Building to flip is building to flop Jason 17 Jan 2006

21 comments Latest by Anonymous Coward

If you’re about to build anything, don’t build it to flip or you’re almost guaranteed to flop. Sure, you could win the Yahoo lottery, but the odds aren’t in your favor. If 9 out of every 10 new companies fail, I can’t imagine the minute percentage of successful acquisitions. 1 in 100? 1 in 1000? Worse?

Believe it or not, it’s far better (and easier) to build a small, profitable, healthy company that sells a product or service to a thousand small customers than it is to sell to that one magical big buy-out customer.

Secondly, name a great company that was built to flip. I can’t name one. Great companies are built to build, to grow, to mature, to make a difference eventually. Not to sell to someone in a couple years. A sale is a side-effect of building something great, it shouldn’t be the motivation for building something great.

So, if you’re shooting for mediocrity and trying to win the lottery, good luck to you. If you want to build something great, best success to you.

UPDATE: Om Malik wonders if the falling stocks bring shopping sprees to quick halt.

21 comments so far (Jump to latest)

Jonathan Holst 17 Jan 06

I vote for building to suit your idea, not whether it will be a great product or not. If your idea is great, and you make a product that fulfills that idea, you’re almost certain to have a great product.

Don’t wonder whether your product is good or not — focus on your idea.

Alan 17 Jan 06

Hear, hear to this post.

Brandon Uttley 17 Jan 06

Right on, Jason! The Build-to-Flip mentality is so…’90s. You guys, for example, have a great thing going, and no doubt are building a great lifestyle company for your partners and employees. At the same time, I’m sure you are fending off VCs with a large stick. Keep up the outstanding work on your own, and if and when you opt to flip, hold out for a huge payout!

beto 17 Jan 06

It must be hard to fight the tempting VC offers while the rest of your competition can’t get down at their feet fast enough.

I just heard your interview back at web20show.com. Hearing you talking in such a convinced and mature way about these statements can’t help but set a great example of how keeping control of your destiny pays off on the long run. Quite some stuff to ponder about.

However, as Web Bubble 2.0 gets closer upon us, yours will most likely keep being the road less traveled. Time will be the ultimate judge.

dmr 17 Jan 06

I love Jonathan’s comment, it’s really about finding your audience. I’ve been stuck in the “is this good or not” mindset for far too long, especially with my art. While there’s some merit to that discussion, if your heart is into something then go find your audience. Find people that like what you’re doing; sometimes that takes some pursuit, but the web is a good tool for that.

sj 17 Jan 06

I had a discussion a few weeks back with a guy who had just read “The E-Myth” and was talking about Gerber’s concept of ‘building a company to sell it’ and his fascination with the Web 2.0 climate right now. But I think he missed the point. Jason and team have built a company to sell it…to themselves. The point isn’t the exit, but the things that are necessary to make a company that anyone would want. Companies that are organized in such a way to get bought as soon as possible aren’t organized for success.

A friend of mine was involved in a company that was trying so hard to get acquired that they only paid attention to the things their suitors were telling them. They focused on sales after hearing they needed a bigger pipeline, then customer service when they were told that their reputation in the marketplace was less than stellar, then on technology when they realized that their products didn’t really do what they promised. They didn’t really seem to care about the company or the product or the employees…or anything. Just the opinion of someone with a checkbook that would give them their retirement.

Companies that are truly ‘built to sell’ picture a company in their mind that is phenominal in every way. It offers a compelling product that produces a real, measurable benefit for their customer. They conduct business in such a way that makes suppliers, customers, employers…and financiers…truly enjoy interacting with them. And when a company is built like this, they often realize the same thing that it seems the 37s guys have…..

why would they want to give up something this good?

jasonwatcher 17 Jan 06

rah rah yawn

Ric 17 Jan 06

Jason says:

“Secondly, name a great company that was built to flip.”

Answer: Viaweb (vv. Paul Graham)

Kyle 18 Jan 06

I love this post. Thanks for saying what should be common sense, but unfortunately isn’t. Too many people take the short-view of business, trying to make a quick buck.

Nollind Whachell 18 Jan 06

“Great companies are built to build, to grow, to mature, to make a difference eventually. Not to sell to someone in a couple years.”

In other words, build for sustainability?

rob 18 Jan 06

I wholeheartedly agree, BUT
that’s exactly what Flickr was built for.

JF 18 Jan 06

rob, Flickr wasn’t built to flip. In fact, Flickr wasn’t even built to build — it was part of something else Ludicorp built. The extracted Flickr when they saw it had value as a stand alone product.

Anonymous Coward 18 Jan 06

nate 19 Jan 06

Blue Hornet was built to flip. I’ve talked with the founder personally about it.

Rob H 19 Jan 06

Google (the search technology) was initialy shopped around (to Yahoo, Altavista, etc. ~ $1 Million) before they (Larry and Sergy) decided to drop out of Stanford and form Google, since no one was interested at the time to purchase them.

Rob H 19 Jan 06

Google (the search technology) was initialy shopped around (to Yahoo, Altavista, etc. ~ $1 Million) before they (Larry and Sergy) decided to drop out of Stanford and form Google, since no one was interested at the time to purchase them.

Anonymous Coward 20 Jan 06

STOP picking up ideas from http://blog.guykawasaki.com/

JR 21 Jan 06

winamp, yahoo music, bloglines, google, yahoo groups, android, the compiler company I sold to Intel in 2002, etc.

it makes no sense to say that you can’t think of any great companies that were built to flip. you are missing the point. if you build to flip, you aren’t trying to build a company. you are trying to build a technology and userbase that some other company might want. many technology oriented entrepreneurs just want to build up a cool technology. they have no desire to run a company.

(“entrepreneurs” may not be the right word here… not sure what build-to-flippers should be called)

Rajesh 30 Jan 06

i think whether you build to flip, or build to sell, the whole point of life is to make sure youre enjoying what youre doing.

Keeping that in mind, building to flip may not give you that enjoyment as you are not exactly enjoying what youre doing, youre just doing something that “one day will” make you rich “if everything goes good”. That “living in the future” attitude cant make it fun for you - and therell be too much anxiety and crap to deal with: enough to make things not worth it.

So I prefer building for yourself. This ways, even if you fail, you can still say you enjoyed the process and didnt feel you wasted your time (and life)

Ben Metcalfe 04 Feb 06

I just want to agree with the flowing sentiment here that ensuring that you enjoy (or will enjoy) working on your start-up is the crucial thing.

If you want to just flip it, than the chances are you’re going ot be less passionate about the core of your business than if you are planning to see it out.

I have to say, I think it’s also a lot easier to vouch for the the long-term position Jason when your running a company like 37S with numerous projects with very viable business models.

Would you be writing the same thing here and now if basecamp had been flipped to one of the GYM crew?

Anonymous Coward 09 Mar 06

Lots of networking startups were/are built to flip. Easy example from years ago was New Oak, the first major IPSec VPN gateway maker, which sold to Bay Networks before it even had a sales force.

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