Today, Groupon did something that all entrepreneurs, in their heart of the hearts, wishes they could do: spur the big acquisition offer and swing for the fences.
I got home from Graphicly HQ today around 4pm. It had been a long week, but ended nicely. To celebrate, I took a three hour nap. At about 7pm, I woke up, walked over to the laptop, and started to work again. While, I was plugging away, a flurry of tweets flew by. Each with approximately this message “what the hell is Groupon thinking?”
My reaction: “It all changes when the founder drives a Porsche.”
A couple of years ago, when Twitter was contemplating a sale to Facebook for $500mm, I was talking to a VC friend of mine. The conversation went like this:
Me: “What the hell is Evan thinking?”
VC: “Well, he drives a Porsche.”
Me: “Are you saying that the Porsche is unable to navigate to Facebook’s offices so he can collect his bags of cash?”
VC: “Founders make different decisions when money doesnt matter. He doesnt HAVE to sell, so he can wait. He can do what he thinks is right for the business. He can focus on his legacy.”
Since then, the issue of founder cash-outs has fascinated me. How does it effect the ability of the founder to execute? Is it a detriment? Or is it the difference between the success of the mega-wins (Facebook, Groupon, Twitter, etc.) and the “just wins” (so many of the $25 – $125mm acquisitions we have seen over the past couple of years.)
During “AngelGate,” an email my friend Chris Sacca wrote was leaked. In it, he wrote:
4) Earliest stage founder cash-outs. Among efforts from others, we talked about my recent projects to get very early stage founders some liquidity. Traditional VCs have rarely been inclined to give founders any ability to cash out claiming it makes them less “hungry”. As someone who, just five years ago, had net worth of exactly zero dollars, I remember the difference between being “panicked” and “hungry”. As I have invested in more and more companies, I have learned that many founders would benefit dramatically from even the smallest amounts of cash (ed: emphasis mine) (compared to the overall deal size). I have worked hard to get my founders as little as $25,000 to pay off credit cards and student loans. Or, in a small deal that closed this week, I was able to get a founder the money so he can pay for his wedding and not have to worry about taking on debt. I, and the other investors in this group who do the same thing, feel good about helping our founders in this way.
What Chris outlines is very different than the money the Groupon founders took off the table when DST and Battery invested $135mm to solve “the money problem.” In Chris’ case, he is simply trying to keep the founders focus on the business, not on their climbing debts or horribly inadequate lifestyle.
With Groupon, with the money problem solved, they can “go for it.” Basically, the motivation for a big exit is no longer motivated by “how much money can I get,” it is motived by “what is my legacy.” That simple shift makes their rejection of Google’s $6B offer not that surprising.
Mark Zuckerberg turns down Yahoo!’s $2B offer. They had raised enough money at that point, that clearly Mark had taken some off the table. He is also interesting in that it appears he has never been motivated by money (he turned down $2mm and a job offer from MSFT in high school).
Evan Williams – sold Blogger. Not needing the money, rejects Facebook’s offer.
Dennis Crowley (sold Dodgeball) and Naveen Selvadurai – took a couple of million of dollars each off the table in their last financing. And rejected a rumored $100mm+ acquisition offer from Yahoo.
And now, Andrew Mason and crew have turned down a $6B offer from Google.
Surprised? Nah, the founder drives a Porsche. (BTW: I have no idea if Evan Willams drives a Porsche. He could ride a very nice SF hipster fixie for all I know.)
Related articles
- Groupon Turns Down Google’s $6 Billion Offer [REPORT] (mashable.com)
- Thanks, But No Thanks: Groupon Pulls a Facebook (kara.allthingsd.com)
- Should Groupon Sell Out or Not? (blogs.wsj.com)
- A Silicon Bubble Shows Signs Of Reinflating (dealbook.nytimes.com)
- Groupon VC’s Model: Invest, Sell to Google. Repeat (blogs.wsj.com)
Subscribe to this blog's RSS feed
Every year when people start applying to Techstars (now in 3 cities!), I get emails and phone calls asking for my advice.
I always ask the same question, “Do you have a Hacker and a Hustler?”
Sometimes, I get the response, “Im both.”
To which I suggest that they rethink their application. Its nearly impossible for a single founder to have much success building his startup, let alone getting through a program like Techstars (or Y-Combinator or any of the dozens of others). One person can not do it all. Its really that simple.
What do I mean by a Hacker and a Hustler?
A Hacker is more than a code monkey, who can quickly build software and find interesting ways to hack together code. Thats a developer. Thats someone who is definitely an important part of a startup, but not critical to its success. A Hacker is someone who looks the problem, and solves it in a unique and special way. A Hacker finds the process of problem solving exciting and interesting, and spends the majority of their time looking at the problem in multiple ways, finding many potential solutions.
Often the Hacker is a coder, but not always the best coder you have on your team. Nate and Natty, of Everlater, are decent coders at best. In the last couple of years, they have taught themselves, by trial and error, how to code. I would imagine if you asked either one of them if they considered themselves amazing developers, they would probably indicate otherwise. But as Hackers? They are amazing.
A Hustler on the other other hand is a relationship builder. Someone who can build direct relationships with their customers. They arent really promoters, although they do a lot of promotion. They arent salespeople, although they do a lot of selling. They are passion people. They have the ability to articulate their passion clearly and in a way that gets other people equally passionate.
A true Hustler can get people using their product, or raise money, with little to no capital expenditure. Any one can run a Google Adwords campaign, or buy a billboard. Only a Hustler can get you to love their product in a way where you will speak passionately about it to your friends. A true Hustler is patient zero in a viral campaign.
My favorite young Hustler is Garry Tan of Posterous. Their recent campaign about switching from “dying” services to Posterous is genius, and a great example of the Hacker/Hustler dynamic. To figure out how to import data from one system to another is never easy, yet Posterous has hacked together some great importers. Rather than just releasing an “All-in-One” importer, Garry decided to release one a week, and build some noise around it. Not only has their been noise, but Posterous’ growth has been reported on (since they are self-proclaimed not dying) several times.
Was it just Garry’s idea? I would guess that with investors/advisors like Tim Ferriss, Chris Sacca, Paul Graham and others that it may have originated from the larger group, but his execution of it has been perfect.
A Hacker and a Hustler. Every great startup has a pair. Woz and Jobs are probably the most successful Hacker and Hustler tandem out there, there are thousands.
Ask yourself, as you begin down the path of building a great startup, are you a Hacker or a Hustler? Does your team have both pieces?
If you lack one or the other, your ability to be successful greatly diminishes.
(BTW: A topic for another post, but a company doesnt need a Hacker and a Hustler forever. Its why most startups see at least one founder leave.)
Related articles by Zemanta
- YC Founders at Work Interview: Posterous (ycombinator.posterous.com)
- Learning To Program (feld.com)
- What I learned at Angel Boot Camp and Techstars demo night (gabrielweinberg.com)
- How to Create Your Own Real-World MBA – II (fourhourworkweek.com)
