Y Combinator founder Paul Graham has penned another one of his essays, this time tackling not one but two issues in it. The first is why the best Internet companies are not sold (think eBay, Google, Facebook). Paul's argument is simple; they would have sold but nobody offered them a price they were willing to accept so they just kept on going:
Google's founders were willing to sell early on. They just wanted more than acquirers were willing to pay.
It was the same with Facebook. They would have sold, but Yahoo blew it by offering too little.
Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain.
Then he goes on to to talk about VCs, something I know a little bit about myself. He says that the popular view of VCs as bold risk takers is wrong:
The most surprising thing I've learned is how conservative they are. VC firms present an image of boldly encouraging innovation. Only a handful actually do, and even they are more conservative in reality than you'd guess from reading their sites.
Paul sent me and several others a draft of this essay before publishing it. He asked if he was "wrong" about anything he said in it. I think not. People will always want to debate controversial statements like the ones Paul makes in this essay. But the basic point that Paul is making is that big value creation comes in funny places and many of the people who want that value (VCs and big companies) are slow to see it and take advantage of it. And that is true and always has been and always will be.
My partner Albert has a different take on Paul's essay and posted his thoughts on his blog this morning.