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Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?

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Re: Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?

#21

Post by Psyonic »

gte910h wrote: post #5

I don't even understand the debate: Your lifespan, healthspan, lifetime happiness and ability to run a company will only go up once you cash out for 4-10 million or more. You've literally solved the money problem at that point. Why would you risk that on a vanity billion dollar exit?

If you're doing what you love, why give that up for money and the chance to find another thing you love? Lightning doesn't always strike twice.

Also, to rip off Sean Parker's character in "The Social Network", do you want to end up like Roy Raymond, who committed suicide after selling Victoria's Secret on the cheap, watching with regret as it grew into the billions?

http://en.wikipedia.org/wiki/Roy_Raymond_(businessman)

Re: Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?

#22

Post by philwelch »

_delirium wrote: post #16
bapadna wrote: post #10

Earlier quoted context omitted.

Your argument is only true for people who have only one business idea. If you have a wealth of ideas, you can execute one and sell at a point that gets security for your self and your family, then execute another and aim bigger, but with your downside risk eliminated.

Is that common, though? When I think of companies that shaped the tech industry in a huge way, very few are companies founded by people who had already had a big exit and were on to their second or third company after already becoming millionaires. Impact on the scale of Apple, Google, Microsoft, Sun, nVidia, Oracle, etc., seems to involve founders who stay with their companies and guide them over a period of decades…

Elon Musk. PayPal, SpaceX, Tesla.

Re: Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?

#23

Post by srwh »

pg wrote: post #14

This is wrong: "And if you’re lucky enough to get a life-changing acquisition offer like Mike Arrington just did, follow his example. Go for the billion dollars when you start your next company—by then you’ll have more experience and you won’t be risking the kids’ college education." His mistake is to forget that the two options aren't exclusive. A large percentage of founders in startups successful enough to be on t…

Yes, the founders level of motivation is a key factor of risk for a startup company, one thing is early after the creation and another ten years after, even if your company is profitable. One test is how motivation works after macro/micro economic cycles (i.e: dot com) or inflection points (crisis or growth). Also excelent moments in a company gives a false sense of security for the inexperienced management, so... I'll get the money if I have the risk of being out of business and without some personal financial security

Re: Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?

#24

Post by nostrademons »

bapadna wrote: post #19
_delirium wrote: post #16

Earlier quoted context omitted.

Is that common, though? When I think of companies that shaped the tech industry in a huge way, very few are companies founded by people who had already had a big exit and were on to their second or third company after already becoming millionaires. Impact on the scale of Apple, Google, Microsoft, Sun, nVidia, Oracle, etc., seems to involve founders who stay with their companies and guide them over a period of decades…

Jobs also had Pixar, which had an undeniable impact in it's field. Here's a question to test if you really believe the argument you seem to be making: You have the idea of your lifetime. It's a billion dollar idea. You are looking for a co-founder, and find two amazing prospects. They are equal in every way (education, drive, interests, etc) except one: Jim spent the past five years working at a startup that he just…

I don't think that's really testing the argument he's making. He's arguing that people are more likely to start giant companies on their first go round, not that they're more likely to prefer cofounders who're on their first go round.

When you're looking for a cofounder, you're naturally biased toward someone with relevant experience, because the whole point of recruiting them is so that they can add value to the business and increase its chance of success. But when you're the initiator, a large portion of your contribution is picking the initial direction of the company, and what it's trying to accomplish. It's quite possible for first-time entrepreneurs to pick more ambitious goals and yet have less of a chance of success than repeat entrepreneurs.

Re: Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?

#25

Post by srwh »

_delirium wrote: post #16
bapadna wrote: post #10

Earlier quoted context omitted.

Your argument is only true for people who have only one business idea. If you have a wealth of ideas, you can execute one and sell at a point that gets security for your self and your family, then execute another and aim bigger, but with your downside risk eliminated.

Is that common, though? When I think of companies that shaped the tech industry in a huge way, very few are companies founded by people who had already had a big exit and were on to their second or third company after already becoming millionaires. Impact on the scale of Apple, Google, Microsoft, Sun, nVidia, Oracle, etc., seems to involve founders who stay with their companies and guide them over a period of decades…

You can't compare (or compare in an unfavorable way) the fundamentals of these companies with the fundamentals of hyped web companies, also many of those companies were profitable quickly and follow the IPO way. FourSquare will be here in ten years? Twitter? Zynga? M&A can make them durable but IMHO their fundamentals are more volatile: Google is not just a company who configured open source software and develop some scripts, some of their processes (adwords) can't be even copied with virtually infinite money (microsoft=>adcenter, yahoo=>overture, Apple=>iAds). We can argue that you can't copy/trash the network effect of facebook but we are in the prehistoric moments of the hypercompetitive web and their fundamentals are more volatile.

Re: Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?

#26

Post by kellishaver »

gte910h wrote: post #5

I don't even understand the debate: Your lifespan, healthspan, lifetime happiness and ability to run a company will only go up once you cash out for 4-10 million or more. You've literally solved the money problem at that point. Why would you risk that on a vanity billion dollar exit?

Maybe some would say I lack ambition, but I wouldn't even need millions. If my start-up was acquired for enough to pay off the mortgage and toss a bit of funding into the next venture, I'd be happy, but I'm looking at it from someone in the perspective of being in a very low cost of income area, who's building up a business from $0 in outside funding.

Do I think our product has potential for more? Yeah, sure (though it's still in development at the moment), but I'd rather have the security of having "enough" than the risk of waiting for a top-dollar offer and ending up with nothing if it never happened.

Which maybe means the start-up scene isn't the best fit for me in the first place, but I love what I do.

Re: Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?

#28

Post by mkramlich »

Psyonic wrote: post #21
gte910h wrote: post #5

I don't even understand the debate: Your lifespan, healthspan, lifetime happiness and ability to run a company will only go up once you cash out for 4-10 million or more. You've literally solved the money problem at that point. Why would you risk that on a vanity billion dollar exit?

If you're doing what you love, why give that up for money and the chance to find another thing you love? Lightning doesn't always strike twice. Also, to rip off Sean Parker's character in "The Social Network", do you want to end up like Roy Raymond, who committed suicide after selling Victoria's Secret on the cheap, watching with regret as it grew into the billions? http://en.wikipedia.org/wiki/Roy_Raymond_(businessm…

That scene with Parker was one of my favorite in the movie. I liked how after telling Roy's story to Mark and then talking about how Facebook was a once in a lifetime opportunity, and seemingly after he was done talking about Roy, he tossed out the line, "The water under the Golden Gate bridge is cold." Awesome line. Then not a minute later he told Mark that he wanted him to be able to say, "I'm CEO, bitch."

Regardless of whatever imperfections the man may have had, he clearly knew how to motivate people. As portrayed in the movie, he seemed to have a powerful effect on Mark and the rest of the Facebook crew.

Re: Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?

#29

Post by adrianwaj »

pg wrote: post #14

This is wrong: "And if you’re lucky enough to get a life-changing acquisition offer like Mike Arrington just did, follow his example. Go for the billion dollars when you start your next company—by then you’ll have more experience and you won’t be risking the kids’ college education." His mistake is to forget that the two options aren't exclusive. A large percentage of founders in startups successful enough to be on t…

"in practice that usually reduces to doing what you prefer"

Unless a set of investors with board control want to sell and the Founder/CEO does not. They can then sack the CEO and replace them with a Yes person. Right?

Re: Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?

#30

Post by Psyonic »

mkramlich wrote: post #28
Psyonic wrote: post #21

Earlier quoted context omitted.

If you're doing what you love, why give that up for money and the chance to find another thing you love? Lightning doesn't always strike twice. Also, to rip off Sean Parker's character in "The Social Network", do you want to end up like Roy Raymond, who committed suicide after selling Victoria's Secret on the cheap, watching with regret as it grew into the billions? http://en.wikipedia.org/wiki/Roy_Raymond_(businessm…

That scene with Parker was one of my favorite in the movie. I liked how after telling Roy's story to Mark and then talking about how Facebook was a once in a lifetime opportunity, and seemingly after he was done talking about Roy, he tossed out the line, "The water under the Golden Gate bridge is cold." Awesome line. Then not a minute later he told Mark that he wanted him to be able to say, "I'm CEO, bitch. " Regardl…

Absolutely. I found that speech very inspirational. I'm aware that founding a startup isn't really like that (not usually, at least), but it still threw some coals on the fire.
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