Three years ago, I sold my startup because I was an idiot
peterc.org
peterc.org
Starting a business, operating it for a while and a successful exit are the whole meal, if you had continued to run it you might have crashed it or you might have been in debt now.
There is no way to know what would have happened in an alternative universe, and it's a pretty good thing on your resume to say that you ran a startup that made you and your investors money. That puts you in the < 5% bracket of the entrepreneurs.
Now you simply need to do that all again, with the lessons learned and your newfound energy, capital and the success story behind you.
You'll do very well indeed if you play your cards right.
Don't be so hard on yourself, don't compare with the 'could have been' from the perspective of it could have been more, it could have been a whole lot less too!
Are you serious? You mean that in general, or in this particular case? Frankly, I am shocked by your assertion. Quoting Andy Grove:
"Intel never had an exit strategy. These days, people cobble something together. No capital. No technology. They measure eyeballs and sell advertising. Then they get rid of it. You can't build an empire out of this kind of concoction. You don't even try."
My thoughts exactly, only expressed more eloquently. What do you want? Make a couple of million and spend the next 30 years bored by the pool drinking cocktails? Or do you want to build an empire? Sure, building an empire is hard work, but at the time of my death, I want to know I chose the path of adventure, not the easy way out.
I am by no means advocating taking enormous risks and chasing quasi-impossible dreams. But if one's startup is taking off, why not stick around and try to scale it up? Building a company of a few 100s of people from scratch sure must be a whole lot of fun. You are creating employment, you are creating wealth. If you sell your business as soon as it starts working, then you do the hard work, and someone else gets all the credit and the fun.
If your goal is to create a company that is going to be around in its original form and that will 'change the world' then by all means, stick around.
But if you create 'web-apps' for an emerging field where you'll be faced with 10's if not 100's of competitors a successful acquisition is not bad at all. In such markets shake-outs are the norm, and that period is marked by acquisitions and obituaries.
Most successful start-ups find that at some point in time they're going to be acquired.
Your comment reminds me of the criticism levelled at mint.com when they 'sold out', as though what they achieved and did was all negated by selling to their 800# gorilla competitor.
Personally I think they - and Peter Cooper, albeit at a lesser scale - did great.
Whether you should stick around or not depends on a lot of factors, your ambition, your ability to manage a larger company (and your desire to do so), your risk profile and so on.
No one size fits all, there is room enough for all strategies and tactics, what works for you may not work for everyone. Peter managed to do what very few people here will ever manage to do, in spite of all the potential, he did it under his own power, recouped his investors money and paid them a premium, had a pretty much text-book acquisition for a company this size. Nothing to complain about.
Could you do better ? Maybe. But you could also do a lot worse.
The joke goes that no deal is ever right, if you manage to sell you should have waited, if you crash you've waited too long.
So a certain feeling of 'I could have done better' post sale is pretty much the norm, and maybe you really could have done (a lot) better, but for all the same money you'd have crashed horribly or you could have found yourself the proud owner of a stagnant business in a field with lots of better funded and better executing competitors. There might be a way to turn that around but it's not a given.
I entirely agree. I know that HN'ers love web-apps and love thinking that "building something people want" is enough. But web-apps are too "easy", i.e., the barrier of entry is too low, and the competition is fierce. If one's business is a website, then sticking around may be foolish. Just take the cash and go build something real, and let people with a large pillow of capital take the risk.
My point is this: Andy Grove and the founders of Intel were not successful because they built "something people want". They were successful because they created something people did eventually want, because they made wise decisions at the right time, and because their skillsets made them irreplaceable almost. If you want to build an empire, then create something the world will need in the future, make sure you're the only one who knows how to do it, and capitalize on your knowledge while the rest of the world is catching up. This is extremely hard to accomplish in software, but it's not impossible in hardware. I am thinking of electronics, photonics, microfluidics, and the like... not web-apps that can be built in a weekend.
The way tarsnap is marketed I'd never ever expected it to be b2c, most private individuals I know outside of computing would have a very hard time understanding what it's all about without a lot of explanation. That's really interesting.
Facebook had ?
but yes, i am going on record saying that facebook will probably not be the last word in social networking. someone else will come along and figure out how to do it better, just like what happened to friendster and myspace.
They do have some strong network effects, but just like its predecessors, this market moves too fast for that to create a durable lead, I think.
Also, social networking is subject to the whims of fashion. I think part of what facebook used to kill myspace was that myspace was full of lower class people. Facebook seeded themselves from colleges, giving themselves a nice middle class base to build upon. Facebook has largely abandoned that level of control now, and it has yet to be seen if the seeding was enough.
There were a load of online auction sites, then eBay won. You could wrongly say that people moved from auction site to auction site, but that wasn't the case.
Maybe there will be the next facebook, the next ebay, the next amazon, but I'm skeptical.
See here:
I actually think the search engine market has the opposite of a network effect barrier to entry. If you made a search engine that was half of google's 'native effectiveness' (by which I mean googles effectiveness before the spammers start mucking it up) assuming your search algorithm is different enough that it's not gamed in the same way as google's, you will have a search engine that is more effective than google until it becomes worth the spammer's time to mess you up.
I think google's talent pool is interesting, though. they have a whole lot of really good people, and they are probably exploiting that talent better than any other company of similar size. It really seems like they should own more markets than they do.
I think Google's biggest weakness on that front is that they have nearly all their employees thinking that google is both competent and altruistic. I don't see the same internal dissent with my friends who work at google as I saw when I worked at Yahoo. At Yahoo, we'd point out what the company was doing wrong. At google, the employees seem to think their masters know best.
(this aside, the essential problem with search engines is that the advertising business model creates a conflict of interest; if the search results are that much better than the search ads, nobody will click on the ads. On the other hand, nobody has come up with another business model for 'generalized search')
(Well, that and being generally insightful and expressing a valid, important opinion.)
His current thinking reflects a learning process that he might well not have engaged in without the sale.
And who knows what he'll accomplish with the benefit of that learning?
All in all, his first sale was definitely +1 in the W column.
The point is: if you're after financial independence, take the boring, yet easy, path. Give 10 years of your life to a bank or law firm. Maybe you can make a million or two. Retire. But, if you're going to give 10 years of your life to a company that has a 1% chance of getting anywhere, then be committed to it, do it for fun, to build an empire. You'll most likely fail, but you'll have a good time, at least.
Building a web app that might be the gateway to your dreams takes nothing but a computer, a working brain and an internet connection. Getting into investment banking has a wholly different set of requirements and so might not be the 'boring yet easy path', it might in fact be much more difficult. Also, investment banking would not support the number of people that are trying their luck in the web-app (or phone app) lottery.
And for plenty of people 'boring' doesn't cut it, no matter what the rewards.
The problem with web-apps is precisely that the barrier of entry is too low. You are competing against the entire world. No special skills are required beyond programming. It does not require credentials. What makes the game easy to play is also what it makes it so hard to win.
That alone is a deal breaker for probably a very large percentage of those that would want to go this route. Also, it requires a plan long in advance. So that 'only' is a bit out of place there I think.
> to be able to tolerate excruciatingly boring work for 16 hours a day.
That's another slight problem. You couldn't pay me enough for a job like that, I'd probably burn out long before reaching my goals, whatever they were.
> I know people who amassed a nice loot that way.
So do I, their personalities and backgrounds are about as far away from the typical web entrepreneur as you could get.
> I don't know anyone who amassed the same amount by creating software, although I know a few who tried.
I know more people that made somewhere in the millions to 10's of millions with a few 'out of the ballpark' hits in software than in any other business outside of regular trade.
I know one investment banker that did well, but then again, most of my contacts are in the software world, not in banking so that will likely skew the picture.
Competing against the entire world is pretty much the norm for every other business except for software. So first mover advantage, execution, customer support and so on are where you make the difference, and that gives people a sense of control over their destiny, which is a powerful motivator by itself.
I know several newly minted lawyers from reasonable but not top tier schools who are trying to find work. (unfortunately in fields I don't know and don't care much about, like family law, otherwise I'd find something for them to do.)
as for investment banking, the competition, I hear, is absolutely fierce. I'm a pretty bright kid for a biz guy, but your average quantz is going to eat me alive.
Working for other people is really only easier if you are the sort of person who is good at playing the organizational game.
My impression is that if you start a company in an area where you have some experience, your chances of success are way better than 1%. Is it better than your chances of making a lot of money working for other people? my experience has been that building a business that pays bay area sysadmin wages is a /whole lot/ harder than getting a bay area sysadmin job. But my theory is that multiplying that bay area sysadmin money by five or ten is going to be easier to do with this business than it would be going back to school and attempting to learn a trade that would pay that much natively.
but yeah; most people who run businesses for the long term do it because they enjoy the freedom. My company is paying me about 1/3rd a bay area sysadmin wage right now, and I'm a /whole lot/ happier than I was being a sysadmin for someone else.
Does your advice stay the same? Does it look easy?
For me, reading Hacker News and dreaming about a startup is one of the few ways I can envision myself being financially independant.
(I'll move past the "dreaming" and into the "doing" part soon :) - I'm currently shackled with self-inflicted debt)
These days, people cobble something together. No capital.
No technology.
By contrast, Reddit looks like something that was built in a couple of days by two bored college students. I like Reddit, but let's face it, they're not pushing technology anywhere. They don't have to deal with quantum effects, current leakage, and that kind of stuff. They just run a few servers, and they don't have a business plan that can compare to Intel's. So, what exact point are you trying to make?
Frankly, when compared to Intel, Reddit surely looks like something that
was just "cobbled together".
They don't have to deal with quantum effects, current leakage, and that
kind of stuff.
are often not it's just too easy to disregard the problems each distinct piece of software faces.
I'm pretty sure my own company does not qualify as an 'empire' by any standard, but it keeps me free, off the streets and pays the bills, I couldn't wish for more. I wouldn't exchange it for a boring job in investment banking for whatever compensation you put on the table, there's more to life than money, as I've found out the hard way.
In any case, there's nothing particularly noble about empire per se. Sure, it pleases the ego. But there's always a bigger empire. And empires require HR departments and middle managers and other such distasteful things. You don't need to be the captain of an aircraft carrier. It's also fun to run a pirate ship.
Intel has been a hugely successful company, so successful in fact that they thought that they could get away with practices like this.
I mean, I've turned down a few offers for my own business in the same price range. If I could turn around and build another, competing business, it would likely make sense for me to sell. but if I have to find some other line of work? well, unlike you, I value the few grand a month I make over the couple hundred grand I'd get from selling it. I really, really like doing this.
But if I could sell out, then turn around and start over, competing with the company I sold, keeping my knowledge and experience uh, I probably would.
You should talk to a lawyer and get the ground rules for competing with your former company; for example, you may have to take care to document that you aren't making use of IP that you sold to them. But, in general, why not? Ask Steve Jobs about the ethics of starting up NeXT after founding Apple. Ask the Intel folks about leaving Fairchild to found a direct competitor. Ask most founders, really.
Now, not knowing such things were unenforceable and generally wanting to keep my word, I refused to sign the non-competes. Sometimes I'd get the work anyhow, sometimes not. But when doing business with a larger entity, I expect to get screwed. The deck is going to be unfairly stacked against me; that's just how the world works, and you've got to expect and to deal with that as is. It's not something I feel I can change.
also, there are all sorts of spoken and unspoken rules in business... I know when I was primarily a contractor, I, of course, always tried to cut out the middle man, and that is considered /extremely rude/ in that market. (I mean, /I/ was never asked to sign something I wouldn't go direct, but usually the client is.) now, it wasn't rude enough to stop people from pimping me out, but I think it was part of the reason I was never able to become a body shop myself, in spite of having good people working for me.
Now, some things are rude, but I do them anyhow, like shopping around for quotes, and telling vendors what other vendors quoted you. I mean, sure, the sales guys think it's rude, but who cares? all the products I buy have many, many vendors, so pissing off any one doesn't matter at all.
Still, before I violate a social rule, I'd like to know it is a social rule and why. and then make an informed decision as to if I want to break it or not.
While I'm not a customer of yours (due to bad timing, mostly) I'm going to be mean and note that I've seen a lot of people singing your praises and who really love your services.
The almost immediate crash in the level of service received is something my ex-customers were rather vocal about in the support forums for a few months thereafter. On the plus side, your business doesn't seem to be particularly service driven and customers are very used to acquisitions in the hosting sector (I'm friends with the founders of a big host that sold for 8 figures recently and their customers didn't bat an eyelid).
My guess would be that the major downside for the customers is that while I remain committed to being the lowest price player in the field, I doubt anyone wanting to buy me would feel the same. The gentle side of that is that in this industry, you raise prices by not lowering them, so if that was a huge problem for customers, they have plenty of time to move. on the upside, the 'out of space' sign would go away.
In my case, unless there are statutes about this, no. The contract had no non-compete clause. It had a non-solicitation clause but since I was the only person in the business, there was no-one I'd want to "hire away."
is it rude?
I think so. It boils down to my sense of "doing right" which has been both called callow by practical and hard-nosed folks or upright and decent by others. I worry about other people's feelings more than I let on, but it takes all sorts to make for an interesting world ;-)
unlike you, I value the few grand a month I make over the couple hundred grand I'd get from selling it. I really, really like doing this.
At the time of the sale, it was a "never again" experience. A bit like after I finished my first book. I was burned out on the sector. I have to take a little time to get back on the horse. It was only about a year later I even began to think "I should try that again!"
How long is standard for a non-compete? I'd expect anyone who bought me would want to hire me for a certain period of time afterwards, if nothing else to integrate my stuff with their stuff, train staff, etc...
Really, setting any employee in a zero accountability situation and expecting them to act in your interest is irrational... but when the worst an employee can do is hang out on facebook all day rather than working, it's not as big of a deal as the executives who can line their own pockets with much more of your money than most employees take home. Executives can and do take home all kinds of rebates, vacations, and other goodies from vendors.
so yeah, I think the behavior of your typical executive has very little to do with what he or she believes is the best interest of the company.
It's certainly a better problem than, say, wondering if you can actually build something that will allow you to quit your boring day job.
Good luck!
Man, I hate perfectionism. I've done a similarly stupid thing or two. This is something worth striving against.
"As someone who is in a similar position you were, what advice do you have? I have a website that generates a few thousand dollars a month. Like you said, it's enough to live by, but I'm doing everything myself and I'm not sure how to scale.
You mentioned being able to see what you were doing wrong...what was that? Do you have any tips?"
"It's hard to come up with any gems of advice for you specifically because you're in an area I really don't understand - entertainment. Humor, games, and other sorts of light entertainment are obviously a big business (CollegeHumor, Break, Sickipedia, JibJab, Kongregate, et al. show this) but I haven't got a grip on how they work at all. I've kept my focus on software and technical content and I could write quite a bit about that.. that sounds like it should be one of my next blog posts ;-)
It's generic, but my best advice to you would be to figure out who is using your site and why, and optimize heavily to that demographic. Once you know who's using your site, you can make them keep coming back by optimizing the experience. Once you keep people coming back (or new people coming in), you can target money making products and services at them. It seems to me that entertainment sites are heavily focused on sponsorships and advertising as their main revenue streams with subscriptions and products coming a way behind. CollegeHumor, for example, are running a Converse sponsorship right now, and they can sell this sort of package because they have a strong grasp on the demographic of people hitting their site. It's like how Rolex and Prada always advertise in the glossy fashion or "wealth" magazines.. they want to stay in the consciousness of a certain demographic. With weed smoking, you might have an uphill struggle with that.
Another approach is to find existing successes that relate in any way to your own site and see how they are making money. Even if you can't get any numbers, people's sales channels are usually quite transparent because that's how they get people in to make money. How are other sites related to marijuana making money, if at all?"
I actually did secure some direct advertisers from the UK, the payments should be on their way, and then I'll have some more revenue which is good. Still not as scalable as I'd like, though. I only got $2 CPM from them...
What hasn't changed are the needs of getting users, charging enough, and having the guts to do it in the first place.
He missed the forest for the trees in terms of his industry. As he says at the end of the article, it is only now - 3 years later - that he has enough perspective to see some of what he did wrong.
His story reminds me a lot of Gerber's master technician who is good at his craft but not the business thereof. Fortunately for him, that industry is still quite small but has massive potential, and he could jump in again (assuming the terms of sale allow it).
But face it: by your own admission, you didn't really know what you were doing the first go around. You think you can do better this time, and, most importantly, build something that can scale better and be very useful to a wider range of people and enterprises. You'd be building on past experience to create something better that adds value to the world and (possibly) wouldn't exist otherwise.
Try to look beyond your own particular situation and think, "could the world be better if I started working on this stuff again?" And if you think the answer to that is yes, I feel like you should be able to proceed without any feelings of guilt or rudeness. The fact that you can make some money doing it is certainly motivation (we're human, after all), but it's almost besides the point.
You sold your company, and you honored the terms of that sale. If you think you have an opportunity to do something awesome that you'd enjoy and you're passionate about... go for it!
I tend to wear my heart on my sleeve. From endless private conversations and all of the entrepreneurs I'm friends with, I'm somewhere in the middle confidence-wise, but others are better at projecting an image of greater confidence. I'm a humble and extremely introverted engineer and just don't project an image that's either above or below my station. I accept that this is a flaw in certain walks of life, particularly business.
He probably is not because of what he did (he made a good amount of money) but emotionally I still feel like he is an idiot. Weird huh?
Sure, I'm still an idiot in lots of things. There's always more to learn, always more wisdom to extract from situations, always better ways to deal with things.
I think I feel as much uncertainty or intimidation as anyone who tackles difficult work - I'm just not scared to admit my shortcomings. As I said before, I think this might just be a clash in our cultures and approaches to life.
Do you feel the same way about Derek Sivers? He recently wrote about assuming he's always "below average" in things. His thought process is similar to mine: http://sivers.org/below-average
On the other hand, it seems to me that others, who go into the article with the idea that it's going to be a lot of low-confidence self-pity type statements, approach it with a different attitude.
Obviously I can't speak for fmora or anyone else, but the impression I get from his statements make me think the title of the article is the main sticking point; taking it too literally colors the rest of the article in a much more negative light. On that note, Derek's article is titled in a "better" way, since saying "I'm below average" has nowhere near the negative undertones that saying "I'm an idiot" has.
fmora - Would you agree with what I'm saying? Or am I misinterpreting?
In Engineering that sort of self-deprecation is considered polite. False humility is /essential/ for Engineering types to get along without our massive egos causing unproductive fights. You quite often see "But I might be wrong" at the end or "Perhaps" at the beginning of very detailed, very correct mailing lists... it's just there to soften the "You are wrong" blow.
Of course, this is quite different from the business world, where people seem to select for massive egos.
It's interesting, really, how my world has changed as I've learned to fake confidence as well as I can fake humility.
(of course, in both cases, I think everyone knows you are faking it, and nobody cares. It's sort of like wearing culturally appropriate clothing. investment bankers don't show up in T shirts, and coders don't show up in suits.)
Really, this is one of the things I find most interesting about the hacker news crowd... so many are halfway between the worlds of Engineering and Business that you see these two diametrically opposed cultures mixing, sometimes producing something that is more useful than either one by itself.
Further, though, I'm English, and this sort of self deprecating speech is characteristically European. Read http://en.wikipedia.org/wiki/Tall_poppy_syndrome for more info. It's mostly not "the done thing" to boast about minor achievements. Derek Sivers (of CDBaby and now a multi millionaire) approached the overall topic well: http://sivers.org/below-average
Anyway, I totally get where you're coming from, but I also think you may have read too much into a little half-hearted humility.
Update: I've just found an article that scientifically supports your hunch: http://www.sciencedaily.com/releases/2010/07/100729122330.ht...
I don't think I'd write the post any differently despite learning something about your perspective, but.. who knows, it might make me think twice at some point in the future :-)
Really? I call it honesty, but maybe I'm just an idiot.
I've tried to 'get it' about why they are good and have given them a try, but I end up back at HN or Reddit for my updates. Am I missing something that everyone else knows about? Is my time being wasted checking web pages instead of checking feeds?