While I was the Web 2.0 Expo last week I attended a session titled, Cashing Out: When, How and How Much?
It was a session I had eagerly anticipating due to the all-star panel: Mike Lazerow, Kevin P. Ryan and Lorien Gabel and moderated by Henry Blodget.
Leading off, Mike Lazerow pointed out that he’s never met an entrepreneur who regretted selling — and yet, he knows many, many who regret not selling.
Mike’s point came to be the underlying theme of the discussion: if you have the chance to sell (and you and your shareholders stand to gain) you better have a good reason not to do it.
Typically entrepreneurs overvalue the potential of their ideas by 4x, still in the heat-of-the-moment it can be difficult to rationalize giving away your baby.
Kevin, Michael and Lorien all agreed that of its your first company, selling needs to be looked at as an opportunity to build a track record.
Selling or at least taking some money off the table is nothing to be ashamed of. When the stress of fundraising and personal finances is behind you, it’s much easier to be focused on moving business forward. (Interesting in light of rumors of founders taking money off the table in secondary rounds).
Kevin Ryan shared some funny and poignant stories about the Double Click acquisition. While skiing in Aspen Kevin heard that DoubleClick’s market cap had increased nearly 100% for no apparent reason. At that point Kevin told himself one of two things was at play: either DoubleClick was severely undervalued (maybe it was worth $10-$15B?) or it was overvalued and selling or raising money should happen immediately. They raised $700M.
Situations like the infamous Zuckerberg turning down a $1M offer for Facebook (and it working out) are rare outliers.
Much more likely is the current situation of Yahoo’s Jerry Yang, reflecting on what could have been with Microsoft.
Finally, the panelists agreed that angel investment will not be deterred by the recent financial unnerving. Great angels continue to invest through down cycles and great entrepreneurs continue to build.