Andrew and Garry's Guide to Selling Your Startup


When and how should you sell your startup? M&A (mergers & acquisitions) are always a high stress process, and there are a lot of things you have to consider when you are trying to get a startup exit executed in the right way. Garry's startup Posterous was sold to Twitter for $20M and Andrew Lee's startup was sold to Zynga too. As venture capitalists today we work with more than a hundred startups from the earliest possible stage to now a total market value of over $36 billion. We've seen nearly every kind of startup exit and regularly try to help founders as they navigate these problems. This short video encompasses a lot of the advice we end up giving frequently to our community.


Transcript below

Andrew: Are you recording now?

Garry: Yes, recording. The reality is like, we sold our company because the company was ****ed.

Andrew: Yeah.

Garry: We were out of money. This is why you really sell your company. You made something good and then you're not growing. You can't raise more money. The company's going to die.

Andrew: Yeah, but sadly, what's happening is you always get approached when your company is growing, it's doing super well, and you don't really need anybody, and that's the time when it's probably the best time to sell. That's the classic problem.

Garry: That's the conundrum! It's okay, though, this video is to help you figure out how to actually get it done.

Andrew: And remember, companies are not sold, they're bought.

Email overload is the first sign you need to scale yourself

New vlog this morning! Transcript below or click play above.

Do you ever get a lot of email? Do you ever wish you could just do this with all that email? 

Of course, then this would probably happen.

As much as I'd like to hide from email, I can't hide, and most founders cannot hide either.

The ability to deal with a crazy amount of information and prioritize it properly feeds into the one trait that is super important for every founder— Conscientiousness. That is being able to do one's work well and quickly, with diligence.

There's an interesting study by Bucknell University from 2004, linked here. It's a study of businesses that were able to survive for eight years, and it studied founders on five different traits: agreeableness, extraversion, emotional stability, openness, and conscientiousness. 

Those first three had no affect on the outcome of the business after eight years. There was no significant correlation. Being agreeable or disagreeable? Maybe it doesn't matter. 

However, conscientiousness and openness we do have to worry about. Conscientiousness is positively correlated. The surprising result is that openness is actually anti-correlated with success over eight years. 

I think this points to a certain type of transition that happens in the life of every startup. Early on it's incredibly important to be as open and creative as possible. Later on, it's incredibly important to be as conscientious as you possibly can be.

Pre-product market fit? You need openness. You need creativity. You need the ability to do something that nobody else has done. You need the chaos of the prototyper, you needed to try things that other people have never tried. You need to be contrarian against the status quo.

But, over the long haul, that switches. It's the founder who has to manage the transition from this open, creative period, to one of scalability. 

Post-product market fit is about execution. It's about that founder who found product market fit, giving power and control over to the best possible people they can possibly hire. It's about delegation, it's about goal setting, and then it's about keeping people accountable to those goals that were set. It's a switch that a lot of people fail at.

Here's what it looks like when someone who has product market fit finds it, and loses it. The graph goes up, up, up, to the right, plateaus, and then starts falling. 

Founders who cannot scale, end up being overwhelmed by email first. It kind of looks like the scene from the movie "Brazil" that started this video. You're jammed for time. You become a bottleneck for the decisions you have to make. Your decision quality suffers over time. 

The fix is straightforward. You must invest in your skills as a manager. You must hire people you really trust, who are excellent, and then you have to delegate and trust them. But then verify! You've got to hold them accountable.

Those are all skills that many first time founders, who start off as incredibly open, and creative, do not have, but they must either develop those skills, or hire people under them who do have those skills. 

We have a finite number of hours in the day. Founders need to really manage this transition well— going from founder to CEO, running a board, running a team of executives. You have to be the player-coach, instead of just the star player. 

So this is actually a pretty useful roadmap for founders. Pre-product market fit, it's about openness, it's about creativity. Later, they need to switch into conscientiousness mode. They need to take what they've learned, and then march the whole team in that direction, and hold that team accountable the way they would hold themselves accountable.

When a founding team nails the first, and then the second, that's the makings of something that can truly be great.

What to do when someone steals your idea

New vlog this morning! Transcript below:

What do you do when someone steals your idea? First off, yes, it does happen. It's so hard to get a good idea that sometimes it's easier for people to just look at what's already working, and then rip it off.

Parker Conrad on building eng teams outside of SF and why engineers must do customer support (Part 2)

This is part 2 of my interview with Parker Conrad, founder of RipplingRead part 1 of this interview here.

Garry: Parker, one of the things that we're definitely seeing across our whole portfolio is that we're here in San Francisco, but engineers are very expensive. There's not enough housing, quality of life is very difficult at some level... but what's difficult for San Francisco is turning out to be an incredible boon for the rest of the world. How do you guys think about remote work, and what are you seeing across all of your customers?

Parker: In my view, remote work is the worst way to build a company, except for all the others. It's really not possible to build engineering teams at scale in the Bay Area right now. I think it's not something that a company can do, and so, if you need to build a big engineering team, you've gotta do at least some of it, or big parts of it outside of San Francisco. 

One of things that I think was not unique anymore, but was unique when we started doing it, is most of the company was actually outside of the Bay Area. We have a second office in Bangalore, and that's, even to this day, more than half the company is at our Bangalore office. And a lot of that is engineering, but there are other functions there as well. 

All of the challenges of having remote teams are there, but it's so impossible to build everything in the Bay Area that you need to find ways to overcome those challenges. And we see in our customer base, Rippling is really one of the only systems like this, it's the only payroll and HR system that was built for remote-distributed teams across the globe.

You can hire people outside of the U.S., you can pay them outside of the U.S., you can have one system for everyone, and so, we see this in a lot of our customers. That's one of the big value propositions is for companies that do have people, whether it's employees or contractors outside the U.S., you can do it all seamlessly inside of Rippling.

The 4 Habits of Auteurs That Made Hideo Kojima’s Video Game Masterpiece, Death Stranding

New vlog today! Here's the transcript below if you prefer to read, but this one in particular is a lot of action! The video game we talk about is gorgeous and words don't do it justice.

Games are violent. Really violent. Holy crap! Really, really violent, seriously. 

But do they really, really have to be that violent? 

This game doesn't think so. 

Today we're talking about "Death Stranding" One of my favorite games. It's so beautiful, it's super fun, and you don't have to kill a lot of people. 

Parker Conrad's hard-won billion dollar startup lessons: Do unscalable things, but then actually scale it (Part 1)

New Vlog this morning! It was a real treat to sit down with Parker. 

Transcript below

Today we're going to hang out with Parker Conrad. He created Rippling. He's one of the best product-focused CEO's I've ever met. Today he's going to share some of the most hard-won startup lessons that I've ever heard. And he hasn't talked about it anywhere else.

Let's go check it out. This is part one.


Garry: Thank you so much for hanging out.

Parker: Yeah, no, thanks for coming by.

Garry: So Parker, what is Rippling?

Parker: If you're a founder or CEO, one of the things you probably noticed at your company is that there's a lot of just irreducible admin work involved in running a business. Could be getting hired, it could be getting a raise, a promotion, getting married, having a kid, moving to a new address, eventually leaving the company, and each of those life cycle events for an employee create, have this set of implications across all or some subset of your different business systems that today, you need to handle manually and by hand, but with Rippling, we automate that end-to-end.

So, we get people added to all the right email lists, the right Slack channels, we get them a computer, all the right softwares installed, they're enrolled in the right insurance benefits, get 'em paid correctly.

Storytelling for your Series A, with Initialized Partner Andrew Lee

Hi everyone. The vlog today is a little different, since I asked my friend and colleague Andrew Lee to sit down with me and talk through some of the advice we give very frequently to our founders. This isn't intended to be a comprehensive guide, but most everything we discuss here is stuff that comes up as a part of our experience working with hundreds of startups at Initialized.


Transcript below

The advice that I'm going to give is just a truism that you already know, but it reminds me of the good Buddhist mantra: 

When the student is ready, the teacher will appear.

Hi, my name is Andrew Lee. I'm a partner at Initialized Capital. I'm going to talk to you about follow on fundraising. That means you've already raised, for example a seed round and you're going to raise your next round. Let me go ahead and dive into some of the things that we've seen that are very helpful to those who are working on their next follow on funding round. 

Nikola Tesla predicted the smartphone: Now the world is forming into a global brain

Today, we're gonna talk about the global brain.

Imagine every single person on the planet, all seven and a half billion people. In the past 10 years, something remarkable has happened. Five billion of those people now have phones. Suddenly nearly every person on the planet can talk to everyone else instantly. 

Let's put this into perspective. In 1860, it took 10 days for mail to travel from St. Louis to Sacramento by Pony Express, two times faster than the next best alternative. As awesome as the Pony Express was, it was put out of business in two days, by the advent of the intercontinental telegraph, October 24th, 1861. There were a lot of sad horses and riders that day. Ponies have difficulty keeping up with the speed of light. 

The world used to be a really huge place, and now, we've brought it together, it's much smaller. 

Working for Microsoft cost me $200 million

Hey everyone, new vlog for this morning. I was in Seattle last week and it made me nostalgic. When I lived there, I made a career decision that cost me a lot, so I wanted to share it with you with the hope you can make different mistakes than me. 

Watch on YouTube—

Transcript below

My name's Garry Tan, I'm a Venture Capitalist. I started off as an engineer, a designer, a product manager. If you're new to this channel, I'm here to teach you all the things that I learned the hard way, starting with the most painful lesson, which cost me $200 million. 

I'd just graduated in 2003, and my friends were starting a company with Peter Thiel. They flew me down to have dinner with Peter. 

It was about the time Peter wrote the $500,000 check to Facebook that made him a billionaire. He was a known great entrepreneur. He just wasn't the billionaire that you know him as today. 

He looked at me and said, "Garry, "what are you doing at Microsoft? "You're wasting your time." Keep in mind, I was 23 years old, I didn't know anything about startups, I didn't know anything about finance, and I definitely didn't know how these things got started. 

He said, "Garry, I'm so sure this is the right thing for you, "you need to quit your job right now." 

He asked, "How much a year do you make at Microsoft?"

It was $72,000 a year, really the lowest of the low coming right out of college. He got out his checkbook and wrote me that check. 

"Cash this check, quit your job. This is a zero risk opportunity for you." 

I said, "Thank you very much, Mr. Thiel, but I might get promoted to Level 60 next year." 

Big mistake. This mistake cost me $200 million in equity, at least. Palantir is now worth $20 billion or more. 

Later, I did end up joining as employee number 10. I got to build one of their major product teams from scratch. I learned a lot, and it still worked out, but this is a story that you should keep in mind as you think about where you want to work.