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I remember the YC startup school at De Anza many years ago, when Andrew Mason, of Groupon, was one of the guest speakers and he basically said that the worst mi
by yumraj 7y ago
I remember the YC startup school at De Anza many years ago, when Andrew Mason, of Groupon, was one of the guest speakers and he basically said that the worst mistake he made was going public.[0]
And basically what had happened was that post IPO Groupon's accounting irregularities, which were earlier hidden, became public and the company fell from grace.
Same thing happened recently with WeWork and there have been numerous other companies.
Basically, while private, startups are able to engage in practices that don't survive under public scrutiny. No wonder startups, especially ones on shaky foundation, are remaining private longer.
[0] https://genius.com/Andrew-mason-andrew-mason-at-startup-school-sv-2014-annotated https://genius.com/Andrew-mason-andrew-mason-at-startup-scho...
- cmroanirgo 7y agoThen there's the continual pressure of trying to serve two masters: your original customers vs shareholders. Often it's the latter that takes precedence when they go public. What would FB or Goog be like if they were still private?
- halflings 7y agoLarry and Sergey still have >50% of the voting power. Zuckerberg has >60% of the voting power. Do you really think these companies are just following what shareholders are telling them?
- arcturus17 7y agoAlso they’re special cases where the founders’ visions have created so much shareholder value that there hasn’t been much for the shareholder to say anyway...
- joncrane 7y agoThey ARE following the shareholder. The founders are the shareholders. The minority shareholders are just along for the ride.
- zwkrt 7y agoideally there Is a trade off between staying private to have more control and hopefully make better decisions that aren’t quarterly-focused, vs having more capital. In practice it seems like a game of “how long can we get away with cutting corners until we are big enough that going public won’t ruin us entirely”
- mikeg8 7y agoI agree, but think its a shame the game has become so common place in this era. Hopeful that we’ll see more players emerge who are focused on a strategy of sustainability and ethics.
- Ygg2 7y agoPretty sure capitalism and ethics are mutually exclusive. Capitalism at its core runs on infinite greed.
- mikeg8 7y agoThere is no law making those mutually exclusive. And the infinite greed isn’t “capitalism” in an of itself, it is human nature that is the root cause. IMO we are at a point in time where we need more high-profile examples of capitalists who are not motivated by greed. And I’d argue there are a million small and medium sized businesses, run by capitalists, who operate in ethically and beneficial manner.
- Ygg2 7y agoAnd capitalism is built on exploiting that same human nature. Even if individual capitalist isn't motivated by greed, the market itself is. It's literally built on presumption of infinite growth. Small and medium sized business, are more like a stage in lifecycle than an exemplar. They either get merged or sold into a larger entity or they grow to become a larger entity.
- icelancer 7y ago
- malandrew 7y agoOne of the big challenges is the asymmetry in when to go public relative to your competitors. If you go public too soon, you're competitors get the upper hand because they can spend more freely on growth without oversight and that lets them suck investment dollars out of the market like fire consumes oxygen. If you go public too late, then you learn no discipline with how you spend and the market recoils in horror and you burn out before getting costs under control before running out of runway. Blitzscaling has really changed things.
- countryqt30 7y agoSo Groupon's CEO mistake was that other people DISCOVERED his fraudulent activities? That's a great learning LMAO. It sounds very much he hasn't learned a thing.
- nostrademons 7y agoHe also railed against companies with unsustainable business models. And someone asked him why he went public, if going public was the worst thing he ever did. His reply was that because of how Groupon was financed, it was basically forced to go public. It was very odd. I got the sense that he got frustrated with all his business ideas failing, ran with the one business idea that actually could succeed (which was basically a pyramid scheme dressed up as marketing), but never really got comfortable in his own head with running a pyramid scheme, so all sorts of psychological defense mechanisms come out when he talks about it. His other actions (like introducing Progressive Equity [1], and his subsequent startups Detour and Descript having legit if less successful business models) also suggest this. [1] https://medium.com/detour-dot-com/introducing-progressive-equity-f424a51ee3a4 https://medium.com/detour-dot-com/introducing-progressive-eq...
- anongraddebt 7y agoMy accounting professor used Groupon as an example of a company that was aware it's business model was unsustainable. Basically, their domestic churn is remarkably high because businesses realize after a couple campaigns on Groupon that they're actually losing money. So, Groupon decides to tap international markets. This does nothing to reduce churn, so it's just a matter of how long it takes before they run out of new businesses to bring into the fold.
- halfjoking 7y agoIsn't he the one that started Lightbank VC fund - which offers $100k funding for 50% of your company? [1] Anyone who offers a deal like that can't be very ethical. [1] https://www.quora.com/When-is-lightbank-starts-100k-for-50-a-good-deal-for-entrepreneurs https://www.quora.com/When-is-lightbank-starts-100k-for-50-a...
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- iamasoftwaredev 7y agoWorst mistake he made was not just taking the money from google. It is shocking, and kind of infuriating, that he whines about going public being his biggest mistake when the only reason it was a problem was because of his companies questionable behaviour.