Hiding inside the incredible journey

At some point, it seemed that everyone who’s company got acquired was handed talking points for a spiel about Our Incredible Journey. There’s ample reason to laugh at this trope, but there’s also ample reason to dig a little deeper.

(I enjoy playing an armchair remote psychologists because it’s both easy and the patient doesn’t talk back. It’s also pretty likely to be wrong for any particular individual, so take the following with a grain of that extra coarse, seaside salt that people who’ve sold their company can afford.)

I think part of the reason that so many exiters have latched on to The Incredible Journey trope is exactly because it’s a trope, and therefore safe. It shows proper deference to the company’s new overlords, it tries to soothe the sting for employees who’s work will now likely be distorted or flushed, and, most importantly, it seeks to reaffirm the seller that They Did The Right thing.

We all want to do the right thing. So badly that even when we’re doing things that aren’t “right”, we just come up with fanciful reasons for why those wrongs shouldn’t matter or aren’t important. I think that’s what’s happening here.

The Incredible Journey also offers a convenient banner for people who want to cheer on someone selling their company. One that’s more palatable than “hey, congrats on that big check!”. If we all pretend to believe that The Next Step is this beautiful leap to unlimited resources, backing, and potential, hell, we can have a party instead of a wake. How convenient!

Yet it’s still just a refuge and a bit of a sham. Imagine how much more liberating it would be for all parties, if you just spilled the beans however they got baked. I think customers of products that got shuttered or neglected after acquisition would be more forgiving and understanding, if this journey bullshit was replaced with some honest truths instead.

Like, “I was just not sure whether this thing ultimately had legs. And it’s the best idea I’ve ever had. I’ve dreamt of buying my mom a new house since forever. So I just couldn’t stomach the risk that this dream would evaporate. I’m sorry / not sorry!”.

Or, “I started this company because I really didn’t have another idea at the time, and pursuing Flappy Bingo seemed like a hot thing to do. Now it’s big, but I still don’t care about the particulars of Flappy Bingo, so better I pack my bags and find something I really care about. Adios!”

Isn’t the whole point of cashing a fuck-you sized check that you can finally tell people how it really is? Give it a try next time and let that incredible journey take a rest.

How we put together a simple deal to spin off Know Your Company

It’s easy until you make it complicated. So don’t.

Back in June of 2013, we launched Know Your Company. We built it in a few months with a small team of 3. A few months after launch it had generated a couple hundred thousand dollars in revenue, so there was definitely a good business brewing.

Later that year we made the decision to focus our business exclusively on Basecamp. That meant we’d either sell, spin-off, or roll bits of our other products into Basecamp. These products included Highrise, Backpack, Campfire, and Know Your Company, among others.

Jumping ahead, we decided to spin-off Know Your Company into a separate company. And we knew the perfect person to run it: Claire Lew.

Skipping over the why to get to the how

There’s a long back story about how we met Claire, why we decided she’d be right to run Know Your Company, etc. But I’ll save that for another post. I want to get right into how we structured the deal.

But first, there are a million ways to spin-off a company. And most of them are fucking complicated. Complicated stuff is anathema to us at Basecamp, so anything messy, extensively lawyer-y, protracted, knotty, or otherwise elaborate was off the table. So what was simple?

How we structured the deal

At the moment of the spin-off, Basecamp owned 100% of Know Your Company. The product had generated a few hundred thousand dollars of revenue at that point, so it was a nice growing business, but it was still young and mostly unformed. Its best days were way ahead of it.

So we decided to give Claire half of it. We’d own 50%, she’d own 50%. Her 50% wouldn’t cost her anything.

We wanted her, she was up for the challenge, and the money that she would have to normally come up with to buy-in wasn’t an amount that mattered enough to us to put any hurdles in the way of making it happen. Plus, we didn’t have to mess around with silly valuations either. Why complicate things?

We’d maintain that 50/50 partnership until she generated $1,000,000 in new sales. It could take 3 weeks, it could take 3 months, it could take 3 years. The $1,000,000 was cumulative — she’d hit it whenever she hit it. And when she did, we’d flip the partnership in her favor. She’d now own 75%, and we’d own 25%. And that’s how it would run in perpetuity.

It was that simple.

Here’s the actual term sheet to prove it:

I’m sharing the non-signed version so we don’t publish signatures.

It was signed on November 20th. She hasn’t hit the $1,000,000 marker yet, but she’s real close (over $700k so far)!

These things can be simple

Talk to enough people about spinning things off, putting deals together, writing up agreements, coming to terms with people, etc. and you’ll inevitably hear how complicated it is. But it’s not inherently complicated. It often becomes complicated. Just about everything can be made complicated. In fact, spend enough time doing business and you’ll notice that making things harder than they need to be comes naturally to most people.

I believe simple is actually the natural state of things. It’s simple until you make it complicated. This goes for just about anything in life and work.

I hope the way we structured this deal — simple terms, a single one-page plain language agreement, a handshake, and a ‘we’re here to help any time’ will serve as an example of how simple a deal can be.

It’s been a blast to see Claire grow the company, improve the product, and service the customers. We get together a few times a year and riff on ideas, help her think through some challenging product decisions, and talk shop. And in between the face-to-face stuff, we have a Basecamp project set up where we discuss finer details, review numbers occasionally, share ideas, and get updates from Claire when she has something to share. It’s perfect.