Take the Money
The legendary Bill Campbell was my boss at Intuit. He was also confessor to Steve Jobs and on Apple's board, consigliere at Google, and mentor to countless tech leaders. Bill got his start as a college football coach and is still known throughout Silicon Valley as the Coach. He's a man of few words--often of the colorful, locker-room variety--but intense loyalty to his teams.
He was on the board of one of Marc Andreessen's companies when the board members were considering taking money from a new investor. The debate raged on: Was the valuation high enough? Would the deal dilute the founders' ownership stake and control too much? Finally, someone asked Bill's opinion, and he looked up and said (roughly translated), "Take the friggin' money."
Take the money. This is the best advice I've received in my 20 years in Silicon Valley. If you're starting a tech firm, you'll always need money--and you'll always need more of it than you think you will. Money is not always available. So when it is, take it.
I've worked on small start-ups, where nobody takes a salary and you spend the bulk of your limited time trying to raise a couple hundred thousand from angels. This is time that ought to be spent building products. So when you stumble upon an investor who believes in your idea, don't let him rest until he's signed the term sheet.
I've also seen high-stakes financings where the numbers are outrageous. We launched PayPal in 1999 and signed up one million customers in the first six months. Our growth was eye popping, but so were our losses. We were losing $10 million...a month! We had already raised tens of millions of dollars but needed a lot more.
We were mostly a bunch of kids just out of school--I was the old man--working in a loft office over a bakery in Palo Alto. We had no revenue and were hemorrhaging cash. But it was 2000, and my colleagues, Elon Musk and Peter Thiel, were fearless. We decided to go raise $125 million.
Our growth was so hot that investors lined up around the world. We were oversubscribed and turning money away. One group from Korea, having been told we could not accept its investment, simply wired $5 million into our bank account. Scared the hell out of me, and we wired it back right away.
We closed on the $125 million in March 2000--the very month the Internet bubble burst. It seemed as if PayPal was the last company to get money. Investors ran for the hills, and nothing much got financed for the next 18 months.
PayPal eventually turned quite profitable, but the investment necessary to get to scale was huge. March 2000 may have been the only time in history that you could have funded such a wildly ambitious attempt to build a new payment system.
I've also been on the boards of companies needing money for a restart. In the late 1990s, Jake Winebaum started Business.com and Purnendu Ojha started NexTag, only to have their businesses collapse when the Internet bubble burst. But each founder held on, slashed head count, and fought for a lifeline of funding.
The terms were draconian: The investors demanded very large equity stakes--a move that diluted the founders' equity down to small minority stakes--in return for the cash necessary to keep the companies afloat. But Jake and Purnendu each took the money, then built great businesses--one worth half a billion and the other a billion dollars about seven years later. The companies did well, the founders did well, and none of it would have been possible without the cash to bridge these ventures through the lean years. Survival is perhaps the best and only reason to give away big chunks of your company.
What did I learn from Bill, Elon, Peter, Jake, and Purnendu? Take the friggin' money.
PRINT THIS ARTICLE