Entrepreneurship overall isn't about the exit, but VC-backed technology startups are very likely about the exit. To me, entrepreneurship is the chance to build something that people want, the chance to lead and the chance to have a voice in one's own destiny.
Corporate jobs often don't offer those things. You usually build what others tell you to build, follow orders and have little voice in your own future.
Can you imagine if the team at 37 Signals had corporate jobs? They wouldn't be rock stars, they'd be cube-dwellers with no blog, no chance to make big changes, with vague titles like "Lead Web Designer" or "Enterprise Architect." David Heinemeier Hansson wouldn't be known as the designer of RoR, he'd be that kid who came up with the non-corporate-standard framework that got mothballed after he was laid off. The people left would complain when they got assigned to port his weird "Ruby" apps over to Struts.
Entrepreneurs, from the person who opens a McDonald's franchise to an Ivy Leaguer seeking millions in VC want more or less the same thing, and for them an "exit" is often just icing on the cake.
On the flip side, if the team from 37 Signals worked for a great technology company like Facebook, Google or Apple, they could have built products that tens or hundreds of millions of users and hundreds of thousands of developers use every day. They could have worked with some of the best engineers and designers on the planet and have had a huge impact on the products they've built and their company's success. They also could have also created popular open source software that runs on massive infrastructures, written their own blogs, and achieved industry fame.
I'm not trying to argue that entrepreneurship isn't a great path to pursue for many people, but I disagree with the simplistic picture that people sometime paint wherein entrepreneurship is always glamorous and employment is always dreary.
That's a really good point. There definitely are shades of gray. There are companies where one can have a voice and build some great things. One doesn't have to be the founder to be part of an entrepreneurial effort.
It doesn't always always have to be about money. Open source software gives people to build something, break some new ground and make a change. I guess that's the same drive that gets people to found or be part of all kinds of efforts that extend beyond software and startups.
It's no coincidence that founders who get bought by BigCo's end up looking miserable 12 months down the line, after being demoted to an employee, who doesn't have full control of their baby any more.
You're not mistakenly thinking that 37Signals was liberated by VC, right? They were self-funded with consulting work. And David was just a freelancer for them at the beginning.
"Can you imagine if the team at 37 Signals did corporate consulting? They wouldn't be rock stars, they'd be design whores with no blog..."
Lots of people who have "real jobs" also have outsized online presences, have gone on to fame and relative fortune because of their off-hours OSS contributions.
Adding VC to the people who don't, sure isn't going to change their path.
I agree with your definition of entrepreneurship - a chance to lead, to do it your way, to have a voice in your own destiny.
Which is why I'd never, ever, ever take funding, and risk having to manage the expectations of someone whose goal wasn't a fabulous business, but the biggest/fastest exit possible.
I've been having that corporate vs self-funding dilemma for a while now. I am part designer, part entrepreneur, part programmer. I enjoy doing all these activities, and I do them with desire. I have an idea
which would improve designers life and I think I might have figured out working business model. More importantly, it's very hard to get me doing something I find either illogical or immoral.
I have been reading HN for a while, follow 10+ blogs from VC-world and read whole bunch of books about successful startup founders and although I find corporate sponsorship great for some sectors (biotech, hi-tech hardware, some IT where founders are born programmers and not entrepreneurs) I've come to a conclusion that if I was to seek founding from either VC or Angel investor, I'd be giving away my freedom to experiment, my freedom to work in a pace and rhythm as I'd like and all the fun that would come with. That's was the whole point about being an entrepreneur, right? Doing the stuff you like / world needs and supporting yourself to a point? And who would guarantee me that investor knows more about my sector than I do?
At least for me, the decision to not seek funding sort of answered itself. I didn't know who or how to ask for money, but I did know to program the tool I envisioned. Fast forward 3 years and I've got a moderately profitable business, and no investors. The work is fun, and no one tells me what to do.
I'm just always curious about others who seek the go the investor route. Do most of them actually get funding? If so, when? How? In most cases, I see people talk a lot about investors, but I very rarely see anyone actually get investment money. I'm skeptical that it even exists for the typical first-time entrepreneur.
You seem to have found your destiny. Why do you even care what other people think/do? I would say: follow your path perseveringly and you will end up fine. Not having the urgent need to think about the "investor route" is a good thing. Everybody additionally involved is going to meddle one way or another.
If your business model includes charging your customers (designers) directly for a service that improves their ability to earn money, you can totally do it, if you just put enough elbow grease into it.
If you don't charge your primary audience, if you get into some whacky convoluted business model that doesn't involve charging them, you're almost surely going to fail. You reduce it from skill and effort (create value, charge directly) to depending largely on luck.
Basically what this article is talking about are two breeds of entrepreneurs:
1. Lifestyle business guys like the ones featured in the article
2. Big exit guys who are after the Forbes cover, the big IPO / acquisition, the VC funding, etc...
There's merit to both styles of entrpreneurship; style #2 obviously brings with it a lot more stakeholders (employees, investors, etc...) and therefore a lot more responsibility and accountability on the part of the entrepreneurs / founders, but the potential rewards reflect that.
Style #1 doesn't have all of the fame and glory, the 8-9 figure exits, but it creates a self-owned source of income which can be really liberating. The trick with a lifestyle business is to make your operation lean enough so you don't have to hire a tremendous number of people to run the business.
Possibly, but I don't think it's necessary. Sometimes money-losing companies are offering their users real value, which in effect the VCs are subsidizing. That's pretty good for the users so long as the VCs are willing to keep subsidizing the services! There was a good deal of that in the first dot-com bubble, where basically everything was free due to huge piles of neverending investor dollars paying for it all.
I have a different model of exit that is my goal. To create companiesnthatncan run without my daily involvement. Then repeat.
I currently am a partner in an LLC that owns two retail stores. We will do a third of this franchise and then move on to something else. I essentially live off the profits currently and spend 10-30 hours a month on them.
I would definitely have to agree on this. As much as I am open to the possible "lifestyle business" examples given, I would still think about scaling the business to a level similar to SAS if given the opportunity (I applaud them for recently being the #1 company to work for). And by the time the exit is done, I should hopefully have the experience and fiduciary resources to start another company.
I believe you, but its major failure is not looking at the problem from the viewpoint of investors and risk. Sure, $500K for "several million dollars in dividends" sounds great, but how many $500K investments will you have to make to get such payouts and what's your opportunity cost in meantime?
A “lifestyle business” might be great for a lifestyle investor---and there are those, just not very many, especially ones who can put up $500K or 1/10th or 1/20th in a syndication.
Great context for the article is a book I'm currently reading: Small Giants. Its about companies that could be large choose to stay small and intimate.
I'm not really a fan of the build a company that needs investment in large quantities to grow and eventually be sold. I'd much rather build something that is useful, makes good money, and lets me work with a great+small team. I'm currently fighting this battle with Cloudomatic. I don't really want to build a large vc backed business, but it looks like we have to in order to really achieve our long term goals.
Start-ups have so much uncertainty in what the final business will look like that it's difficult to tell at the outset whether the start-up will result in a lifestyle business (a.k.a. a "small business"), or something that is best suited a larger enterprise.
It's somewhat of a lifestyle decision for the founders, but sometimes the realities of the business make the decision.
It is not about the exit, it's about making the exit pay more than Sarbanes-Oxley and other laws cost. The sad fact is that, with present regulations, a $1M/year American company has a net present value of zero. In a sane economy, the VC could flip that in a heartbeat, but instead they are forced to blow up profitable companies so as to realize a tax deduction.
In fact, I suspect that VCs would prefer to take sub-Sarbox exits and ignore the 20x exits if they had the choice: 10 exits of $2M each has vastly lower risk than a single $20M exit.
Corporate jobs often don't offer those things. You usually build what others tell you to build, follow orders and have little voice in your own future.
Can you imagine if the team at 37 Signals had corporate jobs? They wouldn't be rock stars, they'd be cube-dwellers with no blog, no chance to make big changes, with vague titles like "Lead Web Designer" or "Enterprise Architect." David Heinemeier Hansson wouldn't be known as the designer of RoR, he'd be that kid who came up with the non-corporate-standard framework that got mothballed after he was laid off. The people left would complain when they got assigned to port his weird "Ruby" apps over to Struts.
Entrepreneurs, from the person who opens a McDonald's franchise to an Ivy Leaguer seeking millions in VC want more or less the same thing, and for them an "exit" is often just icing on the cake.