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It All Changes When the Founder Drives a Porsche
- jfb 16y agoPorsches are gauche. There's some lunatic who parks his DB9 on the street (3rd & King, if you're interested), which is a statement of utter contempt for us proles. "I don't mind parking my quarter-million dollar car at a meter because I have four more just like it at home".
- MarkSweep 16y agoOr maybe he just wants to park his car? Why should "proles" feel resentment for his success or parking place choice?
- jfb 16y agoI don't think I'd park an Aston Martin at a meter, particularly in SOMA; I'm perfectly comfortable parking my $4k used Jetta there, but I've seen plenty of cars significantly less awesome than a DB9 vandalized on the street.
- jonknee 16y agoI'm sure he has insurance. What's the fun of a nice car if you are too paranoid to use it?
- nickpinkston 16y agoTotally - then again DB9s are a poor choice for a daily driver - at least a Porsche can survive the grind - try driving anything British or Italian daily - won't end well!
- laut 16y agoMillions of people drive Italian cars every day. Fiat is taking over Chrysler. You'll see modern Italian cars in the US soon. They are not like in the 1970s.
- nickpinkston 16y agoSorry, I should've said I'm talking about British/Italian exotics... Ferrari/Lambo/Aston/etc. are quite unreliable long-term (i.e. over 30K miles), but Porsche is like the everyday exotic - they're actually great long-term and available in 4WD (the Carrera4, Targa4, Turbo at least). Then again the truly rare American exotics (Saleen S7, Mosler, etc.) are even worse, but next to no one even has seen them. Certainly not a blanket statement about about those cars. I love Fiats/Alfas, and I'm glad they might be coming to the States soon. Though British cars have had a bad rap for a long time (from the Brit Leyland / Rover / etc. days) - Jag is still pretty boring and only Land Rover is at all relevant / reliable.
- laut 16y agoIt might be true for cars like Jaguars and Ferraris from the 1980s, but not today. Do you think a Ferrari California or Lamborghini Gallardo becomes unreliable over 30K miles? They are made to last much longer than that. Most current Lamborghinis have 4WD, but 4WD is not really necessary unless you are driving up a steep icy, snowy hill daily.
- Locke1689 16y agoActually the biggest problem you'll run into with a Ferrari and similar in the states is that they ride so low that you will be continuously screwed by US speed bumps. Hearing the bottom of a Ferrari scrape against a speed bump is a truly tragic sound. For whatever reason Porsches actually do ride a bit higher, just enough to avoid speed bumps (although some curbs can still be a problem).
- nickpinkston 16y agoHell - in my town my GTI scrapes all the time... I can only imagine having something lower. Porsche has the courtesy to put a replaceable black lip for the scrapes.
- tspiteri 16y agoI don't afford a Porsche. But if I could afford to buy one, I would still not buy it unless I could afford to park it anywhere. That is, there is a difference between affording to just buy a Porsche (perhaps as a status symbol), and affording to buy a Porsche and use it without care. I don't think that it takes a lunatic to park his DB9 on the street, just someone who bought the car just because he likes it and can do it. The feeling I get is that you are implying that a Porsche is a status symbol, whereas the owner thinks it's just his car, and does not care what any of "us proles" think.
- jodrellblank 16y agoA quarter million dollars? You can get them second hand starting around 60k USD: http://www.autotrader.co.uk/classified/advert/201047373895282/ http://www.autotrader.co.uk/classified/advert/20104737389528...
- deleted 16y ago[deleted]
- jedc 16y agoSeriously, come to London if you want to see this all the time. Walk through Mayfair and you'll see Porsches, Astons, Ferraris, Rolls-Royces, Bentleys parked on the street all over. It's crazy... Sometimes it's not contempt, it's just what you need to do to get a parking spot. :)
- ChaseB 16y ago"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." 6B isn't a home run these days?
- tomjen3 16y agoGoggle made a lot more than that, so while the price is high, even for the Valley, it is not unheard of.
- jfb 16y agoWhen I heard that I ran a quick EV% calculation and thought ... whaaa?
- scootklein 16y agonot compared to an IPO
- nhangen 16y agoNo kidding. I'm wondering if Groupon founders are overestimating the ceiling of that business.
- sliverstorm 16y agoIs it possible they don't ever intend to exit? I know that's pretty rare- most startups seem to be aiming for the exit- but can't some simply be trying to be their own business?
- nhangen 16y agoSure, I suppose it is...it's just rare. 6 Billion is a lot of money to turn down, but I've never been in their shoes, so I can't say what I'd do.
- jules 16y agoWhy is it so rare? If I had the choice between being the owner of and working at a company that I love and believe in while earning $x, versus earning $10x, the former sounds much more attractive.
- hc5 16y agoI don't know if Groupon made a mistake, only time will tell, but this statement irked me a bit: 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.” This can easily be the other way around: the founder chooses to focus on his legacy instead of what is right for the business.
- ericb 16y agoOne nuance that I would add to your thinking. In the VC's eyes "right for the business" really means "swing for the fences." In a VC's eyes, taking risks that will kill a business 85% of the time but give 30x returns the other times are probably doing "what is right for the business" because of the structure of how they invest. In VC land, the big big wins pay for everything else. In that case, I would argue they should be strongly in favor of cashing out founders nicely when a business takes off. It is much easier to swing for the fences when you're not worried about striking out.
- mixmax 16y ago"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." Am I the only one who finds this despicable, and probably bad business too? The one person in the company making the most sacrifices, taking the biggest risks and working the hardest is the one that can't even pay for his own wedding. Even when there are millions floating around in VC money.
- mgkimsal 16y agoIn some ways it's not a sacrifice for those people. If someone got me an investment and paid for my wedding so I wouldn't have to, while getting to work on a project with VC connections, have I 'sacrificed' all that much? I get where you're going - there's plenty of 'entrepreneurs' (see earlier trending article) who give up stable jobs/raises/etc with no guarantee of a payoff. But the people who are getting VCs to pay off student loans aren't the ones making sacrifices (imo). One could turn this around from an investor's point of view too. If this kid can't manage her finances well enough so that they need a $20k 'quick fix' to pay off their credit cards, why should I invest my money in her idea, or even her as a person? How are they going to run a business? If I as an investor have to put up the money and put up the 'experience', perhaps I can find someone else with better financial skills.
- nhangen 16y agoMany times those credit cards are used to pay for basic living expenses and/or even to bootstrap the business. Having high cc debt does not mean they've been irresponsible. Seems to be a double standard here... Founders are expected to pour every ounce of their life into the business, which means they can't work a 9-5 to pay the bills. Yet having debt is considered a bad thing.
- tptacek 16y agoIncurring untenable credit card debt for basic living expenses in the service of bootstrapping a company that ultimately needs VC funding is prima facie irresponsible. I'm not condemning it (I haven't been absolutely responsible with my own finances), but let's not sugarcoat it either.
- daemon 16y agoIt's possible they were turning down the terms of the deal. If someone offered me 1M for my site, I'd take it in a heartbeat. If someone offered me 1M and I had to dance nude in the lobby for a year... I'd still take it. But some people wouldn't and observers would say they turned down 1M.
- rhizome 16y agoWhat if your $1MM site was giving you like $10K/mo and was still growing?
- asanwal 16y agoFor folks thinking of working at a startup where stock options (and their potential) are part of the decision criteria, it is important to ensure that there is at least high-level alignment of goals and incentives between employees and founders.
- flyosity 16y agoThe title of the entry put me off to the overall premise, which, I think, even the author may have missed. Basically, the article should've been titled "It All Changes When The Startup Is Making A Lot Of Cash". Supposedly Groupon is making nearly $2 billion a year in revenue. The decision to turn down an acquisition has more to do with "we're a real company making a TON of cash and we don't need to sell" than the founder thinking about their legacy. What's the point of an exit? Mostly it's to get a gigantic payday. If your startup-turned-cash-machine is already making a ton of cash every month, the founders are already getting a payday... all the time. If you're already making FU money from the revenues of your business and someone offers you more of it, the benefit of the FU money is you can say FU to the offer.
- patio11 16y agoOne of my surprisingly life lessons from 2010: "revenue makes money less attractive" is true at numbers much, much smaller than 6 billion, too.
- vaksel 16y agoyeah if you have a real a business, making real revenue, then selling really isn't a huge priority, and you can work on making something really huge. However, I do think that Groupon is an exception to this. You can't build a long lasting business, when your business model relies on tricking people into throwing a ton of money down the drain. Once the whole hype ends, and all business owners realize what a bad business proposition Groupon is, they'll lose their market...and will regret not taking the offer.
- klbarry 16y agoIf you've studied the rise of the department store, John Wanamaker and Macies, I think you'll find Groupon is following a pretty great and old formula of style and group buying dynamics. The idea it's based on, people getting excited about good deals that are trendy, is solid.
- vaksel 16y ago
- SteveC 16y agoWhile not related to the content of the article, the title reminded of Eagle Computer. Its CEO, Dennis Barnhart, bought a Ferrari and accidentally drove over a cliff and was killed on the day of their IPO. http://en.wikipedia.org/wiki/Eagle_Computer http://en.wikipedia.org/wiki/Eagle_Computer
- piney 16y agothe rest of us are scrambling up the slope to get to $5m, then we can relax. Founders who reach that goal and still command the helm and less inclined, nowadays more than ever, to jump ship and sit at a cafe with their laptop, trying to look busy and tweeting about their comeback. Its cold outside baby!
- whatusername 16y agoAnd when you drive your own custom branded supercar -- we all know that you're never going to cash out: http://zondahh.com/ http://zondahh.com/
- tptacek 16y agoPretty sure DHH is in a continuous state of "cashing out". He has no VC, in the sense being discussed here (they have a strategic investment from Bezos, but that isn't a VC relationship).
- al3x 16y agoI'm kind of surprised that this conversation is solely about founders (well, and which Porsche to buy). There's only a few founders out there, and a lot more regular ol' employees. Here's the thing about the scenario in this post: the founders and investors that are swinging for the fences and taking big risks probably have their nest eggs in place. But what about their employees? A modest exit could mean security for them. That exit may not cement the founder's "legacy", but it might give a few, a dozen, or even a big group of people a stable financial footing for the first time in their lives. What's more important? What has the most utility? I'm honestly not sure. Having been an employee in that scenario and now a founder, I can see both sides. Personally, I'm glad to see more investors making sure that early employees get an opportunity to get a bit liquid if their founder bosses decide to shirk acquisition offers and spin the wheel of IPO fortune.
- blahedo 16y agoBut, and this is important, this isn't an alternative between "exit with fat sacks of cash" vs. "exit flat broke", for either the founder or the employees. Presumably, in the "founder drives a Porsche" scenario, the startup is not in imminent danger of collapse and the employees are not subsisting on ramen. So if the founder decides not to cash out, the employees have the "stable financial footing" of having a job that, presumably, they like and are good at. On the other hand, if the buyout was a talent buyout aiming for the founders or a shutdown buyout, if the founders decide to cash out, the employees may have some $$ in hand but are back on the job market. That's not exactly the most stable of positions.
- mkramlich 16y agoIndeed. Say you were an employee with a mere 1/10 of 1%: $6b * 0.001 = $6m I'd say $6m would be life-changing for most employees.
- Dylanlacey 16y agoIf security is something the employees are worried about, they should not have joined a start-up for whom an exit is their best chance. Startups are volatile environments with risky financial conditions, hopefully driven by people for whom making the best impact in their chosen area is the most important thing. It should all be about the product, making the best decision for the product, championing the product. Employees are valuable and necessary. I would never argue that employees contribute less then management in general. However, it's not a founder's place to make sure they get security via an exit... It's their place to make their product fantastic, which as a side-effect, should keep the employees employed. If they want security, they should bet on a stable job in a stable market. It's boring, it's not as challenging... But it's safe.
- WillyF 16y agoNot that it's actually relevant to the point of the post, but Andrew Mason rides a Vespa and lives in Ukrainian Village (not the most expensive real estate in Chicago). Apparently his big splurge was on a grand piano. Source: http://chicago.timeout.com/articles/shopping/90800/groupon-20-andrew-mason-groupons-next-deal http://chicago.timeout.com/articles/shopping/90800/groupon-2...
- CamperBob 16y agoNever invest in a startup where the parking lot is full of Porsches and Ferraris... and don't ask me how I know.
- danwolff 16y agoWhen the author implied that driving a Porsche means not caring about money is exactly when I lost interest in his opinions. The most interesting and successful (same traits, different present situations) owners in the Porsche communities I participate in cringe at the type of people who see it as a status symbol. It's about the connection to the planet/universe that you get from driving such well designed and engineered machines. To the author's point, though, if they're driving it for the purpose of that alone, yeah, I'd question their integrity, too. edit - spelling typo