How to sell a startup for $20M with zero paying customers
By: Notech Ana
Tags: Product Hunt, Startup Exit, Startup, Mailing Lists, Community Engagement

How to sell a startup for $20M with zero paying customers

6 smart moves every founder should learn from the history of well-known platform NoTech Ana Jul 13·5 min read

Once upon a time, one founder loved to write stuff. Surprisingly, what he was writing was not a code, — he was a founder without a technical background, you see. Still, he was inspired but tech-related things and that’s exactly what he wrote about: startups, new products, cool useful applications. He frequented Hacher News, where he was one of the contributors, Twitter…

His name was Ryan Hoover (@rrhoover). And that’s how the story of Product Hunt began in 2013. This is what Ryan Hoover did next:

1. Launch a Mailing list

Hoover’s approach to building a startup — be fast and iterative. He wanted to build a community of founders, offer a platform for indie hackers to showcase, but he had no idea how to do it technically. So he just put together a landing page and offered people a free subscription.

​It took me 20 minutes. And in several weeks, I had several hundred subscribers. — Ryan Hoover

Actually, PH is not the only example of a successful community startup that was initially a mailing list — that’s exactly how AngelList started, too. It might prove to be the best strategy for community-based startup MVP — launch a mailing list and see how it goes.

2. Get next 2000 users

Ryan was writing a lot before Product Hunt. He also helped Nir Eyal with his book “Hooked. How To Build Habit-Forming Products” and did more writing there — step by step he was building a little but supportive audience.

People around just have heard my name a lot, so when I announced PH launch on Hacker News they just, like — Let’s go see what this Ryan is doing and give it a try. That brought me next 2000 subscribers or so. — Ryan Hoover

3. Upgrade from mailing list to a platform

However, PH would have remained just another mailing list if not for YCombinator. The famous accelerator admitted Ryan 6 months after PH was launched. How did a non-tech founder get there? Ryan believes he was just confident, convincing, and passionate about what he did. Having obvious product-market fit did a good job either.

YC helped Ryan in several aspects:

✅ formalize strategy

✅ build a vision (PH as “a place on the internet for makers, a place to discover all these products are being built”)

✅ raise Series A

✅ find a CTO Andreas Klinger

4. Build a Distributed Team

Up to now, Ryan was a solo founder. After Series A was raised, he hired 10 first employees. Primarily, engineers from Europe — as that’s where the new CTO’s network mostly was. PH was one of the first companies in tech run by a distributed team.

Very fast Ryan realized that there’s a couple of huge advantages here.

You don’t need to hire people just in San Francisco or people who want to move here.

It’s very expensive to hire in SF, of course, the cost of living here is dramatically higher than it is in Bulgaria. It’s also very competitive when it comes to hiring, especially for an early-stage startup when you’re trying to take someone from Google or Facebook. They’re getting paid $200,000 with beautiful cafeteria lunches. You as a seed-stage or pre-funded company, it’s harder to convince them to come on board. — Ryan Hoover

5. Use “Wizard Of Oz” Technique

In the early years, when PH was moving slowly from the mailing list to a community, lots of onboarding had to be done manually. Ryan used a lot famous Wizard Of Oz techniques, where you have to do all the jobs behind the scene to show a customer a nice and clean UI. For instance:

➡️ products were uploaded and “launched” by Ryan and the team

➡️ they created an engagement around the product (comments, feedback)

➡️ next step — reach out to a product owner on Twitter and say “Hey, people are discussing your stuff on PH. Would you like to come here and answer the questions”.

This created the impression of an active maker-to-maker and makers-to-customers interaction on PH. And it was there! It just did not happen on its own.

6. Take the Deal

In 2016 Ryan was approached by AngelList founders who liked what he was doing and were very much interested in the community he’s managed to build. By the end of the year, PH was acquired for $20mln.

And know what? The company has not made a cent by then! First $ in its history PH made in 2017 when it introduced paid feature Ship — a service that allowed founders to “launch” their products on PH. Here’s to say for profitability and “paying customers” that you’re supposed to have to get funded!

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Monetization

By now PH has gone on a long journey of trials and errors (like, “podcast hunt” project that was killed in 2017) and found a model that works for it. So, how do you make money on a community of startup founders?

PH Ship — offer a tool to showcase. Make sure there’s a reputable service behind it and charge a fee per launch

— offer a tool to showcase. Make sure there’s a reputable service behind it and charge a fee per launch PH Jobs — connect talents to employers and charge the searching side

— connect talents to employers and charge the searching side PH Events — promote events for founders for a fee

— promote events for founders for a fee PH Product promotion — charge for promoting a product on a platform and in the newsletter

​Sum up:

🔥 You can build a successful startup in tech without a tech background How? Build a community first.

🔥 Aim globally: hire across the globe, tap on global talent, reach out to global audience.

🔥Test ideas fast with less expenses — even Ship was tested for 2 years before it was launched. During tests, PH used no code and low-code tools (like Mailchimp and Typeform).

🔥 Get admitted to the accelerator, keep on building the network around the idea.

🔥 Sell the business to a stronger player to get access to its resources.​