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Lifestyle Startups are Bad?

June 11, 2008

David Ulevitch thinks that startups are about ‘one thing - Big risk = Big reward.’ He bashes the 37Signals guys for operating their business like ‘a lifestyle company who wants to be treated as a startup.‘  I have to disagree with David’s premise.  There are a million reasons people start their own business.  Some of us are interested in taking monster risks in the hope of achieving moster rewards, but there are others who are interested in the entrepreneurial lifestyle that running your own business can provide.

Scott and I met with an M&A advisory group yesterday who was interested in helping us either a) sell Architel or b) acquire similar companies in our space.  During the conversation we explained that Architel was a nice little business we have operated for almost eight years.  The company is very profitable, but the market for IT services companies pays only 6 times EBITDA.  Architel provides Scott and me a lifestyle that most employers would be hard pressed to provide and very few venture capitalists would allow.  It also provides a stream of capital that we can reinvest in other ventures; businesses where the market allows for far greater returns (i.e. software).  Are we wrong for not wanting to sell?  Are we wrong for not wanting to ‘roll up’ other IT services companies?  Are we still entrepreneurs?  I think so (I was even awarded entrepreneur of the week so I must be, right?).  We are creating a balance between creating a near term lifestyle through Architel and long term wealth creation through our Big in Japan startup.

I profile entrepreneurs all of the time and I know for a fact David is simply wrong.  Why did you start your business?  Are you taking big risks in hopes of big rewards or are you doing something else entirely?  Love to hear your thoughts on David’s premise.

Written by Alexander Muse · Filed Under Blog, Startups 

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