The acquisition of the social media-monitoring platform Radian6 by enterprise cloud computing company Salesforce for $326 million made headlines recently as a major win for the Canadian venture capital and startup community.
Radian6 is a prime example of how a startup can be successful by establishing itself as a leader in a relatively unknown and risky space. Social media monitoring platforms are still far from perfect and were in their infancy when Radian6 entered the market. The huge acquisition also supports the argument that entrepreneurs should build their companies to sell, even if they haven’t the slightest ambition to do so.
Allow me to elaborate.
Building a company to sell means developing a product or service that lasts. It requires risk, a brilliant business model, strong team and scalable idea.
The entrepreneur must have a long-term mentality and consistently bring to the table those core characteristics that are crucial to building a successful company: passion, ambition, leadership, adaptability and coachability. Focusing on a long-term business strategy compels the entrepreneur to look in the mirror and ask that pivotal question: Am I willing to sweat blood and stick through the daily grind to carry this company to the edge of possibility?
I am not arguing that built-to-flip and lean startups are inferior. In fact, the goal of these companies is to create a promising product to sell and therefore requires the same long-term thinking to convince buyers of its value and scalability. The factors that make a business attractive to potential acquirers are the same ones that make a business successful to begin with.
I am arguing that all entrepreneurs must build their companies with the purpose of creating something that is groundbreaking, globally valuable and scalable. As Anthony Lee, general partner at Altos Ventures and co-founder of the C100 told us in a previous post, while building a globally competitive company may not be the right objective for everyone, a venture will only succeed if its founders have a vision that stretches the boundaries of what they know and challenge what they believe is attainable.
Building companies to last does more than just benefit the company directly, it benefits the startup community at large. I can’t go a day without reading a post that argues that we are in another tech bubble because too many startups are building flawed and unsustainable products and services.
Former CEO of AOL and entrepreneur Steve Case defended the argument that entrepreneurs should build their companies to last at his Leader lecture at Stanford University. According to Case:
“[Entrepreneurs] are taking little risk with more of a “build-to-flip” mentality as opposed to a “build-to-last,” “change-the-world” mentality, which troubles me a bit. The barriers to entry have come down. Now, anybody can create a website. But as a result, there is significant competition … and there are relatively small amounts of money going into these companies.”
What does this mean for bringing technology to market?
Entrepreneurs should build companies that last to improve the market into which they may, one day, sell. As a result of Radian6’s success as an independent company, Salesforce was determined to enter the social media monitoring market, which triggered further investments in this area. For example, Salesforce has already invested in Seesmic and Hubspot. Instead of diluting your market with transient products and services, why not build your company over the long-haul and support your market at the same time? Maybe, if you wait long enough, a multimillion-dollar offer will come knocking at your door.
Photo: Oracle ThinkQuest