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?
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?
Many years ago a similar question came up on HN, I summarized all the responses and added some of my own experience to the article:
https://jacquesmattheij.com/how-to-sell-your-company/
Hope it is useful to you. Best of luck with the sale!
I would add a small caveat to your advice on hiring an investment banker: A good banker that is well-connected to target acquirers is very likely to be beneficial – you are paying for connections and reputation, which can be very valuable in M&A.
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.
Yes, this is very much true, thank you for the feedback. Investment bankers come in all shapes and sizes and a bad one can actually sink a perfectly good deal. I've seen this up close recently and it isn't pretty (incredible, really).
What, in this case, is “a profitable open-source software company”? I.e. what is your exact business model? To be precise, when your customers pay you, what do they expect, and recieve, in return? This could be consulting, bespoke development, etc. That, whatever that is, is your company, not “open source”. The fact that you publish some code as open source is mostly irrelevant. No company is “an open source company”, they are instead companies with business models which allow them to publish source code under open and free licenses. A woodworking shop could be such a company if they also publish whatever software they write (during the course of their normal work) under open and free licenses.
In other words, open source is not a business model¹.
1. https://news.ycombinator.com/item?id=30291919#30292595
I sold an open source company in 2015 - video log [1].
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.
[1] https://jaisenmathai.com/openphoto-trovebox/video-log/
For what it is worth, I don't think it matters much that the business is open source.
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.
If your business is profitable, normally it should not matter that it's open-source. If you post your ARR and type of business, you might find potential buyers even here.
Well, maybe it's their other company. (Just kidding.)
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.
I just try to learn something from others. My main goal is to create the best software and help other developers, that's why I consider many opportunities how to develop the company.
- 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.
It sounds a bit like you are emotionally invested in it.
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.
Yes, it may sound a bit emotional, but I'm aware that maybe the best for my "baby" is to find someone who can help him grow faster.
I can be wrong but from my point of view, open-source has a big advantage over normal business, it's a great community of developers.
It's hard for folks here to give you the best advice without more details. I remembered seeing your name before and found brix.io, now coreui.io. Not sure if that's what you are selling, but it looks like it has ok traffic stats from a quick check : 80k monthly traffic, 140k backlinks (40k with anchor text of 'bootstrap themes'). No idea what your conversion rate or ARR is. I suggest posting the answers to the following questions:
- 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?
As someone who bought CoreUI, hopefully this isn't it. Nearly non-existent support despite a paid support tier, dead forums, straight up broken components with the justification being "I'm fixing it in 4.0, ETA is 6-12 months." I'm sorry but if your production build is broken, "I'm fixing it next year" is a completely unacceptable response.
I'm sorry for the inconvenience, can you send me our support reply to lukasz (at) coreui.io, I will check want went wrong because ETA is 6-12 months is not possible for bug reports.
Your history has a lot of posts about your product, so I'm guessing you don't need to leave people guessing here. For anyone wondering, the company in question is https://coreui.io
Yes it is a CoreUI
This broker might be of interest:
https://feinternational.com/
Best of luck!
i've bought open source software companies before and without revenues you are useless. there's this idea that github stars and # of downloads mean something here, hate to break it to ya but they aren't worth much
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.
Advertise it.
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.
Do you know when I can find potential buyers?
If you meant to write "where", you could check out https://flippa.com/ or https://microacquire.com/
Start with a broker like FE International. In the evaluation process, it will help you to think of your business as an ordinary software company.
(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.)
Try getting a free business valuation from FE International. They don't take a commission until it sells, and their success rate is over 94%. https://loom.ly/dWyvw2w
there is microacquire.com or similar sites where you can list your company for sale.
Submit it and see what type of responses you'll get!
https://www.sideprojectors.com
What are the numbers bebhind the busniess? What is ARR, number of customers, team size. My friend is looking for a business with templates.
300K ARR 226182 users 4 people 2.5 years
rezi.ai
Please send me an email to lukasz (at) coreui.io, I will give you all details.
Don't be afraid of sharing the numbers publicly. Everyone that will be interested in buying will ask them anyway.
If I knew a service or company I used were doing this, I'd take what data I can and delete my account. Good things rarely happen in a transition. I'm not saying it's right, I'm just saying what me, the user, has been trained to do for my safety.
No one is sharing the data about users, here. We are talking about disclosing things like recurring revenue, projected growth, size of market, etc.
When a service is being shopped around to prospective new owners, eventually user data leaves the custody of those I originally entrusted it to. I'm voicing my opinion on signals that indicate to me it is time to go, and that to me, this is one of those signals
We don't monetize user data, our business model is the main open-source product and premium product with more features and dedicated support.
What user data did you provide to buy a set of open source components from CoreUI - the company in question?
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.
Everyone interested in buying won't have an issue sending an email either.
Not very open are we?
You are going to have a hard time selling if your code is incorporating open source libraries.
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.