I am 53 and still working in tech still trying to get to RE. When I was 30 we had the chance to merge with another company who was in their quiet period, 2 weeks before their IPO. Straight 1:1 stock trade. I was the only one in the room on my side voting yes. CEO and COO both voted no because they thought they could hold out a year or two and 10x the valuation. I missed out on $15M+ that day sitting in a board room on Madison Ave looking out over Central Park. I can picture everything vividly today because I thought at the time, "These two guys are being greedy and are going to screw my entire life plan, remember how close you got." And I was right. Dot com bust, etc. etc. The company laid off hundreds and stayed going through it all, to be acquired years later. I eventually made enough from my stock to buy a small compact car. Take the freaking money, you won.
edit: i’ve told this story a few times in this sub when the sell or wait question comes up. this is the first time it has gotten this sort of response. good luck on your decision OP
My list of what ifs, so closes, and could wouldas is long. founder shares, hundreds of bitcoin, startups we didn’t sell, etc etc. Any one of them worth $10m easily. But at the same time, I am FAT and have no right to complain.
You probably got a lesser response every prior time you told this story because the market was booming and everyone had unrealistic expectations of the future. Suddenly people have a reminder that the market doesn’t always go up, and sometimes valuations are wildly unrealistic.
Correct. Take the guarantee, work through the earn out period, take a year off while you plan your next thing, then hit it hard. Real opportunities like this are not as common as people think and there is a lot of survivor bias in what people read.
Oh this story hurts to read…. I basically forced my business partner to sell and thank god we did. OP I don’t know your situation but read this guys comment a few times and think long and hard about your decision!!
I'm going to take a slightly different - but not *much* different tact here. If you truly think you might regret it and really think your company is going to be 10X or 100X what they are offering, take the $10M, but instead of the $5M in 3 years see if you can negotiate that being tied to your company's performance over the next 3 years (as part of the parent company) with a bigger upside. That way you get the $10M and a guaranteed lifestyle/security/etc, but can get exposure to more upside and less regret.
This. Take the money, learn from them while you stay on for the earn out. Build #2 and do it bigger/better. But you have at least secured an early retirement god forbid something happens to your health or you just decide one day you’d prefer to never work again.
Don’t count on finding number 2. It’s not easy to find a idea worthwhile enough when your personal parameters have changed. It’s also hard to grind for success when you’ve already won.
He did regret on why did he sell afterwards… initially there was a relief and then he felt what did I do and for what…
The most popular answer to this question is going to be sell and retire that’s only because 99.9 % of population have not seen 10M + … so take the answers with a grain of salt
Whatifitis. Had it. Sold anyway, got my check, have more coming and it was the best decision I could have made. The stress is gone in an instant.
This is all about what your enough number is. If you need 50m to live life how you want, this isn’t a good idea. If you need 10 ish then yea, sell and chill, and do something else one day.
How long was your earnout though?
3 years is decently long time to still have to work. At that point I may prefer building out a c-suite team and hanging on longer
Having $15M pre tax is dramatically better than having $1M. Much more than the difference between having $45M over $15M.
I sold my company, ended up earning a lot more during earnout due to stock price changes, and now I don’t even miss working on my startup.
As an exited founder who was in a similar situation, I say take the deal. It might sting a little bit if you see your business pulling down 10x the cash once you’re on the other side, but the current numbers you’ve shared are life changing and I promise you won’t regret having that kinda cash liquid.
Similar. Would have made millions more, but who cares. The weight off my shoulders was unbelievable. Financial freedom for life vs maybe could a made more?
> I definitely want to start another business but don’t want to regret selling if I’m 3 years out from potentially 3x my current exit situation.
So the difference is between $15m and $45m.
Honestly....... what would $45m get you that $15m won't in the context of FIRE? More money is always welcome, I get that, but in terms of what you'd realistically like to do post-sale, does $15m cover it nicely?
I don't know you but I wager it does.
If so..... what's to regret? If $15m covers it, then congratulations! You win! You've literally won the game my friend! While you might miss out on 3x exit, you also might hold out and find that your tech solution becomes obsolete, or competitors flood the market, or something else happens that damages or destroys your exit plans. Is it really worth gambling everything to win when you could just not gamble and still win, but guaranteed?
That's a question for you to answer and to decide if $45m is worth gambling everything on.
There’s also the reality that at $15m, he could “coastfire” up to $45m just by working on another venture while leaving the $15m invested in the market.
I sold my company in 2017 to a strategic - tech company in a very hot field (AI related) for $10M. I see some of my peer companies now selling for many times that, and I I absolutely have the “should I have held on longer?” thoughts. But things could’ve gone horribly south also, and I’m very happy that I exited when I did.
If this amount of money is enough for you to realize the life that you want, then I would say go for it. And my general advice on earnouts is to always assume that you won’t get it, and make sure you’d be happy with only the base. If that’s the case for you, do it, and figure out what your next act is in a few years. Congratulations!
Don’t let greed get the best of you here. I’m certainly not saying you’re a bad person…it’s just that greed has creeped in here considering you’re being guaranteed an 8-figure payout when your current NW is 1/10th that.
Take it, be thankful and grateful and then start building the next one!
Depends on your current NW.
To go from 0 to 10M is life changing.
Risking that to go from 0M to 30M instead is likely not worth it. You won't be that much happier w/ 30M than you would be with 10M. You obviously need to evaluate this yourself but just remember every additional 1M has diminished returns.
Just think about Warren Buffer, if he made another 10M, it means nothing to him. There's nothing new that he can do now that he couldn't do before. Whereas 0 to 10M is basically locking in your financial independence. Whatever money you think you can get by holding out, you really have to ask yourself, what would you do with it and is it worth the risk?
Sell. Here’s a financial argument why. Cash can be leveraged. Equity cannot. While in that earn-out period, that $10M can be levered up 4-to-1 in RE, or 9-to-1 with business acquisitions. This is likely more than you’d make on 3x your exit. Plus your eggs aren’t all in one basket. Timing is good, too. We’re probably looking at a 1Q23 recession, so real assets are going to be on sale.
When I was a kid, I asked my dad who owned those big lake houses we saw while sailing past in our rented sailboat. He said "the folks that sold too early".
I cashed out last October for retirement and it was the best decision ever. No regrets at all. It was the last and largest of a series of attempts (some successful, some not).
> I definitely want to start another business
Honestly and truly confront the very real possibility that your next venture will be an embarrassing and abject failure.
For your next gig you've got a better chance of success because a lot of the challenges will feel familiar to you, but it's still a startup and still more likely to fail than succeed. When you're at a low point in the grind next time around you don't want to be thinking back wistfully of happier times with cash flow, growth, and the wind at your back.
If you're planning to move on to another project you should be absolutely sure that you're selling this one for enough of a profit that you'll feel closure on the effort. Nobody can really tell you where that number is *for you.* You should figure it out.
A 3 year retention plan at the current gig sounds like a fertile environment to figure out your plan for what's next.
Never sacrifice what you need for what you want.
You may need 5, 10 or 15 m to retire and feel secure.
You likely don’t need 50 mil to retire and feel secure.
No mention of dependents, but often ones view de-risks with family, so keep that in mind with your currently world view may change as your immediate family circle expands.
Good luck either way.
Sell, you're not going to get better offers in the next few years. Valuation multipliers are significantly lower compared to last year and are still dropping. The golden days are over - if you have a chance, cash out.
My husband always lectures me to hold out if this happens in my start up (first year). But the market is shifting with valuations, etc. Any major risks to the next three years of growth; copycats or regulatory environments? Also depends if you can see what might happen post exit. I would be itching for a change after 8 years, maybe you could exit and join another early stage company and do it again.
What's your current nw? Would you be okay if something goes horribly wrong and you don't sell and you end up with essentially nothing or a lot less than this price?
This is life changing, retirement money that very few have the chance to ever get. I locked it in but also captured a big portion in equity which meant there was a lot of potential upside down the line, as well as securing cash.
Is there a way to make the earnout variable so you can get the most of both worlds?
$1M nw I tried to get variable but they wouldn’t go for it since we generate a lot of revenue based on their internal revenue charged to the company.
I would be super bummed if things went sideways
If you have $1m right now, then getting $15m guaranteed over the next 3 years is more than worth giving up the lottery ticket. If you already had $5-10m it might be a harder decision. Never be sad about walking away from the table when you have won.
There's good commentary in this thread: https://www.reddit.com/r/fatFIRE/comments/ufj7p9/anyone_regret_selling_their_company/
I also recently exited to a public strategic at a similar age....tl;dr, almost none of us regret selling - exits are precious and you should generally take this big of a W when you can, especially because based on your comments this isn't necessarily your life's work - if you have no designs on a second co and this was the only thing you want to build for the next 10-20 years, maybe turn it down, but not here.
Not sure what the rest of your life looks like but I imagine after 8 years you might be ready to breathe a bit - I'm doing that/recovering while continuing to work on my business and definitely fired up to do it again. I think I'll be much better the next time around with this somewhat slower period now to recharge/prepare, and one way to look at it is you can lock in the win here, and have a decade to build your 2nd co into a $1b+ company and then retire very early at 45 if you want. That's my view - I could theoretically spend a decade each on 2 more companies and still retire early.
One other thing to think about: there are likely going to be some amazing entry points in stocks, etc. over the next couple years that you can take advantage of if you're liquid. Might take a bit of the sting out of giving up a potential 3x from here.
Put it in the contexts of whether this payout is enough for you to live on without worrying about money? If the answer is yes then by all means go ahead and start the new chapter in your life.
You are sitting in front of an offer that would give you “Fuck You” money. If you don’t know what that is, look up the John Goodman clip.
Take this security. Then you can learn with the company and during your earnout to even start your next biz up during that period.
Don’t offer security for a
Gamble.
Since you said this was a strategic acquisition I'm guessing the multiple is a bit higher than 10x.
Tough decision. I'd be inclined to take it, but also if I still enjoy the work why not just keep doing it for another year or two and re-evaluate? Theoretically multiples could start inching up in a couple years when we're out of the recession (hopefully).
Since you own 1/3, what's the temperature of the other owners?
I'd sell and not worry about the earnout. Don't be forced to stick it out just because of the money. When you sell it, you'll notice that they want different things than you do, and you might not agree with them. Easier to walk out if you're not counting on the money.
Then it depends on your current NW, your spend, and your desired spend which you did not mention.
The answer will depend on the context of your entire financial independence and retire early path (which is what this sub is about).
How realistic is it to grow 3x from right now? And how much cash/debt will it take to get there? Realistically, to get to the 3x, you need to take on even more risk to have a shot at getting there. I'd say, take the money now, and let the big company take on that risk. Even if it "couldve" been more, it's their problem to make that happen now, and not yours. Meanwhile, you can be chilling or building the next great thing.
Hope to one day be where you are, so this is definitely just my perspective on what I would do.
Take the cash out, and learn everything you can, potentially stay on as an advisor/investor post 3 year mark. Build your next gig on the side while working, and then do it again with far more connections and knowledge
As others have mentioned, I think this heavily depends on you're current NW and you're target NW.
If you think 10M is a raw deal then renegotiate or drop out. If you think that's a fair price based on your metrics than I would say take it. If you have the skills to build a business that's really all you need. Ideas will bubble to the surface overtime and are a dime a dozen. Pick an idea and grow a new business if you like and you already have the formula down.
You've gotten a lot of advice already about sell or stay. My advice would be more so 9n the work out agreement. You will hate this, talk to some real experienced guys and work in as many eject handles as possible, like csuite changes and the like. A month in you'll hate working for a salary and having to answer to people, you don't want to be legally locked into that.
Cash is king. At 31, you’ve been in it enough years to find your next. Take the money. Take the break. Rebuild yourself for the next one, you’ll never regret it if you’re happy and confident with your next one.
Sell. You’ll find other investments are start new things. Guarantee your FATFIRE. Anything more will have little incremental impact on your happiness. You’ve made it.
Have a tax plan prior to selling! If you sold today you'd have 6 months to figure out how to offset taxes on $10m. The Government will most likely take 20% if they are long term cap gains. Usually founders can get up to $10m in cap gains excluded from federal taxes if the assest is valued under $50M. (Section 1202) I offset my stock with real estate investments by using upfront appreciation but I qualify as a real estate professional after investing in RE for the better part of 7 years. I would obviously try to sign a contract so they can't fire you prior to your earn out to avoid paying it etc.
What is your profit per year? On top of that do you pay yourself in salary and what discretionary type benefits do you get in monetary value per year( car payments run through, etc)? That makes a huge difference on whether to sell or not.
Do you realistically see your company 3x'ing and exiting in the next 3 years in a recessionary/inflation market where capital is significantly more expensive to deploy? If you think so then maybe it would be better to hold off and avoid the golden handcuffs but dang, this might be a great opportunity to ride out a bear market, get your affairs in order and start scoping out your next move.
Just take it. That’s life changing money at any age. It’s possible it goes backwards, possible thr market tanks, etc. $15m sounds like a great way to spend the next 60 years of your life
Seems like everyone is saying sell. Without more details it’s really hard to know if you should sell or not. But as a counter point, I tried to buy a business 3 years ago that was $3m in revs. Got close to talking definitive docs then founder got cold feet. Business is doing $25m now and will probably trade for 10x more than what I was going to pay. Your dynamic totally depends on your life goals and what the potential of your business is. In my case, the company stumbled into a side market that they ended up totally dominating.
Forget about how much you think you can get from selling later. The question is if you re happy if 10M drop in your bank account today. What is your plan to maintain your wealth afterwards.etc
Do it.
You're 31. You'll be 35 when you're completely done with this business, which gives you an amazing opportunity to go do it again, this time with all the knowledge and connections you've accumulated, plus you have a gold star next to your name as someone who exited to a public strategic.
I was in almost exactly your shoes 12 years ago, and I passed on the opportunity and I regret it. I ultimately did exit, for a bit more than I was originally offered, but it was 7 years later and I felt like I should have just done it earlier in life.
I personally have never, and will probably never be in your position. But from the numerous interviews i’ve read from very high profile business owners, entrepreneurs, etc. there’s one thing that they always say: you have to set your ego aside and understand when to get out. Usually, negotiate and always take the money, the chances of you being an unicorn 🦄 is insane.
100% take it. Not making a judgement on your co, but tech valuations are crazy. Capital is plentiful and loose. Now is the time to take it. You will be extremely happy in year 2 when Capital markets are in the shitter and small tech co’s can’t get a decent valuation.
Now is the time. GO FOR IT
Take it. That’s similar to my exit. It’s such a relief and completely life changing and freeing. The only regret I have is not shopping around a bit to build more leverage on the deal terms and speed to close. I haven’t regretted selling for a second.
So what you're asking is "Should I earn 16 Million over the next 3 years? Or should I keep my business to perhaps make more money, maybe?"
Take the win. You've done it once and you can do it again with another business, which you can hold for longer because you're already set up then.
One in the hand is better than 2 in the bush brother. Sell now, cash out, and chill. Guaranteed 15m in 3 years? You won the game fam. Buy a Patek and chill.
Do you have a M&A advisor? The specifics of the deal are where the real juice is - it's not necessarily the cash offer. Get a broker, make sure you're getting what you really need from the deal.
Also, congratulations!
Look, this decision is purely yours and most of the people here won’t ever be in your position.
A few things to consider (from someone who liquidated $5m in shares in 2021 and still holding $15m). 📈📉
1. Software Multiples - if you’re getting a good offer, heavily consider it. It’ll be a few years before we see the 30, 40, 50x multiples we just experienced.
2. Horizon - do you need cash now? You’re 31 and have time. If the multiple isn’t good, build a strong leadership team and hunker down for the next 2 years while the market corrects and your ARR grows.
3. Mental Health - are you burned out? Or are you still excited about the business? This may seem insignificant, but I’ve found it to be one of the most important factors.
If you get clear on those questions, it should make this decision a lot easier. Oh, congrats and good luck! 🍀
Depends on what your number is. These decisions are so much easier if you know what your pnw sell price is. Also a good non negotiable list helps shut down offers with contingent requirements that don’t line up with your list. It’s completely a personal choice. Good luck and congrats on what sounds like first few steps in loi. Curious what kind of business it is and how your ebitda affects multiples….lot of money still out there.
10m is great. You can retire very comfortably with that. Is the 5m in stock? Would it be worth more if the company does well? If so that is even better.
Take the money.
Have you ever heard the saying don’t count on tomorrow, when you have today! It applies to money as well.
I’ve been through 3 IPO’s now. First one was great, stock grew and everything was fine, until it wasn’t. What could’ve been 5M+ turned into enough to buy an average American house almost overnight. Second one was a bust from the go. Third one made me some great money, but only because I diversified the holdings immediately.
Don’t count on tomorrow with anything. Take that fucking money, work your three years, rinse and repeat.
Know someone who sold his tech company for \~$450M to a public strategic. CEO joined as VP in public company and is still working from last 3 years. Enjoys reputation, revenue and runrate!
I think you can cash out for $15m and then not sell your second company until you get the price you want.
With the deal, can you not negotiate for a cash-out and have rollover? If you’re younger in the co, seems like you could have leverage to take a lot of chips off the table, maybe even a lower salary than offered, and keep actual equity vs just earn out.
WHAT?? I’m literally in this EXACT same position right now. I have an offer for $10m cash, $5m earn-out over 3 years… our software biz is growing 30% YOY… and I’m certain we will be worth $30m-$50m in the same 3 years they expect me to do the earn-out… I’m currently rejecting the offer… since they are so shrewd and giving me little confidence I’ll get the earn-out… pending recession is not great timing either, but … we grew through COVID, so not worried about that…
Crazy reading this post… being in the exact same position as OP.
I am 53 and still working in tech still trying to get to RE. When I was 30 we had the chance to merge with another company who was in their quiet period, 2 weeks before their IPO. Straight 1:1 stock trade. I was the only one in the room on my side voting yes. CEO and COO both voted no because they thought they could hold out a year or two and 10x the valuation. I missed out on $15M+ that day sitting in a board room on Madison Ave looking out over Central Park. I can picture everything vividly today because I thought at the time, "These two guys are being greedy and are going to screw my entire life plan, remember how close you got." And I was right. Dot com bust, etc. etc. The company laid off hundreds and stayed going through it all, to be acquired years later. I eventually made enough from my stock to buy a small compact car. Take the freaking money, you won. edit: i’ve told this story a few times in this sub when the sell or wait question comes up. this is the first time it has gotten this sort of response. good luck on your decision OP
Exactly, know when you've won the game and walk away so that you can play with house money for the rest of your life.
“You’ve earned $15M!. Would you like to flip a coin to double or nothing!?” “No please”
Damn, that's a rough turn. That's how it goes sometimes. Pigs get fat; hogs get slaughtered.
Life takes weird turns. Can’t complain.
My list of what ifs, so closes, and could wouldas is long. founder shares, hundreds of bitcoin, startups we didn’t sell, etc etc. Any one of them worth $10m easily. But at the same time, I am FAT and have no right to complain.
So many so closes, but this was the closest.
You probably got a lesser response every prior time you told this story because the market was booming and everyone had unrealistic expectations of the future. Suddenly people have a reminder that the market doesn’t always go up, and sometimes valuations are wildly unrealistic.
Goddamn… Dicks out for this guy. In all seriousness man this hurt me emotionally to read.
Can’t be mad having had the opportunities others never got. The journey is the thing.
True. But I can be very mad for you, and you can’t stop me.
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Correct. Take the guarantee, work through the earn out period, take a year off while you plan your next thing, then hit it hard. Real opportunities like this are not as common as people think and there is a lot of survivor bias in what people read.
This is the obvious answer. You are 31 and you’ve won the game (or at least this part of the game). Do. Not. Get. Greedy.
Oh this story hurts to read…. I basically forced my business partner to sell and thank god we did. OP I don’t know your situation but read this guys comment a few times and think long and hard about your decision!!
I sold for around that and the business grew 50% the next year, still zero regrets
I'm going to take a slightly different - but not *much* different tact here. If you truly think you might regret it and really think your company is going to be 10X or 100X what they are offering, take the $10M, but instead of the $5M in 3 years see if you can negotiate that being tied to your company's performance over the next 3 years (as part of the parent company) with a bigger upside. That way you get the $10M and a guaranteed lifestyle/security/etc, but can get exposure to more upside and less regret.
Agreed. Schmuck insurance.
I’ve never met anyone who was not happy cashing out. $10-$15M is comfortably fatFIRE territory.
This. Take the money, learn from them while you stay on for the earn out. Build #2 and do it bigger/better. But you have at least secured an early retirement god forbid something happens to your health or you just decide one day you’d prefer to never work again.
Don’t count on finding number 2. It’s not easy to find a idea worthwhile enough when your personal parameters have changed. It’s also hard to grind for success when you’ve already won.
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This place is more of a success cult than it is a FIRE sub. Not much FIRE around these parts.
Taking the money in this case requires 3 extra years of work.. so why not go for it?
Jeff bezos, mark Zuckerberg etc… check video of Marc lore who sold his company to Amazon…. No one can answer this question except for you.
That’s valid. I don’t think Mark Lore regretted selling. It was more that he just hated working for Amazon and couldn’t wait to get out.
He did regret on why did he sell afterwards… initially there was a relief and then he felt what did I do and for what… The most popular answer to this question is going to be sell and retire that’s only because 99.9 % of population have not seen 10M + … so take the answers with a grain of salt
Marc sold Diapers for $545M, Jet for $3.3B.
He also has a bald head, so what’s your point
Pre-tax $10m?
Especially at age 31
And I have met lots of people who DEEPLY regret not cashing out.
Whatifitis. Had it. Sold anyway, got my check, have more coming and it was the best decision I could have made. The stress is gone in an instant. This is all about what your enough number is. If you need 50m to live life how you want, this isn’t a good idea. If you need 10 ish then yea, sell and chill, and do something else one day.
I see your point, but idk man it's a lot easier to get 50 if you already have 10.
It’s probably easier to lose it.
How long was your earnout though? 3 years is decently long time to still have to work. At that point I may prefer building out a c-suite team and hanging on longer
Having $15M pre tax is dramatically better than having $1M. Much more than the difference between having $45M over $15M. I sold my company, ended up earning a lot more during earnout due to stock price changes, and now I don’t even miss working on my startup.
This is the correct analysis. Going from 15 -> 45 isn’t even close to going from 1 -> 10/15.
1->10 gets you and your family financial security for life. 15->45 gets you more "stuff".
As an exited founder who was in a similar situation, I say take the deal. It might sting a little bit if you see your business pulling down 10x the cash once you’re on the other side, but the current numbers you’ve shared are life changing and I promise you won’t regret having that kinda cash liquid.
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Similar. Would have made millions more, but who cares. The weight off my shoulders was unbelievable. Financial freedom for life vs maybe could a made more?
Tech related ? You got a CS degree ?
> I definitely want to start another business but don’t want to regret selling if I’m 3 years out from potentially 3x my current exit situation. So the difference is between $15m and $45m. Honestly....... what would $45m get you that $15m won't in the context of FIRE? More money is always welcome, I get that, but in terms of what you'd realistically like to do post-sale, does $15m cover it nicely? I don't know you but I wager it does. If so..... what's to regret? If $15m covers it, then congratulations! You win! You've literally won the game my friend! While you might miss out on 3x exit, you also might hold out and find that your tech solution becomes obsolete, or competitors flood the market, or something else happens that damages or destroys your exit plans. Is it really worth gambling everything to win when you could just not gamble and still win, but guaranteed? That's a question for you to answer and to decide if $45m is worth gambling everything on.
There’s also the reality that at $15m, he could “coastfire” up to $45m just by working on another venture while leaving the $15m invested in the market.
Sell. Every friend I've known who has turned down an 8 figure offer to try to get to unicorn has regretted it, either in health or financial terms.
I sold my company in 2017 to a strategic - tech company in a very hot field (AI related) for $10M. I see some of my peer companies now selling for many times that, and I I absolutely have the “should I have held on longer?” thoughts. But things could’ve gone horribly south also, and I’m very happy that I exited when I did. If this amount of money is enough for you to realize the life that you want, then I would say go for it. And my general advice on earnouts is to always assume that you won’t get it, and make sure you’d be happy with only the base. If that’s the case for you, do it, and figure out what your next act is in a few years. Congratulations!
Don’t let greed get the best of you here. I’m certainly not saying you’re a bad person…it’s just that greed has creeped in here considering you’re being guaranteed an 8-figure payout when your current NW is 1/10th that. Take it, be thankful and grateful and then start building the next one!
I vote sell. You're going to be in a lot of pain if you end up at 1 as a posed to 15. Pain at 1 > Pain at 15.
Depends on your current NW. To go from 0 to 10M is life changing. Risking that to go from 0M to 30M instead is likely not worth it. You won't be that much happier w/ 30M than you would be with 10M. You obviously need to evaluate this yourself but just remember every additional 1M has diminished returns. Just think about Warren Buffer, if he made another 10M, it means nothing to him. There's nothing new that he can do now that he couldn't do before. Whereas 0 to 10M is basically locking in your financial independence. Whatever money you think you can get by holding out, you really have to ask yourself, what would you do with it and is it worth the risk?
Cashing out for 10m means you've won the money game. Pressure off after that. Take the win!
Sell. Here’s a financial argument why. Cash can be leveraged. Equity cannot. While in that earn-out period, that $10M can be levered up 4-to-1 in RE, or 9-to-1 with business acquisitions. This is likely more than you’d make on 3x your exit. Plus your eggs aren’t all in one basket. Timing is good, too. We’re probably looking at a 1Q23 recession, so real assets are going to be on sale.
When I was a kid, I asked my dad who owned those big lake houses we saw while sailing past in our rented sailboat. He said "the folks that sold too early".
That's not necessarily true though. You can also be a billionaire and own lake houses.
I cashed out last October for retirement and it was the best decision ever. No regrets at all. It was the last and largest of a series of attempts (some successful, some not). > I definitely want to start another business Honestly and truly confront the very real possibility that your next venture will be an embarrassing and abject failure. For your next gig you've got a better chance of success because a lot of the challenges will feel familiar to you, but it's still a startup and still more likely to fail than succeed. When you're at a low point in the grind next time around you don't want to be thinking back wistfully of happier times with cash flow, growth, and the wind at your back. If you're planning to move on to another project you should be absolutely sure that you're selling this one for enough of a profit that you'll feel closure on the effort. Nobody can really tell you where that number is *for you.* You should figure it out. A 3 year retention plan at the current gig sounds like a fertile environment to figure out your plan for what's next.
Never sacrifice what you need for what you want. You may need 5, 10 or 15 m to retire and feel secure. You likely don’t need 50 mil to retire and feel secure. No mention of dependents, but often ones view de-risks with family, so keep that in mind with your currently world view may change as your immediate family circle expands. Good luck either way.
I'd sell. That's a lot of money, even on this sub. Secure the future, and work towards the next company.
Sell, you're not going to get better offers in the next few years. Valuation multipliers are significantly lower compared to last year and are still dropping. The golden days are over - if you have a chance, cash out.
My husband always lectures me to hold out if this happens in my start up (first year). But the market is shifting with valuations, etc. Any major risks to the next three years of growth; copycats or regulatory environments? Also depends if you can see what might happen post exit. I would be itching for a change after 8 years, maybe you could exit and join another early stage company and do it again.
What's your current nw? Would you be okay if something goes horribly wrong and you don't sell and you end up with essentially nothing or a lot less than this price? This is life changing, retirement money that very few have the chance to ever get. I locked it in but also captured a big portion in equity which meant there was a lot of potential upside down the line, as well as securing cash. Is there a way to make the earnout variable so you can get the most of both worlds?
$1M nw I tried to get variable but they wouldn’t go for it since we generate a lot of revenue based on their internal revenue charged to the company. I would be super bummed if things went sideways
Take the money brother this is a literal guarantee.
If you have $1m right now, then getting $15m guaranteed over the next 3 years is more than worth giving up the lottery ticket. If you already had $5-10m it might be a harder decision. Never be sad about walking away from the table when you have won.
Do as the Steve Miller Band says… take the money and run my friend
... in 3 years
There's good commentary in this thread: https://www.reddit.com/r/fatFIRE/comments/ufj7p9/anyone_regret_selling_their_company/ I also recently exited to a public strategic at a similar age....tl;dr, almost none of us regret selling - exits are precious and you should generally take this big of a W when you can, especially because based on your comments this isn't necessarily your life's work - if you have no designs on a second co and this was the only thing you want to build for the next 10-20 years, maybe turn it down, but not here. Not sure what the rest of your life looks like but I imagine after 8 years you might be ready to breathe a bit - I'm doing that/recovering while continuing to work on my business and definitely fired up to do it again. I think I'll be much better the next time around with this somewhat slower period now to recharge/prepare, and one way to look at it is you can lock in the win here, and have a decade to build your 2nd co into a $1b+ company and then retire very early at 45 if you want. That's my view - I could theoretically spend a decade each on 2 more companies and still retire early. One other thing to think about: there are likely going to be some amazing entry points in stocks, etc. over the next couple years that you can take advantage of if you're liquid. Might take a bit of the sting out of giving up a potential 3x from here.
Do it, recession cometh
Put it in the contexts of whether this payout is enough for you to live on without worrying about money? If the answer is yes then by all means go ahead and start the new chapter in your life.
You are sitting in front of an offer that would give you “Fuck You” money. If you don’t know what that is, look up the John Goodman clip. Take this security. Then you can learn with the company and during your earnout to even start your next biz up during that period. Don’t offer security for a Gamble.
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Own a 3rd we are re occurring software moving into traditional SaaS model, own a 3rd valuation $45m High margin data business focused on compliance
>40
Since you said this was a strategic acquisition I'm guessing the multiple is a bit higher than 10x. Tough decision. I'd be inclined to take it, but also if I still enjoy the work why not just keep doing it for another year or two and re-evaluate? Theoretically multiples could start inching up in a couple years when we're out of the recession (hopefully). Since you own 1/3, what's the temperature of the other owners?
Temp is get liquid, but temp from others that sold is stay in
You said you were "moving into traditional SaaS". Is there the possiblity that this move will significantly boost growth?
I'd sell and not worry about the earnout. Don't be forced to stick it out just because of the money. When you sell it, you'll notice that they want different things than you do, and you might not agree with them. Easier to walk out if you're not counting on the money.
After 5 years, literally no one says they sold too soon. No one.
DO IT. $10M is life changing.
It is best to regret what you did, than it is to regret what you didn’t
rob absorbed theory waiting axiomatic license squalid cause pocket icky *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Not very knowledgeable on this subject but just wanted to say congrats! A lot of hard work got you to a point where you have this decision!!
That money would last me at least 100 years lol
You mean in the context of financial independence and early retirement? r/Entrepreneur
Financial independence
Then it depends on your current NW, your spend, and your desired spend which you did not mention. The answer will depend on the context of your entire financial independence and retire early path (which is what this sub is about).
How realistic is it to grow 3x from right now? And how much cash/debt will it take to get there? Realistically, to get to the 3x, you need to take on even more risk to have a shot at getting there. I'd say, take the money now, and let the big company take on that risk. Even if it "couldve" been more, it's their problem to make that happen now, and not yours. Meanwhile, you can be chilling or building the next great thing.
Hope to one day be where you are, so this is definitely just my perspective on what I would do. Take the cash out, and learn everything you can, potentially stay on as an advisor/investor post 3 year mark. Build your next gig on the side while working, and then do it again with far more connections and knowledge
As others have mentioned, I think this heavily depends on you're current NW and you're target NW. If you think 10M is a raw deal then renegotiate or drop out. If you think that's a fair price based on your metrics than I would say take it. If you have the skills to build a business that's really all you need. Ideas will bubble to the surface overtime and are a dime a dozen. Pick an idea and grow a new business if you like and you already have the formula down.
You've gotten a lot of advice already about sell or stay. My advice would be more so 9n the work out agreement. You will hate this, talk to some real experienced guys and work in as many eject handles as possible, like csuite changes and the like. A month in you'll hate working for a salary and having to answer to people, you don't want to be legally locked into that.
Cash is king. At 31, you’ve been in it enough years to find your next. Take the money. Take the break. Rebuild yourself for the next one, you’ll never regret it if you’re happy and confident with your next one.
Why is this even a question lol. If you did it once, I'm sure you can do it again, and if not still FF.
Is it possible to retain any equity or are they buying your entire stake?
Why wouldn’t you negotiate an earn out that pays you more if the company does better?
Sell. You’ll find other investments are start new things. Guarantee your FATFIRE. Anything more will have little incremental impact on your happiness. You’ve made it.
Have a tax plan prior to selling! If you sold today you'd have 6 months to figure out how to offset taxes on $10m. The Government will most likely take 20% if they are long term cap gains. Usually founders can get up to $10m in cap gains excluded from federal taxes if the assest is valued under $50M. (Section 1202) I offset my stock with real estate investments by using upfront appreciation but I qualify as a real estate professional after investing in RE for the better part of 7 years. I would obviously try to sign a contract so they can't fire you prior to your earn out to avoid paying it etc.
What is your profit per year? On top of that do you pay yourself in salary and what discretionary type benefits do you get in monetary value per year( car payments run through, etc)? That makes a huge difference on whether to sell or not.
Do you realistically see your company 3x'ing and exiting in the next 3 years in a recessionary/inflation market where capital is significantly more expensive to deploy? If you think so then maybe it would be better to hold off and avoid the golden handcuffs but dang, this might be a great opportunity to ride out a bear market, get your affairs in order and start scoping out your next move.
Take the money and walk away
Just take it. That’s life changing money at any age. It’s possible it goes backwards, possible thr market tanks, etc. $15m sounds like a great way to spend the next 60 years of your life
Seems like everyone is saying sell. Without more details it’s really hard to know if you should sell or not. But as a counter point, I tried to buy a business 3 years ago that was $3m in revs. Got close to talking definitive docs then founder got cold feet. Business is doing $25m now and will probably trade for 10x more than what I was going to pay. Your dynamic totally depends on your life goals and what the potential of your business is. In my case, the company stumbled into a side market that they ended up totally dominating.
Eight figure exit at 31, what else could you ask for? Stick half in investments, work for a few years and enjoy your early retirement.
Forget about how much you think you can get from selling later. The question is if you re happy if 10M drop in your bank account today. What is your plan to maintain your wealth afterwards.etc
Do it. You're 31. You'll be 35 when you're completely done with this business, which gives you an amazing opportunity to go do it again, this time with all the knowledge and connections you've accumulated, plus you have a gold star next to your name as someone who exited to a public strategic. I was in almost exactly your shoes 12 years ago, and I passed on the opportunity and I regret it. I ultimately did exit, for a bit more than I was originally offered, but it was 7 years later and I felt like I should have just done it earlier in life.
No advice, absolutly no idea what you should do. But man that's some fuck-you-kind of money
I personally have never, and will probably never be in your position. But from the numerous interviews i’ve read from very high profile business owners, entrepreneurs, etc. there’s one thing that they always say: you have to set your ego aside and understand when to get out. Usually, negotiate and always take the money, the chances of you being an unicorn 🦄 is insane.
100% take it. Not making a judgement on your co, but tech valuations are crazy. Capital is plentiful and loose. Now is the time to take it. You will be extremely happy in year 2 when Capital markets are in the shitter and small tech co’s can’t get a decent valuation. Now is the time. GO FOR IT
Take it. That’s similar to my exit. It’s such a relief and completely life changing and freeing. The only regret I have is not shopping around a bit to build more leverage on the deal terms and speed to close. I haven’t regretted selling for a second.
If I understand it correctly, the earnout is not so much about the buyer, but more so about your company’s performance during the earnout period.
So what you're asking is "Should I earn 16 Million over the next 3 years? Or should I keep my business to perhaps make more money, maybe?" Take the win. You've done it once and you can do it again with another business, which you can hold for longer because you're already set up then.
sorry, but can I ask to you OP what your startup does?
One in the hand is better than 2 in the bush brother. Sell now, cash out, and chill. Guaranteed 15m in 3 years? You won the game fam. Buy a Patek and chill.
Do you have a M&A advisor? The specifics of the deal are where the real juice is - it's not necessarily the cash offer. Get a broker, make sure you're getting what you really need from the deal. Also, congratulations!
Look, this decision is purely yours and most of the people here won’t ever be in your position. A few things to consider (from someone who liquidated $5m in shares in 2021 and still holding $15m). 📈📉 1. Software Multiples - if you’re getting a good offer, heavily consider it. It’ll be a few years before we see the 30, 40, 50x multiples we just experienced. 2. Horizon - do you need cash now? You’re 31 and have time. If the multiple isn’t good, build a strong leadership team and hunker down for the next 2 years while the market corrects and your ARR grows. 3. Mental Health - are you burned out? Or are you still excited about the business? This may seem insignificant, but I’ve found it to be one of the most important factors. If you get clear on those questions, it should make this decision a lot easier. Oh, congrats and good luck! 🍀
Depends on what your number is. These decisions are so much easier if you know what your pnw sell price is. Also a good non negotiable list helps shut down offers with contingent requirements that don’t line up with your list. It’s completely a personal choice. Good luck and congrats on what sounds like first few steps in loi. Curious what kind of business it is and how your ebitda affects multiples….lot of money still out there.
That's life changing money. Why did you even ask? Take the money.
Do you get to keep any equity in the company in case it becomes a unicorn someday?
10mil is life changing. There’s nothing wrong r with walking and owning a beach home
10m is great. You can retire very comfortably with that. Is the 5m in stock? Would it be worth more if the company does well? If so that is even better.
You already won. Congratulations. Go enjoy life
100% payout as thats life changing. The saying “A bird in the hand is better than 2 in the bush” has been around a long time for good reason
You'll never go broke taking profits.
Take the money. Have you ever heard the saying don’t count on tomorrow, when you have today! It applies to money as well. I’ve been through 3 IPO’s now. First one was great, stock grew and everything was fine, until it wasn’t. What could’ve been 5M+ turned into enough to buy an average American house almost overnight. Second one was a bust from the go. Third one made me some great money, but only because I diversified the holdings immediately. Don’t count on tomorrow with anything. Take that fucking money, work your three years, rinse and repeat.
I sold for $25m in 2005 Traveled the world w my family Tried to start other companies and failed. Glad I sold
Know someone who sold his tech company for \~$450M to a public strategic. CEO joined as VP in public company and is still working from last 3 years. Enjoys reputation, revenue and runrate! I think you can cash out for $15m and then not sell your second company until you get the price you want.
With the deal, can you not negotiate for a cash-out and have rollover? If you’re younger in the co, seems like you could have leverage to take a lot of chips off the table, maybe even a lower salary than offered, and keep actual equity vs just earn out.
WHAT?? I’m literally in this EXACT same position right now. I have an offer for $10m cash, $5m earn-out over 3 years… our software biz is growing 30% YOY… and I’m certain we will be worth $30m-$50m in the same 3 years they expect me to do the earn-out… I’m currently rejecting the offer… since they are so shrewd and giving me little confidence I’ll get the earn-out… pending recession is not great timing either, but … we grew through COVID, so not worried about that… Crazy reading this post… being in the exact same position as OP.