Carsonified

So as most of you know, DropSend is on the block.

I apologize for the lack of updates. One thing that I’ve learned about selling a web app is that most of the time is spent waiting for people to get back to you.

The scales have fallen off my eyes

A friend of mine expressed interest and we started trading emails. After several emails back and forth about the figures, I got this amazing response:

Ryan,

I’m just going to be really honest with you. Simply because I don’t want to see someone purchase your site, run some basic marketing on it and make a killing off of it, whilst you did all the hard work.

I plain don’t understand why you haven’t marketed DropSend. Or got someone on a salary (preferably in the US) dedicated to just that task now that the product is complete. I reckon your 5 (?) potential buyers are thinking of doing just that.

I can already see some of the people on Ed Dale’s Dominiche system (the art of buying and selling websites) smacking their lips in anticipation of ‘flipping your site’ with some basic marketing.

Some basics:

1. Adwords. Get Perry Marshall’s Definite Guide to Google Adwords. Run some PPC campaigns focused on getting traffic to various landing pages around the idea of sending stuff over the net. Get signups for your list so you can run autoresponder sequences.
2. Autoresponder sequences. The landing page from a PPC ad has an opt-in form. Get the sign up and send a free five part mini course comparing all the file sending programs out there and the best way to do it + free access to the tool for 1 or 2 sends. This gives you permission to contact people each day for the five days. Then do an upgrade on day five for a ‘discount’.
3. Organic. Articles submitted to article directories for some decent backlinks with keywords in them.
4. Blog for same reason. Short keyword rich articles on your blog to generate some nice back links and bring in some organic traffic.
5. Back end. Once you have sent out the five part mini course it’s time to start sending out information on other related products that you have a % affiliation with. People interested in sending large files are probably interested in video streaming services (low end/high end), folder sharing apps. Each email will generate a nice load of signups and some nice commissions for you.
6. If you’re not sure what they want then ask them with a multiple choice survey email. Segment the responses into more refined lists that you can mail. I like manageprocrm.com for heavy duty autoresponder action tracking and response. I also like getresponse.com for more just basic autoresponder stuff.
7. Affiliates. Does dropsend have an affiliate system? Get your affiliates to sell your product for you.

These are just the basics of internet marketing. But at the very least you should read Perry Marshall’s book or get someone else to read it, implement his strategies. Get a ton of paid traffic (search network & content network), monitor conversions with the Google adwords & analytics tracker and drive some more sales. Then do the autoresponder stuff to follow up with those who signed up to your opt-in form so you don’t waste the adwords click. Remember ‘frequency x time = reach’.

You’ll quadruple your income.

Hope that was helpful :-)

I felt like someone had punched me in the stomach. How had I not seen this? Why have I been wasting DropSend’s capabilities to bring in valuable revenue for us?

I guess sometimes you can’t see something until someone puts it right in front of your face and slaps you around a bit. Hey, I’m always the first to admit I don’t know everything.

The plan

I’m not sure my friend’s advice is 100% the way to go, but it’s a damn good start.

We’re going to start by moving Lisa off of managing FOWD and onto marketing DropSend almost full time (the remainder of her time will be spent maintaining Vitamin). We feel she’s got an amazing ability to learn quickly and she’s got a great marketing brain.

We’re temporarily moving Mel onto FOWD (she’s one of the best events organizers we’ve ever seen!), while we look for another events person to bring on board. This will help with the events load.

The goal

Lisa’s got a goal of tripling DropSend’s monthly revenue in eight months. We think she’s got a great chance, considering we haven’t been actively marketing it. After that, we’ll put it back on the market and hopefully achieve a much higher sale price. Our new mentor/advisor has offered to help us sell it at that point - he’s got the skills and connections to make it happen.

Hell, even if it doesn’t sell and we’ve tripled the revenues, we’ll keep it and enjoy the extra cash! :)

Well, that’s the plan. Let me know what you think! We’re sure excited.

I was browsing TechCrunch today and was surprised to see an article about DropSend (one of our web apps) called “Anatomy of a Failed Merger“. It’s about my writeup of the failed DropSend-YouSendIt acquisition.

As I said in the comments, the reason why I wrote the post was to help other small companies like us, to understand how these negotiations work. It’s pretty scary and confusing if you’ve never been through it!

If you’re hoping to sell your web app or company some day, I hope that you find it useful.

Here’s the latest on the DropSend sale …

YouSendIt, one of the big buyers, has dropped out. Here’s the whole story.

It started at Web 2.0

I received an email from Khalid Shaikh, one of the founders of YouSendIt, asking if we could meet up at Web 2.0 and chat about DropSend.

I obviously got excited as YouSendIt seemed like a great fit for DropSend. It would help strengthen their offering while also making a powerful statement to the industry that they’re serious about dominating the large file sending industry.

I sat down with Khalid in the hallway at the conference and we had a nice chat. I broke out my laptop and showed him some of the stats from the backend of DropSend. He was impressed and it was looking pretty positive. (By the way, there’s a great lesson here: potential buyers love quality stats. The fact that we had very detailed reports and graphs on DropSend impressed Khalid quite a bit.)
I figured I’d cut to the chase so I asked “Do you want to know how much we’re looking for? We might as well get it out into the open!”. He smiled and said “Sounds good. Hit me.” (or something like that). I said “In the range of $1M US. What do you think?” He was said he was relieved as he expected me to say something crazy like $5M - $15M.

We chatted for a little while longer and he said he’d make a presentation to the board and get back to me. He didn’t promise me anything but said he liked DropSend and he’d let me know what they said.

Waiting …

And then the waiting began. Khalid emailed some facts to the board, including Ivan Koon, the CEO of YouSendIt. I asked if I could blog about our conversation and Khalid said the board wasn’t comfortable with it (Damn!). I had a couple quick chats in the hallways of the conference with Mike Arrington (TechCrunch) about the possible sale and I said I’d let him know first if they make a solid move.

Well, that didn’t happen right away. Khalid said that if they board was interested, they’d let me know and I could head out to their office in Mountain View for a quick meeting before I got on the plan back to London.

For whatever reason (Khalid didn’t tell me), that meeting didn’t happen. I think things were busy over at their office and they just didn’t have enough time to prepare for the meeting.

Khalid said he’d be in touch and let me know what happened.

Phone meetings

Once I got back to the UK, I received an email from the personal assistant of Ivan Koon, the CEO of YouSendIt, requesting to setup a phone call. Of course I got excited about it and we set up the meeting.

Ivan and I had an interesting chat. He’s a very smart man (ex-Adobe) and I respect him very much. He basically said that he didn’t need DropSend’s technology. Their system is very impressive and the number of paying customers that DropSend would be offering just wasn’t big enough to warrant an acquisition. At that point, my heart sank.
However … they were very interested in our access to the creative market. DropSend has made large in-roads to the design and moving image industry. We have a ton of clients on the Business Plan that are designers, motion artists and creative professionals.

Obviously YouSendIt wants to dominate this market as these are the folks that are willing to pay for sending large files. If you are creating large PDFs, JPGs, QuickTimes, etc, then it’s worth your money to pay for a reliable system to deliver these to your clients.

Acquiring DropSend as a marketing move

So what it came down to is that they were interested in buying DropSend as a statement to the creative industry that they are the market leaders.

And this is where the talks started to break down. They just couldn’t justify spending $1M on a marketing move. It’s just too much. If they needed the technology and the paid customers, it would’ve been a different story.

The final phone call

We setup one final phone meeting with myself and about five of the YouSendIt folks. It was pretty intimidating, actually. Thankfully everyone on their side was super friendly and easy to talk to.

At the end of the conversation, we all basically agreed that the only reason they would acquire us was to make a strong marketing statement - and that’s just not worth $1M.

What’s next?

Well, we’re still in talks with two large buyers and we’ll see what happens. I’m still hopeful that we’ll sell it, but even if we don’t we’ve got two great things going for us:

1. We’ve learned a ton about how to sell a web app / business. It’s been fascinating, scary and exciting.
2. DropSend is still profitable (and continues to increase in revenue)!

We’ll keep you updated.

In case you missed it over on Bare Naked App, we’re in the process of selling DropSend. I’ve decided to move the discussion over here at Carsonified.

I thought it would be useful to share some of the questions we’re getting about the app. This way, if you want to sell your app, you can research these things before you sell:

1. What is the churn rate?
2. Are there any patents held by Carson Systems that relate to DropSend? Are they included in the sale?
3. In your opinion, how long will it take for a developer/product manager on our side to ramp up with the application so as to be able to add features, debug, trouble shoot, etc.?
4. How do you handle security of files during transfer and storage? Do you manage SLA’s at all with your SMB clients?
5. I have looked up traffic figures on Alexa for DropSend, do you use a different tool?
6. How goes the process with the other two interested parties?

DropSend Churn Rate

The most interesting figures are in our Churn Rate. Note: Churn rate is defined as what percentage of your customers cancel the service per month.