NYC-based VC Ed Sim, on whether entrepreneurs should a) sell a startup on the hype of buzz, or b) double-down and build it to last. Sim's BeyondVC Startup Cycle:
Sim concludes that selling at the peak of a Hype Cycle, such as we are in now, is the easier — and, therefore, possibly better — path:
1) [The] easier, less risky choice to make is [selling] at the Peak of Inflated Expectations/height of buzz…where an entrepreneur can maximize short-term value as acquirers will buy more on vision … than on business fundamentals.
2) If you decide to build for the long haul and go for the home run, it will take you a fair amount of effort and time to create the same value that acquirers will pay today; they will expect more [from] mature companies.
3) Companies that sell [at the Hype Cycle peak] may forego going big. [But] if they do not…they will have to live up to their hype in the future. As companies mature the valuation of a startup turns from pure strategic value to one where it is based more on actual revenue multiples and market comps.
via Found+Read
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