There was a great spitting contest a few weeks ago that I greatly enjoyed. It went something like this: a company named Mint, a web-based personal financial manager a la Quicken, was purchased by Intuit for $170 million. Jason Fried, a well-known bootstrap proponent who runs 37 Signals, said that it’s too bad that the investors would force Mint to sell as here was a chance for a lasting brand. A few people then shot back calling Jason bad names and saying there was no way the investors forced Mint to sell, which is true (straight from the mouth of one of the lead investors). (read here and then here)
The reality is the founder is young (under 30) and saw a chance to cash out and wanted to do it. The investors had no choice but to back him up, even though they saw much greater returns if the company waited into the future.
Tough problem, of course, for the entrepreneur. A chance to live a life without worrying about cash! (My assumption on his feelings.)
And that’s why, as has been suggested in the past, it’s time for a national exchange outside of the stock market. We need middle ground between private and public companies, a market where only qualified investors can participate, meaning that you’d have to be in an asset class to participate in angel and VC rounds of funding.
This would have allowed the Mint founder (or the investors) to pull some value out of the investment and allow a company a chance to be the enduring brand it might be destined to be.
That’s basically what the Vancouver Stock Exchange used to be. It’s hard to keep something like that from turning into a cesspool of fraud and deception, unfortunately.
The way you keep it from becoming a cesspool is by requiring high audit and accounting standards, but the cost overhead of those standards keeps small companies from listing.