Wednesday, November 02, 2005

BrilliantPhoto

I think this is fascinating.

It's an eBay auction, and a somewhat unusual one.  Jim Lamb is selling his Micro-ISV.  He's got a photo management application called BrilliantPhoto.  He just swallowed the red pill (he's going to work for Microsoft) so he doesn't have time to build/maintain/promote/sell/support a software product anymore.  Jim is trying to sell the whole package, including full ownership of the product, the source code, his website, and the domain name.

On eBay.

Like I said, I think this idea is interesting.  Sales of this kind happen all the time, but not on eBay.  They happen behind closed doors in secret discussions where the person with the best negotiation skills wins.  For every ten such discussions that begin, nine deals fall through.

On eBay it will be very different.  There is no reserve.  The deal is going to happen (barring fraud or some other oddity).  And this time, the rest of us get to watch.  Or even bid.  :-)

(Jim's decision to use eBay was apparently inspired by another auction.  Evidently somebody bought jux2 (a search engine, never heard of it before) for over $100K.  Assuming the deal was legit, that's a heckuva lot of money for an eBay auction, especially when the item being sold is not physical property.)

I don't really know much photo management apps, but I assume that this is a reasonably large market and that there are lots of competitors out there.  Still, BrilliantPhoto seems like it might be deserving of a slice of the pie.  I just downloaded the demo version and very briefly gave it a whirl.  It installed with no problems.  The app seems to work and the UI has a very nice level of polish.

Don't expect eBay to take over the merger/acquisition market anytime soon.  Several reasons come to mind:

• I seriously doubt it is legal to sell an actual business entity on eBay.  The SEC has tons of regulations governing the sale of a corporation.  Any auction website where people try to sell used celebrity chewing gum is not going to be able to comply with the rules.  The BrilliantPhoto auction is an asset sale, which is quite different from a corporate acquisition.  BTW, asset sales usually get lower valuations than the sale of a business entity.
• I can't imagine trying to use an eBay auction to sell anything larger than a Micro-ISV.  Heck, I think it's weird to sell intellectual property on eBay for 5 and 6 figure numbers.  When the price gets into the millions or tens of millions, there are better ways to solve the problem.
• A purchase of this kind usually involves a due-diligence phase.  The buyer gets to review the source code and/or the historical revenue numbers.  This auction doesn't list that kind of information.  It's not likely that the seller would want it publicly visible on the eBay website for all to see.
• Selling a software business on eBay is not the way to earn top dollar for your sale.  However, to be fair, I should acknowledge that this problem is not specific to eBay.  Nobody gets top dollar when they want to sell.  The conventional wisdom says it like this:  "Software businesses are bought, not sold."

Despite all this, a Micro-ISV is special and different in many ways from a larger small company.  I'll be watching this auction to see what happens.