While I was the Web 2.0 Expo last week I attended a session titled, “Cashing Out: When, How and How Much?” It was one that I had been anticipating based on the all-star panel and it did not disappoint! Mike Lazerow, Kevin P. Ryan and Lorien Gabel shared some great insight and personal anecdotes on their approaches to selling businesses.
The session started off with the moderator, Henry Blodget, cracking a joke about the topic in light of the financial crisis headlines pouring in.
The audience was light on laughter.
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 it’s 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.
I appreciated that Mike stated running his company is the “third most important thing in his life” – with his family and himself being one and two respectively.
Kevin Ryan shared some funny and poignant stories about the Double Click sale. While skiing in Aspen Kevin said he 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 are the rare exception. Much more likely is the current situation of Jerry Yang, reflecting on what could have been with Microsoft. When offered a 60% market premium on any company at any point, it’s tough to turn down. This Yahoo/Microsoft conversation likely fueled a follow-up article by Henry reflecting on the failure of Yang’s decision on Alley Insider.
Finally, the panelists agreed that angel investment will not be deterred by the recent financial unnerving. Said someone, is it really that risky when you consider what’s happening on Wall Street?
