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A comment on Should Entrepreneurs Bet It All On The Billion Dollar Exit, Or Cash Out Small?.

Re:Should Entrepreneurs Bet It All On The Billion Dollar Exi... by csallen on Sunday October 03, 2010 @12:31PM (#1752996)
I never really understood this debate... as if all companies should go big, or all companies should stay small/medium. Every business is different. Businesses have varying amounts of potential for growth, varying numbers of possible revenue streams, and even varying numbers of directions in which to pivot should things hit a wall.

If you're selling people hands-on classes in underwater basket-weaving, it's probably not a good idea to make all your classes free so you can chase VC money. On the flip side, if you've created a social network that's on track to become the biggest website ever, it's clearly unwise to sacrifice that massive potential by cashing out early. One-size-fits-all arguments ("All companies should go for the gold!") don't make any sense, and are probably issued by people who have a direct incentive for their arguments to become reality.

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Re:Should Entrepreneurs Bet It All On The Billion Dollar Exi... by webwright on Sunday October 03, 2010 @01:04PM (#1753064)
The debate is for people/companies who have a choice-- obviously you're right about the fact that there's no debate where there is no choice. Mint sold for $150m, but perhaps could've aimed bigger. Blogger sold pretty early-- perhaps they could've been/beaten WordPress. Google famously tried to sell for $1m to Excite. LOTS of companies who sell early have an opportunity to aim bigger.

I think partial cash-out Series B rounds are a good development which allows founders to have their cake and eat it too. Aaron Patzer probably could've raised a big Series B, pocketed a few million for himself and retained a fairly massive chunk of ownership.

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Re:Should Entrepreneurs Bet It All On The Billion Dollar Exi... by staunch on Sunday October 03, 2010 @03:07PM (#1753358)
The problem with the Mint example is that the acquisition price was really quite high. Patzer's personal stake was $40 million(!). That's in the same ballpark as he might make in an IPO 5 years later, after being diluted to hell. It's FU money 4-6 times over.

I think cashing out a couple million only works when a) the founders are obsessed with the company's mission above all else b) the acquisition offer is small enough that VCs can give the founders ~20% of their would-be cash now.

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Re:Should Entrepreneurs Bet It All On The Billion Dollar Exi... by myoung8 on Sunday October 03, 2010 @01:42PM (#1753150)
It's not rational, but part of the Silicon Valley mindset is "go big or go home" and oftentimes people don't stop to think whether it's good for their business, they just accept it as fact.
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