Between November and December last year, we acquired Jarvis for $15,000. The purchase price was originally set at $80k and was negotiated down from there.
Jarvis was a new company in the “virtual assistant” space. At the time, Jarvis was pitched as your dedicated virtual assistant that never sleeps. It would do unlimited tasks for you, for just $99/month.
We’ve been using what we’ve learned running Jarvis to build out Second, our next product. Second is a smart assistant that learns you. It’s going to be awesome, but more on that soon. If you’re interested, you can signup for when it launches here.
We thought it would be interesting to share how the acquisition of Jarvis happened, and go inside the negotiation process. We’ve even included some select email exchanges.
You hear about multi-million dollar startup acquisitions all the time, but what does a scrappy acquisition of this size look like?
How We First Learned About Jarvis
We first heard about Jarvis on Product Hunt at the end of July 2014. The idea that you could get a dedicated personal assistant for less than $100 a month seemed too good to be true. Jon signed up straight away.
The value of the service was apparent almost immediately. In the first 24 hours Jon had Jarvis:
- Find some healthy food recipes that are suitable for freezing and reheating.
- Call a fresh fruit company and figure out what delivery options they have.
- Interface with a courier to deliver ice cream to his girlfriend in Colorado.
- Order some new checks from the bank.
The great thing about Jarvis compared to other virtual personal assistant services is that as a user, you have unlimited tasks (that take less than 15 minutes to complete).Other services in the same space typically charge you per task. This adds a huge point of mental friction each time you use the service.
i.e. “Is it really worth me giving this task to my assistant and using up one of my credits?”.
It was this “all you can eat” model that really intrigued us.
We liked the service so much that we talked about it in detail on the first episode of our podcast.
Beginning Acquisition Talks
A few months passed and we were just happy users of the service. Behind the scenes, the founder Omar Bohsali was working on building out the backend to make it easier for the operators to manage tasks whilst building a team to help with requests.
Omar is somewhat of a serial entrepreneur, founding a number of other awesome companies, including Priceonomics (you’ve probably read their great blog). In addition to working on Jarvis, he was also beginning to work on a new financial startup that he decided to put all of his time towards. Because of this, he needed to find Jarvis a good home.
As a side effect of talking about Jarvis on our podcast, we were on Omar’s radar. He messaged Jon through Jarvis and asked if we could jump on a call. He explained that he wanted to focus on other things and was looking for Jarvis’ new home.
We setup a call to go over how everything worked on the backend. The system that Omar had built single handedly whilst handling support requests and building out a team was seriously impressive.
After the call we were excited and knew we wanted to do a deal.
Negotiating The Deal
We first got an idea of how much Omar was hoping to get in an email.
Omar opened with $70 – $80k. For some additional context, at the time the company was making roughly $6,000 in recurring revenue each month from around 60 customers. We were definitely interested but not at that price. At the time we simply couldn’t afford it.
We countered with $15 – $20k.
After talking more we started to discuss a slightly more “creative” deal structure. Omar really cared more about finding Jarvis a good home than making a bunch of money from it.
We were happy to do $30,000 structured with $15k up front and then $5k a month for the next 3 months. We had a deal.
Doing Our Due Diligence
Once we all agreed on the price, we started jumping into the due diligence.
We had to figure out if the two employees that were currently running the service would stick around.
We setup a call to all talk and figure out next steps, and learn a little about how operations were managed. Thankfully they were both willing to stay around after the sale and help get us up to speed on how everything worked.
Omar’s new company was starting to eat up his time, and he became unable to stick around for a month like we originally agreed on. This changed the terms of the deal slightly so we further negotiated a lower purchase price of $25,000.
Everything was in place and we were ready to do the deal. Marshall wired the first $10,000 on Thanksgiving day.
At that point, we received full access to the Stripe (credit card processor) account, and found a bug in the app’s reporting of paying customers.
The system was reporting slightly wrong subscriber numbers. This was a bug, and definitely nothing done intentionally. We quickly figured out how it happened. However, it was a disappointment, and one that again changed what we had built a deal around. Omar was very cool about the whole thing, and suggested lowering the price.
We still very much wanted the tech and customer base, so we re-negotiated again.
All said and done, we agreed on a $15,000 total purchase price, and wired 1 more payment of $5,000. The company was now ours.
As an aside: another major issue we’ve had with Stripe is what they give visual importance to in their dashboard. The largest stat in the dashboard is “total volume”, which just doesn’t matter at all to someone in business. This is just the total number of dollars that have flowed through your system, including refunds, chargebacks, fees, etc. It’s the sexiest number because it’s the largest, but it doesn’t matter. We used to think this meant total revenue, but it’s not.
What We’ve Been Doing With Jarvis Since
Originally we intended to happily run and grow Jarvis. However, when we went to the drawing board we realized we had much bigger plans and ideas for it.
We decided to stop accepting new Jarvis customers, learn how to best serve the existing ones, and start fresh with a reimagined product. That new service will be called Second. It’s going to be amazing.
You can signup to be the first notified when Second is ready for you. We should begin opening it up shortly.