Nivi · October 17th, 2007
Q: Should I sell my company or raise capital and go for it?
Sell if it dramatically changes the lives of the founders and the early team. Every dollar after your “fuck you money” is icing—get your financial independence first and make the icing at your next company. You can also use an earn-out at the acquirer to capture some of the potential upside of raising money.
If you raise capital, you risk your current value for a chance to capture your future value. Is there a difference between capturing future value at your current company and your next company? You can create future value at your next company after you’ve captured your current value and done your time at the acquirer.
Also consider selling if you are at a local maximum, e.g. your company or market is going sideways and the company will be worth less before it is worth more. Of course, smart buyers will wonder if they should be buying when insiders are selling.
One alternative to an acquisition is to cash-out some of the founder’s shares so they’re wealthy enough to feel comfortable with the risk of building a bigger business. I’m guessing the Facebook founders have been cashed-out to some degree.
Q: What does it take to be a successful entrepreneur?
Successful entrepreneurs delight their customers, execute relentlessly, and enjoy lots of luck. You recognize great entrepreneurs when you see them (like porn) and you get better at recognizing them every day.
Q: What does it take to be a successful investor?
To be an investor, you need access to capital. There is no IQ test.
To be a successful investor, you also need great dealflow, good judgement in picking companies, and, in competitive markets, the competitive advantage to win deals.
Note: These excellent questions are adapted from Ashkan Karbasfrooshans’s Venture Hacks interview.
Image Source: Richard Seaman.