Why [is the] focus on selling the company instead of building the company?
Many people are only considering building a company to make money. They're rightly considering whether their action will get the effect they want. Only consultants make money building companies. A sale is the quicker, more certain+ way of making good# money.
Everyone constantly talks about exits, but before you are getting a divorce you have to be married.
Does this imply the speaker is a gold digger?
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+ Owning and operating a company involves ongoing work, risk, and the potential of making money. Selling a company trades all of that for certain money now.
# Good money = Well over their income as an employee.
A sale is the quicker, more certain+ way of making good# money.
Really? I'd like to see the statistics, please. How many of the entrepreneurs worth--let's say--ten million did it by building companies they flipped without any serious attempt to actually run them as viable businesses? How many actually ran them for years, building value as they went?
I have a strong suspicion that the vast majority of wealthy businesspeople built their worth slowly and steadily by operating their companies and managing for growth rather than looking for a quick exit.
Furthermore, managing for profitability is the safe way to run a business. If your business has positive cash flow you can run it indefinitely, biding your time until you feel like cashing in. You are beholden to no-one. If you have no ability to actually run the business if both you and it are 100% invested in the quick exit, you are at the mercy of forces beyond your control.
How is an investor/VC going to get a meaningful return? Usually via a M&A or IPO, the latter being extremely expensive and really only reserved now for a few exceptions. Investors generally come in at the start, and therefore the exit conversion begins early because it's important to them (and us). And quite frankly, sometimes it's just a fun discussion to have to keep the motivation and drive going because startups are an emotional roller coaster.
I respect 37signals for what they've done, I use their products regularly, I partly agree with their notion that too many web startups don't know how to make money, but I tire of their gross generalizations and assumptions that what works for 37signals works for everyone else -- mostly because it comes off with a dash of arrogance.
An investor can get a meaningful return the same way you always could while investing in a company: by sharing the profits that the company makes over the life of the company. This means the investors are motivated to provide advice/connections/decisions that benefit the corporation over the long term, rather than concentrating on short-term solutions. I think it is a much more positive way of growing a business, but it seems like no one is interested in that anymore, either because they have no actual faith that what they do is valuable/viable long term, or because they are impatient. I don't see what is offensive about the article. It just points out what the trend currently is.
There is a balance that can be found if you want to commit to a 10-20 year business, but I'm not huge a fan of profit share plans in an early-stage company because they take away the most critical resource which is reserved for growth and/or survivability (like when the market retracted and VCs were on the sidelines).
Also, most entrepreneurs I talk with have a ton of ideas... after about 4-5 years I think it's in a lot of peoples blood to start something new and let the expects take over growing the company from 70mph to 90mph.
But I think that is the point of this article. What you state is a valid way to handle things. 4-5 years in, you have a profitable company that needs grown out from 70mph to 90mph. But the trend is currently to start thinking about handing the company over when it still has training wheels on, way before it has hit 70mph.
The point that resonates with me is that people are so fixated on the hand-off that they fail to really make a (sustainable) company. People ought to go into a venture thinking: I'm going to make a great company, and if at some point I decide to sell it/hand over management, I'll have that option. Instead, from day 1 they are obsessed with getting out.
I think the article is too strong in saying 'everyone' does this, and I don't think it is the case that 'no one' should do that, but I think that businesses would be better off in general if that plan were the exception rather than the rule that it is becoming.
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[ 3.0 ms ] story [ 21.1 ms ] threadMany people are only considering building a company to make money. They're rightly considering whether their action will get the effect they want. Only consultants make money building companies. A sale is the quicker, more certain+ way of making good# money.
Everyone constantly talks about exits, but before you are getting a divorce you have to be married.
Does this imply the speaker is a gold digger?
---
+ Owning and operating a company involves ongoing work, risk, and the potential of making money. Selling a company trades all of that for certain money now.
# Good money = Well over their income as an employee.
Really? I'd like to see the statistics, please. How many of the entrepreneurs worth--let's say--ten million did it by building companies they flipped without any serious attempt to actually run them as viable businesses? How many actually ran them for years, building value as they went?
I have a strong suspicion that the vast majority of wealthy businesspeople built their worth slowly and steadily by operating their companies and managing for growth rather than looking for a quick exit.
Furthermore, managing for profitability is the safe way to run a business. If your business has positive cash flow you can run it indefinitely, biding your time until you feel like cashing in. You are beholden to no-one. If you have no ability to actually run the business if both you and it are 100% invested in the quick exit, you are at the mercy of forces beyond your control.
I respect 37signals for what they've done, I use their products regularly, I partly agree with their notion that too many web startups don't know how to make money, but I tire of their gross generalizations and assumptions that what works for 37signals works for everyone else -- mostly because it comes off with a dash of arrogance.
Also, most entrepreneurs I talk with have a ton of ideas... after about 4-5 years I think it's in a lot of peoples blood to start something new and let the expects take over growing the company from 70mph to 90mph.
The point that resonates with me is that people are so fixated on the hand-off that they fail to really make a (sustainable) company. People ought to go into a venture thinking: I'm going to make a great company, and if at some point I decide to sell it/hand over management, I'll have that option. Instead, from day 1 they are obsessed with getting out.
I think the article is too strong in saying 'everyone' does this, and I don't think it is the case that 'no one' should do that, but I think that businesses would be better off in general if that plan were the exception rather than the rule that it is becoming.