Absolute gold for any founder or would-be founder, as are all his posts on TinyPilot and his other web businesses. Raw numbers and transparency abound, and the overall tone is that of a well-organised, fair-minded person.
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This sounds crazy to me. Never ever mix your business and personal accounts for anything! The point of an LLC (in any jurisdiction) is to keep your personal and business concerns separate, so why would you break that rule for Google? Which is why my reaction to these lines:
> I always sent emails related to the business from my @tinypilotkvm.com email address.
> I always used @tinypilotkvm.com email addresses whenever signing up for services on behalf of TinyPilot.
was along the lines of "Well, DUH!" Of course, that's the first thing you do with a new business: dedicated bank account, dedicated email address.
> $920k over four years
so this gives an average yearly salary of 230k. Very close to FAANG senior salary with much more risk, effort and (probably) worse life-work balance. OP quit from google in 2018 and ran some other business, and this is his biggest sale so far. I think it shows how hard it is to make better money outside FAANG even when extremely talented and lucky like OP. But it's probably more about lifestyle choices.
Working for a good company is still the best most consistent way to make good money and have a good life.
I'm European so I don't really click with the obsession some places have with avoiding tax, so you may have to explain it like I'm 5 :-)
The difference isn't just working for FAANG vs running a business, the difference is also working in software vs working in hardware.
$5k/month is $60k/year — I am not myself comfortable with the unlimited personal liability risk that brings without a company.
Yeah, here that's not such a problem; I wouldn't do a LLC at all if it would not really help with selling it.
Now that you've been through this process, how would you go about finding a buyer yourself?
Also, are there any resources you found valuable for starting your business? How did you go about hiring your first employee and setting everything up for them as employees?
Again, thanks for the writeup and congrats on the sale!
I'm currently working on a book about writing as a developer, and that's my main focus for the next few months,, but I don't know if I' call it a business because I haven't sold anything yet.[2]
You have to stick it out for 5 years (the rollover provisions are not well aligned with SAFEs), but all your capital gains are tax free up to $10m.
Reforming the rollover provisions or making it not a hard cut off would certainly be helpful though.
A freelancer spending very little time working probably isn’t making much money. But an employee who spends little time working, is still bringing in those same paychecks, week after week.
Yep, still happy with the decision. A lot of my comp at Google was stock, so I would have made a lot from the stock price movement over the last six years, and I'm a bit envious of that, but still yes.
I do still love the independence of working for myself, so I'm happy to have had the last six years of that rather than feeling unfulfilled at Google.
With everything shifting around AI, and big tech could be doing massive dev layoffs in the next five years. Given that risk, I'm happy to have experience as a founder rather than a dev who could be laid off immediately in a down market.
https://news.ycombinator.com/item?id=42126800
>Do you feel richer or poorer for the experience?
Definitely richer. I'm glad I did it, and it was so much more meaningful than the work I did at Google or any previous job.
>What's next for you?
My wife and I just had our first child over the summer, so I'm mostly on paternity leave to enjoy time with my family, but I'm slowly easing back into work. My next project is a book about what I've learned about writing effectively as a software developer.[0] Eventually, I'd like to try building a SaaS, but working on a book is much friendlier to an unpredictable work schedule at the moment.
where do you think Netflix and google ads fit in Maslow's hierarchy of needs?
Also, big tech had a huge amount of jobs cuts recently.
Q: personal guarantee loans/contracts
I know it's common practice for lenders & commercial real estate to make small business owners personally guarantee the loan/contract.
Did you have any of this? And if so, how did you unwind those contract?
>Now that you've been through this process, how would you go about finding a buyer yourself?
It would have been tough to find a buyer. Before I met Quiet Light, I was worried a broker wouldn't take me, and I'd have to find a buyer myself. So my plan was to (in order) start more loudly telling other founders that I'm looking for a buyer, reach out to more adjacent companies pitching them on a strategic acquisition, discuss on my blog that I'm looking for a buyer, and if all else fails, put up a banner on the store website saying the company is for sale. The problem was that the more loudly I advertise the company is for sale, the more obvious it is to buyers that I'm desperate to sell. It also risks spooking customers who might not want to buy hardware from a company whose ownership is about to change.
>Also, are there any resources you found valuable for starting your business?
Minute for minute, the best resource I've found is Jason Cohen's talk, "Designing the Ideal Bootstrapped Business."[0, 1] The key insight for me is that bootstrapped businesses have very different strengths and weaknesses than a VC-backed startup, so you should pick a business that plays to those strengths.
I also enjoyed Start Small, Stay Small by Rob Walling [2] and The Mom Test by Rob Fitzpatrick[3]. The tl; dr from those is that you need to avoid the trap of building something for months and then looking around for customers once it's done. You instead should flip it and talk to customers before you even start and find out what they need.
It's not a book or resource, but one of the most valuable things I did and wish I did it earlier was create a course. It's a very condensed version of the experience of bootstrapping a business because you need to identify a need, create a product that fills the need, then market it to customers. And you don't have to be the world expert on anything, you just need to know enough to get someone who's at level N to level N + 1 and who likes the way you explain things. And you can pick a small topic and create a course with 30-100 hours of work.
I spent 60 hours on my first course, and it made $10k, so it's not like a smash hit, but it's the highest ROI thing financially I've done since quitting Google.
>How did you go about hiring your first employee and setting everything up for them as employees?
In the first few months, I was assembling all the devices, packing boxes, and printing out instruction sheets myself. It wasn't sustainable because I was also trying to write code and do customer support. It was during COVID and my wife and I were quarantining strictly, but she also was looking for a job since she was in grad school, so she was employee #1.
We started with just Google Docs. I'd write things and share them with her, and she'd ask questions or make updates.
My next hires were developers, which was a pretty dumb decision because it's the most expensive role, and it's the job I like doing most myself. I was finding that I didn't have time to advance the product because customer support was taking too much time, so I should have hired a customer support person. But I hired devs because I'd hired devs before and worked with a lot of devs, so it was a role I felt comfortable hiring. For that, I tried to add lots of automated checks on Github and document things there. I also wrote guidelines on my blog that became official guidelines for devs within the company.[4]
We moved into an office in early 2021, and at that point, I had to hire real W-2 employees rather than contractors. For that I used JustWorks, which I hated. I switched to Gusto, and they were poor but not terrible. In the future, I'm going to avoid creating a business that needs W-2 employees because in the US, it's just set up so badly for small businesses to manage the paperwork around it.
As we were moving into the office, we also switched from Google Docs to Notion, and I had a good experience with Notion. It's set up well for internal documentation, and it's user friendly, so it's easy for everyone to do basic searching and editing.
I could go on and on about hiring, but those are the biggest things that come to mind.
[0] https://www.youtube.com/watch?v=otbnC2zE2rw
[1] https://mtlynch.io/notes/designing-the-ideal-bootstrapped-bu...
[2] https://mtlynch.io/book-reports/start-small-stay-small/
No, the only place where I was personally on the hook was credit cards, but that was fine because I just paid the balance and closed the accounts.
I maybe had to give a personal guarantee to rent our office, but it was $600/mo and the landlord was extremely laid back and agreed to month-to-month after our lease was up.
I didn't take out any small business loans to start the business, as I started it with my own cash, and then it generated enough revenue to sustain itself.
The buyer may have had more complicated agreements with his lenders to purchase the business, but I wouldn't be exposed to any of that.
Your worst case is you lose the deal and the time and money you spent on it, and their worst case is they are fired and lose their healthcare (that is how it works in America right?), is that correct?
Just off the top of my head
>Your worst case is you lose the deal and the time and money you spent on it, and their worst case is they are fired and lose their healthcare (that is how it works in America right?), is that correct?
Yeah, I get that perspective.
As I said, I don't think there's any good solution here. I don't think it's fair for me to hand the company over to someone who might just fire the employees, but I also can't promise to keep everyone in their role forever regardless of a sale.
For added context, everyone at the company worked part-time, generally a max of 20 hours per week. Some were contractors who had multiple clients, others were founders with their own side projects, and others worked part time because they wanted to focus on other things in their personal life. Nobody had healthcare insurance through the company.
So, in the worst case of an owner coming in and firing everyone, it would suck, but it's also not like anyone would be like, "Oh no! I just bought a new house on the expectation that I'd be at the company for the next 20 years!"
The worst case for me isn't just that I lose some time and money. I was terrified of not being able to sell the company by the time my son was born. I was the sole founder and manager, so I can't exactly say, "Okay, I'm going to take a few months of paternity leave. Pay yourselves and our vendors while I'm gone." So I'd be probably in a position of letting down both the team and my family trying to keep the company afloat while becoming a new father.
>This sounds crazy to me. Never ever mix your business and personal accounts for anything! The point of an LLC (in any jurisdiction) is to keep your personal and business concerns separate, so why would you break that rule for Google?
The finances were always separate. The company GCP project was on a dedicated billing account within GCP, so I don't think it violated any rules about business/personal separation of an LLC.
>was along the lines of "Well, DUH!" Of course, that's the first thing you do with a new business: dedicated bank account, dedicated email address.
Dedicated email address: yes.
Dedicated bank account: no, not from the start.
What bank do you use that will give you a dedicated account for every business idea you have before you even know if it will materialize into something?
I have a business checking account under my sole proprietorship before I know if the business will turn into anything. A few months into TinyPilot, I registered an LLC and created dedicated bank accounts at that point.
But there's so much work and friction in opening a business bank account in the US that I couldn't possibly do it as soon as I have the idea for the business. I had ~10 other businesses that flopped before TinyPilot. It's impractical to have dedicated bank accounts for each one ready to go on day one. And registering an LLC is ~$600 all-in plus a few hundred in yearly renewals, plus $200 to shut it down.
Do you think that allows you to expand your market since the hardware is cheaper as you maintain great user experience? Or does that force you to go upmarket as hobbyists need only the minimal feature set?
A lot of very cheap risc-v boards like milk-v duo sbc are available now
I can also attest that in my local small business community I have been met with puzzlement and suspicion for not engaging in expense fraud and PPP fraud. Deviation is almost completely normalized.
>Wondering what your thoughts are of these extremely low cost kvm’s from Sipeed (NanoKVM)?
>Do you think that allows you to expand your market since the hardware is cheaper as you maintain great user experience? Or does that force you to go upmarket as hobbyists need only the minimal feature set?
To be clear, I'm totally gone from the company at this point, so I'm not thinking about strategy for TinyPilot at all anymore.
But I will say that every year, I'd see a new KVM over IP pop up that claimed that they were going to undercut TinyPilot by 60%. And then they fizzle out, and I never hear from them again.
My suspicion is that people see TinyPilot and say, "Wow, that looks like $100 worth of hardware being sold for $400!I could do what they're doing and sell for $200 and eat their lunch and still make $100 on every unit!" But then as you get into it, there are all these more subtle costs like compliance testing, tariffs, customer returns, insurance, etc.
And that's before you even get to customer support. For a KVM over IP, you can't just give customers a "have you tried turning it off and on again?" support response because the issues are more technical and deal with things like NATs and proxies. So if you're making $20 per sale on a low-cost device, and then the customer has one conversation with a support engineer, you lost your profit and probably would have been better off not selling to them at all.
So, I think there's room to reduce prices as hardware prices come down, but I'll be surprised if other vendors can slash prices to below $100 and still run profitably in the long-term.
“Sales below $1M are usually asset sales, meaning that the buyer is purchasing assets from the business but not the business itself. So, I technically still own a company called TinyPilot, but I transferred all of its physical and intellectual property to the new owner.”
Aren’t these contradictory? If it’s an asset sale, the deal is between TinyPilot LLC and the buyer for the assets.
Yeah, that seemed strange to me, too, but that was how my lawyer told me it worked. And the buyer's lawyer cared enough to fight about the exact amount of liability, so I assumed the buyer's lawyer felt that way as well.
In practice, it seems like liability protection would have to change in some way otherwise the seller could abuse the system. Like imagine that I sell the new owner $200k worth of inventory and then the new owner discovers that, unbeknownst to either of us, the inventory has some kind of defect and is unsellable. If the buyer comes back and says, "Hey, I want my $200k back," it would be strange if I'm allowed to say, "Oh, too bad for you. I've shut down the LLC that sold you that inventory and moved all the money to my personal accounts, so there's no money for you now."
Especially at a 2.4 multiple... It seems like you could have just let it keep running mostly on autopilot (assuming the team could keep working on improvements)?
I wrote about that in a previous post: https://mtlynch.io/i-sold-tinypilot/#why-sell
That said, U.S. LLCs are not normal limited liability companies (like they are in the rest of the world). A U.S. LLC is a weird amalgamation of tax and law. Perhaps what you’re describing (as described to you buy your lawyer) is just one more weird aspect of U.S. LLCs.
(Outside of the U.S., a limited liability company is nothing like a U.S. LLC. The closest the U.S. has to a typical limited liability company is an Inc.)
it would have cost me about 2 grand to diligently pay for parking. the actual expense from tickets? about 100 bucks maybe 200. and some of them got automatically thrown out just by challenging them. now towards the end of my time there i did see a guy get towed as he was walking up to his car. i started paying for parking then.
Now I know this is such a broad question, with many factors that could influence whether this pursuit is worthwhile, but maybe your experience could point out whether this is even something to consider. For example, would I even gain the necessary skillsets required to found a company whilst pursuing medicine? Would knowledge of tech compliment a medical-related company, or would I better spend my time working on the non-tech side of a company?
Your writing is great to highlight the complexities in the world of indie businesses. Thanks.
First, a meta comment is that I've found that you should weigh advice based on how similar the advisor is and how closely their success matches what you want. So, given that I came in with a background in software already, my advice might not be a good match for you.
I feel like I went down a lot of misguided paths as a founder following advice of people who were successful but were very different from me (e.g., their goal was to reach $1B in valuation, they love pitching to customers).
That said, the thing I recommend to a lot of people curious about starting out with an indie business is to create a course or a book. People call these "info products" and that term has kind of a stench to it, but I think they're a great way to learn. I prefer the term "educational product" because there's less of a stigma. I created a video course in year three of going off on my own, but I wish I'd done it sooner.
I think people feel reluctant to create an educational product because they feel like they're not an expert at anything, but you don't have to be the world expert on something to make a course. You just have to know enough that you can get your students from level N to level N + 1. You can take something that you recently learned and make a course that you wish that you'd had that would have let you learn the same information in 5 hours rather than 50 hours. And you don't have to be the world's greatest teacher as long as you can find some people who enjoy the way you explain things.
Creating an educational product is like a microcosm of the full experience of launching a business. It forces you to think about what customers want, build something that fills the need, and then market it to find customers who want it. And all that stuff is hard, but it's much easier to do with a course. If you spent 50 hours making a course and find out you can't sell it, you lost 50 hours. You can learn from the failure and try a new course or product the next month. If you spent 2 years learning to code and building a tech product and find that nobody wants it, you'll feel very tied to that idea and have a hard time pivoting to another idea.
I have my issues with Pieter Levels, but I think he's a great case study in trying businesses rapidly and then doubling down on the ones that work. When he started, he didn't know how to code well, so his early products would just be like a Google Sheets spreadsheet that he sold access to.
Google founders themselves could have got a nice job at IBM.
Op is free as in bird too.
this is just bad analysis, and as part of that you don't understand risk.
Financial risk is the variance of the expected outcomes, it is not a component of the expected value. The risk that you will fall short is always balanced by the risk that you will strike it rich; otherwise, you have calculated your expected value wrong. Expected value does not include variance, it's the missing factor.
your faang salary is your upper bound on income, is the cost you bear eliminating the risk; the risk the entrepreneur takes is rewarded by the option on vast riches.
You are looking backward as if you could have guessed a priori what would happen. If you could guess looking-backward-in-advance that you'd wind up with a faang salary running your own gig, definitely worth "the risk".
because he portrayed risk as "the risk of losing money", but that is not a proper definition of risk.
it's easier to understand the concept with the stock market because there is a market price (there is not a market price for startups). If a stock in the market has a price, what does it mean to say that it's a risky stock? that it might drop? No, not if you say that to the exclusion of the risk that it might also go up.
If a company has a price in the market, and you are an omniscient who can definitively say that there are a bunch unaccounted for factors that increase the probability that that stock will go down, what you would conclude (because you are an omniscient who also understands risk) is that the price of the stock is wrong, not that the riskiness has been mis-assessed.
This is an important area of finance, it's the basis, or rather the inescapable conclusion, of option pricing, the famous Black-Scholes model. It turns out the option price calculation does not contain any of the probabilities of what might happen to the stock/company in the future, the option price is only based on the variance of the outcomes. How can that be? Turns out the probabilities (the expected value) have already been accounted for in the market price of the underlying security. If a market is fairly pricing stocks, riskyness means degree of variation in outcomes.
There is a probability in variance, the probability "that you will wind up away from the mean". the FAANG salary is the mean, with no risk, meaning you aren't going to fall below or go above. He called out the other option as "risky" and somehow decided that the outcome this founder experienced was the upper limit, had no chance of being higher. He had no basis to think that, and his analysis is basically Monday night quarterbacking. "Since you didn't make the field goal, you shouldn't have tried, should have tried for a touchdown instead", ignoring that on average it's easier to get a field goal.
> This strategy is not ideal or fair to everyone, but it feels like the least bad of many flawed options.
That's better than the norm, but I agree it's not entirely satisfying.
For sales larger than the one the author wrote about, I wonder whether the possible problems that the author mentioned could be averted by making the sale a win for the employees.
Ideally, the employees already would have enough vested equity, for the sale to be positively life-changing. But if not, maybe, as the sale is planned, everyone gets issued RSUs that vest immediately if and when a deal closes? Or bonuses? Or maybe the sale terms include retaining everyone for at least a year at double compensation?
(More generally, I believe in cutting in early startup employees on equity in a more significant way than is conventional. And maybe the imminent-sale alignment risks are another instance in which significant pieces of the pie would help and be appropriate.)
My sense was that the customers would have been pretty unhappy about that setup. Like, a common question was, "I plugged in my device, but I don't see it on the network. What do I do?" They'd be pretty annoyed if I had just said, "I'll help you if you pay me $99 for customer support."
I think in practice, if I tried to pull that, the customers would just say, "Okay, then I'm sending it back for a refund," or, "Okay, then I'm calling my credit card company for a chargeback," both of which are costly for the vendor.
Plus, I personally don't like the dynamic of customer-paid support. If customers have to pay for support, it incentivizes the vendor to make the product difficult to use so that customers need support.
I always want my products to work so well that customers don't have to contact support. So, if a customer has an issue, I want to feel the cost of that as the vendor so I'm pressured to fix it.
>Or tariffs - is it bad to let the customers know that there are cost differences in the product offered to them due to their request coming from different tariff-impacted markets?
For tariffs, I actually meant tariffs that I pay as the manufacturer. For most of the time I was running the company, we were sourcing most components from overseas and doing final assembly in-house, so we paid tariffs on components as they came in. That's a huge headache, especially when we have distributors in other countries, and we're paying tariffs multiple times for multiple border crossings. And tariffs seemed to change per shipment by 2-3x for reasons that were never clear to me.
Tariffs that the end user pays are a whole other headache. We didn't have a way of predicting what tariffs the customer would pay, so customers would sometimes be upset that we didn't warn them, especially in countries when they receive the tariff bill after they've already received the item. At one point, we tried to use DDP, which is supposed to let us pay the tariff on the customer's behalf, but we tried it a few times and the customer was charged a tariff anyway, so it seemed like it was just a huge expense that did nothing.
In the USA I think you get a lot of resentment over people paying for populations who they don’t feel they themselves are part of. Whereas in Europe it’s more plausibly a “there but for the grace of god go I” situation, where the person using some form of government assistance may plausibly be your second cousin.
Of course no one talks about this directly because it’s wrong think. I suspect this is also why a lot more right wing people are anti tax and left wing people are tax accepting. On the left you have less of the in group out group sentiment, for whatever reason.
[0] https://mtlynch.io/solo-developer-year-6/#tinypilot-became-2...
US LLCs are a comparatively newer business form that was created mainly to be a streamlined form (compared to a corporation) for corporate joint ventures. They've since become popular for other uses beyond the original focus.
The millionaire farmer near us (in Ireland) got state support for sending all his kids to university because of this kind of flexibility, while my parents (wage earning suckers) didn't.
OTOH, look at places like Italy where there's more evasion, because people don't feel that they get anything back.
Especially funny with Germans who still believe they are richer than the eastern part of Europe, but a SWE working for the same US company from here makes 10-20% more due to lower tax. The faces they make when they finish the mental calculations are incredible.
I'm not massively happy about the amount of tax I pay, but I do like living in a relatively prosperous society without too much suffering, so it's fine I suppose.
Generally, the east of EU is much safer and while it's poorer and that is its own kind of suffering, there's nothing like the bombings, muggings, general dirtiness everywhere, etc. I feel perfectly safe any time during day and night in Warsaw, Poznan, Prague, Brno, Bratislava, Ljubljana... Definitely not in Paris, Berlin, Brussels and so on.
Keep in mind stories of people telling how they were passed on by some big name corp just to go on to build something big.