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(Business Insider)   Protip: If someone offers you $100,000,000 for your internet startup where people just share short videos, take it. You're not the next Instagram   (businessinsider.com) divider line 73
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5742 clicks; posted to Business » on 06 Feb 2013 at 10:22 AM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-02-06 10:24:42 AM
I like how cynical the game has become. From the way TFA is written, the *point* of doing a startup is to get huge overnight success and then cash out. Not because you're bringing something new to market or because making society a better place, the whole point is to get rich and cash out while you still can.

Finance people are assholes.
 
2013-02-06 10:32:05 AM

Fubini: I like how cynical the game has become. From the way TFA is written, the *point* of doing a startup is to get huge overnight success and then cash out. Not because you're bringing something new to market or because making society a better place, the whole point is to get rich and cash out while you still can.

Finance people are assholes.


Who knew!? A Business Website focusing on making money!!!
 
2013-02-06 10:35:03 AM

Fubini: I like how cynical the game has become. From the way TFA is written, the *point* of doing a startup is to get huge overnight success and then cash out. Not because you're bringing something new to market or because making society a better place, the whole point is to get rich and cash out while you still can.

Finance people are assholes.


How was a video sharing website somehow revolutionary or supposed to "make society a better place"? The whole point of the business venture can only be described as a cash grab.
 
2013-02-06 10:50:41 AM

Lost Thought 00: Fubini: I like how cynical the game has become. From the way TFA is written, the *point* of doing a startup is to get huge overnight success and then cash out. Not because you're bringing something new to market or because making society a better place, the whole point is to get rich and cash out while you still can.

Finance people are assholes.

How was a video sharing website somehow revolutionary or supposed to "make society a better place"? The whole point of the business venture can only be described as a cash grab.


I dunno, never used it, but 30 million people per month apparently thought it provided something that all the existing competitors didn't.  You can view business as merely a means to extract money from people, or you can think of it as providing a service to society in exchange for giving you a living wage. Doesn't matter that you or I don't see any value it in, if society at large sees value in it then the business will thrive. That's the whole free-market principle.

I'm not saying that businesses shouldn't make money and feel good about it, I'm saying that the attitude surrounding some startups of "get famous and sell out quick" is stupid.
 
2013-02-06 10:52:43 AM

Fubini: I'm not saying that businesses shouldn't make money and feel good about it, I'm saying that the attitude surrounding some startups of "get famous and sell out quick" is stupid.


If it works how so?
 
2013-02-06 10:53:39 AM

Lost Thought 00: Fubini: I like how cynical the game has become. From the way TFA is written, the *point* of doing a startup is to get huge overnight success and then cash out. Not because you're bringing something new to market or because making society a better place, the whole point is to get rich and cash out while you still can.

Finance people are assholes.

How was a video sharing website somehow revolutionary or supposed to "make society a better place"? The whole point of the business venture can only be described as a cash grab.


Exactly. If you invent something that cures cancer or saves the whales or something, sure. Creating a pretty much intangible thing just so 15-20 somethings can share cat videos is not making society a better place. You have to be an idiot not to take the money and run.
 
2013-02-06 11:00:31 AM
Groupon is gonna be wondering why they turned down that billion mighty soon
 
2013-02-06 11:05:08 AM

mrlewish: Fubini: I'm not saying that businesses shouldn't make money and feel good about it, I'm saying that the attitude surrounding some startups of "get famous and sell out quick" is stupid.

If it works how so?


Again, I'm not saying that it's bad for businesses to make money, I'm saying it's bad when the entire point of businesses becomes a machine to extract money for the benefit of the owners. What I specifically take issue with is the assumption by TFA that startups ONLY exist for the purpose of making money, and to eventually be sold.
 
2013-02-06 11:05:13 AM
What exactly does this mean?

"Facebook curbed distribution ...."
 
2013-02-06 11:10:25 AM

Fubini: I like how cynical the game has become. From the way TFA is written, the *point* of doing a startup is to get huge overnight success and then cash out. Not because you're bringing something new to market or because making society a better place, the whole point is to get rich and cash out while you still can.


Ironically, when I clicked to the site the story that caught my eye in the sidebar was Startups, Don't Build An Empire Overnight And Do What FreshDirect Did
 
2013-02-06 11:35:10 AM

Fubini: mrlewish: Fubini: I'm not saying that businesses shouldn't make money and feel good about it, I'm saying that the attitude surrounding some startups of "get famous and sell out quick" is stupid.

If it works how so?

Again, I'm not saying that it's bad for businesses to make money, I'm saying it's bad when the entire point of businesses becomes a machine to extract money for the benefit of the owners. What I specifically take issue with is the assumption by TFA that startups ONLY exist for the purpose of making money, and to eventually be sold.


The problem is that too often, startups have your idea - they'll stay in business forever and change the world! Unfortunately for many of them, that's the wrong idea and will get them crushed by their competition. Sometimes, it's better to sell at a huge profit and then work on your next startup than to insist that you be a private, founder-operated company forever.
Selling out doesn't mean you have to retire, you know.
 
2013-02-06 12:13:25 PM

Theaetetus: Sometimes, it's better to sell at a huge profit and then work on your next startup than to insist that you be a private, founder-operated company forever.
Selling out doesn't mean you have to retire, you know.


For sure, but that's a strategic decision.

<i>A big incumbent sees your success and shoves money your way.It's a lot of money, but not Instagram-level money, so you walk away ... even though its plenty to make you rich for the rest of your life.</i>

TFA makes it sound like the whole point is to maximize the number of dollars you get from the cashout, and that is the sole goal of having a startup. Even though, they admit, there are lots of buyout offers that are more than enough to make yourself rich for the rest of your life.
 
2013-02-06 12:23:15 PM

Fubini: Theaetetus: Sometimes, it's better to sell at a huge profit and then work on your next startup than to insist that you be a private, founder-operated company forever.
Selling out doesn't mean you have to retire, you know.

For sure, but that's a strategic decision.

<i>A big incumbent sees your success and shoves money your way.It's a lot of money, but not Instagram-level money, so you walk away ... even though its plenty to make you rich for the rest of your life.</i>

TFA makes it sound like the whole point is to maximize the number of dollars you get from the cashout, and that is the sole goal of having a startup. Even though, they admit, there are lots of buyout offers that are more than enough to make yourself rich for the rest of your life.


Sure, and the best decision could go either way... My point was merely that somewhere north of 95% of entrepreneurs think that they're in the sole-proprietor/next-walmart category and that they'll ride their baby to the sky, when, honestly, their "multi-trillion dollar idea" is more like a few million and they should take the offer and work on the next thing.
 
2013-02-06 12:31:03 PM
But we can all agree that if someone offers you $100million for anything, you take it and never look back, right?

This is how that conversation should go, without exception...


"We'd like to buy (something/everything) from you for a hundred million dollars."

"Sold, where do I sign?"
 
2013-02-06 12:42:25 PM

pudding7: But we can all agree that if someone offers you $100million for anything, you take it and never look back, right?

This is how that conversation should go, without exception...


"We'd like to buy (something/everything) from you for a hundred million dollars."

"Sold, where do I sign?"


That reminds me I need to get a powerball ticket tonight.
 
2013-02-06 12:47:34 PM

Fubini: Again, I'm not saying that it's bad for businesses to make money, I'm saying it's bad when the entire point of businesses becomes a machine to extract money for the benefit of the owners. What I specifically take issue with is the assumption by TFA that startups ONLY exist for the purpose of making money, and to eventually be sold.


A business exists solely to extract money for the benefit of its owners or shareholders.  This has always been true.  If not - what the fark is the incentive of starting a business?  If you want to change the world - join the peace corp or start a charity.
 
2013-02-06 12:53:09 PM
If you want to change the world, then FARKing kill yourself. At least that will reduce climate change impact.

Think of the children.
 
2013-02-06 12:55:51 PM

pudding7: But we can all agree that if someone offers you $100million for anything, you take it and never look back, right?

This is how that conversation should go, without exception...


"We'd like to buy (something/everything) from you for a hundred million dollars."

"Sold, where do I sign?"


I would say that's true 99.99999% of the time. If somebody offered Richard Branson $100 million for the Virgin Group he would tell them to go pound sand.
 
2013-02-06 01:00:07 PM
PandoDaily reports that O'Brien willkeep a seat on the board, but that's about it.


CEOs should never be on their own Board of Directors.
 
2013-02-06 01:01:28 PM
Google and Apple should've taken 100 million instead of turning into juggernauts
hindsight, it's 20/20
 
2013-02-06 01:05:59 PM
After a decade of trying to compete with the big boys, I'd be happy to sell our IP for 1/10th that.
 
2013-02-06 01:06:02 PM

pudding7: But we can all agree that if someone offers you $100million for anything, you take it and never look back, right?

This is how that conversation should go, without exception...


"We'd like to buy (something/everything) from you for a hundred million dollars."

"Sold, where do I sign?"


In most cases, yes.

If the CEO already had $20 million stashed away and wants to swing for the fences...go for it. If you're trying to take down youtube or facebook (and you don't already have a nest-egg)...you're crazy. Take the money, then try again (but this time with a safety net).
 
2013-02-06 01:24:46 PM

Komplex: Fubini: I like how cynical the game has become. From the way TFA is written, the *point* of doing a startup is to get huge overnight success and then cash out. Not because you're bringing something new to market or because making society a better place, the whole point is to get rich and cash out while you still can.

Finance people are assholes.

Who knew!? A Business Website focusing on making money!!!


the point is, people used to open a business thinking "im going to develop a product/service and if customers like it enough, i should have a stable income, hopefully even a significant one, for the next 40 years. Maybe even turn it over to my children when i die"

which is what used to make economies strong. But nobody wants to put in that work or think about the long haul, so if they don't have twenty "enterprises" behind you on your resume, you are somehow a financial failure. So instead you get six-month pump-and-dumps that help nobody.
 
2013-02-06 01:48:30 PM

Some Bass Playing Guy: What exactly does this mean?

"Facebook curbed distribution ...."


I wondered the same thing. What does Facebook have to do with this?
 
2013-02-06 01:48:53 PM

Fubini: mrlewish: Fubini: I'm not saying that businesses shouldn't make money and feel good about it, I'm saying that the attitude surrounding some startups of "get famous and sell out quick" is stupid.

If it works how so?

Again, I'm not saying that it's bad for businesses to make money, I'm saying it's bad when the entire point of businesses becomes a machine to extract money for the benefit of the owners. What I specifically take issue with is the assumption by TFA that startups ONLY exist for the purpose of making money, and to eventually be sold.



In a non-Communist society, isn't that the function of a business? Extend shareholder equity and pay dividend?

But the guy made a choice, took and risk and failed. His money.

He learned his lesson.
 
2013-02-06 01:53:47 PM
Found a different article that explains it: Viddy did do something right: it is widely credited with having expertly exploited an opening of Facebook's Open Graph to video apps. Starting in March of last year, Viddy quickly used its Open Graph access to grow traffic, and cleverly position itself as "the Instagram of video" - invoking the name of a photo site worth $1 billion - and win favorable terms from venture capitalists. Things turned sour when Facebook promptly cracked down on the ability of Viddy and Viddy's arch-rival SocialCam to pump viral clips through the social network.
 
2013-02-06 01:57:25 PM

Fubini: I like how cynical the game has become. From the way TFA is written, the *point* of doing a startup is to get huge overnight success and then cash out. Not because you're bringing something new to market or because making society a better place, the whole point is to get rich and cash out while you still can.

Finance people are assholes.


Leave your ideology at the door.

Few, if any, for profit busineses are established for "the greater good", hence the title "for profit".

It's not a bad thing, entrepreneurs take huge risks.

Why don't you quit your job at the monestary and start a company? Put your money where your mouth is.
 
2013-02-06 01:59:55 PM
He turned down 100 million then got 350 million from other people I mean it wasn't that bad of a decision at that time.  Now cashing out then would have been good but eh.
 
2013-02-06 02:04:41 PM
The reason it's ok for startups to go big and cash out is that the model works and it encourages rapid development and innovation. The VC funded model employs thousands of people and encourages people to work their asses off in rapid/agile environments for the promise of potential pay back on employees risking their time and dedication while VC's risk their cash.

Wonder why the big companies that do a lot of the acquisitions don't just build competitive products themselves? Because once you get to a certain size that kind of rapid deployment becomes infinitely more difficult.

Oracle could build every acquisition they've made in the past 3 or 4 years with their internal teams and then use their clout to crush the competition. But it's actually cheaper and easier for them to acquire.

That's why the big guys know that a couple of years after their acquisition--let the leadership from the start-up go. They're gonna do another startup. You're starting to see companies make acquisitions from the same serial start up guys 2, even 3 times. Startups are the way to innovate and build quickly.

Also, it's built into the funding model. No one wants to invest $2 million in a series A because it might make back $2.1 million in 5 years. The funding system wants acquisitions to happen because the return can be fantastic. VC firms invest millions, providing hundreds or thousands of jobs in startups knowing in their model that maybe 1 or 2 out of 10 will bring them the return. So the returns have to be big enough to cover the investments that fail and still make money.
 
2013-02-06 02:35:44 PM
That'll learn ya to do things and try stuff.
 
2013-02-06 03:04:38 PM
Building your entire product on Facebook API is not a very wise long-term strategy, especially when Facebook loves to pull the rug out from people they feel are gaining a competitive advantage.  Almost all the success stories end with either selling out to Facebook, or quickly figuring out how to make money for Facebook.  If you get too big, and don't do either of those, you are probably not going to last very long.
 
2013-02-06 03:07:56 PM
images.wikia.com
 
2013-02-06 04:40:47 PM
Protip: If someone offers you $100,000,000 for your internet startup where people just share short videos, take it. You're not the next Instagram

Or more importantly, don't spit in the hands of the guys who drive the majority of the traffic to your site. It's like a pilot fish pissing off its shark.
 
2013-02-06 04:49:12 PM

jackiepaper: Groupon is gonna be wondering why they turned down that SIX billion mighty soon


FTFY.

/I would just be sick to my stomach every day if I'd been the guy who made that call
 
2013-02-06 05:46:16 PM

Opiate of the Lasses: jackiepaper: Groupon is gonna be wondering why they turned down that SIX billion mighty soon

FTFY.

/I would just be sick to my stomach every day if I'd been the guy who made that call


Actually it was $5.75 billion. Or a potential $800 million on the tableif the merger were to fail anti-trust review.
 
2013-02-06 06:08:13 PM
ego got in the way.  he prolly wanted to have a movie written by Aaron Sorkin made about him.  he'll be a CEO somewhere else and try it again.  it'll be in his biography about how failure bred him for the REAL challenge later, or some such self-pandering.
 
2013-02-06 06:08:58 PM

Opiate of the Lasses: /I would just be sick to my stomach every day if I'd been the guy who made that call


I wouldn't.

/because I would have killed myself already
 
2013-02-06 06:14:51 PM

TNel: He turned down 100 million then got 350 million from other people I mean it wasn't that bad of a decision at that time.  Now cashing out then would have been good but eh.


It's amazing how many people miss this incredibly simple point.  And it is impossible to judge whether it was a good, bad or GREAT decision without looking at the company's cap table.

For instance, if he got $50M on a $350 pre valuation that means it only cost 1/6 of the company.  Typical growth stage funding can put 1/2 of the capital invested into the pockets of founders and early investors, allowing them to take a small profit and roll the dice with OPM.  If you assume that a guy smart enough to build a company worth (at one point) $100-350M is not a total imbecile it was probably a good deal, and quite possibly still will prove to be.

Another possibility: he takes $20M from Sand Hill Road sharks and after a few rounds gets caught behind preferred stock with a 4X preference meaning if he only gets in the money if the company sells for over $100M.  He tries to re-negotiate with the investors but they don't because they never re-negotiate, so he exercises his only weapon: the veto.  Since he had another deal in the works he can make the growth capital deal at a high valuation and get some of that preference off his back.  Again, probably a good idea.

I've seen both of those happen.

Never assume these stories happen in the vacuum the writers like you to believe they happen in.  There are always more details.  Few people are that greedy or that stupid.  (some, but few).  For instance the Groupon thing was passed on because the mgmt. believed it would never pass due diligence and once that deal blew up their value would be toast, permanently.  They would have taken it if they thought they could get it.

/ not an expert
// just an entrepreneur of 18 years
/// above is why I have avoided venture capital like the dogshiat sandwich it usually turns into for founders
//// go without if you can!
 
2013-02-06 06:57:31 PM

falcon176: Google and Apple should've taken 100 million instead of turning into juggernauts
hindsight, it's 20/20


Google and Apple had veritable paths towards becoming juggernauts. This guy gave up control of his company by taking venture capital, and their reliance on facebook seems to have been an insurmountable issue. Facebook acquired Instagram---in lieu of need to acquire this guy's company, he is now short shrift. I think cashing out and founding another startup would have been more prudent, with my backseat, no skin in game, 20-20 hindsight...
 
2013-02-06 08:07:01 PM
images1.wikia.nocookie.net
"Ray, if someone comes to you and offer's you $100,000,000 for your tech start-up company, you say YES!"
 
2013-02-06 08:24:34 PM
If someone can build a knockoff of your only software in a couple months, guess what? Your company is not worth $100 million.
 
2013-02-06 08:52:12 PM
If you feel like $100,000,000 isn't enough, you should probably just kill yourself, because you will never, ever be happy.
 
2013-02-06 09:20:08 PM

SevenizGud: If you want to change the world, then FARKing kill yourself. At least that will reduce climate change impact.
Think of the children.


In other words: "If you want to change the world then kill yourself. At least that will reduce change."

You, my friend, are comedy gold.
 
2013-02-06 09:28:13 PM

MrEricSir: If someone can build a knockoff of your only software in a couple months, guess what? Your company is not worth $100 million.


That's an extremely simplistic view and also false.

If someone can rebuild your whole company in a couple of months, sure, but there are a shiat tonne of variables to building a company.
 
2013-02-06 09:38:27 PM

Cluckity: MrEricSir: If someone can build a knockoff of your only software in a couple months, guess what? Your company is not worth $100 million.

That's an extremely simplistic view and also false.

If someone can rebuild your whole company in a couple of months, sure, but there are a shiat tonne of variables to building a company.


Is it? Can you think of one major company that only sells a single product which could be easily reproduced, and has had success with that model?

I agree that there's a lot of variables to building a successful business, but that also means that farking up one variable can bring down the entire thing.
 
2013-02-06 10:06:52 PM
A very successful company in my industry just got bought out by a smaller company, racking up huge amounts leveraged debt to do it, while making approximately 6 wealthy people wealthier beyond anyone's dreams, by buying out their stock at twice it's current price. Which will most lifely result in numerous layoffs of various duplicated jobs.

Now, this doesn't bother me too much...businesses contract and expand and merge all the time. Even though it clearly sucks when you are the one getting booted out of the job. The sickening part to me was the following:

An industry investment newsletter reporting on the buyout commented that "everyone in the industry should take note...that this is reason why people invest  in your companies. It's not about quarter to quarter growth, or your financials. It's all about making the deal. Hopefully indusy leaders will finally get their wake up call as this is how the business should be run."
 
2013-02-06 10:07:06 PM

falcon176: Google and Apple should've taken 100 million instead of turning into juggernauts
hindsight, it's 20/20


Google and Apple listen to Insane Clown Posse?
 
2013-02-06 10:29:12 PM

Fubini: I'm not saying that businesses shouldn't make money and feel good about it, I'm saying that the attitude surrounding some startups of "get famous and sell out quick" is stupid.


I disagree. There is a valuable service in starting businesses and selling them to others. It's demonstrably true that the skills required to get a business up and running are different from the skills needed to keep a business profitable year after year. Someone who is good at starting successful companies should be well rewarded for their efforts, as well as compensated for the risks involved.

The system of quarterly profits and short-term thinking that allows someone to hype a crap business and cash in is farking retarded, though, and that's what we should focus on. Quality, utility, and brand loyalty don't have their own entries on the quarterly earnings report.
 
2013-02-06 10:38:27 PM

scotchcrotch: Fubini: I like how cynical the game has become. From the way TFA is written, the *point* of doing a startup is to get huge overnight success and then cash out. Not because you're bringing something new to market or because making society a better place, the whole point is to get rich and cash out while you still can.

Finance people are assholes.

Leave your ideology at the door.

Few, if any, for profit busineses are established for "the greater good", hence the title "for profit".

It's not a bad thing, entrepreneurs take huge risks.

Why don't you quit your job at the monestary and start a company? Put your money where your mouth is.


The problem with this is not that it's morally wrong, it's that it's stupid. You should indeed start a business for "the greater good". The for-profit company that provides the most utility-or "good"-to the public is rewarded with the most dollars in exchange for this utility. It's long term thinking. Of course, supply and demand factor heavily into what you do and do not provide, but at the end of the day if you don't provide something positive (or prevent something negative) you won't be a successful business in the long run. Anything else is just three card monte.
 
2013-02-06 10:44:19 PM
Of course, we foster a perverse system in this country, warping that utility calculus. We couldn't design a worse system to reward investors if we tried. Investors throw money at any company that can show a healthy 3 or 6 month growth, ignoring companies that steadily make money year on year. We are literally paying the CEO con men to steal our money from us. Meanwhile, billionaire investors have the leverage and the information to inflate those already inflated values, and extract a portion of our money before the CEO can get it all. It's like a group of professional sports bookies betting on a game of monkey-in-the-middle, except instead of the grifters throwing the mark's hat around, the mark is tossing them dollar bills, hoping that eventually they'll drop enough of them that he can make a profit.
 
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