Reading the Earnout: Cash Now vs Growth Later

You get an acquisition term sheet, and the headline number looks generous. The first job is to separate the cash you can bank from the growth the buyer still expects you to deliver. A bootstrapped founder should read the earnout like a performance contract, because the difference between profit and cash decides what you actually keep.

• Cash at closing: the amount paid when the deal closes.
• Earnout milestones: the future payments tied to performance.
• The relevant financial line is the one to consider.

Cash at closing is the real entry price

Start by writing down the amount actually paid, not the headline price. Done looks like a single line in your notes: dollars in the bank, date, and any holdback. If the term sheet calls the deal a round number, ask which part is paid now and which part is deferred consideration.

Ask for the payment schedule in writing. A closing date, a wire date, and a holdback release date are all part of the cash line. If any of them are vague, the cash is not as real as it sounds.

In June 2025, Wix bought Base44, an app-creation platform. The announced initial consideration was about $80 million. Cash at closing was just $18.1 million. That gap is the part of the number you are still working for.

Maor Shlomo, who built Base44, turned down every investor while building the company. That matters because a bootstrapped founder has no outside money cushioning a slow earnout. The cash at closing is what you can count on.

Some offers are cleaner than others. One company's founders declined a 2021 C$20 million proposal because of attached conditions. A year later, they accepted a C$40 million counteroffer that was fully cash and without complex terms. The structure matters more than the price. A fully cash offer with simple terms can beat a bigger number with conditions.

Earnout milestones are growth you still owe

Next, list every earnout trigger, the metric it uses, and the date it is measured. Done looks like a table with columns for milestone, target, payment, and evidence the buyer will accept. If the trigger is revenue, ask whether it is recognized revenue, bookings, or annual recurring revenue. If it is users, ask what counts as a user.

Once traction arrived, Base44 added $1 million of annual recurring revenue in three weeks. By mid-April 2025, Base44 had 140,000 users. At the sale, the user count was 250,000. Fast growth can make an earnout look easy, but the buyer will measure it with its own definitions.

The mistake is pricing the earnout as if the buyer's growth plan is already yours. A milestone is a payment that unlocks only when the buyer's systems show the target was met. If the buyer controls the data, the dashboard, or the definition, you are selling against a moving target.

Discount the earnout for risk. If the milestone depends on integration, customer retention, or a new product, treat part of it as upside rather than base case. A conservative number is easier to defend in your own head and in the room.

A founder received an all-cash offer priced at 10 times EBITDA and 1.5 times revenue. An employee-owned business sold in March 2024 for more than $25 million, at 6 times EBITDA. A consulting-funded company sold in 2022 for $25 million. Multiples are useful, but they do not tell you when the money arrives.

The buyer's public numbers tell you what is being paid for

Finally, read the relevant financial line. Done looks like you can say which part of the deal is being capitalized, expensed, or tied to future performance. If the buyer is public, its quarterly results can show whether the acquired business is driving bookings, revenue, or margin.

Look for the acquisition-related expense line, too. If the buyer is amortizing intangibles, the cash story and the income statement story can diverge. Your job is to know which one the offer is using.

Wix reported second-quarter 2026 bookings of $569 million, up 12% year over year. Revenue was $563 million, up 15% year over year. The company said strong Base44 performance helped drive the results.

Wix expected Base44 to reach approximately 60% non-GAAP gross margin in the second half of 2026. The company started the year with near-zero non-GAAP gross margin. That margin path is part of the growth the buyer is paying for, not the cash it has already paid.