I Sold My Startup for $25.5 Million

Here’s how I did it.

Brad Flora, back row, second from right.

Photo courtesy  Brian Cary

I sold my startup for $25.5 million on Monday just after 2:23 p.m. Pacific Time.

Selling the company, Perfect Audience, to Marin Software took six months of writing carefully worded emails, meeting secretly in cafés, and pacing around the streets of San Francisco’s SoMa neighborhood after dark. In the end, I sold Perfect Audience—a software platform which helps small businesses buy online ads—on a phone call on which I barely said anything at all. Our lawyers conferred with their lawyers. It was agreed that after weeks of due diligence, the seemingly 14,213 closing conditions had finally been met. Marin’s lawyers declared the deal “closed,” everyone dropped off the conference call, and my company officially belonged to someone else.

Poof! Gone.

Perfect Audience started as an ad design product called NowSpots, which was itself spun out of a previous company called Windy Citizen, a local news aggregator that I bootstrapped (entrepreneur speak for self-financed). NowSpots got me into YCombinator, the prestigious startup incubator, in 2011, and I raised a $1 million seed round for it. But it became clear that the market for ad design products was tiny compared to the market for online ad buying. As we learned how advertisers buy online ads, it became clear that ad retargeting—in which you show ads to people who recently visited your website—was where marketeering dollars were going, and that there was a need for an easy-to-use software solution.

Fast-forward to November 2013. My co-founder, Jordan Buller, and I had a 14-person team, more than 5,000 customers, and a business seeing double-digit growth month over month. We’d managed to use what remained of our $1 million seed round to build a legit company. Enter Marin.

The acquisition process started in late November, when we received an email from someone at Marin asking to discuss a strategic partnership. When founders are starting out, partnership inquiries sound really exciting. In theory, a successful partnership with a larger company could help your company get more customers. What you realize, though, is that partnerships are rarely a real thing. When you work with another company, either they are your customer or you are their customer. Anything other than that usually just eats up time and energy. 

After years of pointless meetings, if something sounded promising, I’d take a call, but just one. So I took the call with Marin. That led to an invitation to demo our ad retargeting software to execs at Marin. Over the last two years I’d given hundreds of product demos to small groups of potential customers. This time, though, when I walked into the room, nearly 20 execs were there to hear it. A 30-minute demo turned into a two-hour discussion. We were impressed.

The next week Jordan and I were invited to demo for a smaller group, including the Marin CEO. We were asked if we’d be interested in discussing an acquisition. We said we’d be open to offers but weren’t looking to sell the company. Given how well the business was doing, we just had no need to sell.

The first offer came a week later. The three months that followed were a blur of negotiations, heated exchanges, asks, counters, and conferring with investors.

Eventually we agreed on terms and signed what’s known as a term sheet. A term sheet is like an agreement to agree on something. By itself it’s more or less meaningless, but in the Valley, they are sacred indicators of intent. Once a term sheet is signed, a deal is going down …

… unless something horrible happens during due diligence, which began soon after. Marin’s team sent over a list of hundreds of technical, legal, and business questions that we’d need to answer for the deal to go through. What type of database had we used? Had we used any software we didn’t have the rights for? Did we have IP assignments from every contractor who touched our code? How did our billing system work? How did we make money? How much money were we making?

Tracking down document after document was tedious beyond compare. And during this time, we had to keep the whole thing a secret from our employees. This meant that Jordan and I were effectively leading double lives for two months. The company kept growing revenues each month, but the stress was killing us.

Eventually Marin’s team was satisfied with our company and we were satisfied with the terms of the deal and their plans post-acquisition. That meant it was time to get the thing closed.

It turns out that closing is actually really hard to do. For starters, we had about a dozen investors who needed to sign off on the deal. Each of them had questions and concerns about various deal terms. We had both former and current employees we needed to run the deal by. Unlike a lot of other startups that give options to their employees, we’d given them actual shares, which made them all shareholders and required us to get their consent to the deal.

Telling the other 12 people on our team about the deal was itself a challenge. We wanted to tell everyone in person, but three employees work in Chicago, and one is based in Raleigh, North Carolina. So we needed to fly people to San Francisco on zero notice. Meanwhile, other employees had left on vacation or planned to work from home. Eventually we got everyone together in one room, for the first time in the company’s history.

When I shared the news, the team stared blankly at me, unsure if it was a good thing or a bad thing. My co-founder popped open a bottle of champagne and started pouring. We answered questions for an hour, and with each answer, it became clear to the team this was actually a really terrific outcome. The financial case was straightforward: Having only raised $1 million in funding, the vast majority of the deal proceeds would go to employees. Also, a significant piece of the deal—more than 10 percent—had been set aside for restricted stock for them. They were getting significant windfalls and in some cases had worked for us for less than a year. Getting to tell our employees—people who took big risks to join our little company—that their decision had earned them a big chunk of cash and stock was the best part of the process.

After the deal closed, I announced it on our company blog and with an email to customers. This wasn’t really necessary because TechCrunch and a host of other startup blogs had already gone live with the story 90 minutes earlier. The press coverage was straightforward, but the reactions on Twitter and sites like Hacker News were surreal. Total strangers on the Internet were speculating on why we sold, how much we might have made, and what our revenues might have looked like. Our company’s biggest news day came on the day it ceased to exist as a legal entity! These days, most startups “exit” in a blaze of clichés, never to be heard from again. These “acquihires” are acquisitions in name only. I wanted to make it clear that we’re not going anywhere.

I wish I could say I felt elated, that I experienced the thrill of victory, or started hatching elaborate plans to spend my returns from the deal. But in those moments right after the deal closed, I was just too tired. I just wanted to take a nap and then get back to work and normalcy. Intellectually, I know this is a life-changing event. The financial rewards are great, and if I ever want to start another company, every piece of that process will be easier. But it’s going to take awhile for all that to sink in. For now I’m just glad to be done talking to lawyers three times a day and excited to return to solving business problems.

One thing that did cut through the exhaustion was a task I’d been anticipating for more than six years: writing the Facebook post in which I announce to friends, former friends, frenemies, ex-girlfriends, college roommates, future wives, and family members that I was not in fact an obscure failure but a new, minor footnote in the annals of Silicon Valley startup successes. 

Writing it was easy. I’d had six years to plot it in my head. I kept it simple and tried to strike the right mix between “Aw yeah!” and “Aw shucks!” No one likes a sore winner. I pushed it live and watched as over 400 comments rolled in. Meanwhile my phone buzzed across my desk as it received text messages from people I’d not heard from in years. The middle school crush. The Sunday school teacher. The startup friends from Chicago. At last!