

Built to Last vs. Built to Flip - bootload
http://bostonvcblog.typepad.com/vc/2008/04/built-to-last-v.html

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pg
I have yet to read a post that had "built to flip" in the title that wasn't
sanctimonious bullshit. It's invariably a signal that the author is going to
brag about how he's in it to build companies of lasting value. But ask
yourself this: how would this guy feel if he funded a company that became very
successful, but never got bought or went public? Not very good, you can bet,
when his current fund closed and all he had to give his limited partners was
some highly illiquid stock. So all he's really saying is that he hopes the
companies he invests in go public. But all investors want that!

~~~
kingkongrevenge
> all he had to give his limited partners was some highly illiquid stock.

Why would these people spit on a stock that's throwing off nice dividends?

> a company that became very successful, but never got bought or went public?

Option 3: Stay private, finish growing, throw off fat dividends until the cash
cow dies.

What's the problem?

~~~
pchristensen
Because liquidity is valuable and cash cows don't live forever. VCs and
aggressive investors are looking for big returns, not cash thrown off. If does
make me wonder if a VC or angel fund could solicit patient capital, like from
a pension fund or life insurance, that would be content with owning dividend-
rich stock. That's an area as unexploited as YC's niche was three years ago.

~~~
kingkongrevenge
> are looking for bug returns, not cash thrown off

You can get huge returns from a profitable private company out of owners
equity withdrawals over a short period. If the business is not capital
intensive there's no real reason to go public, growth market or not.

I see nothing wrong with focusing on the "flip" if the business fundamentally
needs a lot of capital or a big parent company. But nobody ever even mentions
dividends or buybacks at private valuations. It indicates to me that people
are most focussed on taking advantage of a possibly irrational market rather
than building real businesses.

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tx
The best submission today by far, IMO. I suspect it won't get crazy popular
around here, unfortunately.

Creating a sustainable business has been my lifetime dream, and hearing day
after day after day about quick "exit strategies" on news.yc has been very
depressing: if you're so eager to "exit", why are you in it to begin with?
Pure greed would be an honest answer, I suppose.

This is why admire Jobs so much: while he certainly cares about the "money
problem" he has remained so obsessed with Apple, with his baby, throughout his
entire life. There is no "next big thing" for him.

~~~
parker
>> hearing day after day after day about quick "exit strategies" on news.yc
has been very depressing

I'm not a huge fan of hyperbole. Care to back this up? I don't think news.yc
is obsessed with ripping people off... what part of 'make something people
want' contradicts creating value?

~~~
freax
> _what part of 'make something people want' contradicts creating value?_

Crack? Junk food? Time-wasting websites? People rarely act even in their own
best interests.

~~~
plinkplonk
>> what part of 'make something people want' contradicts creating value?

>Crack? Junk food? Time-wasting websites? People rarely act even in their own
best interests.

Who said anything about acting in their own "best interests"? (and who decides
these?)

Make what people _want_ , not what you think they _ought to_ want. Value, like
beauty is very much in the eye of the beholder

~~~
freax
Except these things can be empirically shown to be harmful. The "value" of
playing EverCrack or WoW all day every day can destroy many other valuable
things in your life. This is why addiction is considered a _problem_ , not a
value -- except to pushers.

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edw519
The author is like a blind man thinking that an elephant's leg is a tree.

How could he comment on that which he never sees?

Like small companies that grow with the best infusion of cash there is: from
customers. Here's a novel concept: if you can solve your customers' problems,
protect your market share, manage your cash, and keep a finger on the pulse of
your business while growing it from within, why would you ever need a quick
exit?

------
freax
You need an exit strategy during sex too or there's going to be a merger and
then an acquisition of your paycheck.

You don't wanna be left holding the (diaper) bag.

That's some life advice, boys, since some of y'all are going to be
millionaires and that makes you a target for all sorts of golddiggers.

Naturally, PG had this one sussed like everything else. "Wait a minute,
friend," you might be saying to me, "didn't RTM get an equal share? That's
like 50% in a divorce!" Naw, you see, before they got together, they wasn't
worth two bits between 'em. PG rode that horsey into the sunset and 59 million
pesos!

