Should a Teenage Entrepreneur Sell Out To Facebook?

colinneagle writes "Andrew Mayhall is 19 years old and is running a server company, called Evtron, whose product has reportedly set the world record for data density (4.6 petabytes per server rack) and has begun attracting attention from investors. One of those interested parties is reportedly Facebook, with whom the young CEO claims to have had casual discussions about a potential acquisition/hire agreement (Facebook did not respond to a request for comment on the talks). He says the opportunity to speak with Facebook was simply one he couldn't pass up, and seems more impassioned by entrepreneurship. He speaks often of building his company into an EMC or NetApp, and could very well compete with them soon. But if an offer from Facebook ever comes, should he accept, or try to build something on his own?"

Comments

Retire at 20

[smprather]

Sell for $5mil and be done with earning a living. Relax and enjoy the rest of your life.

Re:Retire at 20

[MightyMartian]

Five million bucks won't keep you for life unless your very prudent.

Re:Retire at 20

[Baloroth]

That's what I'd do. Calculate first to make sure that after taxes what I got was enough to live moderately comfortably for the rest of my life, with some margin for error, then sell for that if I could. Too much risk when building a business to assume it'll work, especially given the size of the players in the field. If you can't sell for enough, well then try to build the company up.

The fact that he has a server business at 19 says he is pretty motivated, though, which means he probably won't sell. He'll try to build it to get more money or a constant stream, motivated types usually do. Might work out, might not.

Re:Retire at 20

[X0563511]

What planet you living on? Most people don't even make half that through their whole lives.

Re:Retire at 20

[jeffmeden]

Especially considering they took VC funding, which certainly came with some sort of strings attached. No way is your investor going to sit on the sideline while Facebook waves a 2x valuation in front of yo; no matter how much you "want" to be the next EMC your VCs will have their say.

Re:Retire at 20

[js33]

What planet you living on? Most people don't even make half that through their whole lives.

You still have to be very prudent with it if it's going to last you your whole life. Most people who win the lottery and take a lump sum are not prudent with it, and they end up broke in a few years. Just like some of the high-paid sports stars when they enter middle age.

Re:Retire at 20

[cayenne8]

Yeah...we call them stupid.

Get $5Million clear....invest it in a non-agressive manner, which could still get you like %5 interest annually.

As long as you don't buy leer jets...you could live easily on about $250K a year pretty readily.....

I know I could.

Re:Retire at 20

[h4rr4r]

Why is it sad that you might have to pay for the civilization you enjoy?

Re:Retire at 20

[WhiplashII]

If he started a company in his teens, I doubt he wants to relax the rest of his life...

He should sell. The reason small companies sell to large companies is to decrease concentration of risk for their owners. He, as an owner of a small company, needs to deconcentrate his risk. He will have another company he wants to work on - he probably already has some ideas. It is far easier to do that after selling your first company, and far harder to do that after missing the only opportunity to sell.

The simple fact is a cash out event gives you great options for your future work. If you don't sell, there is a high risk that the company will fail before you can personally cash out - this is true of all start-ups.

Re:Retire at 20

[Belial6]

This is the correct answer. He would likely walk away with enough money that he would never HAVE to work again as long as he is prudent with his money. This as you say leaves him with plenty of time and resources to start a new company that he doesn't need to count on for survival. If he is completely convinced that he is a one trick pony, he should sell because his company likely won't last. If he is not, then he is in a better position to implement his new ideas if he can run the new startup without having to worry about profit in the short run.

Re:Retire at 20

[afidel]

$5M at 7% ARR with 3.5% inflation throws off about $185k per year of todays dollars assuming a 70 year drawdown period. If you can't live on $185k per year then you're a rich entitled idiot.

Re:Retire at 20

[DriedClexler]

Only a tiny portion goes to the civilization part, the rest goes to the uncivilized political infighting over who gets the free loot.

Re:Retire at 20

[WhiplashII]

Actually, I pretty much disagree entirely with that analysis...

The question is not "sell low" or "sell high" - you do not know the future, so that fact that it went up is not available to you before the decision. The question is are you getting enough that your risk is significantly decreased.

For example, if your company is generating free cash flows of $2M, you will usually get a valuation of $10M. That is the market rate for a startup that's breaking out. (It can change based on other factors, of course, but that is the starting point.) As a public company, that $2M is worth about $30M. You might look at that difference and claim "unfairness", but it is the price difference between concentrated risk and unconcentrated risk. To put it simply, if that wasn't the price difference in risk then most deals would not be made - either the startup would refuse to sell or the large company would refuse to buy.

Honestly, if this is your first company you are going to think that any price isn't fair. And when you don't accept the price, you'll be horrified when the company loses its value a little later. And then next time, you'll understand the price difference and you'll sell.

But the important thing is to keep building companies - I've started quite a few, and there is no job like it!

No

[Anonymous Coward]

Don't sell...license.

A lot of assumptions there

[multicoregeneral]

If one hypothetical things happens, should you do some other hypothetical thing? Sure. Why not.

WTF ?!?!? You're asking us ..

[OzPeter]

as to what the best business strategy should be between two 3rd party companies?
 
You might as well ask what I think your neighbor should give their kids for Christmas. Go ahead .. use that as a Slashdot poll.

Obviously we have not yet reached the bottom of the Slashdot story barrel.

Re:Sell!

[bhlowe]

Yeah, companies go up and down quickly in tech. If you have an opportunity to get your technology into the hands of pros who will pay you big money.. its a no brainer.. With cash in the bank, you'll be able to start a new business, relax about meeting payroll, and take time off to finish college or travel abroad.

Re:Is Facebook starting to lose ground?

[Andy Prough]

Facebook owns Instagram, so it seems unlikely.

Oh, I didn't know that. That's why I come here, to be told what an idiot I am. Very useful info.

You have two options. Both involve selling.

[Revotron]

http://evtron.com/

Based on what I see on their website and how much I've heard about the company (Answer: Nothing and nothing) an offer from Facebook would be a miracle.

I have a feeling this high-density storage idea is just a creative way to stick as many drives in a rack as possible, which means someone will easily beat it in no time because, face it, advances by the big storage companies means drives are getting more and more dense every day. Also, it won't be long before someone else comes along with an even-more-efficient arrangement of hard disks in a custom-built chassis in a 48U rack.

If Facebook wants to buy what's on your drawing board, go for it. You have two viable options at this point:

1. Sell for as much as you possibly can. Get every penny out of it that they're willing to give. Then take that money, hire people smarter than you, and make something even better than what you sold Facebook.

Or,

2. Negotiate a payoff for your idea, and employment. Go work for Facebook and help them bring your dream to life. You'll still get money for your idea but you'll make it come alive through their bankroll. They'll hire on very bright people and bring in storage experts to tweak things. I know it might suck to watch them come in and change your pet project, but watch and learn. You'll learn from these people, see flaws you never took into account, get to know them, work with them, and (forgive the schmoozing business term) network with them. If you choose this option you'll have a few good things going for you:

a. A job. You didn't finish high school - if you don't start another business, there's sadly not much else you can do.
b. Solid work experience for a Silicon Valley company. This will pay off in the long run.
c. Relationships with people in the industry. It's invaluable.
c. Knowledge. You'll learn things you don't yet know about the storage industry and the tech behind it.

These are second-degree hypotheticals though. If you're talking about it publicly that means you haven't signed an NDA, which means they haven't made you an offer yet. Don't count your chickens before they hatch, but always look a few steps ahead.