There’s an idyllic notion that once you’ve sold your company for multi-millions of dollars you’re filthy rich and never have to work again. I admittedly have this automatic mindset whenever I meet someone who said they sold their company to one of the tech giants. Even if they are still living in a one bedroom apartment with their wife years after the sale, I just think they are being frugal.
By also believing everybody makes 10X more than the value of their car based on my 1/10th rule for car buying I’m able to keep motivation high to work harder since even a Toyota Corolla driver is clearing $200,000 a year nowadays. The goal is to give into the illusion of wealth in order to eradicate self-entitlement.
There is startup fever here in the San Francisco Bay Area partly because of all the stories we hear about 1,000 bagger returns in companies such as Google, Facebook, Instagram, Twitter, Tumblr, AirBnB and more. Sure beats investing in stodgy dividend stocks doesn’t it? Real estate is on fire and it seems like everybody in their 20s and 30s are tech millionaires. Given we have a culture of stealth wealth in San Francisco where you can’t tell a rich person from a poor graduate student, the possibility is real that your unassuming neighbor is rolling in the benjies.
The fact of the matter is that the vast majority of startup founders never make it past year three and even less sell for multi-millions of dollars. Even if a founder sells her company for $30 million dollars to Apple, she probably could have done better working a day job all those years instead, with much less stress!
In this article I’ll share with you a very insightful conversation I had with a man who ended up selling his company for tens of millions of dollars circa 2010 three years after business school (Should I Get An MBA?). You’d think as a 30-something year old, he’d just be kicking back on his own private island somewhere blogging right? Not so at all. But before we go through this fella’s example, let’s go through one of my favorite business assumptions first.