Home As Startups Grow Up, More Seem to Hold Their Ground

As Startups Grow Up, More Seem to Hold Their Ground

I’ve learned a lot about startup culture since I started writing about it at the beginning of January, and there is a trend that I have noticed that is different from the stereotypical outsider’s point-of-view – one that I had not too long ago. There seems to be a growing number of companies that are holding off from either being bought out or going public because they are more vested in the interests of their company or their idea than they are about having a big payday.

IPOs have fallen off a cliff in recent years, and it seems like each month we hear about who is potentially looking to buy Twitter or Yelp. Facebook is huge, and makes a good amount of money, but it is still a venture backed company with no IPO. Over the weekend, Spark Capital investor Bijan Sabet published a blog post that reaffirmed my theory that more companies are perfectly content with raising round after round of funding. And when they do allow themselves to be bought, Sabet says that startups are getting a lot pickier with who they will sell to.

“Recently I heard about a startup that turned down a higher offer from one company in favor of a lower offer from a different buyer,” writes Sabet. “It’s not enough to wave a huge checkbook around. That isn’t sufficient for the best startups. Big companies need to show startups how they will fit into the bigger picture, give the startup employees challenging & important positions, demonstrate why the combination will be in everyone’s interest.”

Startups and entrepreneurs are maturing. Quickly launching an innovative idea in hopes of being snatched up by Google in order to sit on the beach and sip mai tais until the cows come home is fading – if not already erased – from the “get-rich-quick” stereotype. Entrepreneurs these days are more genuinely passionate and attached to their companies (or their “babies”) and want to see the product succeed more than they want to benefit financially from it.

It is this passion that has morphed into a stronger sense of self for startups; they are more confident with their positions and are not afraid to turn down a multi-million dollar buyout if the terms don’t look good to them. For many entrepreneurs, a big payday is certainly a goal, and Paul Graham even recently defined success as “the founders end up rich,” but more seem to be holding out and holding on to their companies.

It wouldn’t surprise me to learn that venture capitalists are getting better at identifying the truly passionate entrepreneurs from the ones looking to turn a pretty penny from whatever idea gets the job done. This concurs with the general consensus from a roundup of VC pitch advice last week: you are pitching yourselves just as much if not more than you are your idea. VCs are more interested in investing their money with passionate entrepreneurs than a fantastic idea because, after all, a great idea in the wrong hands can fail spectacularly.

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