The Event Horizon & Business SustainabilityTBOP2017 ⋅ 2:54 ⋅ Filmed May 12, 2017
Don’t make the mistake of imagining that you can build and sell a business in just a couple of years. Maybe you can, but in Derek Ball’s experience, most would-be entrepreneurs need to be willing to commit at least five to seven years of hard work building up their businesses before those business will be ready to sell. Why so long? In this part of the Q&A, Derek explains the realities of today’s market and those “overnight successes” like Shopify and AirBnB.
TC: One of the other things, and you’re a good example of it is, in startups, it's becoming the traditional biography of the truly successful folks in that field, is that he started this business in 2001 and he sold it in 2003 and then started this in 2004. In other words, the question becomes, how long do you stick at something? It's not the like the old economy where you'd start something and the next 5 generations of the your family would be involved in the business. Now, it seems that the event horizon on all these things is fairly short.
[00:41] DB: I think that's very true. Because the public markets have not been very friendly to tech companies recently, although it's getting better now, we've got a few more improvements. Generally, the path to actually getting return on your investment, if you're a founder that might just be your time. Your investors are going to want their money back and hopefully more at some point. The most common way that happens now is through an M&A transaction. So if you've built something of value, someone will pay you for it.
[01:12] DB: I used to joke that really I have one product and I have to sell it one time, and it's the company. If you want to create a sustainable technology cluster. I know Kingston, we were having some discussions about that earlier is, how do you make that happen? You do need some anchors that are in it for the long haul. You need the Shopifys that are helping to fuel what's going on in Ottawa right now. There have been others before that between Nortel in the past. So you do need some that are going to be around for the long haul as well but most of them will not turn into a Shopify. Most of the them will get acquired by a Shopify.
[01:50] DB: The event horizon is definitely shorter but I don't think it's as short as people realize. Most tech companies that you suddenly see as being an overnight success, spend a lot of years trying to get there. AirBnB spent an awful lot of time making no money and struggling. [It] was several years before all of a sudden it took off for them. Before they hit the radar of most people in the public eye, they had been grinding it out for 3, 4, 5, 6, 7 years under the hood. I think some entrepreneurs think, 'I'll jump into this. I'll build something for 2 or 3 years. It will be successful. I'll get bought'. From my experience, it's usually a 5-7 year commitment on every one of these you launch. So you should expect that going in that this is going to be your sole focus for half to 3/4 of a decade.