Entrepreneurs Can Change The World

The growing frenzy of IPOs and billion-dollar acquisitions are no doubt feeding the dreams of every entrepreneur who believes their idea is "the next Facebook." But in dreaming big, are entrepreneurs overlooking the benefits of staying small and selling quick?


The very idea runs counter to the Silicon Valley mystique, where founders believe they have the power to change the world with the right idea.

But on Tuesday, I moderated a panel at the annual Launch: Silicon Valley conference held at the Microsoft campus in Mountain View. It posed the question: "Should startups sell quick or grow big?" Sponsored by the Silicon Valley Association of Startup Entrepreneurs, the event brought together more than 300 entrepreneurs and venture capitalists.

To my surprise, the three panelists made a strong case that the small-quick scenario has a lot going for it.

For one thing, companies such as Google (GOOG) with billions of dollars in the bank are buying everything from startups to private companies with serious momentum, just to get their hands on the talent. And by selling early, founders have more control on that decision and would be in line to keep more of the financial rewards.

Thinking small can be hard for entrepreneurs,who are often told they should be thinking big and looking to address the largest possible markets. And yet, the number of companies that are ever going to reach the size of Facebook or Google or Zynga is a relatively small drop in the startup ocean.

It would seem almost like a mark of shame by some to be starting a company to get in and get out fast. But that's not so, according to Michael Cerda, vice president of technology at MySpace and one of the panelists.

Cerda, a serial entrepreneur, sold his latest company, social-messaging service Threadbox, to MySpace last year for an undisclosed sum. Even as entrepreneurs see more startup valuations reach into the billions of dollars, Cerda said that selling a young company for a couple of million dollars when founders control most of the shares can still be a life-changing financial experience.

"It also means you're not lying awake all night wondering where the next round of funding is coming from," Cerda said.

 Panelist Dan Levin, chief operating officer of Box.net, a cloud-based storage service for small businesses, told the audience that in 20 years working in startups, he had sold two companies and missed an opportunity to sell a third. At the moment, he said, Box is aimed at growing big.

That said, if he weren't working at Box, Levin said, he'd look at product niches that big companies need filled, which would allow him to build something fast and position it for sale to one of the tech giants. Even if your idea succeeds at first, an entrepreneur faces huge challenges sustaining a company past the initial stage and can spend years slugging it out against competitors and unexpected challenges such as an economic downturn.

The venture capitalist on the panel, Glen Solomon of GGV Capital, has had plenty of recent home runs. Three of his companies at GGV have gone public and a fourth, Pandora, has filed to go public. Like any VC, Solomon said he's looking to invest in companies that have the potential to address huge markets and promise large returns on his investment.

Still, he advised the entrepreneurs to keep that motivation of investors in mind when they raise venture capital. With each round they raise, with each new investor they bring on, they face higher and higher expectations. They have to set aside ego and dreams sometimes to make sure they can really deliver on that promise.

Don't want to shoulder that pressure? Then startups shouldn't be afraid to ignore the valley's typical measures of success and embrace the notion of thinking small.