The blogosphere is abuzz over the concept of building a startup explicitly as an M&A target for GYM [Google, Yahoo!, Microsoft]. Todays' discussion started with a post by Dare Obasanjo.
His post ignited a spirited conversation...including reactions from Paul, Scoble, Michael [I particularly liked his take] and Don Dodge.
Reading through Dare's blog, he makes some very valid points. Somewhere along the way, it appears some have misrepresented what he wrote to imply he ENDORSES the idea of starting a company with a flip to GYM in mind. Unless I misread his post, that wasn't his intent. But unfortunately for Dare, he forgot that the last thing you say [or in this case, write] is often what lingers in people's minds...and he made the cardinal sin of ending his post with following:
If you are building a Web startup with the intention of flipping it to one of the majors, only three things matter; technology/IP, users and the quality of your technical team. Repeatedly ask yourself: would Microsoft want our users? would Google want our technology? would Yahoo! want our people?
Simply put, if you are building a startup with the intention of flipping it to one of the majors, the ONLY thing that matters is P.T. Barnum's famous uttering, There's A Sucker Born Every Minute. Whether the seed capital that funds such a business plan comes from the founders themselves [i.e., bootstrapped] or from angel/early stage VCs...it's dumb money.
I'm not a VC, but I know quite a few and have been pitched many a private equity deal in my own right. If I EVER thought a founder was already looking for the exit that early, I would run not walk away from the meeting. Being flexible to an early exit into a larger company is a very real avenue, and one that we've seen many of our colleagues opt for of late [e.g., Weblogs, Bloglines, del.icio.us, Flickr], but to a founder, there is strong indication that they were fully prepared to scale [or attempt to scale] these businesses themselves. Whether or not they all would've made it as stand alone companies in the long run is not the point, but rather that they weren't founded under the presumption that GYM would come along and give them an early payday.
Related Posts:
- To GYM or Not to GYM: An Entrepreneur's Dilemna
- Google Base: Why the Blogosphere Wants (or NEEDS) It To Be Underwhelming
- Yahoo! Becoming a Web 2.0 Poster Boy
Note: At the time of this writing, I and/or funds I maintain discretionary control over may have maintained long equity positions in some of the companies mentioned, but were not short any of the stocks in question.
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