Re: Should Web Entrepreneurs Hang on to their Companies?
by wac6 on Tuesday October 27, 2009 @12:17AM
(#904814)
Yes, you'd have a better chance of accurately estimating the risk, and you would be in a position (control) to do something about it, trim the sails, fire the management, retain the management, whatever. Staying involved day to day has costs for sure, but Carnegie and others in the 19th Century seemed to model a way where they spent a half day on weekdays at best managing many, many businesses. It probably has a lot to do with whether you can motivate and retain good management to work for you.
Re: Should Web Entrepreneurs Hang on to their Companies?
by byoung2 on Monday October 26, 2009 @02:17PM
(#903777)
how is holding large stakes in a small number of businesses less risky
Good point, especially if your small businesses have a limited shelf life (e.g. web based startup that can be replaced by the "next big thing").
Re: Should Web Entrepreneurs Hang on to their Companies?
by wac6 on Tuesday October 27, 2009 @12:20AM
(#904816)
Yes, you have to build the shelf life of the company into this. One model I have seen a Seattle investor use is to assume a shelf life of 12-15 years at best. But if you can return invested capital every 2-4 years, you have a good run. And if someone offers to take you out, you can measure your opportunity cost against the offer, i.e. you can determine whether the buyout makes more sense than running the company through its natural life cycle.
OK, if you built these businesses yourself, you might stand a better chance of accurately estimating the risk, but at the same time you'll have to stay involved with day-to-day operations, which has a cost too.