Yesterday at Web 2.0 Expo one of the main keynote sessions was the “Built to Last” Panel which consisted of John Battelle asking various questions to a few entrepreneurs who have built companies that have sold or were worth selling. The participants in the session:
John Battelle – FM Publishing (moderator)
Mena Trott – Six Apart
Jay Adelson – Digg
Joe Kraus – Jotspot/Google
The following is a paraphrasing of the conversation, so don’t quote me on it.
John: Joe and I play poker, he’s going to Las Vegas this weekend. Joe founded Excite and rode it through the boom and bust, and then founded Jotspot and sold that to Google recently. Mena and Six Apart came to a point to decide whether it was built to last, or built to sell. And Jay, Digg was on the cover of Businessweek, acquirers came calling, but it didn’t happen.
John: What does built to last mean to all of you?
Joe: Entrepreneurs have to decide between success and control. It can really focus where you go. Are you building a company for the long term, or just a product to sell to another company? Funding is another question. If you’re built to sell, you actually want to take less money. The more money you take the harder it is to sell at a good return.
Mena – All those things Joe said have entered our minds. Control was something I was willing to give up because I knew I couldn’t get the company to the point I wanted without help. We’ve always felt we had control over the years, although we’ve given up a lot of control to others with titles and such.
Jay – Digg was something that was born of a passion with a specific goal. A lot of the ideas you come along are components of business models. We clearly went at it with profitability in mind. Digg’s experience has always been that focus. Although even if you do get to profit, aren’t you a better target in the long run?
John: I should disclose that my company FM represents Digg, Six Apart, and we all partner with Google. We couldn’t find a panel that fit this subject where that wasn’t the case.
John: How much pressure is there to sell? When you want to focus on building a profitable business, are there are a lot of pressures from employees and others to sell?
Joe: With Jotspot I felt like I had convinced 28 people to leave their jobs and opportunities to follow me. So there was pressure to me to get these people a good return on their time and efforts. From the VC point of view, most of the VCs don’t want to sell. The entrepreneur has 100% of their equity in one company, but for a VC you’re just a part of their portfolio. They expect most companies to fail and make their money from the big successes. So selling early on the VCs don’t want to sell because they don’t want make 5x, they want to make 100x. The entrepreneur wants to sell to make sure their 100% equity gets positive, so there is tension there.
John: Mena, selling for 50M is rare air, selling for 100M is even rarer air, and selling for YouTube money is even more rare. Do you feel a pressure or distraction?
Mena: I guess a little distraction, but we’ve been around for 6-7 years, and it’s a different acquisition market all the time. We don’t think about being the next YouTube, we think about achieving our company goals. We have 140 people, it’s not something easy to sell. We care about all those people so it’s complicated. It doesn’t interfere to our day to day work.
John: There was a period of distraction last fall right Jay?
Jay: Sure, with Digg last fall the buzz really hit. The Businessweek cover created a lot of calls, big media companies wanted to sniff around. They say they want to overpay, but you don’t know. We came up with a policy that we were going to execute, but the crazy numbers started to pop up and you start to think that you can give them a day or two to discuss it with us. That ends up taking a lot of time. It becomes a real distraction, and you have to bring everyone back to reality about this is who you are, and unless you really think that the acquiring company is going to execute it better than you are, we have to keep executing.
John: Do you guys have a perfect company in mind to acquire you?
Joe: With Google it was the right one because it’s a nerd paradise and I’m a nerd who had 28 other nerds working with him. Entrepreneurs are optimists, and so there are a lot of optimists in Silicon Valley. But Google was just really the right one at the right time for us. I think when I was operating I didn’t think about who the perfect partner would be. I knew what return we needed to hit for our investors and partners so there are companies that can hit that range.
Mena: I can tell you I have a list of who I wouldn’t want to be acquired by. Not so much on who I’d like.
Jay: You have to forget about the YouTube thing, and just focus on reality and what you can do.
Mena: There is a lot of pressure from family. We get newspaper clippings from our family asking when the big deal is going to happen to us?
Jay: It also really matters who you’re working with and owned by. If Digg was owned by the wrong company, it would really put into question the fairness in our algorithm.
Mena: Yes, we have the ability to partner with anyone as an independent company which makes our product better.
John: Is the Web 2.0 golden era over? Do you have to build bigger companies now to succeed?
Mena: We have a bunch of people because we have four product units which really spreads you out. I don’t know if the golden era is over, but we can’t really go back.
John: How many open jobs do you have at Digg?
Jay: Probably about 10, which will get us to 35. I’ve often been wrong about what it takes to get stuff done. I can see so many different things we can do, focusing on other categories, going international with news, etc.
John: When you joined Google did the number of employees on your project change?
Joe: It didn’t change, our non-engineers went to sales and marketing, and our core engineering group stayed together.
John: What are you going to do there?
Joe: Avoids question….Google has a lot going in the in the Web office space and that Jotspot fits into those goals.
