Ask HN: How to sell a startup for $5M in 5-10 years? (not about product ideas)

https://news.ycombinator.com/item?id=41322744

14 15 2 years ago

news.ycombinator.com

Let's say that the goal is to create and sell a startup to earn 5 million dollars within 5-10 years. This question is about everything except product ideas:

- Where do you do business?

- Do you get partners, co-founders or investors?

- How do you approach sales and marketing?

- Do you go for a lot of small customers, or less big customers?

- Do you target a small niche market, or compete in an established large segment?

- Where do you find the buyer? What does the buyer want, and how to optimize for that?

- Is it possible to reliably plan for acquisition by one of the Big Tech companies?

altdataseller• 2 years ago

Personally, i think this line of thinking is going to lead you down a flawed path. The better question is what pain point do I have the unique expertise and experience to solve, and how can I build a product that is differentiated enough to stand out, and any unfair advantages I have in getting customers.

If you can answer that, everything else falls into place. Buyers will come after you - you wont need to worry about that. Whether I go after it alone, raise funding, etc all depends on that product idea. That comes first, not those other things.

mattbrewsbytes• 2 years ago

The simplest approach is to found a product or service of some kind that ends up getting you to $83,334 per month in revenue. That is $1mil/year in revenue and use the often quoted 5x ARR (annual re-occuring revenue) number to get to your $5mil.

That is earning revenue, margins will depend on a lot of variables but this is an abstract, general question not about any specific idea or industry.

Answers to your specific questions require some information about the product or service idea behind the company. Without knowing that nobody can really answer those questions.

throwaway485403• 2 years ago

I'm a software engineer with some amateur knowledge of electronics and 3D printing, if that helps to narrow it down.

giantg2• 2 years ago

Isn't that like 2/3rds the HN population?

brudgers2• 2 years ago

If success is $5,000,000 in 10 years, it’s a small business not a startup. For a startup that would be failure but a practical road would be to take a few hundred million in investments.

Not that $5,000,000 isn't a lot of money for someone when it is yours. It’s just not very much when it is other people’s money.

If that was my goal, I would build a business trading in physical goods. For example buying on Ali Express and reselling. My exit target would be selling to a mom and pop investor looking for cashflow. Big corporations rarely buy small businesses because small deals take about as much time as big ones but have smaller upsides.

Good luck.

brudgers2• 2 years ago

Should add, there’s nothing wrong with building a small business instead of a startup.

mlhpdx• 2 years ago

One path to look at for your goal is to build for a strategic acquisition. Find a dominant application platform like that isn’t already saturated. Like CAD, or another high value software vertical (but not iOS or Salesforce). Build something their customers want but that the platform has never delivered (customer research required, but you’ve narrowed the list so that be more approachable). Go to the platform’s user conference (they’ll have one) and sell some. Most importantly, try to connect with the highest racking folks you can in the product team and make sure they know what you’ve built. If your user base grows a couple years in a row, they’ll write the check.

max_• 2 years ago

- Where do you do business?

Limit yourself to a business that can scale fast. Target high income countries.

- Do you get partners, co-founders or investors?

Don't get any of those unless you actually need them. That is, they are providing value.

- How do you approach sales and marketing?

Read $100m Leads by Alex Hormozi

- Do you go for a lot of small customers, or less big customers?

It depends on the business choose what's more lucrative.

- Do you target a small niche market, or compete in an established large segment?

The riches are in the niches.

- Where do you find the buyer? What does the buyer want, and how to optimize for that?

Acquired.com is very comprehensive. So is Tiny.com Company. They explicitly list their requirements.

- Is it possible to reliably plan for acquisition by one of the Big Tech companies?

Big tech companies cannot just buy a startup at random. You need to build a prior long term relationship & demonstrate that your business can offer value to them.

But $5m is such a small acquisition that they wouldn't pay attention. Maybe small PE funds.

aristofun• 2 years ago

Very vague question, so here are some vague answers:

1. It is generally more profitable to target mass low end market rather than hi end (check how ferrari is doing vs fiat)

2. Yes, it is possible to plan for aquisition and sometimes startups are started with that goal in mind. But you have extra risk that big company will copy your product, instead of buying you.

3. “It depends” is the best answer on the rest of the questions.

indulona• 2 years ago

Read the book "Built to Sell: Creating a Business That Can Thrive Without You"

jf223• 2 years ago

Step 1, sacrifice everything else in your life. Step 2, get lucky.

throwaway485403• 2 years ago

I don't have anything to sacrifice. I'm single, no children, no wife and not looking for one, and the work I'm doing is also my hobby.

jf223• 2 years ago

You've already made the sacrifice then.

Ask HN: How to sell a startup for $5M in 5-10 years? (not about product ideas)

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