Entrepreneurship is High Risk, Deserves High Reward

by Krishna on May 9, 2011

Via Jason Cohen, I landed upon this article by Jason Fried about the sale of Mint to Intuit:

We need new blood, new companies, new methods, new ideas, new applications, and new leaders to regenerate stale industries. The old must be plowed under by the new. But today it seems like the old is doing the plowing. Let’s stop that. Let’s build great companies that are here to fight, here to win, and here to stay until the next generation after us comes along

Also from an interview of David Hansson:

I get annoyed at the destruction of wealth, the creative inefficiencies. But it’s also deeper than that. It’s the corruption of youth. These “swing for the fences” kind of deals and companies have this intense spotlight on them. And it is brainwashing the next generation of starters to think that this is the way to go. That this is how you’re going to make it in startup land. And I think that’s absolutely horrible.

For 37Signals, the only route to success is to spend your spare time developing some project for yourself, try seeing if you get any paying customers and then build upon the momentum by keeping the existing customers and adding new ones. They frown upon getting venture capital or selling out.

For what it is worth, I think this is not particularly good advice. While you always have a loyalty to your product, one reason why you choose to run a company instead of just open-sourcing your product is because you want to benefit financially from the product. And if someone is willing to pay a bunch of money for your trouble, you should take it.

The idea that you need to stick with your product and not sell out at any cost assumes many things that may or may not be true:

  1. You are as good at running a company as you are at building a product.
  2. You can continue to run the company well even as it grows to several people, i.e., you have the right management skills.
  3. You can continue to build the product correctly even as it grows larger and accommodates the needs of thousands of users.
  4. Your customer base growth continues its momentum.
  5. Your prices and profits are not eroded by competition.

I am not saying that you should sell out at the first opportunity you get. But it is important to understand that there are many things outside your control and you always need a Plan B if your Plan A is to keep building the product as long as possible. You also need to realize that as time progresses, you will need the capability to grow in many aspects and gain new skills. Sometimes that may not be your forte and you should quit while you are ahead.

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