Microsoft employee Dare Obasanjo writes about flipping a startup to Microsoft, Google, or Yahoo, where he writes
Repeatedly ask yourself: would Microsoft want our users? would Google want our technology? would Yahoo! want our people? It’s as simple as that.
Scoble and Don Dodge, also Microsoft employees, follow up with more commentary. All the commentary is right on target – but if entrepreneurs need to read it, I think they’ve been asking themselves the wrong questions. If you’re starting a company, here’s what you should be repeatedly asking yourself:
Will InterActiveCorp want our revenue? Will Liberty Media want our revenue? Will E.W.Scripps or Experian or any of a dozen other chunky conglomerates want our revenue?
I’m happy for individuals who start working on something they love as a pet project, never intending it to make money, and end up selling it to one of the usual suspects for $30 million. That’s terrific. But if you’re deliberately planning to quit your day job and start a business from scratch, why go with a zero-revenue model that’s going to be sold for $50 million tops when you could pick a business model with the potential to generate some really, really serious cash? Once you’re bringing in $50m+ in revenue, then flip your company. PriceGrabber took in no venture capital but just sold for $485 million. Shopzilla sold for $525 million. Lower My Bills was a $330 million + earn out acquisition. Provide Commerce, selling flowers and meat, just got bought for $477 million. Even the usual suspects will pay big money if the revenue’s there – Shopping.com sold for $620 million and Overture went for a billion and a half.
With all the Web 2.0 competition out there, the chances of your built-to-flip start-up selling to Google or Yahoo or Microsoft are slim. Instead, take the time to find a compelling revenue-generating model – run correctly, it’ll require as little or less VC than a built-to-flip one, and the upside is an order of magnitude greater. If you’re going to take the risk that comes with entrepreneurship, don’t ask yourself what you need to do to get sold to the usuals – ask yourself what you need to do to bring in some serious money.
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I agree wholeheartedly. However, I think there are exceptions. There are certain industries where it is difficult to generate signficant revenue without a partner that provides the right deal flow.
Of course, a good entrepreneur would know about that barrier to entry before diving in. Anyways, more on that later on my blog.
IMO the flip mentality could be a hindrance to progess as something too new and too cool for the masses might generate a ton of customers in the end run but not be flippable in the short term.
Nothing new as my experience from way back machine was when everyone always ran to change their products every time Microsoft sneezed.
I always stayed the course and listened to my customers and kept innovating as distractions like worrying about what other companies will think (aka flipping) can be an incumbrance to the development and innovation process.
Good entrepreneurs will recognize the difference and stand their ground until the product hits critical mass.