Build a business you’d never want to sell


More and more people seem only comfortable with things when they’re presented in a binary fashion.

It’s as if we’ve lost all our faculties in deciphering situations that are not presented as 0 and 1.

It seems gray (or rainbow) are no longer options.

It’s country v country, red v blue, flag v flag, team v team, animal v animal.

Bootstrapped v funded.

You’re either building the 2nd coming of Amazon or your endeavors are worthless and you might as well just go back to underwater basket weaving.

Reality is…none of that.

Reality is, whatever works.

Like all industries, finance is a sales business. Every financial product is sold before it’s bought.

The sale in most finance is: “capital is scarce and capital will help you grow faster and growing faster is the only way to win and if you don’t raise and you don’t IPO, your life is worth nothing.”

The counter/bootstrapped or die narrative is: “the ONLY way to build a business is to never raise any money because when you raise money, you sell your soul right away, lose control of your company and are beholden to evil financiers.”

Truth, and happiness, I’d argue is often somewhere between zero and infinity.

Don’t let the guru’s tell you otherwise. If you take anything away from this post I hope it is that there are, roughly, quintillion ways to build a successful business.

Just don’t get fixated on the specific path you “must” take. Stay flexible. And don’t listen to the actors who have no skin in the game (financial, reputation, or anything else that matters to them).

As you would in any sales scenario, qualify your leads and make sure your goals align.

There’s absolutely nothing wrong with taking venture capital.

Just make sure you understand what that means.

The VC business model requires you to build a stand alone public company of a certain size. And no, nearly all acquisitions don’t mean shit to a VC and yes there’s only ever been one WhatsApp.

Building a company that will one day be publicly traded is an aspirational goal. And an awesome outcome if you achieve it.

Several founders I deeply care about are on this path. I happen to believe these folks are on their way to building stand alone public companies. They have the business model, the metrics, the determination and support behind them to achieve this. And I’m rooting for their success more than anything in this world.

But what if you’re not sending satellites into the orbit or fundamentally disrupting the gigantic parcel or full truck load industries? Are you still going to put a pitch deck together with a TAM slide showing how your market opportunity is a hundred thousand trillion dollars and if you only capture a shit load of it, you’ll be 3x the size of Google?!

Alas, more often than not, people fundraising are asking for a paycheck and permission to tinker not to build a real business.

Let me make this even more real and tell you exactly what I look for as an investor:

$750 million (US dollars) in enterprise value at time of liquidity. (read: enterprise value at time of liquidity is not the illiquid private market valuation bullshit that tech publications write about. This is actual cash that you can take to the grocery store to buy bread with).

I don’t know where you come from, but where I’m from, $750 million dollars is LOLWUT money.

Turns out, making money as an investor is HARD.

One major difference between what we look for and the other 799 venture funds is that we remove the pressure of you having to burn through the cash raised to raise another round in 8–12 months from the time of our investment.

The contrarian approach we have is that you shouldn’t have to forgo profitability (read: the one and only true optionality you have as a founder) for the sake of growth.

There are some businesses where deficit spending is the only route. Those are the moonshot type businesses like sending satellites into the orbit. Not the 39th meal delivery service that only delivers crispy tofu for dogs to Palo Alto residents on the 3rd Wednesday of every month.

But don’t get it twisted.

If we’re investing, it’s because you have the ambition to build a massive business, in real world terms. Not grow to $8.5m/year and stop there. But if it does stop at $8.5m in annual revenues for whatever reasons, then we have the right to take distributions if the business is doing well.

Just know that we’re not in the cash flow business. Neither are most investors.

Investment returns, in VC and public markets, are driven by skewness. Investing is about playing for option value (often mispriced option value).

I think, what matters in building a business is you deciding what success and happiness (in good health) looks like.

If it means holding a day job and saving until you’ve got 12 months of personal runway to bootstrap the business, do that!

If/when the time is right and you’re comfortable giving up significant ownership and control in return for a shit ton of capital, do that!

If it means you bootstrap, then raise from us or whoever else, do that!

Just know that taking on outside investment literally equates to you taking on additional return expectation in a given time horizon. If you or your business is not ready for those expectations, well, then don’t take on those expectations.

Giving an investor a 150x multiple on their initial investment is certainly not success for most founders. Though, if you do return that multiple, then I pray that you’ve also made a yacht load of money.

Or you could also run a SaaS business doing $1m/year as a solo founder with maybe a few contractors and stay real world rich without taking on additional expectations.

Don’t be dogmatic about or subscribe to someone else’s definitions and path.

Build a business that you’d never want to sell. Start there. If you do that (and build a phenomenal business) the buyers will come to you. I promise you. And then you have the choice to decide whether you’d want to sell or raise…or not and run your business into infinity, profitably!

In closing, as Jay-Z (yes I still put the dash because I’m that old) once said:

I wish you health, I wish you wheels, I wish you wealth. I wish you insight so you could see for yourself.

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