I was really, really trying to come up with a better title for this post, but that sums it up quite well.
Paul Graham, the guy behind YCombinator, posts one of his recent speeches, basically about the future of startups.
As a guy obsessed with M&A, the part about acquisitions becoming more and more normalized and standardized caught my attention. In particular, he mentions how Google’s become a pro at acquisitions, mainly because:
Larry and Sergey only started Google after making the rounds of the search engines trying to sell their idea and finding no takers. They’ve been the guys coming in to visit the big company, so they know who might be sitting across that conference table from them.
My first dot com boss always said that until you have a firm offer, with a tangible sum of money, put in front of you, it’s very hard to actually know what goes through your mind… he was right, trust me.
But, I also think that unless the offer to sell makes a lot of sense, and I mean LOTS, you are probably better off not selling. It is, after all, quite hard to build an empire when you’re someone’s bitch.
Mind you, that’s part of it, the flip side is that 8 out of 10 acquisitions bomb. Howard Lindzon and Fred Wilson frequently talk about ABS: Always Be Selling. I can’t argue with their track records, but something tells me they’re wrong. Sure, as Jim Cramer says, you have to eventually hit the cash register and cash out… but I think that finance theory about buying and holding speaks volumes here.
The best investing strategy has never been to day trade like wild, it’s been to buy and hold. In my opinion, when you are faced with the opportunity to sell, by all means consider it, especially if you are full of ideas, but, before you sign on the dotted line,
- ask yourself if it’s really the best deal,
- if you understand what’s at stake and what will be required from you after you agree to the terms… and
- if you’re ready to be someone’s bitch.
The world isn’t Google’s oyster, it’s Google’s bitch, and that isn’t because they accepted no stinkin’ term sheet, it’s because they stuck to their guns and built a company when everyone thought they were crazy for launching search engine numero quatorze. In Google’s case, I doubt they ever got the term sheet, so I’m not sure my old boss’ advice even applies, which is even more reason for entrepreneurs to think big, and go long.
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