Partnerships – Part 2

By | January 4, 2009

In my previous posting I talked about the partnership I was involved in to sell Adoptme plush toys. The toy company went out of business, and I ended up losing the $37,000 I had invested plus I paid another $25,000 to buy the Adoptme.com website back. But, the story did not end there. In a surprising twist, about 9 months after we shut the toy company down, the employee who had been working for me but spent most of his time on Adoptme Toys, and then switched to working for Adoptme Toys full time once my AdoptMe toys partner started paying him, emailed me to ask about buying Adoptme.com. He had moved to China and was interested in resurrecting AdoptMe Toys to sell them in Asia. Since he now lived where they would be manufactured, it would make things much easier for him. He also had investors, because virtual pets are huge in Asia, so it was not as hard for him to raise money there.

He offered me $85,000, but I had already spent $75,000 to develop Adoptme.com, $37,000 on the partnership, and $25,000 on buying back the Adoptme.com website, so I told him the lowest I would sell it for is $125,000. He agreed, but then said he needed up 3 months to raise the money. I did not have any other potential buyers, so I agreed to this. The day after I signed this agreement with him, he asked me to write up some financial projections for his investors. I said how I made nothing from the site (After I bought the site back, I added pop-unders which made $300/month which exactly covered the hosting costs of the 2 dedicated servers), but if somebody sold kid related ads they could probably make thousands a month. The Adoptme site is programmed in Flash and very complicated, so I never wanted to deal with adding ads to the site myself, since it was not setup to handle them. But, since he was asking me all these questions, I took a closer look and in 10 minutes was able to stick a banner ad on all the pages. The site was now finally making some money, and then next day I decided to try putting a Google banner ad instead. This instantly made 10 times what the other banner ad made, and was making revenue at a rate of $3000/month. I had valued the site at $125,000 when it was making nothing, so now that it was making $36,000/year it was worth much more to me, but unfortunately I was under contract now to sell it. A few people I talked to told me to back out of the contract, but I always stick to my word so that was not an option for me.

Luckily, 3 months passed and the buyer did was not able to come up with the money. I even gave him an extra month since he said he was close to getting it. After that I never heard from him again, and now there is no way I would sell it for that cheap.

So, in the end everything worked out well for me, but it was roller coaster ride. That is just the nature of the Internet.

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