
Flipping is Good. (aka Memo to Jason Fried: Sorry, You're Fucking Wrong.) - prakash
http://500hats.typepad.com/500blogs/2009/10/flipping-is-good.html
======
edw519
This was hilarious. The only thing missing was "You have until 1:36 p.m. on
October 4, 2009, to BUY NOW!" (But that would have required a little js.)

This is a great example of how not to blog:

    
    
      - Challenge a blog post of a successful member of the community.
      - Wait 2 weeks before responding to that blog post.
      - Insult him as often as possible, in as many ways as you can.
      - Swear like a sailor.
      - Brag about swearing like a sailor.
      - Co-opt images that have nothing to do with your point.
      - Have no point.
      - Make sure some of those images are vulgar.
      - Use red letters.
      - Use green letters.
      - USE ALL CAPS.
      - Swear some more.
      - Argue with your only commenter.  (That oughta generate more feedback :-)
      - When all else fails, show your resume.

~~~
chaosprophet
I find nothing wrong with challenging a successful member of the blogging
community. Just because the guy started blogging a few years ago and has a
successful startup does not mean that everything he says is always right.

The other points are spot on though.

~~~
tptacek
Sometimes, taking on someone like Jason or Graham or Spolsky just comes across
like coattail-riding. It's not that it's wrong to challenge them; it's that
the mere fact that you're standing up to them shouldn't be the value
proposition of your post.

~~~
swombat
I don't think Dave needs to "stand up to Jason or Graham or Spolsky" to give
more value to his opinion. He's got enough star power by himself, though oddly
the people posting on here at the moment seem to be blind to it. See
<http://500hats.typepad.com/500blogs/about-dave-mcclure.html>

~~~
edw519
_oddly the people posting on here at the moment seem to be blind to it_

Thank you. I was blind, but now I can see...

 _Dave barely graduated from the Johns Hopkins University in 1988, with a BS
in Mathematical Sciences Engineering and a minor in frisbee, billiards, and
foosball._

Foosball? I had no idea. I take it all back.

In the future all disagreements between foosball players should be settled on
the table where they belong. Does Jason play?

~~~
jfager
You're highlighting the throwaway line about 20 years ago at the end of a
lengthy and impressive resume. I appreciate that you disagree with him, but
that seems like a cheap shot.

~~~
edw519
I wasn't joking. I'd _love_ to play any of these guys in foosball. For geeks,
foosball is like golf for executives or football for Kennedys. I like how a 20
year old "throwaway line" can still bring us together. The only cheap shot
intended here was my bank shot off my opponent's 3 man and into his goal.

------
JCThoughtscream
Is there anybody in this thread actually reading this essay seriously and
weighing its merits, instead of dismissing it on superficial stylistic
reasons?

The man brings up interesting points regarding the Mint.com merger and how
37signals handled the news, f-bombs be damned. Especially in regards to the
differing metrics of incentives for startups, VCs and preexisting competitors.

~~~
dannyr
Agree.

Dave can be very blunt sometimes.

I saw him on a panel earlier this year and he's just very direct. It's
refreshing to get very honest answers. Some people just play too nice just not
to offend anybody.

~~~
sofal
Here we go again with the fallacious nice == indirect argument. I've heard
this over and over again and it never makes sense. Why do you think that it is
necessary to go on an offensive rampage in order to be honest? Guess what?
Some people actually don't hate everyone who disagrees with them and these
people can be very blunt and honest without petty insults.

------
sachinag
The important point of Dave's screed is at the bottom (and it's something
every single person who has ever worked in VC and made the jump to the light
side says this): for your first company, don't hold on too long - it's OK to
sell out.

Successfully selling out makes it ridiculously easy to raise money, strike
partnerships, and do things your way the second time around. Hell, it probably
gets you a third bite at the apple as well.

------
TomOfTTB
Hidden in the F-bombs and the wacky colors I think there is a good point here.
There are entrepreneurs who love the start of a company (working 7 days a
week, adding new functionality, etc...) and there are people who are good at
(and sometimes love) maintaining a company once it's established itself (by
creating moderate growth, doing a bunch of testing for each new feature,
etc...)

What flipping does is to allow the entrepreneurs to pass a company off to the
maintainers once it moves beyond that startup phase

------
idlewords
Textbook demonstration of why cocaine and <font> tags don't mix.

~~~
sayrer
It looks like a letter from a crazy person.

~~~
jrockway
Good point! Take a look at how similar it is to this:
<http://www.timecube.com/>

------
emcooke
Props to Dave. All the flowery language, pictures, and hyperbole generate
great discussion and traffic.

Dave is one of the most savvy investors and marketers around. When we were
first pitching Twilio no one seemed to understand "marketing to developers"
but he got it while half asleep from an all-nighter.

If you curious about Dave's geek cred, scope his linkedin profile: *
Investment Program Director at fbFund Incubator * Investor at Bit.ly *
Investor at DailyBurn * Advisor at Life360 * Startup Investor (FF Angel Fund,
fbFund Incubator) at Founders Fund * Advisor, Investor at Twilio * Organizer &
Founder at Startup2Startup * Advisor at 750 Industries * Advisor, Angel
Investor at SlideShare * Advisor, Angel Investor at TradeVibes * Advisor,
Angel Investor at EventVue * Advisor, Angel Investor at Oortle * Angel
Investor at RichRelevance * Advisor, Angel Investor at KISSmetrics * Advisor,
Angel Investor, Boardmember at TeachStreet.com * Advisor, Consultant, Angel
Investor at Mint Software * Advisor, Angel Investor at Mashery * Advisor at
Kiva.org * Co-Founder, Boardmember at Silicon Valley Microfinance Network *
Advisor, Angel Investor at Simply Hired * Angel Investor at Canopy Financial *
Startup Advisor / Angel Investor at 500 Hats LLC

And, if you head hasn't exploded from the colors in his blog check out his
presentation style... in. your. face.
[http://www.slideshare.net/dmc500hats/startup-metrics-for-
pir...](http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-
version)

~~~
borism
I thought geek cred was achieved by actually building something technical with
your own hands, not by being advisor/angel/marketer, but maybe things have
changed nowadays...

------
ErrantX
The word "fuck" only really works in a shock way the first few times; after
that you just sound angry.

Some good points got lost because of that.

 _Young Entrepreneurs Should Sell Out Early_

I did that - not because I was forced but because the deal was good and I have
plenty of other ideas to turn into countries. And I agree: it's a good thing.

In fact I sold my second company - the first one crashed and burned. It was a
useful experience because the oulay costs were 4 figure amounts and I had no
employee's - so no one really lost out.

Now I feel like I have had the right experiences and can make better decisions
next time.

Too often I think we see people offered vast sums of money with no idea really
what to do with it. The successes we hear about are the multi-millionaires who
make the right decisions (either through luck or skill) but Im sure there are
plenty of others who failed.

Im glad I got the chance when the worst setback I could face is being back at
square one.

~~~
drusenko
when Dave says "sell out early" (and says "firesales don't count), he's
talking about sales < $250M as "early", not $xxx,xxx or sub 5M deals.

~~~
ErrantX
I know but the same principle stands, it's just a different scale :)

~~~
jacquesm
Not sure about that. When I see the word 'sale' and 'exit' together in one
sentence only to find out after a lot of digging that we're talking about a <
$50K deal its painting a bad situation as a win-win.

It means that a startup has basically failed, that there may be some
technology that can be recycled or that the founder has enough street creds
that they can convert their failed startup into a signing bonus and call it an
acquisition.

------
ikitat
He may make a good point, but I wouldn't know. I didn't get past the 8th
f-bomb.

~~~
gaius
Summary: Building a company and then selling it is a remarkable accomplishment
regardless, and it is wrong to criticize Mint for not holding out for more.

~~~
jhancock
good summary. Unfortunately, for Dave, noone would have paid any attention if
he had written something so short and clear it could be sent through twitter.

------
NewWorldOrder
Is someone disagreeing with a member of 37siganls really that surprising?
37signals is a pretty opinionated bunch.

At any rate, when Jason states in his post that he "doesn't know the full
backstory," that signaled to me that I'm reading a post that's based on a
premise that could be completely wrong. And I was okay with that because Jason
appropriately couched his post.

------
thenduks
Jason Fried may be prone to harsh and honest writing but this isn't even in
the same category. Honestly, take another look at 'The next generation bends
over'[1]. Here's a quote:

> _A big payday for sure, and if that was their two-year goal then they nailed
> it, but I can’t believe that was the point behind Mint. It had too much
> potential._

Ok, interesting. What does David have to say about that?

Actually, I wont post any quote from this article here because it's point is
diluted by rambling, poor grammer and unnecessary profanity. Now, I'm usually
the last person you'll see up in arms about swearing, afterall they're just
fucking words. But it turns out words are best used to help get your point
across not just for filling space (a lot of space, in this case).

Jason's article was short, succint, made a point and was pretty clear about
where he was coming from. You might not agree with it, and I might not agree
with it... that's fine. But we can read it and discuss, there's no reason to
fly off the handle and swear at the guy.

Seriously, why so offended? Jason didn't _say_ that Mint's sale was forced by
the VC's, he was merely using his guess that it was to make a point about the
current generation of startups... Namely the trend of aiming directly for the
sellout instead of 'greatness'.

His post _wasn't even about Mint_ , the news and his opinion of it just
prompted it.

On the other hand _this_ article is just plain vulgar, rude and doesn't add
anything useful to the conversation.

    
    
        [1] http://37signals.com/svn/posts/1927-the-next-generation-bends-over

------
nir
Remember when people in software were, in general, pretty thoughtful and self
effacing?

------
johnnybgoode
Neither of them seem to realize or explain why flipping has actually become so
common despite its questionable track record on actual value creation.

~~~
davemc500hats
actually, the latter 1/3 of my post was about exactly that point. sorry if you
missed it.

and while likely more than half of all acquisitions don't actually "work",
enough do to make it worth doing.

~~~
johnnybgoode
No, please read my comment again. The point is that your explanation is not
complete or correct.

------
LeChuck
On a side note (and totally off topic), the statues of two peeing guys are
really cool. You can find them in Prague in front of the Kafka museum.
<http://www.davidcerny.cz/EN/piss.html>

David Cerny is a very cool artist overall.
<http://en.wikipedia.org/wiki/David_Cerny>

------
cridal
I don't know about you, but "whining like a little bitch" warrants a punch in
the face where I come from...

He makes some valid points, but this could have been written in a couple of
paragraphs and without constant personal attacks. I'd like to see this guy
hold his own in a one-on-one confrontation...

Maybe this could be arranged?

------
minsight
I thought it was tremendously entertaining, if a bit earthy. Kind of a
financial Zed Shaw piece.

------
chaosprophet
Boy, that's one pissed off fellow.

------
CapitalistCartr
Wow, now that is an excellent sample essay. On how to NOT write one.

------
pavs
I like the way he reasons. Maybe the mint founder got scared of him and sold
it out.

1) Fucking Wrong, and Irresponsible Conjecture & Hyperbole

2) Completely Fucking Wrong, and in fact Exactly the Opposite trend is going
on, and finally

3) Wrong in most cases & crap advice for young entrepreneurs.

------
apexauk
did anyone else get the irony of "flipping is good" as the title to an post
full of alternative f-words..?

------
xanados
> Fact is, startups operate in a financial system that is inefficient,
> illiquid, and challenging to manage.

Well, that's certainly true...

> more transactions of any kind or size help improve overall startup ecosystem
> health.

While more transactions in theory improves market efficiency (throughout this
post, I will be using efficiency informally), in practice this fact doesn't
matter. In order for the number of transactions to have any meaningful impact
on the actual efficiency of the venture capital markets, the number of
transactions would have to increase by a lot, not by the occasional Mint.com
here and there. Take this as informed speculation, but I don't even think a
doubling of transactions would have a meaningful impact on the efficiency on
the market, because of the severe restraints regarding information and
transparency. To see how this plays out in practice, just imagine that you are
marketing your company for a round of financing. You may know the valuations
and terms of a handful of other investments (and none that are directly
comparable, in all likelihood) essentially from word of mouth or from the
experiences of advisors/banks/investors (who also don't have very good
information) and use those as a very rough benchmark, but in the end that
handful is not at all representative. Even if you double that handful, it
still isn't representative, at least, not enough to persuade anyone much more
of the correct value.

On the other hand, if companies were forced to make a regulatory filing that
included 1. current revenue, 2. details on the round of financing (valuation,
preferences, participation features, etc.), the effect would be much greater
market efficiency even if number transactions stayed at the same level. The
barriers are information-related rather than transaction-volume-related.

> In the long-run, it benefits all system participants for small transactions
> to occur, because it makes the overall market more knowledgeable -- this in
> turn, reduces risk and encourages greater investment... which also
> encourages greater (overall) returns.

Obviously you could argue this point either way (since there are a lot of
definitions to play with in the above paragraph), but in truth, a more
efficient, more liquid market doesn't benefit all system participants. It
would certainly benefit entrepreneurs if there were greater transparency and
efficiency, since they are definitely on the wrong side of information
barriers.

Greater market transparency tends to DECREASE investment returns in that
market, because it removes a source of risk (and risk and returns are
inversely related). It would probably encourage greater investment, but that
could be increased even more by other means, and given venture capital returns
over the last decade, it is not clear that this would be a net benefit for the
economy. Additionally, the more dollars invested, the worse returns will be
generally speaking (more dollars chasing fewer good ideas). But, he uses the
word overall, so maybe he means overall returns including returns to
entrepreneurs rather than capital sources, but that gets into even more murky
territory.

Just to be concrete, I'll give one example from another financial market.
Prior to 2001, stocks traded in the US were traded in fractions of a dollar.
The smallest quotation unit was 1/16, which means the smallest spread a
market-maker would quote was 6.25 cents. The spread is how these firms make
money. In exchange for always having shares available, they charge you (at
least) 6.25 cents more for the share than they are willing to buy it from you.
For decades, market-making was good business, but after decimal pricing was
implemented, these spreads became much smaller, due to competition. Now,
market-making activities are basically not a source of profit for financial
firms. A regulation that lead to greater liquidity in the market was very much
non beneficial to certain market participants, namely, market-makers (many of
these were large institutions that you could argue benefited from bigger
transaction volumes in other areas, but this is not always the case).

------
st3fan
This article would also be a good read without all the f-bombs.

------
yan
This is a lame attempt to fill the void left by Zed's old persona.

~~~
swombat
Dave McClure doesn't need to "fill the void left by Zed's old persona", he
already has his own place that he's quite comfortable in. See
<http://500hats.typepad.com/500blogs/about-dave-mcclure.html>

