Growing and selling an indie business | Michael Lynch (TinyPilot)

Michael returns to the show to chat about growing TinyPilot to $1M ARR and recently selling it for $600,000

---

Having quit Google in 2018 to bootstrap indie software businesses, Michael is known for writing very transparently about the ups and downs of his journey. After recently selling his hardware business TinyPilot for $600K, Michael returns to the show to chat about the misconceptions about running an indie business, the hardest part of selling a company, and why “hardware is definitely out” for his next move 😂

Ronak & Guang’s Picks

#1 The biggest misconception about running an indie software business

“is how great it is.”

“I met a guy at a meetup a couple of years ago, and he was like, ‘We've got a lot of users, they seem really enthusiastic, but like, we're just not making money, so I think I'm just going to give it up and like, go back to working for a big company.’”

“And the way he was talking, he sounded so grizzled and distraught that I was like, ‘Oh man, he seems like he's been at it for like five years or something, he's so burned out.’ And I was like, ‘How long have you been doing this?’”

“And he was like, ‘Three months.’"

😂😂😂

Needless to say, having built a product and gotten real users in only three months is actually way above average - it took Michael 2 years before building something that had traction.

As Michael points out, "there's this kind of Instagram effect where there's a heightened reality that people present online. And I meet people at meetups who want to start an indie business, and their expectations are so high for what it's going to be like. They hear these stories about people quitting their jobs. And six months later, they're making a hundred thousand dollars a month from some SaaS business."

#2 Value Created vs. Value Captured

Which kind of work would you pick?

• Work #1: You create $2M in value for the company and you're paid $400k.

• Work #2: You create $200k in value and keep all of it.

Michael makes the case for picking the latter: "Another big thing that I really like about being an indie founder is knowing that there's not this distinction between the value that you create and the value that you get to capture."

"That was a really frustrating part of working for Google - not so much the value, but feeling like the gap in incentives. Like, a lot of times the thing that was right for me at Google was not the thing that was right for my team or for the company. And I didn't like having to choose between, 'Do I do the right thing to help my teammates or do I do the right thing for my career?'"

Segments:

(00:04:22) The complexity of selling a hardware business

(00:08:49) Why "hardware is definitely out" for Michael's next venture

(00:11:57) The evolution of TinyPilot

(00:16:29) Inherent risks of a hardware business

(00:20:53) The most terrifying 10 minutes of 2023

(00:24:52) The pricing strategy

(00:31:48) Building the team

(00:35:32) Recognizing the limits of solo founders

(00:37:22) What and how to outsource?

(00:42:45) Tracking hours and managing expectations

(00:46:50) High-level math and profit projections

(00:52:17) Working with contract manufacturers

(00:54:12) How to know when to delegate?

(00:58:16) Misconceptions about running an indie business

(01:03:56) The importance of value capture

(01:09:26) Identity and purpose after selling a business

(01:13:40) How Michael arrived at the decision to sell the business

(01:17:53) The process of figuring out the price

(01:20:36) Negotiation and the final sale

(01:25:09) Why due diligence was so stressful

(01:30:09) The importance of buyer fit

(01:34:16) Michael's new course "Hit the Front Page of Hacker News"

(01:35:17) The power of "Show, don't tell"

(01:38:14) Sneak peek of the course

Show Notes:

• Michael’s blog post on the process of selling TinyPilot: https://mtlynch.io/i-sold-tinypilot/

• Michael’s excellent monthly retrospectives on building TinyPilot and beyond: https://mtlynch.io/retrospectives/

• Hit the front page of hacker news: https://mtlynch.io/notes/htfp-live/

Stay in touch:

👋 Make Ronak’s day by leaving us a review and let us know who we should talk to next! hello@softwaremisadventures.com

Music: Vlad Gluschenko — Forest License: Creative Commons Attribution 3.0 Unported: https://creativecommons.org/licenses/by/3.0/deed.en