I've been thinking about how the Internet has changed everything, how it has accelerated things, including the desire to get to a pay-out before the pay-in. Getting equity before building equity.
In a famous article from early 2000, Jim Collins coined the expression: Built to Flip as a juxtaposition to his research documented in the book he co-authored, Built to Last. It started with a story, the experience of a young entrepreneur in Silicon Valley:
"I developed our business model on the idea of creating an enduring, great company -- just as you taught us to do at Stanford -- and the VCs looked at me as if I were crazy. Then one of them pointed his finger at me and said, 'We're not interested in enduring, great companies. Come back with an idea that you can do quickly and that you can take public or get acquired within 12 to 18 months.' "
And delved into the core concept of companies, or rather barely products in the making, built for the sole purpose of being sold.
We see them today still, more than ten years later. An idea snatched before it's had a chance to hatch -- when the idea at the root of the business has not had enough time to breathe, to face (or change and disrupt) market realities, and evolve into a strong (new) business.
Especially where it comes to technology products, even with a few thousand early users, ideas could still develop into something grander yet, given enough time. In some cases, the idea could also be a flop. So time is a luxury both the startup, and the potential suitor, would want to have.
The date in Collin's article was February 2000. There were some unflattering words about the entrepreneurial mindset. Yet it seems to me that was cultivated, encouraged (and rewarded) at the time.
The entrepreneurial mind-set has degenerated from one of risk, contribution, and reward to one of wealth entitlement. We all have friends and colleagues -- often mediocre friends and colleagues at that -- who have struck gold after 18 or 12 or 6 months of work in a built-to-flip company. And we have all entertained the thought "I deserve that too." Here's another thought: When I and a lot of other people began talking and writing about the new economy in the early 1980s, little did we know that it would engender what we most despised about the old economy -- an entitlement culture in which the mediocre flourish.
Is the market still rewarding and encouraging this mindset today? Or are we starting to think more long term? Helping entrepreneurs build great businesses, and organizations.
This doesn't happen only with startups, that the priorities would be forcing a business to do a back flip. In a system where shareholders come first, you will have situations where bad boards kill companies, and the value they were built on.
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I was under the impression that the "flip" mindset was worse than ever. Hundreds of social media sites, most we've never heard of, would seem to indicate hundreds of "get rich quick" ideas -- how many do get bought out, never to be heard from again, vs. failing outright? It would be interesting to learn more about these startups. (Also: I thought this post mirrored a few things I've read lately about Delicious.)
In some spaces I see the desire to keep building, but only where there is already a strong community to serve. Those that start a "built to flip" company don't really care about community much less the people/commodities they want to buy into their product.
Posted by: Christa Miller | October 03, 2011 at 08:39 AM
a business needs to first have something of value to trade on to attract a community. Then they would trade by keeping their promises. And so on. Yes, much easier to come up with an idea and just sell that... which is why we still need strong executions and resilient and enduring organizations.
Many of the pitches I get, when I look into the company, seem to have the "build it and they will buy it" philosophy. I'm interested in working with and writing about the other kind of business and entrepreneurs -- those who think long term.
Posted by: Valeria Maltoni | October 03, 2011 at 09:32 AM
I find this trend particularly frustrating. The built-to-flip shills are generally offering little more than a variation of others' success, land VC, and then move on to start more thin-value properties. Where's the humanity?
We build to last. For the long term. For the end-user.
Posted by: Brian Driggs | October 03, 2011 at 04:32 PM