Built to Last vs. Built to Flip

http://bostonvcblog.typepad.com/vc/2008/04/built-to-last-v.html

by bootload • 18 years ago

26 30 18 years ago

bostonvcblog.typepad.com

tx3• 18 years ago

The best submission today by far, IMO. I suspect it won't get crazy popular around here, unfortunately.

Creating a sustainable business has been my lifetime dream, and hearing day after day after day about quick "exit strategies" on news.yc has been very depressing: if you're so eager to "exit", why are you in it to begin with? Pure greed would be an honest answer, I suppose.

This is why admire Jobs so much: while he certainly cares about the "money problem" he has remained so obsessed with Apple, with his baby, throughout his entire life. There is no "next big thing" for him.

parker• 18 years ago

>> hearing day after day after day about quick "exit strategies" on news.yc has been very depressing

I'm not a huge fan of hyperbole. Care to back this up? I don't think news.yc is obsessed with ripping people off... what part of 'make something people want' contradicts creating value?

ecommercematt• 18 years ago

quick exit strategy != ripping people off

That being said, I agree that there are plenty of motives for hoping for an early exit other than "pure greed."

freax5• 18 years ago

> what part of 'make something people want' contradicts creating value?

Crack? Junk food? Time-wasting websites? People rarely act even in their own best interests.

noodle2• 18 years ago

while i don't disagree, i would like to point this out:

a lot of hackers are on the bottom floor. they enjoy what they do, but they have to do SOMEthing for money to pay the bills.

i, personally, would enjoy flipping a company if i had the opportunity, because this would allow me a huge latitude with what i would be able to pursue in the future. it would give me the ability to build a sustainable company with future ventures without having to make concessions/sacrifices in the name of being able to buy food next month.

i don't think most hackers are on the verge of running out of ideas, either.

tx3• 18 years ago

On the bottom floor? You must be kidding me. Average salaries of CS graduate after 3-4 years out of school are in six-figure range in most parts of the country. That's in top 5% of US population and you can hardly call that a "bottom floor": ask your mechanical or civil engineering friends how do they feel about such "bottom floor".

My younger brother was kind of pissed with his $80K offer from Microsoft immediately after graduation claiming that some of his friends did better. That's ridiculous.

Stop kidding yourself, huge percentage "Web 2.0 entrepreneurs" just aren't interested in building real value-providing businesses. Startups like Twitter aren't built to be companies, they're built to flip - it's included in their "business model". I can't speak for more well-known startups, but those I am personally familiar with are all built on the premise of M&A nearly immediately after starting to break even.

THAT is the primary reason why there aren't too many "next Googles". Not many people are ambitious enough to aim than high.

It is kind of sad that Paul rarely participates in discussions like this one, but understandable given his limited time, but I'd love to hear his opinion on this.

pg3• 18 years ago

"Exit strategies" are strategies for investors. Venture investors need to get their capital back at some point, and the phrase "exit strategy" means the strategy for getting it. It doesn't imply anything one way or the other about what the founders do.

Though you may not be old enough to remember it, Apple had one of the most spectacular exits in history. Their IPO in 1980 was the biggest since Ford's.

freax5• 18 years ago

> Apple had one of the most spectacular exits in history. Their IPO in 1976 was the biggest since Ford's.

Amazing they managed to IPO before they even shipped the Apple II. ;)

Haha, yesterday I was off by a year but today you're off by 4 :P

Apple went public in December 1980.

smalter• 18 years ago

i think "exit strategy" when coming out of the mouth of a founder usually means exit from illiquidity rather than exit from the business completely. exit from illiquidity just makes sense (as paul graham and legions of corporate finance professors have pointed out) because it means liquidity which gives the opportunity of diversification, which is important to everyone.

gscott• 18 years ago

"Creating a sustainable business has been my lifetime dream,"

GoDaddy.com is an example of a company that has been a success and generates a large positive cash flow for it's single founder.

davidw• 18 years ago

One of the things that I like about pg's modus operandi is this: I love to build stuff, but I'm not so much of a business guy. I think I could build something that lots of people want, but less sure that I'd be the right guy to keep running it. Maybe I would, in the right field, but having the possibility to 'flip' the company to someone more adept at running it sounds pretty good to me, as well as allowing me to go back to do what I do best.

freax5• 18 years ago

You need an exit strategy during sex too or there's going to be a merger and then an acquisition of your paycheck.

You don't wanna be left holding the (diaper) bag.

That's some life advice, boys, since some of y'all are going to be millionaires and that makes you a target for all sorts of golddiggers.

Naturally, PG had this one sussed like everything else. "Wait a minute, friend," you might be saying to me, "didn't RTM get an equal share? That's like 50% in a divorce!" Naw, you see, before they got together, they wasn't worth two bits between 'em. PG rode that horsey into the sunset and 59 million pesos!

edw519• 18 years ago

The author is like a blind man thinking that an elephant's leg is a tree.

How could he comment on that which he never sees?

Like small companies that grow with the best infusion of cash there is: from customers. Here's a novel concept: if you can solve your customers' problems, protect your market share, manage your cash, and keep a finger on the pulse of your business while growing it from within, why would you ever need a quick exit?

pg3• 18 years ago

I have yet to read a post that had "built to flip" in the title that wasn't sanctimonious bullshit. It's invariably a signal that the author is going to brag about how he's in it to build companies of lasting value. But ask yourself this: how would this guy feel if he funded a company that became very successful, but never got bought or went public? Not very good, you can bet, when his current fund closed and all he had to give his limited partners was some highly illiquid stock. So all he's really saying is that he hopes the companies he invests in go public. But all investors want that!

rams• 18 years ago

Sounds like a good topic for an essay.

Retric• 18 years ago

A highly successful company is making a lot of money. Going public let's you cash out and diversify but if your equity is pulling in a few hundred thousand a quarter it's not an issue.

It's possible to find or create large company's that don’t make money, but if you can't make a profit with a million users what's the point of growth or an IPO? (Other than a profitable scam.)

kingkongrevenge2• 18 years ago

> all he had to give his limited partners was some highly illiquid stock.

Why would these people spit on a stock that's throwing off nice dividends?

> a company that became very successful, but never got bought or went public?

Option 3: Stay private, finish growing, throw off fat dividends until the cash cow dies.

What's the problem?

pchristensen2• 18 years ago

Because liquidity is valuable and cash cows don't live forever. VCs and aggressive investors are looking for big returns, not cash thrown off. If does make me wonder if a VC or angel fund could solicit patient capital, like from a pension fund or life insurance, that would be content with owning dividend-rich stock. That's an area as unexploited as YC's niche was three years ago.

Built to Last vs. Built to Flip

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