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Yes, I think this is exactly right. The pattern you'd expect to see wouldn't be a small business spawning a large one; it would be one of the principals of the
by ScottBurson 16y ago
Yes, I think this is exactly right. The pattern you'd expect to see wouldn't be a small business spawning a large one; it would be one of the principals of the small business cashing out and leaving to start something that eventually got larger.
Ah, but this reminds me. I know three people who have made $500M or more on their earlier businesss who have cashed out and gone on to found new startups. Only one of the three funded the startup entirely out of his own holdings; the other two have other investors involved. I imagine the latter two think that they get more value (advice, connections, etc.) from these other investors (who I think include VC firms) than they give up in equity.
FWIW, the business funded entirely by the one founder eventually failed (I worked there for several years). Arguably, this was a failure of marketing, as we had a small number of wildly enthusiastic customers that never became a large number. Also arguably, had experienced VC firms been in on the deal, they would have made sure that the marketing was done competently.
So I'm suggesting that if you want to start something that you hope will get large, you may be well advised to involve professional VC even if you don't need the money.
- timharding 16y agoDon't forget that you don't have to cash out of a successful business to move on to other things. You can install managers to grow a business once you figured it out and become an owner rather than a doer.
- tptacek 16y agoIf you're in love with your current business, why would you do that just to take a 1/100 shot at The Next Big Thing? You wouldn't. If you're in love with your current business, you stay. I don't know if most people who get to the "Threadless" level of success with their companies are in love with them, but I bet many of them are.
- Vivtek 16y agoYeah, but at some point it may very well be that you're no longer in love with your current business. It's just become a job. At that point, you can sell it and cash out, or you can hire somebody to run it for you - either way, you move to whatever your Next Thing is. I see myself doing this eventually.
- tptacek 16y agoOk. I get the strong sense† that Fried and DHH are in love with 37signals. Which may be why they haven't bailed to shoot the moon yet. So when you say something resembling "you'd expect to see companies like 37signals trying to roll the snowball into something like Twitter but that rarely ever seems to happen", I'm inclined to point out how that misreads the dynamics of companies like 37signals. † (won't bore you with details, but I have many of them)
- Vivtek 16y agoAh. I guess I missed the context. Sure, with 37signals I definitely agree with you.
- revorad 16y agoI think Fried and DHH are already shooting for the moon in their own way. The kind of people who shoot for the moon are generally not just looking for money, they are looking to "change the world", they are looking for fame. Fried and DHH make enough money from 37signals. They are shooting for the moon by contributing to open source and writing bestselling business books.
- revorad 16y agoIf you're in love with your current business, why would you do that just to take a 1/100 shot at The Next Big Thing? Because you might have fallen in love with the idea of creating the next big thing? The thrill, the excitement, the challenge of taking a shot at the next big thing? Joel Spolsky is a great example.
- nikcub 16y ago> it would be one of the principals of the small business cashing out cashing out to who? another lifestyle business?
- sreitshamer 16y agoI'd guess those people who attracted investment in the new startups could do so because of the earlier (self-funded? "lifestyle"?) businesses. Large businesses don't necessarily come from small businesses, but many people who build large businesses were once people who built smaller businesses.