I wonder how much of a decline in revenue it will have when its no longer owned/linked/shown on 37signals. I bet alot of the revenue comes from internal links and just being owned by 37s in the first place.
I'd guess that they're not just going to jettison it to the highest bidder. I imagine there will be some kind of arrangement between them and the eventual buyer that 37signals will help promote it in some way. (Obviously this is purely speculation on my part, but it would make sense.)
I'd have to think there would be some aid provided by 37s in the changeover process. If nothing else, the service will still reflect 37s in some way in the periods following the change in ownership.
I also think the value that 37s is giving SF is being somewhat overestimated. The revenues are going to be tied in with the amount of people looking for designers. As long as the stream of good customers does not dry out, the site will continue to do very well. At this point, how many customers are being brought in because of 37s? I don't know, but that would be something I'd have to get a better idea of before considering a purchase. I think SF has already gotten all the value from the 37s name that it can, or at least is close to that point. Early on, being a 37s product had tremendous SEO, linking, social news, etc. value. That stuff is already built into the product, so the 37s value is mostly limited to drawing in new customers. I couldn't imagine that value being so high that it's going to significantly effect revenues on it's own.
So let me get this straight -- Sortfolio pulls in $17-20k per month of (relatively) easy revenue, and they want to sell it? That tells me they must be making an absolute killing from their other products.
EDIT: And I'd be remiss if I didn't point out that I got my current job (I'm a web designer/developer) when my boss found me on Sortfolio, so I'm a little sad about this announcement.
37Signals is not selling Sortfolio to make money - clearly they have enough - but because they believe the product deserves a better home.
I believe they won't accept the highest bid as much as the most interesting offer. I don't mean to say they'll give it away to a small, poor startup group; but I do think their preference would be that the next owner take it to the next level both in terms of direction and financial success.
I'm actually more interested in Sortfolio now than I was before. 37Signals is in a position to be as choosy as they'd like with the future buyer. I wonder who they will choose....
37Signals is not selling Sortfolio to make money - clearly they have enough
That's a strange statement. It's also countered by the fact that they're selling the company, for money.. and that they're not interested in equity as part of the sale.
I think the OP is saying the 37s will measure the "success" of this deal on what Sortfolio becomes, not on how much they can make on the transaction. Ergo, if they believe a buyer has the chops to purchase Sortfolio and build it out different markets, they may select that buyer over one that (for example) wants to purchase it for more money and simply shut it down.
I'm not taking an opinion personally, but that's my take on the comment.
"Futher, the Sortfolio model could expand into a variety of other verticals including photographers, wedding planning, catering, illustrators, artists, etc. I’d love to see a Sortfolio for calligraphy or hand lettering."
Hrm, maybe it's obvious now that http://weddinginvitelove.com (directory of wedding invitation designers) was very influenced by Sortfolio. It was the best example of a directory website that put the emphasis on the work as well as shuttling customers to the designer's websites rather than being a middleman. Great to know that Sortfolio was doing so well, gives me hope for WeddingInviteLove!
And it will be interesting to see if there is any change in the monthly revenue because of this post. As you're saying, the 37signals brand adds credibility to being seen on Sortfolio.
If they paid a single developer/designer/salesperson around $80k/yr to maintain it, even after all the perks and insurance and taxes and whatnot, they'd still end up on top if that developer did nothing other than maintain the current number of paid customers.
What could hosting an app like this cost? Very little, I imagine. I'd personally find a service like Happy Cog Hosting (http://happycoghosting.com/) to manage it for me.
Makes it feel like a steal for anything under $1mm (that's approximately 5x revenue), even without the promotion through association w/ 37signals.
I haven't read anything convincing me that this isn't a great deal for an eager entrepreneur.
EDIT: "They" in the first paragraph refers to any owner of Sortfolio. If you take it to mean 37signals, that's fine, but I doubt that Sortfolio has the sort of growth potential that 37signals' other apps still have, and so is not worth the effort to maintain.
"Futher, the Sortfolio model could expand into a variety of other verticals including photographers, wedding planning, catering, illustrators, artists, etc. I’d love to see a Sortfolio for calligraphy or hand lettering."
My thinking exactly ... In fact, I'm pretty confident I could fork SF for weddings and commercial photographers and 3x-5x the revenue within a year (I say that because it's the areas I work in and have connections in).
I also love that SF appears to have some good SEO juice. I googled a couple companies in their directory and their SF profile came up on page 1. I know SEO is a divisive topic on HN, but I think this is a benefit any serious buyer should consider.
From my POV, it comes down to a "build vs buy" question.
So what would be a good offer? If they just run it for another two, three years without spending time on it and then close it down they'd probably make about 600,000$. So the offer should be minimum 500,000$, including perhaps some ongoing traffic/links from them?
That's not bad. If that was the case ($200k/yr profit for three years), the worth would be about $550,000 depending on what you think inflation is. Here's a primer article for you on calculating things like this: http://wiki.fool.com/Net_present_value
However, the market value of the domain plus links plus announcement/traffic from 37signals for the relaunch make it worth much more than that. The price in cash ought to be equivalent to selling a modestly successful startup right now. I don't know what would be appropriate and would welcome additional thoughts from the community.
P.S. The other reply to your post is really lame. Thanks for starting this discussion.
For me, the quality of dribbble has declined a lot the last couple of months. (Your theories are as good as mine.)
The good artists seem fewer and farther between, and where I would also have looked to dribbble before, it just feels like yet another social link to add to your digital CV rather than a place companies trawl for talent.
Bryce, you need to get WAY higher to make this a worthwhile deal. assume you lose half your traffic once they stop promoting it. you still have a decent sized mailing list, so you can sell to those guys, but they might not upgrade once the traffic dies off.
This would be a dream come true for me. I can finally work from home 100% of the time without a boss or anyone to answer to. I can dedicate all my love and passion for web development to Sortfolio.
The only problem is, what is considered a "serious" offer for Jason??? Hmmmm... What if I offer something a lot higher than what he had in mind? (I doubt it)...
Would you take a home equity loan to buy Sortfolio? I am considering it :)
I think they're selling because they're not trying to do everything that makes money, but to concentrate on the things that are the most profitable. For example, you could make money washing dishes, but for most people, there's more profitable work that they could do, so they don't work as a dish washer.
To prospective buyers- would you rather be a dishwasher or try for something that's even more profitable?
$1M is nowhere near a reasonable offer. You're talking 4-5 years to break even just on that sale providing you don't have any competitors. I wouldn't give them more than 1-2x revenue. Of course, I'd have to have 1-2x revenue to begin with ;-)
