They Rejected $20M With Strings and Got $40M All-Cash: AppArmor's Full Negotiation
Campus safety app AppArmor was built by the Sinkinson brothers to $5.6M annual revenue at a 60% margin through RFP-driven sales. In 2021 they rejected a $20M offer with strings attached and extracted CA$40M, all cash, no conditions, from rival Rave. The buyer was itself resold for $560M a year later.
This is a translation of the Japanese original. The Japanese version and cited primary sources are authoritative for all figures.
JPY figures are rough approximations, including CAD conversion (final sale price CA$40M ≈ ¥4.8B).
Timeline
| Period | Event |
|---|---|
| 2011 | David Sinkinson, while at Queen’s University, gets the idea from an audit finding that 30% of the campus’s emergency phone boxes were broken |
| 2012 | Launches with his brother (goes full-time in 2014) |
| End of 2015 | ARR of CA$1M |
| January 2019 | Wins the bid for the Colorado community college system (13 campuses) — begins nearly doubling every year on RFP (public tender) sales |
| 2021 | Rejects a CA$20M offer (disliking the “strings-attached” earnout terms) |
| November 2021 | Rival Rave Mobile Safety offers CA$40M, all cash, no complicated conditions |
| January–February 2022 | Contract signed and funds received. Transition support, planned for 3 months, runs about 7 |
| December 2022 | Rave is acquired by Motorola Solutions for $560M, and the brothers, holding phantom stock, receive an additional payout |
The Business Numbers (at Sale)
| Item | Figure |
|---|---|
| Annual revenue | $5.6M (CA$7M) / 60% margin |
| Customers | 350–400 institutions, mainly universities |
| Pricing | Base CA$15K/year, full-featured CA$45–50K/year (converted from one-time purchase to subscription) |
| Team | 20 people, bootstrapped |
Anatomy of the Negotiation — What Turned $20M Into $40M
- The reason for saying no was crystal clear: not the amount, but the “strings-attached earnout.” It was a judgment that preemptively avoided Tweet Hunter’s regret
- The buyer was a competitor: Rave had kept losing bids to AppArmor, so an “acquisition to eliminate them” carried competitive value. The same structure as the rival that bought Honeymoons.com — the highest bidder is the one losing to you the most
- In David’s words: “In entrepreneurship, chances to lock in the win don’t come around many times.” An all-cash, no-conditions offer of that quality was rarer than any difference in headline amount
What to Take From This
“Seek validation from the market, not from peers.” At founding, everyone around them said universities would never pay for an app. The brothers kept disproving it through validation from the market itself — bidding on RFPs. For a sales-led vertical SaaS, that brutal, unambiguous feedback of “can we win the tender?” becomes the growth engine.
The elegance of phantom stock: keeping a stake in the buyer’s own sale. By taking quasi-equity in the buyer on top of all cash, they harvested again when Motorola acquired Rave a year later ($560M). You can have both the certainty of cash and an option on the buyer’s growth.
The testimony that “due diligence is hell” is a vaccine for every seller. Expect months of invasive scrutiny, and the only mitigation is doing what Usersnap did with an always-current data room in peacetime.
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Sources
This article summarizes and analyzes the public sources above. Please refer to the primary sources for details.