Big Flipping Deal
I remember sitting in a Manhattan apartment a few years ago with an old college friend and his buddies, all of them alumni of the Wharton School at the University of Pennsylvania. When you study engineering at Penn, as I did, you tend to stereotype Whartonites as money-obsessed cynics, and the conversation that evening certainly bore out this prejudice. Specifically, our host, between shots of a very tasty iced Russian vodka, explained how the best way to get rich quick was to found a company, build it up over a couple of years and sell out for a few million bucks. As an entrepreneur who was trying to, you know, change the world, I was taken aback by this callous and unrealistic attitude.
So here we are a few cycles down the road, in the midst of what is increasingly looking like a brand new tech bubble, and once again the conversation has returned to “flipping” startups for a fast profit. (Irrelevant note: how appropriate that a Microsoftie uses an opaque GUID for his permalinks.) And strangely enough, I’m finding myself agreeing with those who defend this approach. If you can build a team, technology and/or user base that is valuable to a larger player, quicker or better than they can, you’ve created value and you deserve to be rewarded for your efforts. Not everyone has to create the next big public company in order to be considered a successful entrepreneur.
At the same time, I have a lot of sympathy for the naysayers. The objectionable part of the flipper philosophy is the assumption that it is somehow simpler or easier to make money by cobbling together a buzzword-laden product and selling the farm than by pulling down a salary in someone else’s company. The reality is that building a company, whether aimed at a quick sale or total world domination, is a huge and exhausting effort. As many have said before, you’d better love what you’re doing or you’ll never make it. What’s more, your odds of success are pretty slim, so you’d better factor in that risk if you decide to take the startup route. Yes, you could toil for three years and then sell your creation for $10-20 million to a big internet player, pocketing $2-5 million in the process. But if your chances of doing so are only 5%, you might be better off working for $100-150K/year as a software developer or manager. And if you don’t have that kind of earning potential, you may not have a resume that a Microsoft or Google would shell out millions for.
So if you’re buying into a new philosophy of corporate structure where innovation is partially “outsourced” to the startuposphere (my worst coinage ever?), your visions of flipping might be wholly rationale, and even admirable, as long as you are aware of the strenuous and perilious journey you’ve embarked upon. If you’re setting up a tech startup as an easy route to filthy riches, consider playing the lottery instead.
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