Rich vs. King in the Real World: Why I sold my company
In this 2013 acquisition retrospective, @tyn reflects on the journey of bootstrapping and successfully selling their business.
Core Principles for Independent Builders:
Unsolicited buyer inquiries versus running a deliberate auction process require very different negotiation leverage.
Bootstrapping for years without external capital provides extreme freedom, but exits are often triggered by energy depletion as much as financial gain.
Retaining ownership of code and operations creates pride, but transitioning to an acquirer requires letting go of absolute autonomy.
Community Debate Themes:
Hacker News peers debated transaction structures (cash vs earnout), founder tax strategies, and life after liquidating a long-term indie asset.
CATEGORY Startup Exits →
HISTORICAL ERA Web 2.0 Genesis (2007–2013)
COMMUNITY SCORE ★ 118 points
TOTAL DISCUSSIONS 38 comments
I'd take Rich. I hate that I would, but I would.
I'd make that call not so I can quit working full-time. I'm only 29. I'd take it so I can start working full-time. So I can guarantee that I focus on real work for the rest of my active life. Liberate the cognitive 1% from subordination, and creation (real work) happens. (Humility is not a virtue in people like me. If we don't raise up our confidence to overwhelm Authority's much more toxic arrogance, with the intent of the latter's decisive and irreversible demolition, the world loses.) It'd be selfish for me not to take Rich, with that option. Then I could go off and be as King as I want.
That said, I think this selfish mentality (Rich > King) is, on the whole, really bad for startups. Rational people will close out lifestyle businesses (and walk away, wealthy) because they aren't likely to get another one if a competitor takes theirs down. That's a shame. The build-to-flip mentality has created a VC-istan ecosystem no longer worth caring about.
In VC-istan, we have an array of dumb ideas and shitty cultures, and no one cares for shit about the future. We have a lot of well-connected VC-funded Founders who are just glorified PMs with the mentalities of dinosaur executives that "startups" were supposed to kill off.
We need to bring back the lifestyle business and make it a viable lifestyle and career (even if individual business shall fail, which is inevitable). A Fleet of 50,000+ small companies doing interesting things and working toward Real Technology. We won't get there as things are now. There needs to be a reliable path for technical minds to find safety and capital. Given that there's no real source of capital for small, lifestyle businesses-- at least, not yet-- it doesn't exist yet. But the world fucking needs it.
I faced a choice like this as I went through M&A of my most recent company. We were doing well, growing like a weed, but also because it was a consulting services company it was very cyclical and dependent on a few large clients. There was a real risk that we could lose both key clients and staff at the same time and eat up our capital reserve. Growth was also dependent on us reinvesting the profits of the business while maintaining working capital. Each time i took money out of the company, it was taking out of it's capital reserves.
The earnout comes in a stages as is norm when you're expected to stay involved. So it hasn't changed my life much except for paying off all of my debts.
While i think the rich vs king thing might have some truth, I ran my company this time to be king. To enjoy doing good work with smart people and build interesting products. Have an awesome office, run a good conference, and the like. It was a lifestyle business and i wasn't looking to sell it. But i'm happy to have gotten the offer, happy with the arrangement, and happy with my new role as CTO of the acquiring company. It's not perfect, but neither was everything perfect running a company all on my own.
The really ironic part is that i've been involved in many startups, which were very intentionally about making money and value. Odeo became Twitter, and really was worth a lot of value, but left after 2 years & sold my options, long before it was clear Twitter would become, well, twitter. With my most recent company, it was about creating a place i wanted to work myself, with a team i liked, doing great work. Sometimes you make money where you intended to change the world, and change the world where you intended to make money.
It might be a small niggle, but the author is pretty dismissive of microeconomic theories of risk.
Despite what the author writes - "Of course statistically there’s no difference, so this isn’t a question of math or economics or intelligence; it’s a measure of your attitude towards risk.", risk aversion is a well studied concept in economics.
http://en.wikipedia.org/wiki/Risk_aversion
Most people have a preference curve that is risk averse, and for these actors it makes perfect economic sense to take the 10 and not the 20. 'Statistically identical' they most definitely aren't, just the expected value.
I think alot of the angst that comes towards people who sold their companies, is simply using the term "sell." That gives the impression that you went out and shamelessly hawked your product to the highest bidder.
I personally find that if you instead say that so and so was "bought out" by a bigger company, then that's much easier to come to terms with for most people. That phrase gives the impression that a bigger company saw much value in your company and just had to have it for themselves, leaving you little choice in the matter.
A good friend of mine (actually back then, my boss) decided to roll the dice in that situation instead of just cashing in 15mill. He lost that game, and he only told me a long time later that he was offered that choice.
I think this is one reason why VCs want young entrepeneurs, because VCs need people who think that they get many more opportunities to cross that line in case the current startup tanks. Because VCs will ALWAYS pick box B if the expected value of B is larger than that of A, even if A is a 100% thing.