No, no, a thousand times no. This is complete bullshit. I'm sorry, but you lost me at:
The proper ambition for a tech entrepreneur should be to join the ranks of the great tech companies, or, at least, to create a profitable, independent company beloved by employees, customers, and shareholders.
Nobody, not you, not my mom or dad, not "God", not Linus Torvalds, not Bill Gates, not the Queen of England, not the Dali Lama, not Zoroaster or the Easter Bunny or President Obama or the sterno bum at the corner of 3rd and Main, not Sergey Brin, not Kevin Rose, but NOBODY has any standing to tell me what my "proper ambition is." Why? Because "fuck you", that's why. You don't know me, my life, my past, my future, my dreams, my fears, my hopes, my goals or a goddamned other thing about me. Don't f%!#ng try to tell me what I ought to aspire to.
Say I build a company to a point where I could sell for enough that I could walk away with, I don't know, let's call it $10,000,000 USD. The other option is to stay independent and maybe, maybe eventually IPO. It's easy to sit on the sidelines and say "Go for the IPO, don't sell, selling is a failure". But you know what... maybe I need the money right now to do some things I always wanted to do. Maybe I want to buy my aging mother a new house, and I don't want to wait for a bloody IPO, I want to do it now. Maybe I have a family member who needs special medical care, or - fuck it - maybe I just want to cash out, fly to Scotland, and spend the rest of my life looking for a 6' tall, redheaded supermodel with a Scottish accent to marry.
In any case, no, you don't get to tell me that I failed, if I choose to pursue what matters to me.
Look, I get the point... I agree that - in general - entrepreneurs would want to stay independent, and would prefer to wait. I don't relish the idea of building a company and then selling it... but life is more complicated than that. And life is a series of tradeoffs and a constant balancing act between doing what is best for us right now versus what is best for the future. One is not a failure for making a rational, reasoned decision to favor one set of priorities over another.
Say I build a company to a point where I could sell for enough that I could walk away with, I don't know, let's call it $10,000,000 USD. The other option is to stay independent and maybe, maybe eventually IPO.
This is the part that rankles with me. Why is, "stay privately held and continue to turn a profit year over year" never considered an option? Why is it only "sell" or "IPO"?
It depends on your goal. Even companies that stay privately held and turn a profit year over year end up in many ways being a lifestyle company; Often resulting in stagnation and then slowly erode from the inside. It can work, you can avoid stagnation, but only for a few types of companies / founders.
For example Valve can pull this off, they are a game company, always building the next great game, they always have something new to work on and have gone to great lengths to keep their employees involved and attract top talent. They have avoided stagnation.
On the other hand, many of the companies you see get acquired built one or two focused products, they don't have 'the next big game' to work on, that is boring for many people, particularly the 'founder type'. Boredom -> stagnation -> erosion.
You could say that company X could just define themselves as e.g. a 'mobile app' company the way that Valve is a 'game company', but in reality, 'mobile app' is way too broad. How is a 'mobile app' company any different than startup? The difference is that instead of investors taking the risk on the new product, the company takes the risk, which doesn't bode well for the constant year over year profit ideal.
The 'company taking the risk' model can work, e.g. Google, but you have to be wildly profitable to pull it off, that is hard, really hard, so hard that only a hand full of companies have ever pulled it off.
tl;dr Privately held long term companies can get boring quickly. It takes a very particular type of market, a founder who really wants a lifestyle company, or a company that is wildly profitable to avoid stagnation. All three options are relatively rare.
My first thought is, you don't have to grow like wildfire. From what I've seen, operations that stay smaller, tend to avoid stagnation.
Of course, I suppose keeping your company modestly sized does stand in the way of securing your "cool billion", which is apparently the minimum take for anybody who is anybody?
It really depends on your industry/vertical. It's true, small companies can remain more agile, but they're also far more vulnerable to change - when it's three friends who run a software development shop, and one of them decides they want to strike out on their own, that's a huge upheaval for the organization. Plus, they tend to have a smaller customer base to draw from, or a smaller set of products on offer, all of which increase the long-term vulnerability.
Snark about the "minimum take" aside, everyone has different priorities. If you're a good businessperson with a good idea, there's no reason that you can't bootstrap a small business that makes you $400k/year for a number of years, which I think most people would agree is a pretty decent living.
Many modern games take a long time to produce, 3-5 years is not uncommon for AAA titles. I also wouldn't say they haven't released a game 'for years', there has been at least 1 title a year, a ton of DLC for older games, porting games to linux, etc.
To which I would say: Seriously dude, why didn't you go into iBanking if you're so shit hot and what you really care about is stacks on stacks on stacks.
This. Many people go into startups just for the profit motive, but I firmly believe that you should start a startup because it is something you want to do or because a side project became too large to continue as a side project (forced to do)
I feel like HN's focus has changed in that regard. Call me crazy, but I feel like it was less "get-rich" focused a couple years ago.
I dunno... considering that HN was originally "startup news" and that it's run by a company that funds / incubates startups, there's pretty much always been a certain segment of posters who are very into the financial side of things.
What gets me is the people who come along and (seemingly) present this viewpoint that "making money is evil" or "wanting to be rich is a Bad Thing". I don't get it and probably never will. As long as you play by the rules, behave ethically, and are honest, I see no problem with becoming as rich as (you can | you want). What's wrong with, say, wanting to have "fuck you money" so you don't have to live the rest of your life under the thumb of a boss, or worrying about how to pay for repairs if your car breaks down, or what to do if sudden medical expenses arise, etc? Even more so if you build a company, create jobs, and improve the standard of living for others along the way. To me, it's the greatest thing in the world.
There's nothing wrong with making money. The problem is that most tech companies focused from inception on high growth never earn their founders or employees anything remotely resembling "fuck you money."
If you want "fuck you money," go into finance. If you want "fuck you money" and still want to be an entrepreneur, start a financial services or legal firm in one of the many niches in the financial industry. And if you want "fuck you money" and you want to create jobs, tech is probably one of the worst fields to be operating in.
What if you've been doing software development, by all rights, since you were 10--it's in your bones and blood, as much as the feeling of wanting to be an entrepreneur is--but you would also like some fuck-you money anyway?
Is the answer, perhaps, "start a SaaS financial services firm"? ;)
Sure, but in that case you've decided to take a path that is less likely to get you "fuck you money," which means you must have overriding goals. This is assuming you are making rational, informed career decisions.
Absolutely nothing wrong with being rich. It's about goals.
When you learn to ride a motorcycle, there is a phrase: "Look where you want to go". At least to me, it seems like when you are looking only at your exit, you might make that exit, but you won't really make much else of value along the way.
In other words, when your goal is not to build a sustainable, profitable company with lasting value, but rather just to get out as fast as possible with as much money as possible... just how far away is such a person from "scam artist"?
In other words, when your goal is not to build a sustainable, profitable company with lasting value, but rather just to get out as fast as possible with as much money as possible... just how far away is such a person from "scam artist"?
Sure, I don't disagree with any of that. I mean, wanting to have "fuck you money" does not necessarily imply that you're only interested in the exit, or that you want to "just get out as fast as possible with as much money as possible". There's some middle ground there.
'As long as you play by the rules, behave ethically, and are honest, I see no problem with becoming as rich as (you can | you want).'
The rules are questionable at best and we've seen many startups (including some that are funded by YC) act in a manner that some would not consider ethical (I'm reminded of InstallMonetizer https://news.ycombinator.com/item?id=5092711 -- I think a made a few comments there). That suggests people are it in just for the money, which makes the situation worse for the rest of us who are doing startups for something more.
Maybe, maybe not. This essay was published almost ten years ago...
"Wealth is what you want, not money. But if wealth is the important thing, why does everyone talk about making money? It is a kind of shorthand: money is a way of moving wealth, and in practice they are usually interchangeable. But they are not the same thing, and unless you plan to get rich by counterfeiting, talking about making money can make it harder to understand how to make money."http://www.paulgraham.com/wealth.html
"I feel like HN's focus has changed in that regard"
I think that people started smelling easy money and rushed in. I hope to see a shakeout soon, not because I want to see others fail but because perpetuating the status quo damages the ecosystem and harkens back to 1999
The profit motive drives a very short-term hyper-growth mentality, and the decisions reflect that nature (abrupt axing of free service tier or price hikes to show "revenue growth", engaging in questionable accounting practices, etc), which increases success if you define success as cashing out.
If you define success in terms of longevity, given that certain practices essential for long-term survival run counter to the goal of fast growth and high valuations, the profit motive decreases chances of success.
Agreed. I think it works that way because if profit is your motive you will run your start-up focusing on the wrong goal, which is to increase your bank account instead of to increase your users satisfaction or the quality of your product. By focusing on a second order goal you will likely lose track of what really matters. But if you focus on what does really matter your second order goal will be achieved as a by-product.
I do believe that you can achieve higher profits by tweaking an existing, successful model. But to achieve high profits by going for the money directly only works well for those that are either in finance or direct derivatives of finance (such as bank robbers, who after all have the most direct line between 'profits' and their actions ;) ).
"There's no reason it can't be that and a desire to become wealthy, ya know..."
I take the (apparently quaint) view that you should make money because your product/service provides real value to others. And that if you do provide real value then there's a monetization pathway (by charging those people that you do provide value to).
I take the (apparently quaint) view that you should make money because your product/service provides real value to others. And that if you do provide real value then there's a monetization pathway (by charging those people that you do provide value to).
I have to admit, I don't see the connection between that and the blurb you quoted above. I certainly don't disagree with the idea of providing real value, nor with the idea of charging people that you provide value to. In fact, I very recently wrote a rant[1] expressing very much that opinion. So I'm not sure what exactly it is you think we disagree about, if anything.
I'm just saying that launching a startup can be based in both a desire to "do something you enjoy" AND a desire to become wealthy. Exactly which "monetization strategy" you employ is, IMO, up to the founder(s) based on: their goals, market conditions, business circumstances, life circumstances, and probably a bazillion other things.
I think we disagree on the extent to which "desire to become wealthy" should be a driving factor. I think the state where founders are primary driven by short-term wealth is not appropriate (it is easier to be wealthier in other areas like finance), whereas I take your comments to suggest that you think it's acceptable for making money to be the primary motivation. The views aren't mutually exclusive (timing factors, etc)
I think we disagree on the extent to which "desire to become wealthy" should be a driving factor. I think the state where founders are primary driven by short-term wealth is not appropriate (it is easier to be wealthier in other areas like finance), whereas I take your comments to suggest that you think it's acceptable for making money to be the primary motivation.
Aah, gotcha. Well, we may not disagree that much after all. I am not saying that "desire to be wealthy" should be a big driving factor, I'm just OK with the idea that it might be. And, more to the point, going back to my original comment that prompted all this, I'm saying that it's OK to "take the money" (that is, take an acquisition) if you need a large sum of money, at a point-in-time, and that's the best route to get it. The reasons you might want to do that are very varied, personal and subjective, and I don't think any of us have the right to judge somebody who makes that decision.
As far as what I find "acceptable", you should understand... I'm a libertarian who finds everything "acceptable" as long as it doesn't involve initiation of force or fraud. But finding something "acceptable" is not the same thing as finding it "desirable" or "good". And since I have no standing to judge someone else's decisions, it doesn't really matter what I think about their motivations, goals, desires, etc.
A VC is only looking at time frames of 3-5 years, given the limitations of their business model. If you don't look poised to grow 5-10x within that time frame then it's not worth their time, given they could be throwing money at the next potentially huge company instead.
If you run out of time you might get turfed by your investors when they call in their convertible note, and they'll either aim to liquidate the place or put in someone they think can turn it around.
If you run out of money, it's likely you're screwed because you were encouraged to trade growth for profitability. By this point it's often obvious whether you've run out of time.
In reality it is an option, but given the artificially constrained "world" we're dealing with in this article, it made sense to skip that to make a point. Also, depending on what you are trying to accomplish, it might not make sense, depending on your liquidity needs. It's one thing to own a big chunk of a company which is actually very valuable, but quite another when you do not have access to that money in order to actually, ya know, do stuff.
It's one thing to own a big chunk of a company which is actually very valuable, but quite another when you do not have access to that money in order to actually, ya know, do stuff
Further illustration of exactly the sort of strange mindset I'm talking about. This mindset where a business does not exist to make a profit, oh no, but to be sold to others for a profit.
The origin of business is to turn profits for the invested via the operations of the business. It gets more complicated in large corporations, but if I start a strawberry jelly business and make & sell strawberry jelly, I directly profit on the operations of that business. Because that is what businesses are for!
Now I suppose if you start a business that is unprofitable and will never be profitable, then you better take whatever buyout you can get and run, making sure to leave someone else holding the bag. But hopefully that is not the businesses you folks are trying to start, else this is just the set for another remake of "The Producers".
Absolutely, and I didn't say anything to contradict that. But there are limits to the availability of the value you have created with your business. Outside of paying yourself a salary equal to the entire profit of the company (or more, for a limited period of time), what do you do if you need a chunk of cash for some specific purpose at a point-in-time? The most obvious, straightforward and common means is to sell equity in the company to others, up to or including selling the entire company.
I, for one, am not advocating the idea of "build to flip" as a generally good thing. But still... the goals of the founders have to be kept in mind, and if selling the company is the best path for them to accomplish their goals, who are we to tell them otherwise?
I think the point of the article is that the majority of startups are founded by people who want to get rich more than they really want to be a visionary or entrepreneur.
People talk about 'exit' strategies. It makes it rather obvious that the thing they've created is much less important than the money to them.
Whether or not that bothers you, I think it's nice to have occasional articles talking about the view espoused in this article - that entrepreneurship is artistic and artists that care about their money more than their art are viewed with a mixture of admiration and disappointment by artists that have not yet had the chance to 'sell out' or the few who get the chance and don't.
Yeah, I can sorta see that. My position is just that "it's complicated" and that no one really has the standing to tell others what their goal ought to be.
In my own case, I absolutely want to build a profitable, sustainable company that "becomes one of the tech giants" or whatever. I'm not into the "build to flip" mentality, and we have some very specific goals and values[1] driving what we're doing. But all of that said, IF we reach a point where our company has some value, and the right acquisition offer comes along, it would be damn hard to say "no" when you consider the opportunity to do things like I spoke about above: Buying my mother a new house, travelling the world, etc. And no matter which decision I might make, I reject the notion that you're a "failure" if you choose the earlier exit.
as someone whose psychology is more aligned with the organic growth model, i fully agree with you, but if you lean the other way staying privately owned is just passing up the opportunity to get big fast.
Indeed. This whole article seems like it must be an elaborate HN Karma Lottery, where the first person to read the headline then post the above comment will immediately walk away with 300 points.
The conclusion is so obviously false that it doesn't even require saying as much. If somebody ever offers to buy one of my businesses for a price that makes me happy, I'm going to consider that a win.
And I'll let the parent explain to the author exactly where he can place his opinion of me.
This whole article seems like it must be an elaborate HN Karma Lottery, where the first person to read the headline then post the above comment will immediately walk away with 300 points.
LOL... it's so funny you would say that. I was thinking last night, after this comment started getting upvoted like mad, how pathetic it is that this comment, which is basically just an emotionally charged rant, gets massive upvotes, while my much better comments - the ones full of research, thoughtful commentary, links, etc., - languish with no upvotes. I mean, I stand behind the above comment 100%, and would repeat it today. But it isn't a particularly good comment. There's nothing actionable in it, and nobody learns anything new from reading it, except for "Phil thinks $BLAH". sigh
I consider myself the lowest of the low, and even I am disappointed by 9/10 HN posts hiding their valuable comments (they do exist) far below the first thing that I see on my web browser.
Self-indulgent comments like yours and mine should be ignored, not upvoted.
It would be very difficult to find, but John Siracusa has said the same thing when asked which of his Hypercritical episodes were his favorites. In short, he explained why he thinks some of his more emotional episodes were very popular, while actually good, well researched weren't, and that people like to like things that inspire discussion and feelings about things they already know and feel something about, not well researched new material. I may be recalling the whole idea bit incorrectly, but there was a similar angle to it as well.
I think if you read the post a different way, what you will find is that the writer had an emotional connection to success and to doing something interesting, and I think he valued that more than the money he got, because as he said, his boss was dropping 50 thousand dollar checks on his desk while he was coding something.
You can see it when he speaks about the media companies paying attention and trying out all his ideas, both of those are measures of respect and acknowledgment that his/their ideas were useful and a positive contribution to society.
If anything, I read this as a warning that "life isn't just about stacking bills" and that money is a means to accomplishing the goals you set before yourself. If you short circuit the fun you are having for money, you either will find something else that makes you happy, or you will pine for the meaning in your life that you lost, and write this article.
maybe I just want to cash out, fly to Scotland, and spend the rest of my life looking for a 6' tall, redheaded supermodel with a Scottish accent to marry
Having lived in Scotland, I can confidently advise you that you are better off conducting that particular search in London. Your critique of the article was spot on, though.
> Nobody, not you, not my mom or dad, not "God", not Linus Torvalds, not Bill Gates, not the Queen of England, not the Dali Lama, not Zoroaster or the Easter Bunny or President Obama or the sterno bum at the corner of 3rd and Main, not Sergey Brin, not Kevin Rose, but NOBODY has any standing to tell me what my "proper ambition is." Why? Because "fuck you", that's why.
This is hands-down my favourite perspective on HN, ever.
I wonder what world people come from where $10,000,000 isn't worth taking. Are they sitting on a family fortune?
Also, once you have your $10,000,000 payout, then you can swing for the fences all day on your later projects. With a few million in the bank you can afford to take the bigger risks. The stress of running a start-up while you have $50 in the bank is real.
>But you know what... maybe I need the money right now to do some things I always wanted to do. Maybe I want to buy my aging mother a new house, and I don't want to wait for a bloody IPO, I want to do it now. Maybe I have a family member who needs special medical care, or - fuck it - maybe I just want to cash out, fly to Scotland, and spend the rest of my life looking for a 6' tall, redheaded supermodel with a Scottish accent to marry.
Then either you've got into this situation unplanned - a failure of sorts - or you made a terrible choice of strategy for getting the money, and got lucky. There are far more efficient paths to that kind of cash if that's what you want.
Then either you've got into this situation unplanned - a failure of sorts - or you made a terrible choice of strategy for getting the money, and got lucky. There are far more efficient paths to that kind of cash if that's what you want.
That may all be true, but how would any of that support the idea that a 3rd party gets to define the "proper ambition of a tech entrepreneur" is? I'm not arguing for "build to flip" here, or even arguing against the idea that most entrepreneurs would prefer to build for the long-term, and build a sustainable, enduring business... I'm just arguing that no one of us has any real basis for making a claim like "the proper ambition of a tech entrepreneur should be X" and then say "you're a failure because you didn't X".
True, but I know about the potential of companies, and failing to reach that potential is a form of failure.
So you know all about the ultimate potential of every single company out there, formed and as-yet-unformed? Dude, if you're that prescient, forget this entrepreneurial thing and just buy lottery tickets, or go to the horse tracks.
All joking aside, I don't completely disagree with "True, but I know about the potential of companies, and failing to reach that potential is a form of failure", but I do disagree that you have any standing to mandate what everyone else should have as goals, or what their "success criteria" are.
I suppose if one were looking at it from the point of view of "the success of the company" as opposed to "the success of the founders" I could be more sympathetic to your position, but I didn't see anything in TFA that strongly suggested that that's where you were coming from.
True, but I know about the potential of companies, and failing to reach that potential is a form of failure.
So you know all about the ultimate potential of every single company out there, formed and as-yet-unformed? Dude, if you're that prescient, forget this entrepreneurial thing and just buy lottery tickets, or go to the horse tracks.
All joking aside, I don't completely disagree with "True, but I know about the potential of companies, and failing to reach that potential is a form of failure", but I do disagree that you have any standing to mandate what everyone else should have as goals, or what their "success criteria" are.
I suppose if one were looking at it from the point of view of "the success of the company" as opposed to "the success of the founders" I could be more sympathetic to your position,
I was, and this probably wasn't clear.
It was my first article in a while and there are a number of things I want to do differently in the next one, especially when introducing a contrarian point. I appreciate your feedback.
> NOBODY has any standing to tell me what my "proper ambition is."
Nobody is telling you what YOU should do or not do as a human being; I think the debate is about the meaning of words.
If you buy a piano and proceed to destroy it with a chainsaw, you can certainly do that. But you don't get to call it "playing the piano" or "composing" (although nowadays it may be considered some kind of "art").
Nobody is telling you what YOU should do or not do as a human being;
But the author of TFA did. He made a blanket assertion about what the "proper ambition of a tech entrepreneur" ought to be.
If you buy a piano and proceed to destroy it with a chainsaw, you can certainly do that. But you don't get to call it "playing the piano" or "composing" (although nowadays it may be considered some kind of "art").
I agree, 100%. But I don't see how that's even remotely analogous to the point about the author of TFA mandating what a tech entrepreneur's ambition ought to be.
There is absolutely nothing wrong with getting into business to make money. Nothing.
There is nothing wrong with discovering a problem you don't have or care about that people are willing to pay to have fixed, slugging through building something to solve that problem, and trying to maximise your profit and minimize your time. There is nothing wrong with working hard in a field you are not passionate about to make money.
How passionate do you think the guy soldering your alarm clock battery to the circuit board in Guangdong China is about his job? He does it to make money for himself and/or his family. Is there something wrong with choosing entrepreneurship with the hope of making a fuck ton more money than that, or are you required to take the job you can get unless you want to build a billion dollar business for shareholders?
Only working on something you are fully passionate about and getting paid well is a luxury not everyone can afford.
There is also nothing wrong with creating a non-profit to help limbless children in Cambodia, taking no salary, and spending all your time in service of others.
In fact, the former can allow you to do the latter, still support your family, and live well yourself.
I agree with mindcrime. And I wonder why so many PandoDaily writers are so full of pomp. And fuck that guy.
Pretty easy position to take once you've already earned your own "fuck you" money.
I do sometimes wonder why these sorts of acquisitions remain so prevalent though when minus a few notable exceptions the life cycle tends to consist of a company paying many millions or even a cool billion for some tech in a stack they don't even use (only to kill it soon after) plus a handful of employees that tend to stick around barely engaged until just long enough to unlock whatever golden handcuffs they have on.
Seems like way more often than not they are failures more on the side of the acquiring party though I guess there may be some valid (though ultimately unfortunate and cynical) reasons for participating like nipping a potential future competitor in the bud.
Almost all popular Google products (other than search and Gmail) have come from acquisition: Maps, Analytics, Google Apps, Android, Blogger, Picasa, YouTube, Postini, reCAPTCHA, etc.
My good friends Robby & Wayne's company, Zenter, was acquired by Google in 2007. While Robby has since left, Wayne is now a very respected eng manager in charge of a very important project, so I would argue that acquisition was successful for them.
So while many acquisitions do not work out well (and usually loudly), it would be a big mistake to pretend that applies to all acquisitions.
You're right; some acquisitions survive as real products and it would be a mistake to call them "failures".
I guess what the OP means is that price alone is not a sufficient criteria to judge whether an acquisition was a success. If you sell your company for a large amount of money, but it gets shut down, that's not "success" (although it's certainly much better for you than closing down without any money).
Same with Adobe. Everything in their creative suite except Illustrator was the result of an acquisition. They had a lot of botched and failed acquisitions over the years but there's no question they wouldn't be where they were today if not for a series of very smart acquisitions.
I'd wager that most acquisitions work out fine, you just rarely hear about it, because "this is a sensible acquisition that is highly likely to work out fine" is not usually newsworthy.
On the one hand I'm sure you are right and this is partly confirmation bias. On the other hand I've seen a few acquisitions first hand (though never as a founder) and they were universally disastrous due mostly to poor culture fit which I suspect is common given the differences in how small and large companies operate (as noted in the original post). So that also colors my negative opinion.
At my last startup we had a near miss on an acquisition that would've been a total waste, but the other suitors we were talking to would've meant a good leveraging of the technology.
I think realistically the companies most desperate to make an acquisition of tech and product talent are least equipped to make good use of it.
As an ex-CTO I could very easily see an acquisition going well.
What most commenters don't understand, in my opinion, is that real entrepreneurs don't start their company to get rich. If getting rich is your priority, become an investment banker (If you really want to code, make some automatic trading algorithms and financial models for investment bankers.)
In that regard, selling your company is, very often, a failure.
In my experience, the worst is to have to give up your values. As a young entrepreneurs, I started my first company 10 years ago with not only a strong vision for my product, but also an quite idealistic goal for the values of my company and my team. We wanted to be different. We wanted to do things as we thought it was right to do. And nobody could tell us what we had to do. It was such a strong feeling. It drove the success of the company. Ten years later, we got acquired by a large corporation that is not better or worse than you normal large corporation. And we had to give up all that. That's failure.
You didn't describe failure, you described Regret. As a young entrepreneur trying to do the same thing you did in the past (establish a company that is strong, independent, has great values) I can see how "abandoning" those values feels like failure. But it really depends on your definition of success and also what you do after. An acquisition could provide someone with the financial freedom, knowledge, and business network to execute an idea with even greater ambitions, values and impact on the world. That's why I don't think it's always a failure. It's only a failure if it was the best thing you could ever do. But to me, the best entrepreneurs are incapable of thinking like that. You can always do better, be better, make something better.
> If getting rich is your priority, become an investment banker
People keep saying this, but it's a whole different category of thing than "become a programmer". You can't start with no particular skills and no education, work hard at learning for three months, and get a job as an investment banker (or, if it's possible, it's not so easy as to be a common route to investment banking, like it is for programming).
Being an investment banker requires knowing people; being a top programmer only requires knowing stuff.
> With a fat bank account, I was pretty set to do whatever I wanted for a long time. ... But it didn’t take long to realize that my new life was a hell of a lot less exciting than running an independent company had been.
Sorry, but this is completely self-contradictory. With your fat bank account, you can start a new, independent company. If what he wants is:
> our way of thinking of a better approach to consumer tech, with less structure and more play, an exploratory mindset that, through trial-and-error, produces very tangible real-world value
Then nothing is stopping him from doing that again. In fact, he's in an incredibly privileged position.
Indeed, being acquired and then let go lets you focus your energies on new things, rather than being stuck maintaining old things you created in the past -- "maintaining" things being something that established companies might very well be more skilled at.
So, besides being needlessly inflammatory, this post doesn't even make sense inside of its own logic.
Some startups are beef type. These are made to grow as fast as possible, increase the user base by whatever means, without care about long-term health. They hunt for investments, especially big ones. Then, the sooner the better, such a company is sold to a large company and butchered, either to be digested and feed the corporate muscle, or just to remove competition with the big company's product line.
Other startups are milk type. These are grown steadily and sustainably, if slowly, with great care about long-term health. They are usually become profitable early on, at least ramen-profitable. Owners usually reject several acquisition proposals, and are careful with 3rd-party investments so as not to lose control of the company.
I think that a milk-type company has a far better chance to be a long-term success and transform the industry. It may grow huge, like Google, or stay small, like Github or Craiglist.
In rare cases beef-type companies do not die within a large corporation but become an important organ (e.g. Android inside Google), or enjoy a benign neglect (e.g. Instagram inside Facebook). But usually they just die, the way the post explains, or even worse.
I'm going to guess that Jake will take a lot of flak here for this article, but the truth is: I agree with him, for a certain version of "success".
There are folks who will pursue money, and then an acquisition looks like a nice validation and exit. Great. No prob there.
But there are a bunch of folks who are satisfied when they are building, and any other mode feels like something is missing in life. My advice to this (my) cohort: Don't fight it, just accept that you're always going to need a project to obsess over. Odds are that project will be a failure but not as much as anything else that is not so much a "project" as "going to work in the morning."
You can keep building when you have $10M in the bank. You can build a lot of things, not just websites. You can build a hotel. There's so much out there to do. Working on the same thing my whole life sounds miserable.
Agreed (despite my response above). I know that if I built a company and then sold it for $10,000,000, that I would - indeed - feel some regret over that. But assuming it was the decision I needed to make in order to do other things that mattered to me, then the thing is... once I "cash out" of one company, I'm free to turn around and start another one! Maybe I want to take a break, do the Scotland thing, veg out for a year, and come back refreshed and re-energized and ready to rock. And guess what? Now I have the seed capital to start my new company and don't have to worry about figuring out how I'm going to finance the initial phases! Win-win.
And I am pretty sure that, in my own case, this is exactly what would happen. Because, yes, a natural born entrepreneur does always feel that drive to build and to create. But nothing says we can only have one creative outlet in our entire lifetimes!
Jake is brilliant, but this isn't always the case: What about Google's acquisition of Android? What about Apple's acquisition of NeXT? What about Microsoft buying 86-DOS from Seattle Computer Products? What about Lenovo's acquisition of the ThinkPad?
These are wins for the buyer, not as clearly for the seller. Of course, if the seller sold voluntarily then it seems silly to argue that it wasn't what they wanted.
The "older doofuses who didn’t understand the Web" seemed to have done pretty well with CollegeHumor and Vimeo without Jake. If they had run them into the ground, I imagine he'd write an article about how being acquired is always success.
The existing businesses were nurtured and optimized reasonably well. I was lamenting the loss of the creative spirit that generated those two businesses in the first place -- the larger, more valuable core of the company.
I kid because the title seems designed to be provocative. It's not always failure to sell out. Quite the opposite in my case, but I hear you. You "sold out" and lost something in the process. They have been good stewards of Vimeo. It's one of the quality sites on the web, so I wouldn't fret too much. You created something wonderful. That's more than most people.
The title is too strong and this post is too black and white. Succeed forever and become a giant or fail? Not very inspiring. I like his views on visionaries and how an acquisition usually removes the real vision from the company but other than that, this is just a very subjective piece.
Choices you have with what to do when your startup gets successful enough to consider your "exit"
A) sell
B) IPO
C) stay the course
If you've taken investment at any point, especially VC, you are pretty bound to do A or B. Your investors want to see the company succeed in many ways, but they are also looking for returns at the end of the day. Large ones. So if the opportunity comes along, your board will probably make you take it.
So C is really only an option if you're 100% bootstrapped. That's pretty rare these days. Even if you are, the excitement, challenge, and general "buzz" you get from being a startup founder is going to pass at some point. Either the company stagnates or you get too big to be nimble.
The author seems to be just lamenting the passing of time, that he's not as excited and hungry as when he first started. In most cases, nothing you do is going to bring that innocence back.
I don't begrudge this author his wealth or his page views. But this piece isn't the least bit serious. Ten times out of ten, he'd take his buyout over again. The only thing that concerns me is that somebody might actually take this post to heart and destroy his or her chances of joining the ranks of the author should the right opportunity present itself.
This article couldn't be any further from the truth. How is selling a failure? What if you're selling because your marriage is falling apart or family is suffering because you're never home? What if you want to persue other ventures? What if you're sick and tired of being responsible for a business?
Sometimes selling is the only option for some and I can sympathise with that. Or if you invested a whole heap of effort, time and money and want to cash out purely for the money, what is so wrong about that?
Screw all y'all, I love this article. It's a sequence of true statements with a hard to swallow and idealistic conclusion, but it's absolutely right.
The only upside to an acquisition is money. Does that often make it the right, logical choice? Of course. Put that aside.
Once you're acquired by a larger more beaurocratic organization, your company dies (perhaps quickly, perhaps slowly), your projects flounder or become administratively managed, your ability to innovate quickly goes away. In short, your dream dies.
His personal accounts of this happening are on the money and are not uncommon effects.
Facebook is a grand counterexample. Zuckerberg didn't sell out when the company was young and he was offered ridiculous buyouts because facebook wouldn't exist today in the same way if he had. The dream would have been killed. Far-fetched example, but maybe true.
Of course it's important to think about reality, of course you have to look at the real world too; of course of course of course. No one can deny you that perspective.
But just maybe, let all that go for one second, and think from an idealistic perspective. Be a dreamer. Don't go after the most logical realistic thing right away. Or at least consider it.
Because we need those companies too. We need companies that can dream, and innovate, and remain independently fueled with a common goal and a vibrant workforce. We need companies that aren't acquired because we need dreamers to think big, so the world can go somewhere better—rather than just somewhere with bigger bank accounts.
Not every business is as free-form as ones where you luck into a $100k/month business when you're just two college kids. In that scenario of course you can throw as much spaghetti against the wall as you want with total creative freedom. But most startups do not happen to be at exactly the right place at the right time like this, and it's a multi-year slog to creak into profitability, and then several more years of intense focus to actually achieve real success. If you want to cash out early to buy yourself the freedom to work on whatever you want, and you end up getting paid more than 99.999% of the world for your months of hard work, I don't see any way you can call that a failure. Even assuming no element of luck and that Jake is just one of the most naturally talented entrepreneurs alive, I still think expectations need to be re-calibrated here.
even neglecting the money aspect entirely, this is bullshit. as a hacker, i want to build things. not "implement a vision", just build something that is useful to someone. if some larger company sees the thing i built and says "wow, this is exactly what we need to fill this gap in our product/service/lineup" and acquires my creation (with or without including me to continue developing it), i would consider that a resounding success.
as a real world example, does anyone think the keyhole vision was somehow killed by becoming google earth?
Maybe it wasn't clear from the article, but I was talking about the acquisition of a company, not a product. Hackers, and SV people in general, tend not to distinguish between the two, as many "startup companies" are actually just attempts to commercialize a single product idea. The potential for a company is orders of magnitude greater, because a company can create endless products. If you're talented enough to build things that are useful to people, why not found a single legal entity that creates many things, mitigating per-thing risk and exploiting countless economies of scale?
The potential for a company is orders of magnitude greater, because a company can create endless products. If you're talented enough to build things that are useful to people, why not found a single legal entity that creates many things, mitigating per-thing risk and exploiting countless economies of scale?
Now that I totally agree with. And that's one of our goals at Fogbeam Labs. I'm absolutely down with the idea of building a large, sustainable, profitable company that branches out into many fields. I've joked with people that our goal is to be "the next Red Hat", but in a lot of ways, I could say that we want to be "the next IBM" or "the next GE" and it would be more on point.
The big part of TFA that I disagree with is the part where you presume to tell entrepreneurs what their ambition ought to be. That and what came off to me as a judgemental tone, but that probably had a lot to do with the title.
okay, that is indeed a good point. one dissenting pov is that the "hollywood model", where a group of people come together, create something, and then dissolve, has produced some great stuff, but i can see how a company can accumulate shared vision and synergy that is lost when it is acquired.
This is a great article! I would say that first-time entrepreneurs should try to get a success even if it means they have to give away equity / get acquired. You can own 100% of your next business if you like, after you have millions in the bank and a track record with investors.
Of course it depends on your own goals, motivation, and the thing that gets you out of bed. If you care about your product and your audience then I think whilst it might sound promising to sell to a bigger company, there are chances your product and audience will be both gone. There are also chances of being able to reach even wider audience with an even better product.
I can think of a couple of examples like Picnik and Posterous. I'm not sure what those guys wanted out of it, and I hope they are happy with the decision. For me personally they were both two great products that dissolved into nothing... I'm sure there are plenty of examples to the contrary (some people mentioned other successful google product that really became huge).
observation: companies get big and successful if the founder is not driven by money, but by the desire to be right (and prove it to others).
however, this does not mean that every companies main goal needs to be to get big. if you're driven by other desires, your style of business will follow. be aware of what you want, visualize it, this makes it far less frustrating.
First of all, let me say that I hate "acqui-hires" with a passion that could summon Cthulhu. I've taken to calling them "welfare checks" because that's what they are: a socially-closed, elitist private welfare system to keep rich kids (born into the necessary investor and acquirer connections) from actually failing no matter how dogshit-awful their ideas are. Acqui-hires usually benefit founders but screw employees, and should thus be thought of as a "gentleman's C" for shiftless, incompetent, useless rich fucks Playing Startup.
Thaaaaat said, I disagree with "always a failure", at least in the pejorative sense. Let's be realistic, here. Let's first take a page from Eastern religions. Impermanence. Go here: http://en.wikipedia.org/wiki/Impermanence
All things change. And die. That doesn't mean they were without value. They contributed, and left a trace. Something that is a ghost or a fragment of a god or a cloud of electricity (depending on whom you ask) carries around a decaying corpse for 100 years. It's absurd! Everything is constantly falling apart, but the universe seems to be get slightly better each day in spite of it. Nothing in the physical world is built to be eternal. That's especially true of businesses, which are generally built to effect one economic change that is initially radical but, once proven, is taken for granted, at which point it's commodity work that will be done better when a more innovative competitor comes along. Circle of life...
I try to live life by the Boy Scout's rule: I win if I leave the place better than I found it. Even though my effects will live on in subtle, chaotic ways, no one's going to remember my name in 500 years. If reincarnation is true, I won't recognize my current name in 500 years. So...
Yes, if you're building a business for "Teh Exit" with the intention of making millions while leaving your colleagues stranded in brain-dead corporate subordinate roles that they'll hate, then you are, in fact, a fucking loser wankbasket and I hope you fail. Build-to-flip scene kids can choke on a taint. But this doesn't describe everyone who starts a business and ends up selling it. Sometimes, the thing generates legitimate value but proves not to have enough upside to justify the entrepreneur's continued full-time commitment... or it just gets into a state where she's no longer the right person to manage it. There are good reasons for good entrepreneurs to sell their businesses.
We shouldn't be looking at the mode of Teh Exit for moral guidance. That's what created this fucked-up, worthless VC-istan so-called "tech" ecosystem in the first place. Sometimes good businesses are acquired and bad ones IPO (which is just another form of acquisition). Instead of boasting or griping about ExitzLulz!!!111!!(10^large-1)/9!!, we should be focusing a return to genuine value creation, no matter what form it takes (and it won't always be a private-sector business). We should get back to Real Technology: solving problems that people actually care about that make peoples' lives better. And we should get back to ridiculing these well-connected (not "empty suit", perhaps "empty hoodie"?) scene kids and their marketing-experiments-called-technology, no matter how they "exit". We should drive those fuckers out of town.
I do think it is fascinating that acq-hires tend to be priced at 40-50 years of salary, given that an employment relationship only lasts 4 years on average. What does it tell us? It tells us that we, as engineers, suck so bad at marketing ourselves and negotiations that an often inconsequential third party (stone soup?) can sell us for a 10x markup. Also, it shows that large companies are ridiculously bad at discovering internal talent. The fact that Yahoo bought 17-year-olds at a panic price just indicates that their middle management filter is so bugfucked that they've given up on discovering talent, internally, at the bottom. If you have to buy a new winter coat for $800 every November, it means you need to get some order in your fucking house so you stop losing track of shit.
By the way, most of "social media" is not that innovative. It's just a wave of marketing experiments that uses technology because almost everything new is technological. Social media are the reality shows of technology. Reality shows aren't prolific because they're good, but because they're cheap (no actor's salaries, no writer fees). Social media startups are so common because they don't require a deep technological understanding, and because well-connected morons can CxO them, so long as they can buy a "scaling expert" at a panic price post-Series-B.
Let's get back to the issues that actually matter. Bashing people just because they get acquired as bad as the tyranny of Those Who Have Completed An Exit (celebrity founders) in fundraising. So let's just stop the nonsense and talk about how to direct ourselves to real work.
The proper ambition for a tech entrepreneur should be to join the ranks of the great tech companies, or, at least, to create a profitable, independent company beloved by employees, customers, and shareholders.
Nobody, not you, not my mom or dad, not "God", not Linus Torvalds, not Bill Gates, not the Queen of England, not the Dali Lama, not Zoroaster or the Easter Bunny or President Obama or the sterno bum at the corner of 3rd and Main, not Sergey Brin, not Kevin Rose, but NOBODY has any standing to tell me what my "proper ambition is." Why? Because "fuck you", that's why. You don't know me, my life, my past, my future, my dreams, my fears, my hopes, my goals or a goddamned other thing about me. Don't f%!#ng try to tell me what I ought to aspire to.
Say I build a company to a point where I could sell for enough that I could walk away with, I don't know, let's call it $10,000,000 USD. The other option is to stay independent and maybe, maybe eventually IPO. It's easy to sit on the sidelines and say "Go for the IPO, don't sell, selling is a failure". But you know what... maybe I need the money right now to do some things I always wanted to do. Maybe I want to buy my aging mother a new house, and I don't want to wait for a bloody IPO, I want to do it now. Maybe I have a family member who needs special medical care, or - fuck it - maybe I just want to cash out, fly to Scotland, and spend the rest of my life looking for a 6' tall, redheaded supermodel with a Scottish accent to marry.
In any case, no, you don't get to tell me that I failed, if I choose to pursue what matters to me.
Look, I get the point... I agree that - in general - entrepreneurs would want to stay independent, and would prefer to wait. I don't relish the idea of building a company and then selling it... but life is more complicated than that. And life is a series of tradeoffs and a constant balancing act between doing what is best for us right now versus what is best for the future. One is not a failure for making a rational, reasoned decision to favor one set of priorities over another.