Sortfolio auction ends with no bidders
flippa.com
flippa.com
It's no surprise nobody bid. Actually, someone did bid but nobody at 37Signals approved it, so the bid expired. You have to wonder why they spent money listing it at all; and, since the auction was essentially abandoned, whether they would've honored a sale if someone had offered the asking price.
Given the prospect of a severe revenue dip once Sortfolio is detached from the 37 signals brand, the asking price (450,000) is very high. Moreover, as far as I can tell, they didn't respond to bidder questions on flippa. To me, it seems like the bidders and the auction were ancillary to their actual intent. Like other posters, I think their actual intent was to gain publicity for the 37Signals brand (not Sortfolio).
I expect they will follow through on their original pronouncement by shutting down Sortfolio soon; however, I don't think they ever had any intention to sell it. I think they are smart enough to know that someone with 450,000 in cash is also probably smart enough to know that it was a bad deal. By providing a spectacle by way of flippa, the narrative is now more impressive, they reaped a lot of positive press, and they reinforced their commitment to their core products.
The sale price ($480k) is just greater than twice 1 year of income ($212k). Why does this seem low enough to be a red flag?
o_O
37signals uses Braintree and probably stores credit card numbers themselves. Besides, I'm sure for a transfer like this Braintree would transfer these existing accounts to a new Braintree account.
Also, there is more information in this blog post: https://www.braintreepayments.com/blog/data-portability
So there is a contract between 37 signals I'm guessing (and sorry no quick way to verify this but it certainly makes sense that they didn't setup an entire separate legal entity which they can sell) and the person paying the money. My guess is that the wording of the contract legally isn't setup to allow the transfer of payment or card details to another party because the website was sold. While defacto this probably happens all the time I'm not sure a new buyer would feel comfortable simply taking over cc details and continue billing. At least not if they are paying hundreds of thousands of dollars. So at the very least you have to send a letter or email stating what is going on and getting a new contract executed.
As anyone who can tell you about recurring billing will confirm that's not ideal because it gives people a chance to reevaluate and say "nah cancel this I don't really need it".
Added: And in fact if you take some time and scroll to the bottom of the home page it says "sortfolio" is a trademark of 37 signals. Unfortunately there is no way to signup for a new account and see the contract that goes with the "pro" setup that costs $99)
It's big enough that shooting it in the head seems wasteful (and potentially disappointing to existing customers). It's small enough that the opportunity cost of dealing with a sale quickly exceed the proceeds, and that sell-side advisors aren't going to be clamoring for the opportunity to help. And on top of that it's an unusual business, so traditional small business brokers don't know what to do with it.
The demand side has similar size issues, where it's big enough to be a large purchase for a random individual, small enough that it's unlikely to attract attention from strategic buyers with an eye out for acquisition targets, and unusual enough that a purely financial acquisition is unlikely.
I feel like you're on the right track, but again it goes back to value. The expected value from finding somebody to take over sortfolio, spin it into a separate entity, and then get 37s out of their ownership position probably isn't that much higher than the value they'd get from spending the time working on and marketing their key products and simply shooting sortfolio in the head at some pre-determined date.
I don't know anybody who is using Basecamp nowadays (and that's their best known product), the same with obscure Highrise and Backpack. Campfire is the only one which is quite popular and well used. But Campfire is just a chat server, really no rocket science and could be substituted by tons of similar services (but I still like it because of the hooks).
Did I miss a joke?
Millions of people in 150,000 companies in 180 countries use Basecamp.
Basecamp.com/basecamphq.com is the 393rd highest traffic site in the US.
Most business is conducted in boring, quietly profitable obscurity.
It is possible that private negotiations have been in process.
I'm ignorant to the rules of posting an auction on sortfolio, and to the fees, but I'd bet that there would be plenty of reasons for a buyer to prefer a different process, and once said buyer approached 37 Signals with a serious offer, they may have changed their mind about it "not being worth their time" [1].
Or, someone they respect and trust could have shown interest and taken initiative to run the site.
[1] I read an unsourced claim in another thread that 37 Signals felt that Sortfolio was not worth their time.
Immediate separation will hurt it significantly and sortfolio will not be able to recover when the only growth driver is killed off.
In fact, Why not hire a typical founding team to find a second growth driver under the 37signals brand and then try to sell it? 212k annually should be enough for such a team.