Build a Business, Not an Exit Strategy • Hacker News Board

Re: Build a Business, Not an Exit Strategy

#11

Post by dmor » Sat, Oct 20, 2012, 4:20 AM UTC

It seems like each week or so we have an existential crisis on HN by an author who has realized the "go big or go home" mindset/lifestyle might not work for them. There is a HUGE fallacy in all this expected value rationalization for building a lifestyle business. You are going to DIE someday. You don't have unlimited time, and I'd rather take crazy bets toward building something risky and radical than be comfortable and safe with "a profitable, small web-based business in just a few years, take a great salary and work 30 hours week".

Yes I know I could do that, I was able to do that at 19. I'm doing a startup because that isn't enough for me. That would be like retiring at 19.

Blog posts like this feel like "why I settled at 20-something". Come on, really?! Ugh

Re: Build a Business, Not an Exit Strategy

#12

Post by jkaykin » Sat, Oct 20, 2012, 4:32 AM UTC

dmor wrote: post #11

It seems like each week or so we have an existential crisis on HN by an author who has realized the "go big or go home" mindset/lifestyle might not work for them. There is a HUGE fallacy in all this expected value rationalization for building a lifestyle business. You are going to DIE someday. You don't have unlimited time, and I'd rather take crazy bets toward building something risky and radical than be comfortable…

Can't agree with you more.

Re: Build a Business, Not an Exit Strategy

#13

Post by seehafer » Sat, Oct 20, 2012, 4:55 AM UTC

dmor wrote: post #11

It seems like each week or so we have an existential crisis on HN by an author who has realized the "go big or go home" mindset/lifestyle might not work for them. There is a HUGE fallacy in all this expected value rationalization for building a lifestyle business. You are going to DIE someday. You don't have unlimited time, and I'd rather take crazy bets toward building something risky and radical than be comfortable…

Posts like this always essentially boil down to one statement:

"The startup (in the pg sense of the term) lifestyle is not for me."

And that's ok. For most people, making a dent in the universe is not an existential need.

Re: Build a Business, Not an Exit Strategy

#14

Post by il » Sat, Oct 20, 2012, 5:08 AM UTC

melanie_io wrote: post #7

il wrote: post #3

This post is based on so many false assumptions that it's meaningless. Most small business owners/bootstrappers are NOT millionaires, most are just barely scraping by. Less than 3% of small businesses make $250K or more in profit. ( http://voices.washingtonpost.com/plum-line/2010/09/boehner_c... ) So if you consider "failure to make over $250K" as failure, 97% of small businesses are failing.

That is a fair point. However, even if you adjust the assumptions for expected value to be 3% (vs 25%, which is what I use), it is still an expected value of $43,000, over 14x greater than that of your average "I want to be the next Instagram" app. I wanted to use 2 hypothetical examples with some reasonable assumptions just to show the staggering difference in probabilities of each scenario.

Yes, but then the expected value is less than getting a job.

Re: Build a Business, Not an Exit Strategy

#15

Post by adambratt » Sat, Oct 20, 2012, 5:14 AM UTC

dmor wrote: post #11

It seems like each week or so we have an existential crisis on HN by an author who has realized the "go big or go home" mindset/lifestyle might not work for them. There is a HUGE fallacy in all this expected value rationalization for building a lifestyle business. You are going to DIE someday. You don't have unlimited time, and I'd rather take crazy bets toward building something risky and radical than be comfortable…

I both agree and disagree. If you're throwing in all your chips you better have an idea for a business that is scalable and has massive revenue potential.

That's where a lot of so called startups miss the mark.

Re: Build a Business, Not an Exit Strategy

#16

Post by oinksoft » Sat, Oct 20, 2012, 5:22 AM UTC

dmor wrote: post #11

It seems like each week or so we have an existential crisis on HN by an author who has realized the "go big or go home" mindset/lifestyle might not work for them. There is a HUGE fallacy in all this expected value rationalization for building a lifestyle business. You are going to DIE someday. You don't have unlimited time, and I'd rather take crazy bets toward building something risky and radical than be comfortable…

It's fine to say that you feel differently from the author and that you have a thirst for glory, a taste for risk.

Suggesting that running your own business without ambitions of limitless growth ... that putting in a good work week, maintaining your own serious enterprise, and having a balanced life is akin to "retiring at 19"? I find that offensive and out of touch.

I'm not sure what death has to do with all of this. Those of us not at VC-funded startups aren't sitting around twiddling our thumbs. A "don't you know your time is running out?" stance usually implies "you're wasting your time."

Now, of course this is a startup website, so the most worthwhile thing you could be doing is building your startup, right? Shouldn't you spend all your time there? Well, it's also a "hacker" website, and there are ways to make your mark outside of the high-energy startup world. Look at that wonderful interview with the creator of Nginx yesterday -- there's a guy who was just working as a sysadmin, saw his own itch to scratch after a lot of work on Apache httpd, and his software has made a major impact. It probably provides much more value on the whole than do most startups.

Re: Build a Business, Not an Exit Strategy

#17

Post by dusing » Sat, Oct 20, 2012, 5:46 AM UTC

seehafer wrote: post #13

dmor wrote: post #11

It seems like each week or so we have an existential crisis on HN by an author who has realized the "go big or go home" mindset/lifestyle might not work for them. There is a HUGE fallacy in all this expected value rationalization for building a lifestyle business. You are going to DIE someday. You don't have unlimited time, and I'd rather take crazy bets toward building something risky and radical than be comfortable…

Posts like this always essentially boil down to one statement: "The startup (in the pg sense of the term) lifestyle is not for me." And that's ok. For most people, making a dent in the universe is not an existential need.

99.9999% of startups are not denting anything, or really even trying to.

Re: Build a Business, Not an Exit Strategy

#18

Post by oinksoft » Sat, Oct 20, 2012, 5:48 AM UTC

seehafer wrote: post #13

dmor wrote: post #11

It seems like each week or so we have an existential crisis on HN by an author who has realized the "go big or go home" mindset/lifestyle might not work for them. There is a HUGE fallacy in all this expected value rationalization for building a lifestyle business. You are going to DIE someday. You don't have unlimited time, and I'd rather take crazy bets toward building something risky and radical than be comfortable…

Posts like this always essentially boil down to one statement: "The startup (in the pg sense of the term) lifestyle is not for me." And that's ok. For most people, making a dent in the universe is not an existential need.

I always forget the name of that startup where Torvalds wrote Linux ... he couldn't have made a dent without a startup, could he?

Re: Build a Business, Not an Exit Strategy

#19

Post by melanie_io » Sat, Oct 20, 2012, 5:55 AM UTC

dmor wrote: post #11

It seems like each week or so we have an existential crisis on HN by an author who has realized the "go big or go home" mindset/lifestyle might not work for them. There is a HUGE fallacy in all this expected value rationalization for building a lifestyle business. You are going to DIE someday. You don't have unlimited time, and I'd rather take crazy bets toward building something risky and radical than be comfortable…

I think you either did not read the article, or did not understand it. I am certainly not advocating 'giving up' in any sense. I doubt you would say that DHH or Tim Ferris have 'given up' and 'settled in their twenties.' I even say outright, that my point is to follow your own path, and make your own rules, rather than listen to the hype and tech press.

I am advocating for a worldview where getting VC funding is not an accomplishment in and of itself, and does not necessarily mean you are successful. By taking funding, you are giving up the opportunity to work for yourself. You are 'hiring a boss,' so to speak. And for me, after working for others for years in finance, and then as a CEO of a funded start-up, I decided I would rather forge my own path in life, prestige and press be damned.

Re: Build a Business, Not an Exit Strategy

#20

Post by runako » Sat, Oct 20, 2012, 5:57 AM UTC

YZF wrote: post #10

Hear hear. I've been saying a similar thing for a long time. If the business is so great why sell? The act of selling implies you think it's worth less than what someone else is willing to pay which is dishonest. If you thought it was worth more you wouldn't sell (under most situations, there are always exceptions). Why shouldn't a VC hold on to the great business they've built for the sake of future cash flow? A gre…

I generally agree with your post, but:

>> If the business is so great why sell? The act of selling implies you think it's worth less than what someone else is willing to pay which is dishonest.

There are a lot of reasons to sell any asset. Life changes, changing locations, or simply want to move on to some other area of interest after building a business for many years. Or since you've been sleeping at the office the last few years at the behest of your VCs, you just want to take a few years off. All of these factors affect how much your business is worth to you. (And only you; whether you have to sleep at the office has no bearing on the value of your company to a buyer, but it might make you receptive to a lower price). Ask a founder during one of the highs, she'll tell you her business is worth 10x-100x the price she'd quote you during one of the lows.

Second, a company's value is relative to its owner. For example, The Coca-Cola Company can sell a lot more Vitaminwater in a year than its prior owners due to its global scope, relationships, etc. So Vitaminwater is worth more to Coca-Cola than to the previous owners (who would be able to extract less value from it in a given timeframe). Another example: Vitaminwater would be worth a lot less to IBM than it is to Coca-Cola. So when the company sold, it should have priced somewhere between the expected amount its owners could derive and the (higher) amount Coca-Cola could derive in the same timeframe. There's absolutely nothing dishonest about this.

>> Why shouldn't a VC hold on to the great business they've built for the sake of future cash flow?

This isn't the VC's business. Their LPs didn't provide them capital for this purpose, so operating companies in this fashion might be a breach of fiduciary duties etc. More to the point, they will likely be bad at it over the long term because their core business is essentially banking (and not operating tech or whatever businesses).