How I sold my start-up for $40 million | Hacker News Reader

How I sold my start-up for $40 million

smartcompany.com.au

26 points_Mark25 comments

So pick out a growing, successful business in the US, bring it to Australia and profit! Great model.

(I'm being serious)

Australia has a pretty small domestic market compared to the USA. There's only about 9M people between the ages of 20 and 50 (just guessing that range is the Groupon audience). If you get 10% of that market, you've only got 900K users. This is pretty good, but nowhere near the scale of these sites in the USA. Even if you get every existing Australian in that age range to sign up, you're still not even half the size of Groupon.

An outcome like selling to Yahoo for $40M is probably the best possible outcome for an Australian Groupon clone. Unless my back of the imaginary envelope math is way off, I don't think the company could really objectively be "worth" more than that. Especially since Groupon clones are already a hyper-competitive space in Australia. Microsoft is backing a company, Cudo, that already has ads on network TV.

I think you're generally right.

If you can dominate a market in Australia you may end up being just as good a business as if you are one of ten players in the US market. Spreets was first to market in Australia, but unfortunately many others popped up very quickly so no one really owns the space.

About "owning the space", it's a website with deals, how much loyalty can one expect...

I think of the Australian market as being similar in size to a single large US state.

Apparently the state of New York has roughly the same GDP as Australia. This chart matches each state to a country with equal GDP:

http://www.economist.com/blogs/dailychart/2011/01/comparing_...

Texas GDP = Russia's GDP!

That's incredible about Texas. I'd heard California was significant on it's own but didn't realize other states could compare to entire countries.

Apparently Journalisted (http://journalisted.com/) is popular amongst PR types in the UK. Anything like it in the US?

My wife, who works in PR here in Australia, passed on this from someone else, suggesting that someone should build it in Australia:

"Journalisted.com - This is a brilliant service and probably one I use on a daily basis. From a PR point of view, it can be used in one of two ways; if you want to get in touch with a journalist about a story or your client, but you aren’t sure if they’ll be interested, you can search for that journalist and look at the articles they’ve worked on in the past. If you want to get in touch about something to do with science, but the contact has only written about politics in the past, it’s probably best to forget contacting them. Similarly, if there’s a subject matter you have in mind and you want to look up journalists who write about it, you can use journalisted.com for that too."

Thought I'd mention it in case it hadn't been done in the US or AU and someone was interested in trying it.

It's called MediaSync http://www.mediasynconline.com/ and it is pretty good, I've used it a number of times

It's not exactly the same, but we're building something similar at http://newsbasis.com

It's a pretty good model if your strength is in execution (i.e. you have a good team and can launch and grow something quickly). If you are more passionate about innovation and coming up with new things, you might not find this model fulfilling.

Well, it works best with businesses like these coupon/group buying startups where you need localized deals/sales to run the business. You won't be competing with the originals and if the idea is proven, funding shouldn't be problematic with a decent network of contacts.

Absolutely. The group buying things are insane - There are 28 different sites in Toronto right now for group buying, with some of them having different deals for different areas of the city. One of them actually markets themselves as a "platform" giving new deal sites the ability to literally launch in a day.

In this type of business it is basically who can get their name out there the fastest in a local area - do that and you can walk away with this 40 million...

So the question is what's the next big (local) thing?!

Why aren't newspapers throwing themselves into partnership with group-buying sites? They have an instant audience and it could easily become a new revenue stream.

WagJag in Canada has done this - they have a partnership with Metroland it seems, which owns The Toronto Star among a TON of free papers in smaller areas. Now I don't know this for sure but I'm 99% certain that they use their personal sales agents for the newspapers (who already have contacts with the local business) and use them to sell the group buying. I'm sure they also get advertising credits for the $$ they have held back from their deals too.

One interesting thing I've seen here in Australia is that people actually still seem to read those NYPost-style daily local newspapers. Am I just imagining this? If not, maybe a tool to help newspapers create their own "deals" would be a decent business.

One of my successful businessman friends told me the same thing years ago. Me being a hopeless optimist, I told him that sounds boring and not very creative. Now 2 years into my own company I see it as a economic reality.

This was a common business model during the first dotcom boom. And it led to a lot of people losing their shirts.

If and when I decide to raise money for an Australian dotcom, I will actually go to Perth first. The city is flush with mining money and has a large pool of investors used to investing in mining exploration -- probably the business most like tech startups in life cycle.

Mining money isn't a good fit for dotcoms, I've seen it first hand, as an employee of a startup with investors there (WA). These guys get edgy in businesses they don't understand, and IT is a long way from digging shit up and selling it to the Chinese. You want savvy investors who move in the right circles, not just ones with fat bank accounts and no clue how to turn a PC on.

Maybe I need to rethink it then. It just struck me as a similar risk profile and lifecycle.

This article made me think about two things:

  - did they raise money before they had a prototype/MVP?
  - do group-buying sites ever loss-lead (e.g., pay merchants to offer extra-special deals) to attract early users?

The product was already live in Sydney before they raised money. They quickly expanded to other cities after raising.

I've participated as a business in one in Toronto. They took 10% after being launched for 2 months (this was 1.5 years ago). Now industry standard is 50% of the revenues the agency keeps.

It is my understanding that initially they waive or significantly reduce their fees to find some key "launch" deals.

Now that I think about it, overly special deals may create an unreasonable expectation in the future.

I have some exposure to this industry and subsidies do happen. It's written off as a customer acquisition cost.

So when you see $20 of Amazon coupon being sold for $10 and wonder how on earth it makes sense for anyone (except the customer, of course) - the deal is most likely being subsidised. Hot deal, creates word of mouth, brings in new business, works better than any other form of advertising for immediately converting visitors into customers.

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