Why I sold my startup, Sparkbuy, to Google
Shortly after the sale closed, John Cook interviewed me about the experience.  He did a great job of transcribing all of my verbal gems, like “Maybe that is an economic way of looking at it, or something that I am unfamiliar with.” I’m not even sure what that means.
It was the best I could muster in the middle of a crazy, exciting, wild time. But looking back, I realize that there’s an important question there and I didn’t do it justice.  Selling a company can be a very lonely decision, so I want to revisit John’s question and share my thinking with others who might be making the call.
It was a great deal for the shareholders
Most VCs don’t care how long your company takes to show a return – they don’t get to re-invest proceeds of their deals, so if you exit early, the money sits in a bank account earning interest for years instead of contributing to their returns. Since my investors were angels, they would look at the exit on a time-adjusted return basis. Or put simply, if I could give them back their capital plus a great return in just six months, that could be a terrific outcome.
It was our #1 choice of acquirer
Most startups are acquired. Actually, most startups fail – but of those that are successful, most are acquired. Given that an acquisition was, one way or another, the most likely outcome for Sparkbuy, I compared Google to a list of about a dozen other potential acquirers. They were at the top of my list. If was going to go to work for The Man, I was more excited about The Man being Google than anyone else. The employees (both of them!) felt similarly. Even the investors appreciated the bragging rights of having a portfolio company sell to Google.
Further, the people who I would be working with were amazing. Scott Silver has always been one of my engineering leadership idols. After trying to recruit Phil Bogle to Ontela I knew I wanted to find a way to work with him. While I’ve never been excited about having a boss again, Nick Fox was someone I actually knew I’d enjoy working with and learning from.
I was excited about pursuing the Sparkbuy vision at “Google-scale”
The Sparkbuy product was launched out of a personal frustration with consumer electronics shopping, but the problem is much broader. It’s just hard to find reliable, accurate, unbiased, quantitative information about products. Search engines favor old prose over fresh data. Sparkbuy was about helping consumers make better decisions.
The team I’m working on now is taking that opportunity to the next level. With business development resources, the Google brand, Fortune-100 budgets, and an appetite for giant risks, we can tackle problems at a broader scale than ever before – making consumer purchasing easier, better informed, safer, and faster.
Working a real job sounded like a good idea for a while
After eight years at startups, the idea of pulling a steady paycheck for a few years was seductive. Some personal events, while ultimately amounting to nothing, made me feel like having great health insurance wasn’t a bad idea either. (Soapbox sidebar: health insurance reform is key to promoting entrepreneurialism and small businesses in this country!) I loved the idea of keeping a more regular schedule, and spending a bit more time with my family.
The money was life-changing
While I’m not in the position of my good friend Rand, who’s gone on the record saying that his life savings is $25,000, I was not previously wealthy. The Ontela/Photobucket merger was a spectacular deal for all parties involved, and I didn’t take any cash of the table – I’m still 100% invested in Photobucket. 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. It also meant that, overnight, I can pay some karma forward and start investing in startups that I’m excited about (more on that soon).
I get to swing for the fences
Some people are wired for the “billion dollars is cool” kind of risk that folks love to write articles about. I wasn’t, at least not until I figured out the aforementioned three problems. At least I was in good company, though – my new great-grand-boss, Larry, famously tried to sell Google for $1mm and failed.
But this lets me play the Shawn Parker game without regrets. When I start my next company, I can swing for the fences. Or self-fund it and do something that I love, without worrying about maximizing shareholder value. Which brings us to…
The company was in a great position to raise money, but I didn’t want to
As the CEO of a startup, I’m dedicated to pursuing value for the investors who’ve extended me their trust. One of the primary inputs to my decision making is how best to create value for shareholders over the life of the company – it’s not the only consideration in decision making, but it’s a big one.
One of the reasons I founded Sparkbuy was that I was excited to try a different way of building a company. While I was at the helm of Ontela (now Photobucket), we raised over $30mm. That’s a ridiculous amount of money. We had a lot of fun and accomplished some amazing things along the way. I worked with a team of fantastic people and was never happier than when I was going in to work to spend time with them. If I had it to do over, I’d do it the same.
But I find there’s two type of people in the world – those who like refining one thing over and over and getting really good at it, and those who like trying new things. You can guess which category I fall in to. I wanted to try something different – a smaller raise ($1mm), angels instead of large VCs, and growing organically based on revenue. That’s what I did with Sparkbuy, and it was a good decision when I made it.
But markets continued to heat up to a fiery glow. The valuation of comparables in our space was shooting through the roof. Competitors were raising rounds in the double-digit millions. It was becoming increasingly clear to me that the best strategic decision for the company was to raise a large financing round at a lofty valuation and grow like crazy – but I wasn’t particularly excited about doing that. In other words, what I thought was best for the company wasn’t what I, selfishly, wanted to do.
If I hadn’t sold, I would have raised money, and I didn’t really want to do that.
It was time to spin up a B2B strategy
Much as Sparkbuy’s direct-to-consumer website was winning rave reviews from users, there was new and substantial interest was on the part of other companies. We were getting offers to do long-term deals with Fortune 500 companies that would generate huge revenues over a period of years. Of course, pursuing those would have required raising a bunch more money. Once again, this was what I did at Ontela; and once again, while it was fun, I wasn’t excited about pivoting Sparkbuy in that direction.
The biggest risk was still ahead of us
The bigggest challenge for any consumer startup is how to profitably acquire customers. We knew from the start that this was the largest risk factor for Sparkbuy, and with the launch of our beta (a month before the sale), we were just starting to dig in to this problem. I had a list a mile long of initiatives to drive profitable growth, but in the end all you can do is experiment and iterate, and it can take a long time to find the magic. Our value as a company wouldn’t hit a new inflection point until we solved this problem, and it was a long ways off.
To sum it all up
Some of my investors were overjoyed. Some of them were sad that Sparkbuy would never grow in to its own. I’ve been called a sellout, and people have told me that I epitomize what’s wrong with entrepreneurs outside the valley.
It’s all cool.
I don’t claim my decisions are right for any other company, or anyone else. This was not the hardest decision I’ve ever made. It wasn’t even in the top 10. There were a lot of moving parts, but at the end, it was simple. Google hit my “life changing” number, provided a great return for my investors, gave me and my coworkers terrific jobs, and made it all happen six months from the day we were incorporated. I’ll have other companies some day, and I’ll play them differently. Your decision, should you be called on to make it, may be quite different – but I hope it leaves you feeling as lucky as mine has!
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