Ask HN: How to sell an open-source software company?
I run a profitable open-source software company since 2013, and I'm considering selling it, can you advise how I can attract potential customers?
https://jacquesmattheij.com/how-to-sell-your-company/
Hope it is useful to you. Best of luck with the sale!
If you don't do enough homework and hire just any old banker, on the other hand, that's absolutely going to be a mixed bag at best.
In other words, open source is not a business model¹.
I generally found the open source nature more of a liability. One which I could not ignore because our project was very public. The approach I took was to acknowledge questions like “what IP acts as your differentiator?”, diffused it and talked about the business itself. Being subject matter experts in the software was a big selling point because it was a hedge against them taking the source (Apache or MIT licenses - I forget) and using it themselves.
Not sure what value you provide beyond the source code but that’s something you can sell - being open source is not a feature when it comes to acquisition or sale of a company, IMO.
It just means that it is not the right business for one group of people versus being not the right business for a different group.
Both groups being approximately everyone of course.
Anyway, Patio11's podcast about selling Bingo Card Creator might provide some perspective: https://www.kalzumeus.com/2016/08/26/kalzumeus-podcast-episo...
Good luck.
I noticed the same thing, and decided not to "out" them. I read a different discussion on HN, earlier tonight (can't find it now) about how companies should communicate impending layoffs (if at all), and it is clear that many choose to keep their cards to their chest. This discussion is very different, and made me wonder if it is part of their open source culture, because through the eyes of many companies this "Ask HN" may be perceived as naive or maybe even desperate.
- We can sell it and develop our products in other organizations. - We can find investors, we are in talks with some VCs. - We also do not have to change anything if we decide that it will be best for our products and users.
Mind that if you sell, the buyer can do whatever they want. They can take your software and make it a small module of their closed source thing or even just try to convince your customers to go with their solution and let everything else go.
Similar with VC. The goal for the VC is to sell their stake and before that they get notable voting power to push directions.
This all can be fine and good, but multiple times I have seen founders who only realized late that they lost their child. If you are aware of that go on, however if you are profitable (inclusing your time!) and are attached maybe continuing that way is best for your own happiness. But likely you won't become rich and certainly not quickly.
- What are the traits the ideal buyer would have and why?
- What are your metrics (conversion rate, ARR, EBITDA and margin, sales backlog, year over year growth, etc.)?
- Who is your competition, and how well are they doing (absolute and relative to your company)?
- What differentiates you from your competition, in terms of assets/talent/IP?
- What is your vision of where the company could go from here?
- Why are you selling it?
Best of luck!
the rules/valuations of open source companies are no different than closed source ones, in fact, it will be harder to justify any sort of valuation because the code is widely available. Once you go away, another fork or iteration will spring up. Tougher when the insane multiples we enjoyed thanks to low interest rate is gone.
You are better off trying to build the company but you probably already did that.
Potential buyers will want to know what software is sold, how many customers it has, past and current financials, etc.
They will also be interested in what price you are asking and details about how ownership will be transferred.
(I’m assuming you’re not going to sell to a specialist in your open source code itself, because you’d already know about that person from your personal network or customer list. If you don’t know that, try reaching out informally to some of these individuals or companies.)
rezi.ai
Also, do you have any example of open source company that monetized user data? Has it happened to you?
The reason that I am asking is that it is very rare to see an open source company being profitable without being focused on enterprise market. Stories of successful ISVs should be praised, not met with suspicion. It seems like anti-capitalist concern trolling.
Standard M&A D&D is to see how defensible the codebase would be and determine IP.
The buyer can be buying several things: 1) Ip 2) people/knowhow 3) customers 4) cash flow
It sounds like you dont have 2. You may not have 3 if you are not doing sticky b2b enterprise sales with low churn. If you are selling your baby, that means the juice is not worth the squeeze and thus 4 is low.
That leaves 1. Do you have IP?
If you are using open source, you are going to have a hard time shopping it. You need a technical buyer to know what they are getting into.