

Rich vs. King in the Real World: Why I sold my company - dmytton
http://blog.asmartbear.com/rich-vs-king-sold-company.html

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jasonlbaptiste
One other saying is: Get rich to get wealthy. If you can get enough in the
bank to not worry about money, and at a young age that's not a whole lot, you
can focus on going for the homerun next time. A successful first time exit
could be considered a "blank check" in this industry:

a) You are secure. You don't need to worry about funds to pay yourself ramen
money.

b) You probably have enough to have people help you build a prototype, so that
gets rid of the friends/family cash crunch.

c) You've done it successfully before, so angels+VCs are much more likely to
write you a check.

d) You've done it successfully before, so people are likely to join your team.
The equity you're offering has value due to past success ie- don't believe me?
I've done it once and I made the last guys who believed in me make some damn
good money

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skmurphy
I can't find any mention of the transaction or who the new CEO is on the Smart
Bear site. Jason doesn't say who purchased the company. It would be
interesting to read the full story. There was probably a two year earnout
provision on the sale which is coming to an end (Dec-07 to Dec-09) which is
why he is talking about it now. Perhaps in January 2010 more of the story will
come out.

This post have focused Jason's your inner psychological landscape, I would be
interested in other aspects of the deal: how did he prepare employees, who did
he pick and why to help you with the negotiations (e.g. attorneys,
accountants, sell side M&A, other entrepreneurs, other advisors), how did he
manage the two year transition.

Looking back and knowing what he knows now, what are one or two key things he
would have done differently, what are one or two key things that he believes
really made this decision a success?

~~~
skmurphy
Jason gives a detailed answer to these questions in the comments at
[http://blog.asmartbear.com/rich-vs-king-sold-
company.html#co...](http://blog.asmartbear.com/rich-vs-king-sold-
company.html#comment-1358) he mentions one key advantage that some startups
ignore in the early going: keeping books up to date:

Another advantage: Having perfect books. Meaning: Perfectly balanced every
month since the company started. Finances were never a problem as a result.
Otherwise they wonder what's lurking--not even that you're being dishonest,
just that you don't know!

~~~
brown9-2
He also explains in another blog post that he is no longer an employee (which
I found as news, I was under the impression he was running the place always),
and that he'll post more about it soon.

[http://blog.asmartbear.com/rich-vs-king-sold-
company.html#co...](http://blog.asmartbear.com/rich-vs-king-sold-
company.html#comment-1338)

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davidu
Just remember everyone...

 _The difference between a sell-out and a not-sell-out is the presence of a
buyer._

:-)

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josefresco
This story makes guys like Zuck and Gates seem extraordinary. They didn't' set
out just to be rich or even rich-enough, they're aiming to change the world.
The former is still working on that, and the later is already there.

Most of us would take Box A, but the folks at FB or even Twitter are looking
at box X, Y and Z.

Of course once you get mid alphabet the possibility of an empty box is
probably pretty slim.

~~~
dataman85
Not to take anything away from Bill Gates, but he always had a million dollar
trust fund to fall back on.

(Source: <http://philip.greenspun.com/bg/>)

~~~
mistermann
You're entirely correct, but what always amazes me, is the amount of time I
spend on MS software, but if you look at the market cap of MS vs Oracle vs
Apple, something seems out of whack.

234.89B MSFT 112.40B Oracle 170.08B AAPL

I can kinda see why apple is worth so much, although, of _all_ apple
consumers, how many hours a day do they spend on Apple vs how many on MS. And
I really don't even see how Oracle is in this same race, but they are.

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nitrogen
I suspect that Oracle is responsible for a _lot_ of "invisible" software that
runs some really important systems. Apple is big because of their portable
consumer electronics as much as because of the Mac, and the typical consumer
probably spends more time with their phone or music player than their
computer. FWIW, I use Microsoft software maybe once a week at best, and I
don't use anything by Apple (unless you count CUPS).

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mseebach
[his friends were saying] _Your company is growing 100% year over year. It's
profitable and throwing off cash. Why not wait another year and let revenues
double again, which will make the company six times more valuable_

If the company is reliably growing at 100% (which it isn't, there's always a
risk), this expectation is reflected in the valuation -- obviously, actually
growing it and overcoming the risk is worth something, but it doesn't scale
linearly as is suggested.

In all fairness, his following explanation actually takes this into account,
my point is just that the replied to a strawman.

~~~
bdurette
It's not exactly reflected in the valuation and Jason recognized that in the
comments in the article:

"If you look at smaller acquisitions like mine (i.e. not like the $170m Mint
acquisition), valuations like "N times revenue" or "N times profitability" is
less correlated with sales, where as "N times number of founders" is closer to
what happens."

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johnrob
In econ terms: optimize for expected utility, not for expected return.

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jjs
The diminishing marginal utility of money leads me to prefer Forrest Gump's
philosophy on the matter:

"So then I got a call from him, saying we don't have to worry about money no
more. And I said, that's good! One less thing."

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dschobel
How does the Rich vs King dichotomy account for the serial entrepreneurs who
have fairly big exits (and guaranteed comfort for life) and do it all over
again minus the branding/prestige of their previous venture?

~~~
dkokelley
A change in personal goals. If you're 25 and have the opportunity to sell your
startup for $5M, you would most likely take it. Now at 27 you're bored, and
have millions in the bank. You don't necessarily need to be rich any more, but
being king is fun. You start another company.

~~~
noodle
i don't even know if being king is fun. i think the process of becoming king
might be where the fun is. for me, at least. ymmv.

which is another reason to sell once you're on top -- to get back to the
pursuit of kingship.

~~~
dschobel
This is what I was trying to get at. I think there's a whole class of people
out there who just like to build things.

Being king means responsibility and headaches. Being rich is nice but once you
get past a certain point it all becomes abstract wealth as the author points
out.

What's left after that? For a lot of the best engineers I know, reverting to '
_6 year old w/ big box of legos_ ' mode and just building something to see how
high you can go.

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sielskr
_Your company is growing 100% year over year. It's profitable and throwing off
cash. Why not wait another year and let revenues double again, which will make
the company six times more valuable (assuming 3x revenue valuation, a
reasonable ballpark for a growing software company)._

Unless I misunderstand the situation in some basic way, there is a math error
in the above. (Of course, even if there is indeed a math error above, that
does not make the whole blog entry worthless.)

First let me restate what I take the above unambiguously to says: it says that
if the company continues to grow 100% year over year, valuation a year from
now == 6 times valuation today.

My math: valuation a year from now == 3 times revenue a year from now == 3
times (2 times revenue today) == 2 times (3 times revenue today) == 2 times
valuation today.

Am I missing something?

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areaMan
you are missing the fact that the last "(3 times revenue today)" factor which
you just dropped means you are expecting the company to triple its revenues
next year, which means the normal rules won't apply (to that extent) so you
can charge a premium today for potentially growing more than 100% YoY. On re-
reading I guess you've managed to confuse me as well and my brain is about to
explode from cognitive dissonance its experiencing right now.

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lkozma
His chart has log scale on the x axis. I suspect it would be in fact close to
linear if we stretched the axis.

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selven
I think the money vs happiness equation is pretty logarithmic. Going from
$8000 per year to $16000 is about the same increase in quality of life as
$80000 to $160000.

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daniel-cussen
Wasn't the king usually also the richest person in the country?

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donaq
Well, yes, but sometimes the king can become richer (and more secure) by
making his kingdom the vassal of an empire.

~~~
gaius
That is the deal Xerxes offered Leonidas, who turned it down :-)

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donaq
Continuing the analogy, that was more of a hostile takeover.

<joke>Yeah. Bugger should have taken the deal and bought himself some
bling.</joke>

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megamark16
I'd love to be a king, my wife would love to be rich :-) But she supports me
in my quest for the crown.

