Why Selling Your Start-Up to Google is Better Than Raising More Cash
The trend among many technology entrepreneurs right now is to go big — and whatever you do, don’t sell out before you absolutely have to.
Perhaps the wave of enthusiasm was only magnified when Groupon turned down Google’s $6 billion offer.
And, maybe the decision was justified, since the Chicago-based company is now seeking $750 million in a blockbuster IPO that will value the company at billions.
But in contrast, Dan Shapiro offers a reason to sell out.
Seattle-based Sparkbuy, which was aspiring to be the Kayak of consumer electronics, was acquired by Google in May for an undisclosed sum. The company launched in March, offering consumers a way to sift through thousands of laptops and tablets to find the device that best suits their needs.
In a blog post, he explains his decision to sell his six-month-old start-up to Google after raising only $1 million in funding. He said he chose safety and security over raising more cash and grinding it out for months or years more.
Some of his decisions were pretty straightforward.
For instance, he said that Google was his number one choice as a potential acquirer. Likewise, he was really excited about pursuing Sparkbuy at “Google-scale.”
But many of the decisions were emotional, and frankly, lots came down to money. While the terms of the deal were not disclosed, he calls the money “life-changing.”
“After eight years at startups, the idea of pulling a steady paycheck for a few years was seductive,” writes the father of twin toddlers. “That means the Google sale accomplished three lifelong goals for me: allowing me to set aside enough to pay for my twin toddlers’ college educations, funding my wife and my retirement account, and giving us a financial cushion that means I’ll never have to work at a job I don’t love.”
Although he sold his last company, Ontela, to Photobucket, he said he didn’t take any cash off the table.
Finally, he explains in the post, that while he was in a position to raise more capital, he didn’t want to. At Ontela, he raised $30 million, or what he called a “ridiculous amount of money.” This time he wanted to do things differently and grow organically. But that was getting increasingly difficult since Sparkbuy’s competitors were raising rounds of cash in the double digits.
“If I hadn’t sold, I would have raised money, and I didn’t really want to do that.”
In the end, he believes he made the right move – it doesn’t even rank in his top 10 for hardest decisions he’s made in his life. Still, a lot of people don’t agree with it.
“I’ve been called a sellout,” he said, “And people have told me that I epitomize what’s wrong with entrepreneurs outside the valley.”