population. But those 99% don't live in the valley where "The median price of previously owned houses is $716,500" and the "median price for previously owned condominiums and townhouses is $475,000" even in this housing slump. So basically that enough to buy a house, furniture and a car in the valley.

They'll be a bit better off in Vancouver but not too much. The USD and CAD are near par these days and Vancouver is the most expensive city to live in Canada.

Also, since only $2 million of the exit was cash, none of the founders even have a million dollars in cash to invest. At most they have $500k if there were 4 founders with each owning 25%. However since there were 6 people there, 2 angels and yc, they probably got much less than $500k cash.

It is quite interesting how you view this exit as sort of an IPO for Auctomatic. I think that is a first for yc? This gives everyone on news.yc and the yc alumni to put their money where there mouth is and invest in a yc company.

Will the stock price rocket turning everyone into multi-millionaires? Only time will tell.

None the less, these guys have done a great job and I wish them all the best.

I might be misinterpreting your comment, and if that's so, my apologies, but that would seem to assume that they're dipping into savings to pay month to month expenses and will be buying houses on top of it. Which is completely possible, I don't know any of these guys, so that's one way to look at the situation.

But, the other way to look at it is that they suddenly have a million dollars (per the article) accruing interest every year as their salaries at Live Current (now I'm making assumptions :) ) cover basic expenses and then some, leaving a security blanket that lets them do most anything they want in the future without worrying about the financial hit.

They can travel off to Africa and spend three years learning Swahili, then surf and learn guitar on a Brasilian beach.

They can build up Live Current per the plan and shape the company.

They can start a new company and bootstrap it, no investors, no worries.

They can do small-scale angel funding, even.

Or not.

But they have options.

And, those options were gathered over the course of a year, putting them in a position that 90% of retirees can only dream of- financial independence. That is huge leverage, and that is huge success.

Also, keep in mind that those are prices in two very expensive places- they could just as easily move to a country where the exchange rate is more favorable and increase their relative savings by a goodly amount.

So, yeah, they didn't cash out for a billion- but they now have a million dollars at 17 and 19. Because of that, they're completely financially independent, and, thus, free- forever, barring any catastrophic financial meltdowns.

So congratulations to them- I can't wait to see what they have coming down the pipe.

Being able to buy a house is no small thing. My father was a fairly well-paid engineer, and I don't think he paid off the mortgage till his late fifties or early sixties.

Also, the reason the Auctomatics don't have all the cash to invest is that the noncash part is already invested: it's stock. And the Auctomatics certainly hope they can get at least market returns on that.

I thought the cutest part of the story is that they are from Limerick.

By the way, no need to guess how the money went down. They were acquired by a public company, who filed all of the agreement with the SEC, who made said filings available on the web. They're pretty interesting if you're into that sort of thing.

Thanks for pointing this out aston! I can't believe I missed that.

I think this is the first public break down of a ycombinator company ever.

For all those interested: http://www.edgar-online.com/bin/cobrand/?doc=A-1108630-00011...

Does YC accepts projects from any part of the world ? In fact I'm from Sri Lanka, story like this was always in my dreams

http://ycombinator.com/faq.html

> It owns internet addresses such as perfume.com, cricket.com and brazil.com.

Is this supposed to be a good meter of a company?

I love it.

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