You don't have to sell your company to have financial security

My point was not that selling was the only way to achieve freedom and security, merely that it was the optimal way. (That was the thesis of the essay in fact: that selling a company and living off its revenues aren't opposing strategies, but rather that the former is the optimal case of the latter.)

I don't see how anyone could argue that selling was not optimal for security. Sure, you could gradually save money, but that's not optimal; it's not more secure than getting a lump sum upfront.

Whether selling is the optimal way for most founders to work on what interests them most is a fuzzier question, because it depends on the likelihood that the average founder's startup is the most interesting thing he could be working on. (Not just interesting; the most interesting.)

You can't prove this, only offer arguments of various strengths.

The strongest abstract one is similar to Occam's Razor: that a choice that has to satisfy two independent constraints is unlikely to be the optimal choice for either alone. Specifically, that you can probably do better on the dimension of interestingness if you don't also have to satisfy the constraint of making lots of money.

I'm surprised people find this idea controversial. It seems to pervade almost everyone's choices from the moment they enter the workforce. I.e. if you want to make more money, you often have to compromise on the type of work you do, and if you want to work on what you love, you often have to make financial sacrifices.

There may be a few statistical outliers who escape this force (a few top athletes, for a few years each) but for everyone else it's as pervasive as gravity.

I find it hard to believe working on the projects they do is the most interesting thing those guys can think of to do for 30+ hours/week. Either they're incredibly boring people or a bit delusional.

I think they continue to work on them because it's mostly pleasant work, they have total control, there's a lot of inertia, and of course because it's making them wealthy.

I respect both PG and DHH and i think that they are both right from their experiences. PG seems to be older and with more experience though. My thoughts on the situation are simple. Why not be flexible? Why not start a business and work on it as long as its rewarding to do so? If your company gets rally big and you think it wouldn't be as fun to manage it, as coding all day, then sell it, if you think running a big business is for you go for it. If you company doesn't grow, but guaranties you an income you can choose if you want to sell it and do something more interesting, or if you want to take it easy and just enjoy working. Are these men blind to see this as an option? Why is it supposed to be one way or the other? Flame wars on technology are annoying enough, but on business strategy they are annoying and boring too.

I think you do need to sell your company. The ideal of living of residuals shouldn't apply to the internet businesses. They are just way too unpredictable, look at companies from 1998...how many are still around? Only a few of the few are still around, and that's only because they have become synonyms with their niches. Google? Search, eBay? Auctions, Amazon? Online Stores etc. But for each one there are a hundred dead companies that had a good 5 years, and then died.

Small companies/large companies, most of them eventually fail to be competitive. Internet has almost 0 barriers to entry, there is absolutely nothing stopping another startup from coming in and taking you out, doesn't matter if you have a bigger piggy bank.

Better to sell while you are still on top, and then if you really want to, you can use some of that capital to build something else that you can be happy about. And lets face it, if its 6 years later, chances are you have plenty of new ideas you want to try out.

If I have a 5 year old company that makes $250,000/yr for me, and Google offers to buy it for 10-20 mil, I'd take the deal, because it means I'll now have guaranteed money to live the lifestyle I want for the rest of my life, and I'll be able to use a portion of that to do my next startup that I'll be just as excited, as I was about my original idea

Sell your company, keep your company. If you want to maximize your ability to work on interesting stuff, remember that there is a effective but unglamorous dual pronged approach to financial security. Require less luxury to be happy.

Learn to cook brown rice. Bring your lunch to work. Walk to your job (or to a bus stop to your job) and can the gym membership. Yoga studios tend to offer free classes on Sunday. Visit the library instead of buying so many books. In fact most libraries will even buy a book they don't have if you ask them. And if you really want to give your mind a break from coding, buy a repair manual and learn to fix your own car. This actually results in the satisfaction of an affectionate bond with your car that you can't buy at the dealership.

Two things have surprised me the further I go down this path.

1. Hacking the system by revolting against the consumer culture is so much fun, that I keep pushing harder regardless of my income.

2. While living like this, you'll even find low-maintenance (high-everything-else) women doing the same thing who find it attractive.

I think both dhh and pg want the best for "us" (and that's why they deserve to have fans). Maybe dhh is worried that pg's talking about risk is too discouraging for many people who would be happier as entrepreneurs but remain scared in their cubicle life. On the other hand pg might be worried that people end up not pushing themselves hard enough and ultimately failing and staying mediocre.

Since dhh was a speaker at Startup School I also assume they get along fine and we simply benefit from a kind of benign competiton.

Probably they are both right, what I would like to know now is which course of action has the bigger chance of success ;-)

Nevertheless I also feel pointing to the CEOs who stayed with their company might be inaccurate. Jeff Bezos might still be with Amazon, but he might not be much into selling books. He might be exploring things like the Kindle and Amazon Web Services, or something entirely different. The point: those longterm-CEOs might simply be doing startups within the safety of the mother company.

My hat is off to DHH and 37signals for managing to implement the simple but not easy and classic ideal of doing what you love for a (excellent) living. If you hate your job, how can you be good at it?

I knew it!!!

http://news.ycombinator.com/item?id=254409

We're in YC Summer 08, and our goal is the model spelled out by DHH in this post...with slightly less arrogance.

Wufoo has a somewhat similar model to 37signals and they're unbelievably profitable.

Nearly every 37signals blog post seems to say the same thing.

One thing that hasn't been addressed here is the likelihood of creating a company that that will be acquired for enough money that you no longer have to work vs the likelihood that you can create a business that lets you live comfortably.

My guess is that most businesses that make enough money for you to live off of comfortably would have an acquisition value that is high enough that you wouldn't have to work anymore.

They introduced the article as a rebuttal to PG's article.

But, like most of their recent articles, its just promoting the bootstrapped stay-small business ideal.

If your looking to make a lifestyle business then they have some good advice. But all businesses are not equal.

The market, industry, and success all play a big role in determining whether or not VCs, M&As or IPO's are right for your business.

I've said this before, 37Signals is selling a work-style philosophy.

Which is probably why they didn't make much of an argument, besides "we work 4 days a week and still take vacation" and "other people have stayed small so you can too".

Let's not forget that 37signals is no longer an early stage start-up. If your making a million+ in revenues, of course you can make flexible hours for your staff.

There's a tax advantage too: to have investments that return $100,000 pa you need to have saved (assuming 10% ROI) $1,000,000. You get taxed each year on that $100,000 as income - but you also got taxed when you made that $1,000,000 in the first place.

But if you create a business that returns $100,000 pa, while you similarly get taxed on that income, you don't get taxed on the creation of the business - even though it's equivalent to having saved $1,000,000, in terms of its return.

And if that doesn't set your heart singing in transcendental joy, it's probably better for you to just do what you love and the money will follow. :-)

I think this is quite interesting. On one hand we have an investor saying things you would expect an investor would say (grow as much as you can). On the other hand we have an owner saying things you would expect an owner would say (my business is great). Yet when these two say it, it seems fresh for some reason.

Perhaps because when they say these things we know that they believe it in some absolute sense not just because it benefits them. So maybe I should say refreshing, not fresh.

I love HN.

Writing business apps in Ruby on Rails is only going to seem cool for so long. Give them a couple of years for the coolness to wear off, and they'll sell without a second thought.

i think its great that theres all of this discussion over something such as business models -- in this age of technology i feel its often something overlooked -- but in my opinion, they are both valid, it just depends on what you're going for. if dhh is happy working 4 days a week on 37signals and earning the money that he is, and he wouldnt rather be doing something else, than great for him! if his interest were exhausted, and he were still doing that, then i would say why not sell? for me personally i could not be happier than working on my current project, because it is what i am most passionate about. however, with that being said, for the right price it would be crazy not to sell. not only could you continue to work on it afterward, but if something else came along more interesting you would have the opportunity to pursue it. i just dont think this is as cut and dry as dhh wants to make it seem, and i really agree with the clarifications that paul made in his first comment.

I can certainly agree with some of this, but I really do enjoy working alot on a software project of some sort. I COULD work 40 hours/week on it, but I'd be perfectly happy working 60 or more and "chasing" this goal.

It's very rewarding for me.

just 2 ways to get to the destination, driving or taking a train .. which is better ? well all depends on your taste, your feel or may be your mood! Just do the way way your like it man!