Knowing When to Flip.

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Magazines take your photo. Venture Capitalists offer to invest over email.  Billionaires smoke weed in your living room. No one doubts you.

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Your company is hot. You are hot. And it feels awesome.

To struggle for months, to dream for years––and then to have the world’s attention. It feels like success. It feels like you’re living the dream. 

But is it?

In that moment, the hardest thing in the world to do is to keep your head, to stay grounded to the reality of your shitty, mismanaged, high churn, unknown CAC, low LTV, money losing company.

Hubris is the easiest sin. I’ve seen it so many times, in myself and others.

Google offered TaskRabbit a hefty sum to power Google Shopping Express. They said no, we’re building the “gig economy.” Whither TaskRabbit now? Management churn, layoffs and a $40M liquidation preference, that’s where.

Google tried to buy Path $150M. They said no, we’re going to be the next Facebook. Now they sell e-stickers in Asia and can hardly raise a Series C.

And yet, in the moment of decision, the future is unknown and unknowable.

Being a founder, a CEO, is fucking hard. You could have made all the wrong choices––hired the wrong team, invested in the wrong technology, picked a terrible business model––and yet if you sell  for the right price at the right time, it doesn’t matter, you won. Indisputably.

The question is: When is the right time to flip?

Answering that question requires a profound level of self-awareness on the part of the entrepreneur and the management team. You have to see through all the press, all the ego-gratifying pomp and circumstances to see your own inner strengths and weaknesses. If your business is fundamentally weak and overvalued by the market, sell. If not, stay the course, take the big VC money. Go hard.

Selling your company requires acknowledging a strategic inner weakness.

Think about that. It’s easy to do when you’re running out of cash and ignored by the press, but how many entrepreneurs can truly see themselves thus–naked in the mirror– during that moment of glory?

***

This post is dedicated to Tony Faddel & the team at Nest, who flipped a niche product with grand plans and a decades long replacement cycle into an epic $3.2B all cash sale to Google. Congratulations, you played the game better than I could ever hope.

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2 Comments

  1. Chris Yeh January 17, 2014 at 7:11 am #

    This is why it’s critical not to believe your own hype. Analyze the situation, and if you don’t truly believe you have a billion-dollar company, sell at the right price. The mother of all such examples comes from the Dot Com boom, where PointCast, a screensaver company, turned down $400 million in cash and ended up selling for $7 million three years later.

  2. Camilo Acosta January 16, 2014 at 5:17 pm #

    Max did it well with Slide, too.

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