I Sold My Company For Millions... Here's What I Did Wrong

Shaan Puri

This one comes from Dylan. Dylan asks, "How do you negotiate the value of the company you're selling?" So, how did you come up with the price? How did you get to a price with your company when you sold it?

Sam Parr

I made a huge mistake. I made a classic mistake. I said the number first. I said, "These companies typically sell for blank X and blank X," and of course the...

Shaan Puri

First offer, they asked you, "What are your expectations?" or "What's a range? What price would you be happy with?" How do they ask it?

Sam Parr

I don't even know if they asked it, but I said, "Oh, you know, I was limited." I think I said, "Look, I'm not going to mess around." These companies typically sell for [a range of values], so if you're in the market, let me know. The first offer was the low number of that.

Shaan Puri

and and last offer was it the high number or somewhere in the middle

Sam Parr

In the well, so it was in the middle. But the thing is, when we sold the company, the HubSpot stock was $350. Basically, a week later, it was— you could look it up— it was like $550. Then, like three months after that, it was around $850.

Shaan Puri

right

Sam Parr

So, like, the sale price was one thing, but it pretty much changed quickly. It was right in the middle of that number. But I made a huge mistake. I should not have done that. As soon as I said that, I was like, "Fuck, fuck, fuck."

Shaan Puri

and you said it in an email

Sam Parr

did I say it in an email

Shaan Puri

I think you said I think I don't know it sound like the story you're sending you're saying you said it in an email

Sam Parr

I don't remember. No, I think I said it on the phone. This woman, who I'm now friends with and who is doing the deal, *fucking latched onto that like a shark*. She tore into it, and I knew it. Afterwards, I'm friends with her now. She doesn't even work at HubSpot, and I'm like, "You got me on that." She's like, "Yeah, like you said the number and the..."

Shaan Puri

Great thing to do is, after you negotiate a deal, go talk to the person. Once you're pals and you're on the same team, say, "Look, we're on the same team for sure, but man, negotiating that was so... you know, confusing for me. What did I do poorly? What do you think you could have done to make me hate myself? What do you think you could have done?" You just ask a bunch of questions to try to suss out what got them interested, what made them hesitant, how they figured out the value, what they were willing to negotiate to, and what mistakes you made in negotiation. Because you get so few reps at negotiating, it's important to do that. But it sounds like, to answer Dylan's question, you did two things. First, you looked up comparables, so you found out comparable sales. That's how you got a range. Then, you made the mistake in your actual negotiation of that range to fit... you actually set up the proper range.

Sam Parr

you're glad to cost me it it cost me many 1,000,000 of dollars right

Shaan Puri

It's like that one decision you made actually was more important than the previous two years of operating. Probably, yeah, a bunch.

Sam Parr

of I don't like thinking about it but yeah how did you do it

Shaan Puri

we I did not say a number right away I fucked up in one regard which was I let my so when we so the way we decided to sell was there was nobody coming and knocking on our door saying we need to buy you you're the best we we we're we want to be in the business of you I was basically frankly I saw the writing on the wall for my business I was like okay I think this is not 0 but it's not going to be huge so what do I wanna do do I wanna ride out a middle of the pack like small like medium sized outcome for the next 5 years or can I just go flip this thing now and I decided I wanna go flip this thing now I was also really tired because I had been doing I've been to find product market fit with different startups in our idea lab for like 6 years I was ready for a change in general and so I told my investor and my cofounder I said hey I wanna sell this thing I think it's time and they were like okay if you wanna sell then let's sell and I said alright let me let me run a process I'm gonna try to sell this in the next 45 days so first that was good because I time boxed it but I also you know like it added a lot of pressure and so the mistake I made when I was figuring out how how to sell I was I let my emotions of the day dictate how I sold how how hard I sold the company so what does that mean at first I was super confident they're gonna wanna buy us so I went to 2 or 3 companies with my super like swagged out like cocky cocky like pitch basically which was sort of like yeah everybody wants us but like you know so if you guys are interested you know you you basically like you gotta let us know because this is moving fast with you know these other people so you we we got approached we're interested we might go that path it you're either gonna get on the train now or you're gonna miss it so I was like kinda cocky confident that was like working but then like 2 days would go by where like somebody you know they didn't text me back or they said they were gonna review the thing and email me and they didn't email me then I started to have I'll have doubt creep into my head a little bit so then I would like kinda like it's like a booty call I'd like desperation reach out to some other company and so one of them was I reached out to facebook through somebody I know and I was sort of like hey like you know we're gonna sell this thing I I used the word acquihire which was like the wrong word to say because acquihire means a specific range of what outcome you're gonna get and it basically means don't value my company just value my talent and I shouldn't have done that I should not have said that there I was luckily able to recover because it was such a big company that by the time he made the intro to the person who made the intro I had like changed the narrative completely but the 3rd guy was like yeah you guys looking at acmehara I was like I don't know where the fuck you got that no and it's like I I literally had sent an email and you know with myself saying that but I luckily was able to change it and actually they they came in with the facebook came in with the highest offer and so we so I ended up recovering from that mistake but that could have been critically bad

Sam Parr

do you wish you would have picked in the facebook offer

Shaan Puri

No, like, the Amazon offer ended up working out great. But, you know, whatever. It was a good deal in the end, I guess. That was the main thing, and I didn't have comparables, really. The comparables I heard were such a huge range. I was like, "Okay, I just need to forget I heard any of those numbers because it's too wide of a range." It just means it depends. So then I started negotiating. I didn't say the number first, and we waited until we got offers. They tried to get a number out of us, but I was not going to do it. I was anchoring in other ways besides saying the specific number. I was leaving little hints, kind of just making sure they knew that we had other interest. Eventually, once we got one offer, I was like, "Okay, that's a ballpark." Then I basically just texted the CEO of Twitch and I was like, "Hey, I'm going to take this other offer unless you can match." He was like, "You know, give me some time." I said, "I don't have time." He replied, "Okay, give me an hour." I said, "Okay, I'll give you the hour." Then he came back with an offer that wasn't quite a match, but it was good enough where I said, "Okay, all other factors considered, we think this is the best," because they were going to take more of our team and other stuff that the other one wasn't going to do.

Sam Parr

it was a stressful it's such a stressful? Yeah it's such a stressful.

Shaan Puri

Yeah, nobody teaches you how to do this, and it's like the most important thing you'll do as the CEO of your company: land the plane. It's like being a pilot. You learn everything about takeoff and flight, but you've never heard anyone mention how the heck you're supposed to land. So you're just kind of pointing downwards, trying to land the thing based on instinct and a few fuzzy messages you get from mentors. If you use an investment bank, it's different, but we were not at that size. You have to be doing $50 million to $100 million minimum in your sale price to have a banker who does it for you.

Sam Parr

Dude, I had this roommate named James. He was a stoner, a pothead. On the first day of work at his new job, he had a teacher who said, "I heart weed," in really big letters, instead of "I love New York." He was negotiating a salary for a company called Vungle, which I introduced him to. He had been unemployed for 10 months and was struggling to find a company he wanted to work at. I think he was using his mom's credit card to pay the bills because I would get his statements. So, I thought maybe things were going south for him. I was like, "Dude, I don't know if you have much money left. I don't know how you're gonna pay rent." Vungle made him an offer for about $190,000 to be an engineer at their company. When he told me, I asked, "Are you going to take it?" He exhaled some weed and said, "I don't know, man. I'm not sure if it's worth my time. I'll just make them sweat a little bit." I was like, "James, are you kidding me? You don't have any money! You've been interviewing and talking to guys for 10 months. You're screwed!" He replied, "Yeah, let's make them sweat." Then, I got a phone call from the recruiter I introduced him to. He said, "Dude, James is like a hot engineer right now. I don't know if we're going to be able to land him. He's just bargaining so hard." I put the phone down and said, "James, do you hear what they're saying? You better come to an agreement soon." I added, "Just give him what he wants. Who knows? Just give him what he wants. You just gotta land him." I hung up, and they ended up upping his offer. He negotiated from a place of having nothing, and he didn't care at all. I learned from him that day that that's actually a really good place to negotiate from, so long as you're willing to accept these horrible consequences.

Shaan Puri

Yeah, I gotta actually say that that was the most useful thing. Like, how we sold our company was that I was totally okay if nobody bought it. I was kind of excited about just ending it and going and doing something completely different. I was kind of like a maniac in that way. I was like, "Okay, look, if I got $0 out of this, I'm actually kind of excited about that path too." So I was pretty free in that way. Whereas I think you had a real business that was producing real revenues and profits. You didn't have that option of not getting a good offer; you needed to.

Sam Parr

I felt that way, though, where I was like, "I'm done, I'm out." I was like, "I just need to get out of here." So, I felt the same way as you, and I'll learn a little bit differently how to run things so you don't get burnt out.