Humor me, there’s an admittedly long prelude before I get to the main point of this entry, but I think it’s important to provide a context.
I owe a debt of gratitude to (in no order whatsoever):
a) all of the readers and commentors of this blog.t
b) all of the folks who email me with nice and not-so-nice words.
c) my colleagues who work hard when I am blogging away.
d) all of the popular and not-so-popular bloggers and writers who link to the blog.
There’s too many to thank, frankly, but the person I want to give a shout out to before making my point about “The Entrepreneur’s [Real] Dilemma” is The Street’s James Altucher.
Before I do, assuming y’all care, another important “famous writer” to thank (who happens to be a more famous VC, mind you) is Fred Wilson who was one of the first ones to feature some of the earlier writings and in some way, I guess, offer good old fashion positive reinforcement as to what struck a chord in the blogosphere.
Having written two books, I can tell you: yes, we write for ourselves, but, we’d be lying if we said we only write for ourselves.
While we’re on the topic, another big name blogger, writer, journalist who influenced me is none other than Rafat Ali, whose success showed me that some risks are simply worth taking. He’s also the best journalist in the space if for no other reason that he seems to be relentless. Anyway, not to make this sound like a knock, but Rafat is also unique cause he inadvertantly drove me (the entrepreneur, not the blogger) to build a company without financing when he basically told me that he’d “mention our company when we got financing.”
Mind you, I’m not sure if I should be picking on a bloke like Ali in a public setting, but in all fairness, this is a compliment to Ali’s (and his site and staff, frankly) influence in online media. All to say, it was somewhat ironic and offensive for (of all people) Rafat to consider that financing was the cut-off mark to getting a mention on his well-read blog, but given my personality, it only drove me to charge faster ahead.
It was ironic, I guess, because Ali did quite a bit before ever raising a dime.
It was offensive (not to me, rather to my team), cause the truth was that I was in fact serving as both an angel investor and founder. No way could we have built a search engine that competes in relevance with the big boys, the largest contest aggregator online, a blog network, one of the largest producers of online video without a team and money.
Money is cheap, or so they say; building a team and recruiting a team takes time and money. I could afford the time thanks to my savings and proceeds of the sale of my old employer (where I had a tiny speck of ownership) to News Corp. Point is: it took money to build this company, and it took time. Just because some VC in the valley had not signed on the dotted line should not have been a knock. (If that was an excuse as to not write about our company, then an excuse was not necessary.) Point is…
Alas, people have a funny way of influencing you, for good and bad, with what they say/do and not say/do. The point is: what are you gonna do about it? Bitch? Complain? Or, show the world. I choose the latter.
But, by the time that I thought to convince Rafat of that nuance, I thought I’d be better served actually building a company. Like I say: for every 1 hour you spend on corporate development, spend 5 on sales and business development. PR, while not quite corporate development, sits at the same level in terms of priority vis a vis sales and business development, in my humble opinion.
Anyway, getting to James Altucher (finally… man, do all freakin’ roads lead to Rome? Not sure when I’m writing…), James is also one of the many “big name” writers who featured my posts - be it my post on Wikipedia’s potential value as a for-profit company, or YouTube’s potential revenues - on his popular TheStreet.com post.
[A forth person, or people, is Mick Weinstein and the folks at SeekingAlpha.com, who feature my articles regularly now… but like I said, the list is way too long and I’d like to finish this post before 2008 rolls by…]
I wrote James to say thanks when he featured my blog. I began to read his articles a bit more. I read that he was actually a lot more than a writer (not that being a writer alone is not enough, of course):
James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and Trade Like Warren Buffett.
Over time, I found out about this stock recommendation site Stockpickr, which is basically:
Stockpickr, located at www.stockpickr.com, will be the first Web site to combine social networking with stock investment ideas. The site will allow its members to compare their portfolios to others in the network, scan portfolios for investment ideas and open a dialogue with like-minded investors in a secure environment.
Some of the Stockpickr features are:
- The Stockpickr Recommendations Engine: an algorithm that generates stock ideas based on the correlations between an individual’s portfolio and those of major hedge funds and mutual funds, as well as other members of the site.
- Browsing Professional & Peer Portfolios: a continuously expanded and updated database of the recent holdings of top Mutual and Hedge Funds that can be browsed by stock, portfolio or user.
- Spotlight Portfolios: a daily collection of topical portfolios such as “The 9% Yield Club,” “Top-ranked ETFs,” and “Black Friday Stocks.”
- Today’s Lists: daily updated lists of the biggest winners and losers, the latest activist situations, analyst downgrades, short squeezes, inexpensive low-priced stocks, and many other portfolios. The lists are presented in the Stockpickr format so readers can follow trends and see how other investors are playing them.
- The Stockpickr Blog: regular updates on new investment ideas and site improvements.
- Active Trader: regularly updated professional-quality trading systems such as “The QQQQ Sweet Spot,” “The Christmas System,” “Mean Reversion System,” and others.
Anyway, according to the press release, which I came across on - surprise, surprise - Rafat Ali’s PaidContent.org, Altucher’s A.R. Media retains 50.1% (not even 51%?) while TheStreet.com buys 49.9%.
Allow me to say that I have no clue what the relationship is between Altucher and TheStreet,com (ie. if he is a writer only or a salaried staff who is a writer), but given that he runs a fund and is CEO of Stockpickr.com, I’ll assume that he’s the former, not the latter. All to say, I’m speculating. We’ll let Rafat investigate the details (we’re kidding… of course).
Said TheStreet.com: “We have had a long relationship with fund manager and writer, James Altucher, who is also the co-founder of A.R. Media, and we look forward to expanding that relationship, creating new ways to generate content and additional traffic for our network of sites. Continuing to deliver our readers superior resources, such as Stockpicker’s investment idea-generating tools in collaboration with TheStreet.com’s editorial content, helps us maintain our position as a top financial/investing destination on the Internet.”
Altucher, too, had nothing but great things to say about the other party: “With Stockpickr we initially started off creating a tool that we could use to generate trading ideas from browsing the portfolios of the top hedge funds and investors,” said James Altucher, who also serves as the CEO of Stockpickr.
“However, it turned out to be even a stronger platform for investing knowledge once we opened it up to a community of active investors. With the addition of TheStreet.com user base, Stockpickr will be the number one community site for exchanging stock ideas and investment knowledge.”
And therein lies the entrepreneur’s real dilemma:
1- to boostrap and reach profitablility independently.
2- to raise money - and money alone - and try to build a company, headcount, brand, etc.
3- to seek a strategic investment by a larger company and tap their resources.
4- to outright sell.
Clearly, there’s no best scenario. As this and other cases show, option 1 is hard as hell, but you retain control and avoid a lot of potential issues down the road. Having been a member of a company whose founder did this initially, I see pros and cons to this option. I’ll write a more detailed post at some point outlining the pros and cons.
Option 2 works but it all depends on whether or not you can find a right angel investor or venture capital. I won’t lie: I have not really spent much time considering all of the options, having served as the angel investor and bootstrapped, I am operating under option 1, but realize at some point, option 2 might make sense. I’ve yet to plan properly and assess who the right investor (s) might be, but my formey company’s founders took this option. I think it worked for us, but the investor was very hands off. Likewise, I’ll write more about this later on.
Option 3 is what my old company eventually sought to do, after having done option 2 early on. They felt that instead of rolling up the sleeves and going in alone in the hope of eventually cashing out for more, they sold outright to become a part of a larger media company. Was it a bad move? No. Was it the best move? No. But this boils down to lifestyle as much as it does to business. James Altucher seems to have picked this option, as outlined in his recent post, but unlike my erstwhile colleagues, he “only sold 49.9%” of his company. He gives up a lot of control and financial upside, but he’ll have a lot more hair in a few years. Not that Alexa is the best source, but judging by the Alexa chart, one can tell that building a startup alone is no easy feat:
It’s easy to make some noise and get people to stop and look, but getting them to stick around ain’t easy at all. We’ve been lucky, fortunate, [insert any voodoo inducing adjective here, PLEASE] at our company, but don’t let the graph fool you, building a startup is hard.
Option 4 is the option that some start businesses for: the lucrative exit. Of course, an exit is truly lucrative if and only if Options 1 through 3 are considered properly. The long story short is that these are the real options and dilemmas that entrepreneurs face these days.
Old media has a lot of money and is slow at rolling out new services, features and properties.
Old, new media (Google, Yahoo! etc.) have even more money sitting around and do not want to let a new player become a MySpace (large enough to pose a threat, then sell to an old media company and become a threat), so they’ll gladly buy them out sooner than later.
Without getting into the details, this is precisely the kind of dilemma yours truly now faces. It’s a good problem to have, I suppose. A wise man would always tell me that the devil was in the details, indeed it is, indeed it is.
We’ll keep you posted and follow up with the pros and cons of each option.
We wish the man who just made his bed some good luck. James, having tried to succeed in a large media company, we can tell you you will need it.
In the meantime, check out Stockpickr here.
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