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May 2023: I sold my 2 years old business for only $128K
Everything about the Black Magic's acquisition + May 2023 updates
Hello everyone, it’s Tony again with another monthly update 😄👋
In case you’re new here: 👋
In the past 2 years, I built and grew BlackMagic.so - a Twitter SaaS - from $0 to $14K monthly recurring revenue.
Black Magic was the most successful product I have ever built.
With only me as the solo founder, healthy revenue growth, and happy customers, Black Magic enabled me to quit my job and live an independent life as a full-time indie hacker.
However, after Twitter announced its new API pricing at $42K/month, suddenly, my business is no longer profitable.
After thinking about it for a very long time, I have decided to sell Black Magic. It was the only responsible way I could find both for me and the current customers of Black Magic. There were no other choices.
Below is the story and the details of the acquisition.
The deal value
Here’s the real meat: I sold Black Magic for USD$128,000
Yes, that’s the total deal value.
At the time of selling, Black Magic was at ~$14K MRR, or $168K ARR.
That means I sold for less than x1 of the annual revenue.
Just about 3 months ago, I received an acquisition offer at $500K, which I rejected.
I would never have imagined I would have to sell it at $128K just a few months later.
Around February 2023, Twitter announced that they would stop the free API.
Nobody knows how much it will cost at this point, but everybody feels like it won’t be something unreasonable.
I was in the camp of people who were ready to pay for the API.
I even added my credit card to my developer account and prepared it carefully.
My rule was simple: I’ll pay for the API as long as the business stays profitable. With $14K MRR at ~90% profit, I was confident that the business would live on.
Around March 2023, a big Twitter app company (can’t mention the name because I haven’t asked them if it’s ok) contacted me privately and broke the big news.
They have been talking with the Twitter Enterprise team for the past few weeks, and the new pricing will be, at a minimum $42K per month. There will be no free plan and no smaller plans.
They are quite sure about the pricing, and they wanted to see if Black Magic can survive the pricing change and, if not - some kind of partnership or an acquisition.
They also shared that Twitter will start to cut off the API access “anytime now”, and planned to cut off all free API access of all apps in about two weeks.
That was all the information I got.
Knowing that, Twitter “cutting off free API access anytime now” is actually quite real.
So my situation was:
First of all, there is no way I can afford $42K per month. I currently only make ~$14K per month on average from the business.
The whole Black Magic product runs on the Twitter API and can go down anytime now.
If that happens, I will have to apologize to all current customers, refund everyone who has paid, and shut down the business.
The only way for the product to continue to exist is to sell (an acquisition).
If I decide to sell, I will have absolutely no negotiation leverage.
Also, if I decide to sell, I only have about two weeks to complete the transaction and transfer everything. If Black Magic’s API got cut off before the transaction closed, customers would be mad and start to leave, the whole business would be in a super bad state, and I don’t think anyone would want to close the transaction at this point. If this happens, the only option will be to “sell for scrapes.”
At the time, people in the Twitter Marker Slack group got creative and suggested a few ideas like using private APIs or forming a “partnership” where small Twitter products unite with each other, use the same API key, and share the $42/month cost.
However, all that was against Twitter’s terms of service and was extremely risky for anyone involved. So I did not decide to do that.
When I say I would have “absolutely no negotiation leverage,” it’s not quite 100% true.
I can still pitch Black Magic around to see who wants to pay the best price.
Given the time pressure, I only managed to get in touch with 3 potential buyers.
Out of the 3 buyers, I got 2 acquisition offers.
I decided to move forward with the acquisition offer from Hypefury for a total value of $128K.
Everything went super fast.
While I was talking with 3 potential buyers, I also considered another option: just shut down the business.
My thinking was that:
I kinda don’t want to go through an acquisition process. It’s the most boring and unproductive use of my time (at the time, I was working on a new app, typingmind.com)
I feel like it would have been ok for me if I completely lost ~$14K of monthly income overnight. I still have income from my other products, and maybe I can play the victim and blame Twitter for killing my business and gain some engagements on social media?!
I feel emotionally attached to the product and wouldn’t want to sell it to anyone else.
However, I decided not to do that, as the downside seemed much worse.
At the end of the day, most customers don’t care who owns the product. They just want to use it. It would be sad and irresponsible if I shut it down, and nobody could continue to use Black Magic anymore.
Having a bit of (final) cash payout is still better than nothing (plus not having to refund existing customers).
I guess I still have a story to tell and gain some engagements anyway!
After we agreed on the deal and signed the Letter of Intent, the first thing we did was to tell Twitter about it.
Hypefury was on the train to bite the bullet, become a Twitter Enterprise customer, and pay $42K/month.
By telling Twitter about our acquisition, we let Twitter know that Black Magic is now a part of Hypefury, and they can give us more time before they cut off Black Magic API access.
Around 30 March (only 1 week after I heard the news), Twitter started cutting off free API access for everyone. Popular Twitter apps like Tweet Hunter and FeedHive are also affected.
Black Magic API access got cut off too, but because we told Twitter about the acquisition, we got the API access back very soon after.
The rest of the acquisition was to complete the transaction on escrow.com, transfer all the assets, and start to work on the “user migration”.
The “user migration” is an unexpected requirement from Twitter. Twitter told us that if Hypefury is acquiring Black Magic, we will need to move all existing Black Magic customers under the Hypefury Twitter OAuth app.
That means we would need to ask all current users to reauthorize again after the acquisition closes.
Overall, the acquisition process went well. And we’re migrating the users as requested by Twitter. I guess some people will not migrate, and we’ll lose some revenue, but there are no other options available for us.
My thoughts on the acquisition
One thing obvious is that nobody is happy with the new Twitter pricing change (except Twitter, I guess). But I signed up for that when I created the product around Twitter API: platform risk.
In general, I have mixed feeling about this whole acquisition.
On the one hand, personally, I consider this a failure from me for not making better business decisions at some critical points. I would have ended up in a much better position financially if I had done things a bit differently, for example:
Sell the business earlier at $500K!
Look for more potential buyers when I heard the news for a better price point, maybe? (there was tremendous time pressure, but still, I think I could have reached out to more potential buyers).
On the other hand, in terms of the business, I’m very happy with the outcome.
I’m happy that the business didn’t have to shut down, that the product continues to exist, and that people can continue using the product I created.
I think Hypefury is a pretty good new home for Black Magic.
I think Black Magic is a unique and successful product, which I am very proud to put on my portfolio from now on.
I guess it’s also a good time for me to step away from the Twitter product market after two years. I also haven’t been focusing on new features in Black Magic over the last few months (but the current product is pretty stable and growing steadily).
In conclusion, “mixed” is what describes my feeling the best about this acquisition.
I didn’t come out as I would want, but I did want I had to do given the information I got at the moment. I think I have maneuvered the situation as well as it could be. Do you think so too?
About the new Twitter $5K/month plan
Not long after, the acquisition closes. Twitter announced a new plan at $5K/month.
My reactions: I would have totally paid $5K/month if this had been announced one month earlier.
I’m sure I can squeeze Black Magic to fit into the API limitations of this plan, even if that means I have to reduce or remove features.
However, the current situation is that the acquisition has closed, and even if not, Black Magic would have already been shut down 1 month ago.
So I didn’t bother to check the details of this $5K/month plan. It’s no longer matter.
Actually, given the current reputation of Twitter in the developer community, I’m actually glad that Twitter didn’t announce this earlier. It would have been a world of pain to work on the API’s limitations, plus the possibility that Twitter will change the pricing and put in place other limitations in the future.
As part of the acquisition, I will continue to work on Black Magic for at least another year.
Mostly, I’ll be operating the business at the high level, while managing other devs and freelancers to work on the product. Sometimes, I’ll jump on coding too (if I really want to have a feature on Black Magic!)
Currently, my full focus is on the new product TypingMind.com. I hope I can bring its MRR to Black Magic’s level soon!
It’s been a long email. Thank you for reading my story this far!
I dedicated this month’s issue to cover the details of this acquisition because I think it’s what you find interesting/helpful the most.
I’ll get back to sharing personal news and product updates next month.
Thank you for following my journey!
Be sure to share your thoughts in the comment below.
See you next time!