Acquiring A Product: Our Kaleidoscope Journey

  • catlan 
  • 7 min read

At the end of 2020, we acquired the app Kaleidoscope. As longtime Mac developers, we were already fans of this powerful tool that makes it easy to spot and merge changes in many different kinds of files, and we were confident we could bring it back to its former glory. In this post, we want to highlight the challenges we faced along the way and share our vision for Kaleidoscope’s future.

Deciding on a Product

We wanted to build our product portfolio, but rather than building from scratch, we hoped to acquire an existing product. When considering which app to acquire, we had two main criteria:

  1. The app had to be one we used and enjoyed
  2. The app had to be well-known with a good reputation among its users

We didn’t want to invest time, money, and hard work into a product we weren’t using ourselves. We wanted it to be something that benefited us in the long run, therefore aligning our interests with our customers. And with an app that was already well-known by a segment of the target market, we could focus on the development, rather than pouring our energies into marketing.

Kaleidoscope fit the bill, so we set the gears in motion to take over.

Purchased on Jan 29, 2013: We have a long history with Kaleidoscope.

The Challenges of Acquisition

The process of acquiring the app took months. We had never acquired an app before, so we had a steep learning curve. One of the first things we did was seek out the expertise of a lawyer specialized in intellectual property rights and contract law. This is especially crucial when the person or company with the rights to an app lives in a different country, as was our case. 

Next, we learned about the valuation process, which involved both a lot of searching the internet, and relying on friends who have gone through this experience to share their knowledge. 

There were other challenges. When an app is transferred to a new owner, the historical revenue data is not transferred. And because it was only recently transferred from Black Pixel to Hypergiant, we had to look for other sources of data to find the trailing twelve months (TTM) revenue, which was needed to have an overview of the app’s financial performance. 

We weren’t able to get all the Kaleidoscope graphic assets. And we had no way of looking up references to issues that were noted in the source code because bug reporting and customer support history were no longer available. 

Making the Purchase

We had a handful of options on the table for financing. 

  • Putting money down and splitting revenue with the previous owner for a period of time
  • Crowdfunding via a Kickstarter campaign
  • Taking out a small business bank loan
  • Pitching VC or angel investors to fund our company

After reviewing the pros and cons of each option, we ultimately decided on taking out a loan from a bank. We were able to get a six-year term, which provides the freedom to try and make the app profitable.  We have two years to try and make it work. If it doesn’t, the six-year timeframe makes monthly repayments manageable in a scenario where we’d have to downsize the team.

“For us, success means making Kaleidoscope the best and most modern app and bringing real value with features that the user community will love.”

Our commitment to Kaleidoscope is apparent in the fact that we are personally invested in making this app successful again. We don’t have outside investors dictating our development roadmap. For us, success means making Kaleidoscope the best and most modern app and bringing real value with features that the user community will love.

Plans for Upgrades

When we first took over Kaleidoscope, we really hoped that the core parts — such as text comparison, merging, and folder comparison — would be in good shape. This would enable us to move fast on updating the UI. The truth, however, is that after years of not being actively developed, the app was a fixer-upper. As a result, there were several times when we had to scale down on our development ideas or place them on the back burner.

So our priorities shifted. We focused on working through the app, piece by piece, to update it and to get to a point where we not only can ship an upgrade within the first year of ownership but also have it ready for the next stage on our development roadmap.

To do this, we dedicated our resources to fixing excessive memory usage and performance. We also added Xcode debugger integration as a major new feature in version 2.4, which was a free update for existing users.  These changes help lay the groundwork for bigger changes in the future, such as color themes, syntax highlighting, improvements to image comparison, a plug-in system for file formats that aren’t built-in, and more. 

The way we determined where to focus our work was by first defining our main audience, which we believe is developers. And then, if a feature we had in mind didn’t line up with the  needs of developers, it didn’t make the initial cut.

Committed Indie Mac Developers

Kaleidoscope was originally developed by Made by Sofa, a great product company, which was acquired by Facebook in 2011. Black Pixel, whose primary business was building apps for other companies until then, took over development and released the last major update in early 2013. When we purchased Kaleidoscope in 2020,  we committed ourselves to focusing on the app and the ways it can be improved and making a product that gives its users the tools they need to get their work done more easily than ever before.

While it’s true that Kaleidoscope is a huge labor of love, we were faced with the reality that revenue from new license sales alone isn’t enough to employ even a single person. We also knew that making Kaleidoscope a subscription-based model would make many users unhappy. Yet we couldn’t improve the product for existing customers for free. So when faced with what to do, the answer was clear: a paid upgrade.

Some might see us as underdogs, without investors backing us. We know we have a long road ahead of us. But we believe in our product; we’ve seen and experienced firsthand how useful it is as part of our own toolboxes. We’re excited and proud about the work we’ve done to release Version 3, and we are really looking forward to continuing along this journey we’ve started to making Kaleidoscope even better.

The About window of Kaleidoscope 3.0

Take it for a spin

We created a shiny new website for Kaleidoscope 3, please check it out. Also, download the app and put it through its paces. It comes with a 15-day free trial, enough time to see if it fits your workflow. And of course, if you have questions or comments, get in touch!