After six grueling months of due diligence for a buyer who was interested in his SaaS analytics startup Baremetrics, founder Josh Pigford realized the deal wasn’t happening.

“It turns out they’d misrepresented their funding situation at the beginning,” he wrote in a blog post afterward. “We’d spent nearly $20,000 on legal fees and months of time gathering all the docs for proper due diligence, and they just disappeared.”

Though disappointed, Pigford, who founded the company in 2013, returned to work. A year later, in November 2020, he ended up closing a better deal.

How Baremetrics sold to private equity firm Xenon Partners

Private equity firm Xenon Partners acquired Baremetrics for $4 million in cash. Pigford walked away with $3.7 million, while $300,000 went to the startup’s 10-person team, the founder said in his blog post. Venture capital investors General Catalyst and Bessemer, which had seeded the startup with $800,000, agreed to write off their investments instead of recouping their money.

“I wanted them to at least get their money back, but ultimately, for the $4m purchase price to work, we’d need to ask them to walk on their investment,” Pigford wrote in a blog post. “They were incredibly gracious.”

Typically, when a startup sells for around the same amount as it raised, the bulk of the proceeds go to investors. Founders have several motivations for selling with this type of outcome. We explain in our article, What happens when a company sells for less than it raised?

The company had about 1,000 customers at sale, and sold for a multiple of 2.65x annual recurring revenue (ARR), he wrote.

Because Baremetrics was established as a C corporation, Pigford was able to claim a tax benefit through QSBS, or qualified small business stock, and he didn’t have to pay federal taxes on his capital gains, he explained on the podcast Startups For the Rest of Us.

Baremetrics continues to operate under new management. Pigford is working on a new startup called Maybe, a financial planning and investment management platform.

Pigford did not respond to requests for comment.