The Bootstrapped Founder Newsletter Episode 9 – January 10th 2020

Dear founder,

When founders talk about due diligence, they usually mean the kind of insight a potential acquirer wants into the business. Rarely do founders talk about the reverse: the sort of insight a founder would want into the acquiring company.

At FeedbackPanda, we wondered why there were so few resources on vetting your potential acquirer. We built our own system and applied it to every acquirer that came our way. I’m sharing this system today in a blog post called So You Got an Offer: How to Do Due Diligence on Your Potential Acquirer.

Here are a few takeaways:

  • Lawyers: Get them when you start signing irreversible documents, not before. Not every potential buyer is worth the legal fees.
  • Make a List, Check it Twice: Research the acquirer, find who sold to them in the past. Ask for references. Make a list of who you want to talk to. Get a list of who your acquirer wants you to talk to. Then, talk to the names that are only on your list first. Then the rest. This approach will surface problems quickly.
  • In phone or video calls with references, ask for how the transition went, how the team was treated, how goals were aligned, how much the acquirer needed to be taught.
  • Do a background check on the money. Are the funds clean? Are you okay with who pays for the acquisition?

I also list all the red flags we checked for in our seller-side due diligence process in the blog post. There are a few things that should make you question if you want to go through with the process, mostly centered around communication problems and power asymmetries.

In the end, it’s all about trust. You need to build trust with the acquirer, and they need to trust you. Be honest, expect honesty, and things will be as smooth and transparent as they can be.

Read the full article on the blog: So You Got an Offer: How to Do Due Diligence on Your Potential Acquirer.

In other news, I finally started working on a passion project of mine. Before I even started writing for The Bootstrapped Founder, I had this idea of sharing my experiences with stress and anxiety. Mental health was one of the things that people didn’t talk about much in the past. Only recently has there been a change in the collective psyche of the startup world to take this seriously.

During my time running FeedbackPanda, I experienced all kinds of emotional upheaval. Anxiety, fear, stress, trouble sleeping, all these things wore down on me at some point during my journey. While I experienced these things, I took notes and made remarks, but I never had the chance to reflect on that entirely. Until now.

I have started publishing a new series called The Emotional Journey of a Bootstrapped Founder, and the first article in this series is about the Fear of Slippery Slope. I had to deal with that fear a lot, as I was responsible both for fixing problems with the tech stack as well as talking to our customers and telling them that their problems would be solved. Through that, I developed a pavlovian panic response to the sound of error emails or Intercom conversations coming in. It took me a while to reframe my thinking, and the article will explain how I did it and what actions I took to reduce the chances of it happening again.

I will continue to release articles in this series from time to time. There are a lot of emotional states to cover throughout the journey of a bootstrapped founder, that’s for sure.

What Happened in the Bootstrapped World

I found myself looking at some startup playbooks recently. While “Definitive” and “Ultimate” guides are abundant, I could only find a handful of reasonable resources that describe the inner workings of successful businesses without being an obvious marketing play. Most of those take the form of employee handbooks and are usually very specific to the businesses that issue them.

This week, I will share a list of those insightful resources so you can bookmark or read them for when you need some inspiration for your own entrepreneurial journey.

The biggest and most renowned bootstrapped player in this field is Basecamp, with its open-source handbook. It offers an in-depth glimpse into the social fabric that makes Basecamp the well-oiled sustainable machine it is. From product explanations to who does what, the handbook shows a level of detail and operational awareness that is very admirable.

The Gitlab employee manual is just as detailed. It spells out every role, names the responsible people, and expands what they do, and why. It’s a living, breathing document that shows how a remote-first company spreads its culture and keeps knowledge and processes aligned. Every section clearly communicates how feedback is supposed to be presented, leading to a remarkable clarity of communication: a must-have in a remote company.

Netflix has an extensive Culture document (and a Reference Guide) that highlights how interactions between colleagues are expected to happen. Core concepts are explained in detail, while company goals and aspirations are made manifest through the behaviors that employees are expected to exhibit.

HubSpot’s Culture Code comes as a slide deck. It’s a fun, aspirational document that makes it clear from day one that HubSpot is passionate about their customer’s success. The empathetic self-awareness of this document shows clearly that they expect employees to have their heart in it.

Trello uses the ultimate dogfooding approach to their employee manual: they offer a template as a publicly available Trello board. While their internal version is private, the structure of the template alone is interesting and thought-provoking.

While much more corporate, the Atlassian Team Playbook contains a multitude of step-by-step plays ranging from conducting customer interviews to mind-mapping an idea. It is process-focussed and can be applied to any team. It seems to have grown from Atlassian’s internal practices. It’s an excellent resource for later-stage businesses, but even a newly created business might benefit from many plays there.

If you’re interested in looking into more of this kind of handbook, I recommend checking out Tettra’s Culture Codes section. And of course, an honorable mention goes to the handbook that triggered my research into this topic: the Valve employee handbook.

Links I Found Interesting

The Earnest Capital Investment Memo (draft) made the rounds on Twitter this week. In this gigantic document that is well worth every minute of your time, Tyler Tringas explains in great detail how Earnest Capital is looking at the SaaS market. The ecosystem for bootstrapped businesses to become small yet sustainable entities is more inviting than ever, and the resulting companies are turning into an asset class of their own, just waiting for investment. We will see more and more funding opportunities for bootstrapped businesses over the next few years, and they will come without the growth expectations and alignment issues of Venture Capital. Read the memo; it is encouraging and exciting to be part of this wave of businesses.

I did an AMA on Indie Hackers on the 8th of January. There were many interesting questions about many different topics, so if you enjoy my writing and want to learn more about me, please check it out.

Bootstrapping Success Stories I Noticed

Sai of Crowdcast reported this week that his business is now profitable! That is quite the accomplishment for any company, so congratulations Sai. It is particularly impressive since Crowdcast is a community-building tool, and that is an incredibly hard market to make money in with all the chicken-egg issues you can expect from such a niche.

Peter Vu of Habitify had a significant milestone to share this week as well: his habit-forming product reached $21k MRR, and almost 890k installs after four years. Habit formation is a wonderful market: you help people reach their goals, and if they succeed, you make money. I’ve been a big fan of the book Hooked by Nir Eyal that outlines how such products can be created. I suggest this to every founder that asks me about a product. It looks like Peter was quite successful in building one of those.

And here is one more of the small wins that will be the first of many: Francesco reports that Mailbrew, a tool to automate the creation of newsletters, had its first paying customer! And with people like @dhh recommending the product, he’ll have quite a few signups by now, I’m sure.

Thank you for reading this week’s edition of The Bootstrapped Founder. If you like what I wrote about, please forward the newsletter to anyone you think would enjoy it too.

If you want to help me share my thoughts and ideas with the world, please share this shareable link to this episode of the newsletter on Twitter or wherever you like, engage on Hacker News, or reach out on Twitter at @arvidkahl.

If you want to send me a testimonial of how much you enjoy reading the newsletter and how it informs your journey as a bootstrapped founder, that would be wonderful, as I am getting ready to “publicly launch” this newsletter shortly. It would be much appreciated if you could send a short sentence or paragraph as an email. I had received a few helpful testimonials from my dear readers last week, so thank you for those of you who sent one in!

See you next week!

Warm Regards from Canada,