What's the lowest offer you'd take?

We're working hard on finishing up our YC application, and we're having a lot of problems with this one:<p>"If one wanted to buy you three months in (August 2007), what's the lowest offer you'd take?"<p>First of all, what if we're not particularly interested in selling the company that fast? Should we just put some ridiculously high number that no one would actually pay?<p>Also, the numbers would seem to vary significantly depending on the details of the acquisition. Are we getting jobs at the purchasing company with good salaries, stock, and creative freedom? Or are we getting some lump sum? Should we put different numbers for different situations?<p>But assuming we knew we wanted to sell and knew some specifics of the deal, it's still hard for me to come up with hard numbers. Should I base it on how much money we think the product will make? Or perhaps how much money we want to have in the bank to fund future startups? Or on the estimated value of our assets after three months?<p>How are you approaching this question? What factors are you considering? Any help is appreciated.

The figure you give depends on your feelings which are created from your internal and external circumstances. I immidiately asked myself the question, "What do I want?"<p>This was my answer: $2,000,000 for property, $1,000,000 for the house (I live in Silicon Valley), $2,000,000 for traditional reinvestment, $1,000,000 to start the next company, $6,000,000 total for each partner,<p>After three months, it depends on where the software is. However, the purchasing company will be the one evaluating that aspect. For me, it is a question of what I want versus what they are willing to give in return.

To valuate your company after three months you have to take two things into account:<p>A) How much value will you have created be the end of three months?<p>B) How much value will you still be able to create?<p>If you only have enough talent and ideas to last you for three months, you don't get funded. And if you think you'll have nothing done by the end of three months (but will still have talent and ideas), you also don't get funded.<p>And if you're able to create something of great value after three months but you'll still have lots of value left to add, then just unask the question because the answer is irrelevant.

The lowest, R4,000,000 (ZAR), it's about $540,000.<p>Invested month-to-month at a fixed interest rate of 8% gives you more than R26,000 ($3,500). After taxes it's roughly R19,000.<p> I don't know about the USA but in South Africa this is a fairly decent amount of money to receive each month.<p>I would use the money to purchase a home and a car (required in RSA) and focus on my next startup.<p>Aaagh. No stress. Just fun.

I will pull a Zuckerberg and turn down 2 billion

Guys, when formulating your magic number in your head, not forget to include taxes...that's up to 50% gone right there. So your $1M is now $500K. I speak from experience on this. It's a good story over a beer.<p>btw - Did you know the SEC is going to pass a rule that no longer considers people with $1M in assets "rich", they are changing the bar to $2.5M...this was in last week's wall st. journal.<p>This is a tough one to answer since I am committed to my idea, and while money is important I want to see it through. To an investor though, their goals are to get out as soon as they can with as much as they can. Obviously you can't have a $100M company in 3 months, but you could have something that gains A-round valuations from a VC.

I'd want to walk away and be able to look someone in the eye and say "I'm a dot com millionaire." So with the share structure, capital gains tax (guessing), and exchange rate the number I'd pull out of my ass would be four million for the whole shot assuming no dilution.<p>Three months is long enough to know if I really believe in something or not. I wouldn't sell out on anything I believe in for less than this. If that money isn't on the table after three months, I can wait and put in the sweat and time to make it worth that much.

As a follow-up question, I think a nice addition for the application would be: "Aside from what you are currently making, what is driving you to be an entrepreneur?"<p>Paul, you mentioned that one of the key characteristics of a good team is persistence and the unwillingness to give up. When you have no fall-back and absolutely must succeed, it can be the difference between success and failure. YC can infer a lot from the rest of the application, but it might be beneficial for both parties if we were explicit about it.

I'd say that not the amount of time spent on the development of the software is the crucial question but the expected earnings. If the idea is really novel or promising and the expected revenue huge than an investor is paying for the idea and probably the team and not for the work done in these three months. If the team consists of gifted inviduals and a great idea than it seems to me not to utopian to accept only a very high sum because it is rather rare to have a very promising idea and gifted people together.

70K net, if the alternative is a 20% chance of getting rich after a couple of years. 70K is below YC's average initial valuation, as I understand it. I wonder how much it would bother them... 70K is enough to live like a student for 10 years in a low-cost region, to learn and work on just about anything.

Why do you have to take an offer at all? It normally takes anywhere from 1-2 years to make a site successful enough to justify selling for a gargantuan amount. In 3 months, how much growth can you get to show enough promise of future growth/monetization?

Don't quote a number, quote a multiple instead. :-) eg. If XX invests 20k for 10% in your company. their 20k becoming 200k is a good deal which implies something like 2M for your company (not bad for three months work!)

For PG: Paul, if you absolutely have to have this question in the application, it might help to add the word "cash", e.g. "What's the lowest cash offer you'd take".

Making a point that one is thinking about what is their low offer means he/she is only for short term gains and realizes their idea is not worth that much.

wow I am surprised this has gotten so many comments. Obviously it depends on the value of the company. If threw together a prototype that hadn't seen a single user and there was no apparent IP, then 100k would be a ton of money. If I were sitting on the next YouTube with millions of users added each month, then 1B+.

just my opinion but i'd approach this question more from the angle, what is the $X I need to have financial freedom. do the math based on the % of the company you own to work out how much you'd need to sell the company for to make that amount. $X is going to vary for everyone.

[dr evil]One miiiiiiiiiiiiiiillion dollars[/dr evil]