November 2, 2009

Building to keep

This tweet by Bonnier R&D head Sara Öhrvall tied into a discussion I had earlier today and thoughts I've had the last couple of weeks.

"Leaving after one week in the US. Met many many entrepreneurs building businesses to sell but not one building a business to keep."

I don't think selling a company, backed by venture capitalists or bootstrapped, is wrong. However, I think building a company of more than a couple of people to sell it to a larger company rather than going for an IPO (or other buyout of early investors) will make it less likely to succeed.

As making, as we say in the business, a shit-load of cash is very difficult for most employees, the opportunity to create something special is the true talent-magnet. If the goal is to build a (mid-sized) company that is acquired by Google/Amazon/Microsoft/eBay/Yahoo/etc for $50-100 million were the startup CEO reports to a big-co VP, you're likely capping your vision and as a result capping the number of high-quality people that will be interested in joining the company.

In addition, I think it's telling that many founders leave the company that bought their startup when their earn-outs are up.

1 comment:

ogo said...

I remember reading this article on the same topic a couple of years ago, when it was making some waves in the acquisition frenzy here in the valley at the time:

Myself, I can't really blame entrepreneurs for taking the chance when offered a substantial amount of cash (read: future creative freedom).

This is a result of the valuations of so many startups (in tech especially) being largely speculative rather than based on fundamentals. Opportunities come and go with the collective mindset at that given moment, and you may only get one shot at getting anything back from your effort - six months later you'll be out of fashion.