A year of answering questions

LiveRecover sold this summer. The process that ended there started around the third quarter of 2020, which means it took roughly a year, and I'd estimate that a large majority of that year was spent producing documents.

I'd read about exits. Everything I'd read was about negotiation and valuation. Almost none of it was about the actual daily experience, which is closer to an audit than a negotiation.

What it actually consists of#

Someone asks you a question about your business. You know the answer. You do not have the answer in a form anyone can verify. So you go build that form.

Repeat for a year.

Revenue by cohort. Churn defined the way they define churn rather than the way you do. Customer concentration. What happens to the numbers if you exclude the merchants who joined during the 2020 surge. Contracts with the people who work for you. Who owns the code. Which parts of the product depend on which third parties and what those agreements say. Every claim you've ever made in marketing, substantiated.

None of these are unreasonable. All of them are answerable. Almost none of them were answerable quickly, because we'd been running a company rather than preparing one for inspection.

The thing I'd tell anyone in advance#

The work is the same whether you start it two years early or during the process. The difference is whether you do it while running the company well or while running the company badly.

We did most of it during, and the company suffered. Not dramatically — nothing broke — but I was the person answering the questions and I was also the person who was supposed to be running things, and for months I was substantially only doing the first one. Growth in the back half of that year was worse than it should have been, and some of that was me being in a data room instead of in the business.

So the actual advice, which is boring: keep clean books, know your cohorts, have your contracts in one place, be able to answer "what's your churn" with a number you'd defend. Not because you're selling. Because these are the questions a serious buyer asks and they're also the questions you should be able to answer to run the thing well. The diligence list is mostly just a list of things a well-run company knows about itself.

What bootstrapping did to this#

We hadn't raised, and that shortened the process considerably in one specific way: there was nobody else to consult.

No preference stack to unwind, no board with a required outcome, no investor whose fund model needed this to be a different number. When a decision came up, the people who owned the company decided it. I'd assumed the advantage of not raising was about the percentage. It's mostly about the number of parties who have to agree, and that shows up as time.

A year is what it took with a clean cap table. I've heard what it looks like with a complicated one.

The part nobody warns you about#

The wire clearing is not the end. It's the start of a different job — moving a company from your head into someone else's, which is a real thing that takes real months and which I'll write about once I've finished doing it.

And the emotional part, which I'll keep brief because it's the least useful section of any post like this: it's much flatter than you expect. There's no moment. There's a signature, and then a Tuesday, and then you're still answering questions, just for a new owner. I spent three years assuming the ending would feel like something. It mostly felt like the end of a long project, which is what it was.