tl;dr: This article is about how we sold a bootstrapped project we started 4 years ago. It took us 6 months to sell it and 3 weeks to close the deal. I will share our experience with finding a buyer, valuation, and closing the deal.
Recently, we made our first exit with Restpack, the product we built back in 2017. It’s an API-based SaaS to generate PDFs and screenshots from HTML. It was the reason we loved B2B SaaS in the first place and started kovan studio.
Why we decided to sell Restpack?
Restpack had no employees, low running cost, and a 90% profit rate. We built it on AWS, with autoscale, replication, and fallback servers. It didn’t require much technical maintenance unless there was an attack or AWS region outage. We were spending just a few hours a month answering support tickets and help new customers with integration. You may ask why did we sell a business like that. Even I asked that question to myself many times 😁
The main reason is that we couldn’t find the time and effort to grow it. Besides technical maintenance, SEO and marketing require consistent care. The last time we did some marketing was around 2 years ago. It brought some good organic traffic but lost its effect after a year. I always wanted to get back to Restpack, hire a digital marketer, a salesperson and grow it. But we were too busy with AnnounceKit, so we put that on ice (several times).
Six months ago, I came across MicroAcquire promotion on Product Hunt. It is a marketplace where you can buy or sell startups without a middleman or commission. We didn’t have the idea of selling it before; however, after seeing MicroAcquire, I was curious how it works and gave it a try. We saw huge interest in Restpack and decided to take it seriously.
How to find a buyer for your SaaS?
We started to look for different buyers other than MicroAcquire. I contacted FE International, a website broker with a network of global buyers. They are a very professional company with decent experience in the industry. Ismael, the founder of FE International, was very helpful. They fairly valued our business (still less than what we sold it for) and were waiting for us to approve the listing. Valuation and listing was free, but they take a commission on a successful deal, which is not high but still hurts 🙂 We were not satisfied with the final amount, so we decided to wait.
I also reached directly some of the VC firms that are buying micro-SaaS projects. Their valuation process usually takes few weeks and requires filling long questionaries about tech, marketing, revenue, etc. All of them valued Restpack almost as half of what we sold it for. Maybe it was just the starting point for negotiation, but we didn’t have any motivation to continue.
Things are not much different on MicroAcquire. Many of the buyers were bargain hunters or small VC firms looking for 2x ARR valuations or less. There are also just curious people with no intention to buy. There is no quick way to eliminate these people other than talking with each of them. You will clearly see the pattern for the right buyer after your first 5-10 calls. Here is what we experienced;
- VC firms will take a lengthy due diligence period, ask to talk with a few of your customers, require you to fill questionnaires and write detailed documentation.
- Many buyers offer seller financing or earnout based upon forthcoming targets of 12/24 months, which is a bit strange for micro-SaaS.
- People who just ask for a website link or MRR are most probably just curious. Serious buyers ask for details.
- Individual buyers are looking for a lifestyle business so they can quit their job and achieve financial freedom. This is a huge motivation. You probably won’t face any bureaucracy and close the deal faster with less hassle.
Restpack is a technical project and requires an experienced developer to run and maintain it. Many potential buyers don’t have programming skills and have to hire a developer to run it. It’s an additional expense that will lower your valuation. Not many developers have a budget to buy a SaaS for more than a half-million dollars. Luckily, we found one 🙂 He was the first engineer of a billion-dollar company with good technical knowledge and plenty of cash. It’s a match 🎉
Closing the deal
We closed the deal within 3½ weeks after we signed the LOI. It was pretty fast and straightforward due to the mutual trust we had. The first step was giving read-only access to Stripe, AWS, and Intercom so the buyer can verify the metrics in our listing. Normally, I would ask to sign an NDA, but I didn’t feel that required in this case. After he checked everything, we proceed to set up an Escrow. Meanwhile, the buyer was getting familiar with code and infrastructure. The buyer funded escrow, we transferred ownership and he released the money. That’s all 🎉
You can also check our short podcast episode with Andrew Gazdecki about our experience.