You can’t say your company is not for sale these days without incredulous stares and doubtful gasps. The big flip has become the holy grail. Worshipped to the point where non-believers are chastised, straight-faced, for refusing to give up their life’s work.
See, the new world of “sell it and do it again” belongs to the serial entrepreneur. The too-cool-to-stick-around nouveau rich of the 21st century. Staying for the long term is now seen as old-fashioned and uncool, a handknit sweater from your grandfather’s closet.
Fuck that.
Do you think Steve Jobs wants to be a serial entrepreneur? Bill Gates? Warren Buffet? Larry Ellison? All these guys put big stakes in their life’s work. Companies that they built from scratch, that they’ll champion until they can champion them no more. Sure, they may have hobby companies on the side, but for each of them, there’s one defining business, one spectacular legacy to leave behind when they’re gone.
These are my business heroes. People so dedicated to their company and its impact on society that you couldn’t pay them any amount of riches to leave. People willing to build for decades.
But, aside from the ideology behind it — the pride and satisfaction of building a company of real value to the world — there’s the financial side too. Why would you want to take a 10 times multiple of today’s earnings, if you believe you can still grow your business and you’re committed to sticking around to do it?
Why do you think you’d do a worse job than a prospective buyer of running your own business? Selling your company only makes sense if you think they can do a better job than you can. Or when you think they’re overvaluing the prospects of your company. That’s either the talk of the meek or a con man (“let’s get these suckers to overpay for this company of questionable value…”).
Flipping is a servant’s game. As the Chris Rock joke goes, Shaq is rich, the man who signs his check is wealthy. Be the man who signs the check, not the baller who takes it.
Josiah Kiehl
on 24 Mar 10Isn’t a successful IPO more or less the same as selling the company to a bigger company, different only in that you sell to the public?
I’m a big fan of Rework and 37signals philosophy in general, but the examples given here seem to fall in line with the “big exit” line of thinking in that they all got rich on a single event… just that it was an IPO, rather than an acquisition.
DHH
on 24 Mar 10Joshiah, going IPO is completely different from selling out to a bigger company. You’re much more in control of the operations and the visions. The name, the history, and the legacy is still all of your doing.
All of the characters mentioned above all have big stakes in their IPO companies. Most of them are the biggest stakeholders. I’m sure Jobs still feels like Apple is his company, despite the fact that the public is in on it. I doubt that the seller’s of Hotmail or Youtube does.
Going IPO with the intention of staying on and running your business is certainly a valid way to go.
Paul Roetzer
on 24 Mar 10David,
I read an article a few year’s ago in Entrepreneur Magazine in which they asked entrepreneurs the simple question: “What’s your price?”
There was a great response (don’t recall the source) that said something to the effect of, “Whatever it would take for me to give up what I love.” In other words, no price, not for sale.
As you pointed out, the first question many young entrepreneurs hear is, “what’s your exit strategy?” Who cares about an exit strategy when you’re in your 20s, 30s and 40s, doing what you love and building something you believe in.
Thanks for the post, and the perspective.
Paul
Richard L. Burton III
on 24 Mar 10I couldn’t agree more. I think there are too many “sell outs” today. Those looking to create something and then quickly sell it.
It’s rare to see someone create a company, sell it and then create another one that’s equally successful.
Regards, Richard L. Burton III
Geir Freysson
on 24 Mar 10An example of why selling is not always the best route is when the Skype founders sold to eBay. The deal made them lots of dough of course, but they actually sold a really promising, disruptive company that was nowhere near its full potential. And now they’ve bought it back!
Winfield
on 24 Mar 10This is a great summation of the Calanis/DHH clash from This Week in Startups – between building long term value/a workplace you love and a bubble mentality of speculation, just enough work to flip it and get out.
Jax
on 24 Mar 10Hey David,
Do you believe in ideology and principles first, business second? (A good example is Google Decisions on China)
DHH
on 24 Mar 10Jax, I believe that the two are the same. That businesses that stick to their beliefs and stand for something are ultimately better off.
Roy Waterhouse
on 24 Mar 10Keep up the fight. Not all of us want to sell, start, sell, start, sell and start. I believe it’s better to build something worth having and then spending a lifetime improving the company.
Guy at HockeyBias dot com
on 24 Mar 10I, Guy from HockeyBias, heed your call and too say ‘Fuck that’.
Will Meurer
on 24 Mar 10Maybe there are “too many ‘sell outs’ today,” I don’t know. But there still aren’t enough to convince me that’s the best strategy.
Mitch
on 24 Mar 10Watching the video of Jason and David, I got the feeling that the real difference was that Jason loves building things TO make money, while David loves building things WHILE making money. Maybe it sounds like a small difference, but I think it is a big one in terms of the attitude towards your work and your company. Are you working towards some kind of cut-off point or are you working to make the company as great as it can be in the long run.
Noah
on 24 Mar 10David,
I love rework and love everything you guys do.
However…...
I agree that flipping as a business model or hoping to build something with the hopes of a flip or acquisition is a silly reason to get into business. The thought of building the next Facebook or twitter is just a silly thing to say.
But I have a hard time 37Signals wouldn’t flip for the right price.
You said it yourself on TWIST that you’re a capitalist at heart. If the right price came along, I am not sure I believe this company wouldn’t be for sale.
the garageur
on 24 Mar 10The biggest winners form this serial entrepreneurship are the venture capitalists who are pulling the strings.No company to sell means no venture money to invest, and that sounds bad for VC.I wonder who is influencing the public opinion about this..hmm.
Lew Cirne
on 24 Mar 10Great post, David.
The irony is that founders who build their companies to flip work against their very goal. The most attractive acquisition targets are companies that are “built to last”, not built to flip. It’s similar to how in recruiting, the top talent already have a job they love, and aren’t “on the market”.
If your plan is to build a company to grow for the long term with the intent to be independent and standalone, then the acquisition route is often available to you as “Plan B” if things don’t work out as you had hoped or intended. If your plan all along is to flip the thing, then Plan B is ugly: fire sale or something worse.
My first company was acquired in 2006 largely because our distribution model (direct enterprise sales) made it difficult for the product to reach its full potential in the market, and it made sense for a company with a large, expensive sales force in place to grow that business. Since that acquisition, sales have grown by about 500%, so I think it has been a great success for the acquirer, and a good outcome for my company’s stakeholders. It would have been difficult for to achieve similar success on our own.
But I founded my next company with a much more scalable distribution model, specifically with long-term independence in mind. I’m hoping we achieve that goal, since it’s a hell of a lot of fun and I can’t imagine anything I’d rather be doing. So far, so good.
Amber Shah
on 24 Mar 10I agree with Noah. To say that there is NO PRICE that would convince you to sell your company is a big fat lie. Everyone has a price. And not just because we all like money and the things we guy with it, whatever our values are, we can go out and do them even more if we had a ton of money. Some of the serial entrepreneurs who flipped for big money are out there as angels or running the startup they always wanted without worrying about where next month’s salaries are coming from.
Of course, being willing to sell at some (presumably) high price – that is a totally different idea than building a company with the primary goal being to sell it for the biggest buck. That is a get-rich-semi-quick scheme, not a passion.
Matt Henderson
on 24 Mar 10@Noah
37signals can speak for themselves, of course, but I wouldn’t be surprised if the answer were that the company isn’t for sale at any price.
One of the more important points made in the TWIST interview is that the difference in quality of life doesn’t change a whole lot going from $1M to $10M to $100M in wealth, relative to that first big jump to $1M. It doesn’t take a rocket scientist to figure that the 37signals founders are likely financially independent by now, so why would they trade spending their time doing what they’re passionate about, and on something that is highly profitable, and with people they enjoy, for any price?
Fred
on 24 Mar 10Thanks David for doing what you preach..
You’re right. It’s not all about the money. It’s about the creative process. The reward you get when you know you may have changed the world even if just a little bit. That feeling being sustained by continuing to build out your brand and product.
Some might ask would King Henry have ‘sold’ his kingdom to build another one? Of course not. You only have one lifetime as far as anyone knows and that one lifetime is currently only enough for one or possibly two major world changing accomplishments.
Serial entrepreneurs are entrepreneurs who haven’t found their great idea yet or are just in it for cashing out. That’s the difference.
Some of us actually enjoy building and fortifying a kingdom. Others just want to buy and flip houses. The former are creative. They really do want to build something. Money is a byproduct of that process, i.e. Steve Jobs. The house flippers have only one goal in mind and that is money..
Ryan
on 24 Mar 10Your perspective is refreshing, and needed. This flip hysteria distracts a team, and leads to lesser products that likely never reach their full potential. Short cuts and compromises take priority. It does work great for the VC’s though, as without it, many of them would be out of business.
Its not a bad deal for everybody though. Founders who focus on building a business are better grounded, and more likely to succeed compared to competitors distracted by the quick score opportunity. Business-builders have a competitive advantage.
Mike Papageorge
on 24 Mar 10“All these guys put big stakes in their life’s work. “
I think this is a key thought; these days long term is eight months away in November. Trying to think about your life’s work… I don’t think people grok that kind of scale much anymore. As a result some of them are in it for the long term; this November!
John C. Bland II
on 24 Mar 10It is great to hear someone else say it. I have side businesses I want to flip but my main biz I couldn’t see getting rid of it. Never will not come out of my mouth but right now I’m not ready to part.
Josh
on 24 Mar 10Maybe some people are just tired of working.
Aaron
on 24 Mar 10David,
Any citations for your first paragraph? I’ve never seen an incredulous stare, heard a doubtful gasp, or observed chastisement towards someone who doesn’t want to sell their company.
Any citation showing that “staying for the long term” is uncool?
I agree with your thrust that growing businesses for the long-term is more satisfying than building to flip.
I disagree that long-term developers are marginalized or ridiculed in general.
DHH
on 24 Mar 10The “but what if someone offered you a trillion dollars?!” mind game is trite and irrelevant. I deal with the realistic and the practical. Worrying about what I’d do if someone made a bonkers offer is meaningless.
DHH
on 24 Mar 10Aaron, here’s a doubtful gasp in response to this very post: http://twitter.com/BrianDrought/status/10989622976
Jason Piemeisl
on 24 Mar 10Heck yes. VC’s and flipping – it’s all the rage. And it’s bogus. Building a new business or product with the intention of flipping it is a horrible model, but it makes money.
Taking pride, having a vested stake and building an amazing company is much more honorable than cranking out something that you never intended to keep.
Cheers to the founders that create successful companies and stick with them.
Ian Ragsdale
on 24 Mar 10You guys act like there isn’t a difference between building a company to flip and selling a company when you want to do something else. I don’t know about you guys, but I don’t want to do the same thing for the rest of my life. Hell, I can get bored of a project in less than a year! I do think I gain some valuable insight from SvN, but the one thing that annoys me is that you talk like there is only one way to do things. Different strokes for different folks, I say.
Noah
on 24 Mar 10@matt
I think you’re right that the quality of life wouldn’t change much.
Don’t get me wrong….I applaud David for saying these things. I just really want to believe them. That’s all :-)
Believe me, I 100% agree with what David is saying. The ONLY thing that really matters is doing something you love in life as far as I’m concerned.
Life is too damn short to do anything else.
TK
on 24 Mar 10Very inspiring blog post and it is right along the lines of what I’ve been thinking about my group communication app that I’ve been building.
Because I know I want to be part of this company as part of the long haul (instead of just doing a small product and flipping it), I took the time to write out my philosophy as it relates to my company.
Rome wasn’t built in a day, and I want my company to be Rome.
Ben
on 24 Mar 10DHH,
something in your discussion with the mahalo guy had a profound effect on me, and it was how you pointed out that if someone’s working on a project, the project is THE BEST thing that he could be doing at that instantaneous point in time, and it’s the best because he’s most passionate about it, has put in the creativity and work into it, and is committed to building it. guys like the mahalo “CEO” just don’t get it. they clamor and dream for the glamor of “being big” whether or not they’re profitable, and whether or not their project is worth a damn in the grand scheme of the universe.
the terms “serial entrepreneur” and “startup” make me cringe with annoyance. the culture now is all about “get rich quick” and not about doing something insanely great and achieving excellence. it’s all a joke.
37signals keeps it REAL.
FredS
on 24 Mar 10Shaq’s probably a poor example. I bet his net worth rivals a lot of NBA owners.
FredS
on 24 Mar 10Also I think the trajectory of 37signals has something to do with your position on selling out. Selling now would probably mean leaving a lot of money on the table. No walls have been hit per se.
Craig Quiter
on 24 Mar 10I agree with @Ian to a point. Some people are good at starting things and get bored with the less exciting job of keeping it going. However, the people who do both often create the most successful companies. If you’re successful enough, the company will be around after you. A great study of the most successful companies in the past couple hundred years is presented in “Built to Last” by James Collins. It contrasts two types of founders, basically charismatic controlling types, with people who are comfortable delegating big tasks. I think the latter type is the same type of person that stays with their creation till the end.
Benjy
on 24 Mar 10I see your point in terms of mindset to run a business as if it’s a lifelong pursuit and passion—I detest when I constantly read about companies who just want to get bought by Google, ebay, Amazon, etc. But there’s always a price…
Are you saying you’d rather develop software, fix bugs, answer tech support requests, run a business, etc. over anything else in the world?
Even if I loved my business, I’d always sell for the right price in order to pursue those things I love but may not provide income, like traveling, learning how to cook really well (but not have to work restaurant hours), spend time with family and friends, get involved with organizations that came make meaningful differences (like Gates Foundation).
And if running a business is such a strong desire, chances are if you built one great one that somebody threw millions at you for, there’s the ability to build another one should the fancy strike…
DHH
on 24 Mar 10Benjy, when you don’t work yourself to death, there’s plenty of time for all those things. I travel, I race cars, I do photography, I do lots of things that I like outside of running a business.
It’s a false dichotomy that you can either “get rich” or “do what you really want”. There’s plenty of room for both if you design your life style that way.
Of the many business owners I’ve talked to who end up selling, none of them were happy to just live the rest of their life off hobbies. Some of them thought they would, but most were back in the game in 6-9 months.
Scott
on 24 Mar 10David,
The best part of your interview with Jason is your advice to be “working on your best ideas at any given time”. That hit home.
That one piece of advice applies to almost all areas of the daily entrepreneur life. Product decisions, time management, funding decisions, choosing partners, choosing customers, and most all other decisions can be assisted by asking: “Will this decision further my best ideas?” If not, don’t do it. Not only don’t do it, but forget all about it. Focus energy instead on your best ideas.
It is such a fundamental and obvious strategy, but is so rarely followed. I, for one, will now be checking myself regularly – challenging myself to ensure I am always working on our best ideas at any given time. Thanks for the reminder.
Ian
on 24 Mar 10Very funny post.
3 months ago you find out that is good to ORGANIZE (yes!!) you team. What a new, fresh idea!
Few weeks ago you just find out that Friday deployment sucks. Wooow! Congratulations! (you just reinvented the wheel)
Maybe in next few months/years you will find out that selling business is good idea?
“Planning is guessing” right? So don’t plan, that you’ll never sell company.
Waiting for new, fresh, great ideas.
Peter Copper
on 24 Mar 10This is just vacuous posturing. In our civilization, anything and everything is up for sale. The reason DHH et al haven’t sold 37signals (as of yet) is simple: no one made them an offer they couldn’t refuse.
DHH
on 24 Mar 10Peter, thanks for proving the point of the post. And Aaron, there’s another example for you.
Merle
on 24 Mar 10Rave on Dave. You’re on a success rush right now that few ever experience.
Christopher Bruno
on 24 Mar 10I also think you guys need to point out why your philosophy is better from a practical point of view: starting a business to sell your for millions is like playing the lottery. Better to focus on developing customers and profits, which is hard, but not improbable.
M
on 24 Mar 10As much as I’d like to agree, I’m cautious when something is presented as an absolute. There are situations when an acquiring firm can offer resources (such as a far superior distribution network) that your company simply could not achieve in a timely fashion on its own. So saying “I will NEVER sell” is arrogant and silly, in my opinion.
Anonymous Coward
on 24 Mar 10“In our civilization, anything and everything is up for sale.”
Including your wife and kids? Why can’t you love a company as much as a person?
Ted
on 24 Mar 10I wouldn’t say it’s vacuous posturing. In fact, I really like the general sentiment. But don’t you think you’re coming on a bit strong? The tone of this posting is a bit dogmatic.
Lonny Eachus
on 24 Mar 10Besides all that: statistics show very few successful entrepreneurs are able to duplicate their first big success.
Victor "Scott"
on 24 Mar 10People who try to build to flip end up just making “fluffy” products. Shiny crap that ultimately brings nothing to the table.
Example: maholo.com I mean come on, that site is just a content farm, it has no voice.
Kevin Milden
on 24 Mar 10David is dead on.
When you sell your company you’ve failed. Everyone will pretend it was a success. The only person that succeeded was the person that persuaded you to sell your business. They took you out of the game. You may put some cash in your account, but I assure you that you’ll live with feelings of regret when they make your business more successful or run it into the ground. Either way you lose. I assure you. Unless you want to fail, never sell.
Aldo Sarmiento
on 24 Mar 10Say your company would make $15 mil over the next 15 years if you managed it. A prospective buyer comes along and offers you that exact amount right now because he thinks can make it a $25 mil company if he runs it.
You just got 15 years of your life immediately, didn’t you? Isn’t that obtaining a certain amount of freedom? What are the drawbacks of that… the risk of feeling frustrated over not being busy running a company?
I mean, sure, there is that close bond between yourself and what you created… and how that reflects what you represent in society. But what are we trying to prove here? Our worth to people that we will never meet in our lives?
Or should getting 15 years of freedom to spend with the people that really matter in your life be more important?
Kevin Milden
on 24 Mar 10@Aldo Sarmiento
“15 years of freedom”
Why is your life’s work not freedom itself? You associate your work with being a job. Something you need freedom from. I don’t see it that way and neither does David. I don’t think Einstein, Picasso or even Steve Jobs looks at it that way.
Do what you love doing and find your freedom today.
DHH
on 24 Mar 10Aldo, so you have less confidence in your business than some outsider has. That doesn’t bode well.
Also, what’s this shit about wasting 15 years of your life? I sure as hell don’t consider the time spent at 37signals wasted. I consider it an important part of the legacy I’ve left on the world. A source of pride and enjoyment. If that was not the case, I would have left already.
The continued false dichotomy still doesn’t play out either. If you’re not taking the “freedom to spend time with people that matter” while you’re working, you’re doing it wrong. How are you going to spend 16 hours/day with friends and family? They don’t have to work?
Just work regular hours and enjoy yourself outside of work. Then there’s no need to give it all up to have fun or hang with friends.
DHH
on 24 Mar 10In addition, if you’re the type of person who considers work to be evil or at best avoided, you’re probably unlikely to be a person who’ll end up building a company that others would want to buy.
I’ve never met a successful owner of a sustainable company that don’t love the work itself.
James Shamenski
on 24 Mar 10Each of Steve Jobs, Bill Gates, Warren Buffet have created 3+ billion dollar businesses each. Steve and Warren have sold multiple companies when the prices rose above 1 billion. Larry treats sailing and real estate like a startup designed to flip as well. Please correct your post as it is clearly slander and defamation.
PS- You guys think small and make it easy for others to get big.
Aldo Sarmiento
on 24 Mar 10Perhaps it’s not about confidence, it’s about grounded expectations. Are you ruling out the fact that over-valuation isn’t a trend in the web market today?
I’m not saying that working for an exit strategy is the only way to go. I am merely pointing out that there are many factors to consider, and although it might be nice to think of it so simply, it doesn’t always apply.
Furthermore, I do retract my usage of the word “wasted” because it doesn’t accurately portray what I meant to say. However, I do stand by the fact that 15 years worth of compensation without having to do the time is pretty enticing.
Bhaarat
on 24 Mar 10Isn’t this article written so price of 37Signals goes up? ;)
Anonymous Coward
on 24 Mar 10“In addition, if you’re the type of person who considers work to be evil or at best avoided, you’re probably unlikely…”
That’s seems pretty obvious, and don’t see why it was warranted.. assuming it’s coming from the use of the word “wasted” I used?
As an fyi, I really am a huge proponent of your ideas… but I don’t go so far to get on my knees and lap up anything you throw out there. I just happen to be a very critical person. I like taking in information, processing it, and seeing how much sense it makes.
Aldo Sarmiento
on 24 Mar 10^^ me aka anon coward
John
on 24 Mar 10It’s worth pointing out that Steve Jobs’s “hobby company” is Pixar. Yeah.
Aaron M
on 24 Mar 10Like the Chris Rock reference, nice.
Mike Macco
on 24 Mar 10First of all, I like your ideas. I like the passion. And I certainly agree that working in an area you love is the best way to live. Particularly when you feel you are contributing something of value for posterity.
That said, although Steve Jobs, Bill Gates, Warren Buffet, et all have worked in their business for a very long time, none of them have the majorities of their net worth tied up in their primary entities. They haven’t for ages! Steve Jobs owns 5.5MM shares of Apple. They have over 900 million shares outstanding. A mere .6% And his salary from Apple has been $1.00 since the late 1980s. By the way, he owns 7% of Disney.
Bill Gates owns 661MM shares of Microsoft. There are 8.7 Billion shares outstanding. Approx. 7.6% And he’s selling 2-3MM shares nearly every day! (That’s over $50MM a day for those of you out there doing the math.)
Warren Buffett long ago traded his shares of Nebraska Furniture Mart in favor of Berkshire Hathaway—essentially a huge personal mutual fund (of which the Gates foundation owns 10x more than Buffett himself). (http://www.berkshirehathaway.com/subs/sublinks.html)
Larry Ellison is the one with the highest percentage ownership in his respective company. He currently owns 1.1 Billion shares of 5 Billion outstanding. But even that’s only 20%.
What I’m saying is this. Everyone’s a sellout! It doesn’t matter. It’s not like they sailed off into the sunset to drink Mai Tai’s and stop contributing to society. But their “selling out” (all by means of IPO by the way) allowed them to focus their intentions on building and creating and contributing because the like to and because they’re good at it. Not because they are forced to or even because they like the cash flow. (see Steve Jobs)
I understand that few will create businesses that they will be able to monetize by means of an IPO. So for most people the path is most likely sale to a private party. But hey, they guys at Mint.com sold to Intuit and their creator stayed on to work for them. He got his payout and his ability to work in an area that he is passionate. Sounds like the best of both worlds to me.
Kevin Milden
on 24 Mar 10@Aldo Sarmiento
I get it man. A ton of money seems like a big win and in the valley it is the most they could ever hope for. I have been involved in a number of sales of different companies. While some people do in fact get paid. In the end they seem unsatisfied with their decision. It isn’t just about compensation it is about execution. The money is good, but succeeding and making a profit from serving customers is just better.
Someone back me up on this. You have to live through it to understand it. It is tough to understand if you aren’t in business and have sold a business before.
Mircea
on 24 Mar 10What if I really want to start over?? What if I get bored after 5 years and I want to start something new?
Some people are just not made to stick around too long…they need freshness in their life constantly. That doesn’t necessarily mean something is wrong with them…
I would rather sell my company after 3-4-5 years than sticking for 20 years with it…life is too short to just do one thing.
Ryan
on 24 Mar 10@Mike, taking money off the table isn’t selling out, and neither is diversifying your portfolio. In fact, doing so while continuing to work for the company that you built and love is validation of DHH’s position.
@Kevin Milden
on 24 Mar 10Believe me, I am not speaking blindly.
I have two people in my life that have lived life in both ways:
Neighbor/golf buddy: http://blog.oregonlive.com/siliconforest/2008/05/saber_founders_leave_company_a.html
Brother: http://findarticles.com/p/articles/mi_m3601/is_14_52/ai_n15894618/
One sold out, the other still working strong.
Different perspectives and different decisions fueled by the context of their individual lives.
I am just arguing the verbiage here. Absolutes are much harder to prove. That’s all I’m saying.
Aldo Sarmiento
on 24 Mar 10^ My post to @kevin. Sorry for the confusion. Text boxes are hard :D
Michael Nielsen
on 24 Mar 10Building companies to last decades? Take a look at the companies here:
http://en.wikipedia.org/wiki/List_of_oldest_companies
One of the saddest stories I know is Kongo Gumi, the Japanese construction company that went out of business in 2006, after a run of nearly 1,500 years, or 40 generations in the Kongo family. They used to build beautiful temples, but they went out of business and were acquired by a big conglomerate.
S. M. Sohan
on 24 Mar 10Hi David: I was watching your interview the other day and I think this blog is a continuum on that. While I see you are really good at what you have done, I think its not always the case that you only have one single way to approach a problem or realize an opportunity. I think its better to be realistic and have a decent respect towards other people’s approach… especially you are never sure if there is a smarter guy who has a better recipe than David!
Derek
on 24 Mar 10I’m with you on this David. All of my business idols didn’t look to sell out as soon as possible either.
It’s not about love, it’s about sticking with your best idea (like you said in the interview with Jason).
And now i’d like to leave you off with a quote that you probably heard before…
“Put all your eggs in the one basket and - watch that basket.” - Andrew Carnegie
Christopher Brereton
on 24 Mar 10I have one, simple thing to respond to this post with…”WORD” Thank You.
JO
on 25 Mar 10DHH:
Thanks for standing up for all the hobbyist entrepreneurs of the world out there. Your interview with Calcanis makes clear the two major camps of the approaches/reasons to making money.
We could care less on building and flipping. If we can make a living doing something we enjoy doing, that covers our expenses and debts, with having stuff left over that can be used for new ideas/projects, than we’ve succeeded in beating the rat race. Not having to eat multiple shit sandwiches everyday working in most Corporate America jobs is a great personal achievement.
The entire idea that one can move as fast or slow, or as small or large as they want to, is power.
If one’s aspirations are to leave a legacy, and be fully committed to crafting the company’s future, the incentive to sell will be slim to none.
Keep up the good fight. REWORK was amazing!
Adi
on 25 Mar 10Hi David,
I think the weakest or the most irrational argument in your reasoning is:
dhh wrote: “Of the many business owners I’ve talked to who end up selling, none of them were happy to just live the rest of their life off hobbies. Some of them thought they would, but most were back in the game in 6-9 months.”
The assumptions are: 1. If I sell my company, I will have to live off hobbies. 2. Most others that did the same were back in the game in 6-9 months.
I think that there is an alternative. Here’s a short brainstorming of ideas: 1. You can actually make an experiment and leave the company for a period of time without selling your shares. You may find out that you enjoy more not working. Of course, if this experiment succeeds it will go against your philosophy up to this point. Obs: I enjoy your articles and talks so I don’t want you to leave but you should know best for you.
2. I don’t think that you need to live off your hobbies. You can invent new things to do. You will probably find hundreds of activities that you’ve always wanted to do but you forgot about them.
3. The fact that they got back in the game does not really matter. That’s because you can enjoy truly free time without having to sell your company. I bet you can come up with a deal with Jason. Also, if they got to the point of selling their company, they were seeing things quite differently from you. So, their advice may not be applicable to you and personality.
4. You worked for years at 37signals. This means that you worked for the company every week or at least quite often. It’s like a routine. It probably feels normal to continue doing the same thing because during these years you formed strong habits of emotion, thinking, action.
Breaking this habit or even trying something new for a couple of months will change your lifestyle almost entirely.
Try not working or thinking about Ruby, 37signals, talks, business, VCs etc See if you can do it for just 2 weeks. I bet that you can not do it. :) I’m actually almost certain of this because you said on twitter that you count the days until the iPad will be released and you fantasize about having it. That’s quite irrational and far easier to overcome than undoing a habit of working for years in a company.
By contrast, you said that you wrote rework based on your experience not based ENTIRELY on what other people did before you.
You can not truly get how it is not to work anymore until you do it, until you experience not working for a while. We humans are pretty awful anyway at knowing how we are going to fell in a certain future situation.
Cheers, Adi
Dave
on 25 Mar 10I’m with you. Build something to last…stick with it and move on only when you let it spiral out of control. My partner is constantly exposed to the world of venture capitalists and build and sell entrepreneurs, but she keeps realizing that going that route is like selling your child that you grew and nurtured to a rich barren couple…
Money’s cool, but having fun and controlling your destiny is better. I’d rather be small, agile and lighthearted than fat and rich.
The Real Josh
on 25 Mar 10Funny how that works, when you least need things is when people try to weasel their way into the mix. I am with you in saying piss off. No sense in all of the hard work going to pay someone else after you already built up something worthwhile.
I can only image how good that feels to look someone in the eye and say tough luck. Another way businesses used to run until the advent of easy funding…
Nwokedi
on 25 Mar 10For everyone trying to come up with alternative situations under which this point of view does not make “sense,” see the following from 37Signal’s Getting Real:
Aldo Sarmiento
on 25 Mar 10@Nwokedi: I’m using my judgment here to say that this stroke might be too bold :D
Many of the alternative situations being presented aren’t fringe cases, but are part of a high-variance mixed bag.
The fundamental problem here is that we are not questioning the premise: all of us should value the same things in life.
Differences in personal values are the result of many arguments. Things such as what religion you should be, how you should raise your kids, what kind of car you should drive, etc.
There’s no one correct set of values that we should all have. That would be asking us to relinquish our individuality.
As such, you might venture to assume that high variance in values could result in a high variance in decisions made… even when talking about running a business. The result of this is what we can otherwise call an opinion :D
Furthermore, I really want to add that I think that DHH is amazingly brilliant and I appreciate his ingenuity.
He is quite inspiring, well informed, successful, likable, interesting, and knows how to host quite the raucous :D. And chances are that if he inspires you to go for your dreams, as you should, you will be looking to Basecamp for all of your project management needs. Verrry smart.
David Andersen
on 25 Mar 10@ Mike Macco -
Buffett owns 34% of BH. No other entity even comes close to that percentage. It has been a long, long time since he’s owned an actual majority of the company, but his reasons and 37s reasons are not the same. He made his initial fortune by taking on investors, investing very well and charging them a fee for performance. That was the business model. It wasn’t selling out for ‘his price’.
Tim
on 25 Mar 10David, I really love the sentiment of this post, but what if you need to sell a “stepping stone” company before you can attempt your true ambitions?
Textbook example – Elon Musk
He sold PayPal for over a billion to eBay then went on to found Tesla Motors and SpaceX. Both truly revolutionary companies, far more so than PayPal. Realistically he couldn’t have started either of those companies without the cash from selling PayPal. Perhaps he could have sold a heap of stock and stayed on the PayPal board but clearly it wasn’t his true passion.
You’re blessed that your passions are in the software industry where you can start with very little. To take the Shaq example, I’d suggest many apparent ‘serial entrepeneurs’ are just aiming to move from their college team to the NBA.
Bradley Joyce
on 25 Mar 10hmm I dunno.. starting a business, building it, selling it, taking a few months off to tool around the world, volunteer at orphanages in a foreign country etc etc, then coming back and doing it all over again sounds pretty fun to me!
Max
on 25 Mar 10May not be relevant, but I found this statistic interesting…
“89.4 per cent of the companies with over 100 years of history are businesses employing fewer than 300 people”
http://en.wikipedia.org/wiki/List_of_oldest_companies
Stephen
on 25 Mar 10My take on it is that DHH’s valuation of what the company is worth to him – ie how much money it would take him to even consider giving the company up – is likely an order of magnitude greater than what any sane outsider would be prepared to pay for the company.
Great interview BTW, the first time I’ve come across TWIST and it was compelling viewing.
DHH and Calacanis have different drives – DHH is having a blast building something he believes is of great long-term value, Calacanis is more of a hardcore entreprenuer who loves the thrill of starting new companies.
Kingshuk
on 25 Mar 10The views expressed in this article by David is certainly his POV and most certainly debatable. He is certainly entitled to his views, but the way I see it there is another side of the coin here that we are ignoring. To stay with your creation is a honorable thing to do. But what happens when the creator is done creating, and wants to move on to something new, entirely something different? The creator wants to create. S/He must have the freedom to create however way s/he wants it.
Gates and Jobs remained at the helm of their respective companies because Microsoft and Apple provided them with the infrastructure and platform to create things over last 2 decades. What if Gates wanted to do something entirely different few years after starting MS? He did start the Gates Foundation though, as a channel to do things he could not do via Microsoft.
I do not agree that selling out should be evaluated only within the constraints set in by David as: “Selling your company only makes sense if you think they can do a better job than you can. Or when you think they’re overvaluing the prospects of your company.” That is to say, you sell out because either you think you are an incompetent and a loser, or greedy and unscrupulous. That is really a very restrictive way of evaluating someone’s decision.
You have got only one life, and if you move on from one interesting topic to another, you cannot afford to carry the baggage of all your past creations with you. It is not reasonable, practical and needless to say profitable, which, all of us will agree, equates to Freedom.
In the end, its a matter of perspective. If you think that 37Signals provides you with the platform to create (whatever it is that you want to create) for the rest of your life, so be it. But if something catches your fancy 20 years hence, you may want to pack your bags and move on from 37Signals – who knows.
It is really not about making money. Although majority of us tend to think that way. It is just about creating something that is enduring, original, useful, and deeply satisfying to your inner God.
Jason Seifer
on 25 Mar 10Selling all of 37 Signals seems like a big leap. Would you ever sell one of the apps themselves?
Deltaplan
on 25 Mar 10I think the problem is a bit more complex than that.
There are people who create a company in order to sell it someday. Because the objective in creating this company was never the company itself, or the fact to work in it, but only trying to get a large amount of money in a minimum time in order to be able to work on another project after that.
For example, I’ve known a guy who has left his job when he was 30, and created his own company. From the beginning, his goal was to build it to a point when he would find someone to sell it to. Because his real goal was to become a politician when he will be 40 or maybe 45, and for that he thought he needed to have earned enough money to be able to stop working and be full-time on his future political career for the next 20 years at least.
Dylan
on 25 Mar 10David, I meant to post “thank you” for the interview that was published here a couple of days ago. I thought it was brilliant and it did the rounds at our office. Hope you keep up your fun and provocative ways!
Steve
on 25 Mar 10“As the Chris Rock joke goes…”
Just to put it in context, the CR joke referred to here is explicitly regarding White vs. Black wealth (the line is “…White man who signs his checks…”).
See the whole, utterly brilliant routine: http://www.youtube.com/watch?v=4m37JkkGjAY&feature=related
Jaret Manuel
on 25 Mar 10@DHH & @jasonFried
Love your approach and keep it up. I think too many people think of the Riches of money, and leave many riches of life on the table.
If people are happy flipping then more power too them, however great legacy, significance, and satisfaction is more likely to come from what you are growing (with monetary rewards in tow).
Confucius said “Find a job you love, and you’ll never work a day in your life!”. That is quite a “Rich” statement and something nice to strive for. I think we need to find ways to let riches (of various kinds) chase us as opposed to us simply chasing getting money rich.
@DHH, watched your Unlearn your MBA talk (Fry Guy watched lots of yours and love them also) & funny enough I worked for Salesforce and I think you are bang on with your comments.
Keep Rockin it! Jaret
Phil McCLure
on 25 Mar 10I know it’s a cliché, but:
Money != Happiness
Having so much money that nothing is beyond your reach would become extremely unfulfilling. Nothing would be a challenge.
Getting paid a generous salary for doing something you love is the perfect balance for a happy, fulfilling life.
Erik Doernenburg
on 26 Mar 10While I generally agree, there are two points that I think are worth considering:
The skills needed to start a company are different than the skills needed to run a large corporation. So, it can make sense for some people to start a company and believe that somebody else will be better at running it in the long term. Bringing leaders in is the better approach in my opinion but a sale is not universally wrong either.
An IPO is obviously different from an outright sale, but even with an IPO the focus does shift, and it shifts to maximising shareholder value. There are successful companies, I work for ThoughtWorks for example, that grow without seeking an IPO for exactly that reason.
Alan
on 26 Mar 10Completely agree. “nouveau rich”... Bravo.
George Morris
on 26 Mar 10DHH: I totally understand your perspective on not selling 37S, but what about selling your products. Has 37S considered the possibility of selling a product to a third-party?
Aaron
on 26 Mar 10I’m pretty sure Apple is still Bill Gate’s company.
Martin Snyder
on 27 Mar 10Its not cut and dried. If you build a successful business, you have major ties to customers and employees, and a moral obligation to do your best for their well being.
If a deal comes along that works great for customers and employess, and just OK for yourself, what’s the right choice ?
What about your own natural lifecycle ? Sooner or later your powers must decline- if the best succession plan involves a deal, shouldnt that deal be made ?
On the other hand, building a nice, tight, profitable business that can go on and on for generations is a superb goal and for those who can achieve it, they get to provide a legacy that will be revered and valued for a very long time.
There are no simple answers to this question.
This discussion is closed.