March 31, 2025 • 31 mins
Will and Ryan discuss the dangerous mindset founders can fall into after hitting it big with their startups. They reflect on the story of Peter Chesky, co-founder of Wish, who became a billionaire during the tech IPO boom of early 2021 but saw his net worth plummet as the company's stock tanked. The episode emphasizes the importance of treating any major payout as if it's the last one you'll ever receive. With only a small percentage of startups ever having significant exits, and even fewer doing it repeatedly, Ryan and Will stress why founders should be cautious with their newfound wealth instead of assuming it will keep flowing.
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Wil Schroter
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Ryan Rutan
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What to listen for:
01:01 The Rise and Fall of Wish
03:01 Lessons from the Wish IPO
05:15 The Psychology of Founders
11:52 A Counter Story: Priceline's IPO
15:13 Reflecting on High School Memories
15:37 The Illusion of Endless Wealth
15:51 The Reality of Financial Downturns
19:09 Understanding Venture Capital Statistics
21:28 The Rarity of Repeat Success
24:18 Advice for Founders: Secure Your Wins
28:11 The Importance of Financial Safety
30:39 Final Thoughts: Keep the Win
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome back to the episode ofthe Startup Therapy Podcast.
This is Ryan Rutan,joined as always by my
friend, the founder,and CEO of startups.com.
Will, Schroeder Will, why isit that every time as a founder
that we hit the startup lottery?
I. We think that it'lljust happen again.
Right?
This feels like a thing, but,but, but hang on, let me,
(00:20):
let me set the stage here.
Picture yourself inearly 2021, I think.
Yeah.
Yep.
So the world's slowly recoveringfrom, from a pandemic.
Tech.
IPOs are everywhere, andsuddenly Peter Chesky, the
co-founder of Wish is a.Brand new billionaire company.
Stock source to memoryserves like 31 bucks.
(00:41):
He's now got a networth in the billions.
And so he naturally celebratesin a very billionaire way and
buys a belaire mansion, right?
And it's only 15million bucks, right?
Which, when you're worth what,like 4 billion on paper, kind
of doesn't matter, right?
Like, who cares who'ssweating 15 million?
It's, it's literally a a, analmost incalculable fraction.
But then what happens Will.
(01:01):
We all do the same thing.
When times are good, when theriches are flowing, we assume
they're gonna keep flowing.
And what's different aboutthis, not just Wish, which
I think is a fascinatingstory, but also just any kind
of payout or big payday, itcould be a good year, right?
Right.
It could be a good quarter,it could be a good whatever.
Yep.
But when we get, when wereceive a substantial payout,
(01:24):
whenever that time might be.
Okay.
Now wish was a rocket, right?
Yeah.
That thing like grew so fast.
It was everywhere.
It also worked particularlywell during the pandemic.
Mm-hmm.
Because everyone was athome and they were on
their mobile devices.
Yep.
And which was servingup junk, popping away.
It was so cheap.
Right.
And they built this wholestory behind it, like this,
you know, bigger storyfor the, for the street.
(01:46):
And they said, look, it's notjust that we're selling cheap
junk, it's that we're buildingthis amazing like third party
logistics infrastructureto be able to do that.
Right.
That's gonna be worthmore than Amazon.
And you know.
Told the story andso it goes out.
Has an amazing IPO to yourpoint, you know, had hit a
market cap of 18 billion,uh, Peter's worth, I think
4 billion at the time.
Yeah.
And I'm watching this wholething and then I, and then I saw
(02:09):
the headline, bought a mansionin Bel Air, and I'm like.
Of course he did.
Right?
No.
And, and, and look, I,I don't begrudge anybody
for spending their money.
Right.
Uh, the irony was I wasthinking about it, right?
Like, my wife and I wereshopping for a house in Bel.
It wasn't a mansion.
It was just a house.
But like, we're shoppingfor a house in Bel,
like a year before that.
Yep.
Can't begrudge the guy.
(02:30):
Yeah.
And I sure shit didn't have an$18 billion IPO, but my point is
all I could think to myself is.
This guy feels likehe's worth $4 billion.
Yeah.
And numerically he is.
Yeah.
He was.
And 15 billion or 15 million,I think it was the price tag.
15 million's, a rounding error.
It is, it's literallya, it's a, it's a tiny
incalculable fraction.
Right.
And if, if you went to eventhe most curmudgeon accountant,
(02:52):
and instead, I wanna makethis purchase, that accountant
would be hard pressed mm-hmm.
To say.
That's ridiculous.
Okay.
Yeah.
Again, this is the point though.
This is, this is why we'regonna set up with wish.
Now I'm intimately familiarwith wish because I
made a Wish too on Wish.
Yeah.
I bought their stock.
Uh, I don't rememberexactly where I bought
(03:14):
it, but I held it.
Through the entire drop.
Yeah.
Now it's bounced back alittle bit since then.
Right.
But when it peaked,okay, I do remember this.
It peaked at $31.
Yeah.
Okay.
So Ryan, if, if you're lookingat your payouts, and this
is what this is all about.
If you're looking atyour payouts and you're
thinking, I'm at $31.
Worst, worst, worst case,we go to 15, 10, maybe.
(03:35):
Nine on the worstday we'd ever have.
24 months later, Uhhuh,it's trading at 38 cents.
99%, 99% percent
reduction.
Ouch, right?
For everybody to own the stock.
That was painful for anybodywho, hell, who had $4
billion worth of that stock.
It
was a lot more painful.
This is what we're teeingup with, right At that
(03:56):
point when his stock kind,you hits that milestone.
Yeah.
He's down to somewhere around38 million of, of value.
Now there's a wholebunch of caveats to that.
People thought,well, 38 million.
I mean, dude,
thank God he boughtthat house that
was a 50% hedge onhis future net worth.
Right?
Holy shit.
Yeah.
Yeah.
And, and so, you know, uh, youcould make the case, well, 38
million stole a lot of money.
(04:16):
It is, it's not that liquid.
It theoretically sounds liquid,but you're the main principle
in a, uh, in a public company.
You can't just fire sale at all,
actually make it worse.
You just solve that.
Yeah.
Especially at a time whereit's gone from $31 to 38
cents, not a good look.
If you're like, I'm just gonnalet go of what I got left here.
Yeah.
And, and, and I'm notintimately familiar with,
with anything Peter did withhis money, so I, I I don't
(04:38):
wanna pretend to be an expert.
Yeah.
However, what I do knowis that when you have that
kind of money in the market,you don't take it out.
Right.
Uh, you don't take it outbecause you borrow against it.
Yep.
It's also a taxstrategy, et cetera.
For those that aren't familiar,the reason people get all
pissed off at rich people fornot paying taxes, truth be
told, they pay tons of taxes.
But what, what, what they,what they hear are the
headlines are this guy Peter,his stock goes to $4 billion.
(05:01):
He takes out a loan Yep.
Against $4 billion andthat loan's not taxable.
Correct.
So he now gets cashin his bank account.
It's gotta pay it back.
But he's got cash in his bankaccount with no, uh, taxes all.
Anyway, a long way tosay when times were good.
Peter did what we all do.
He says they'llcontinue to be good.
Yeah.
This is just the beginning.
(05:23):
Oh, brother.
It, it, if divided, we are
master extrapolatingof our best day ever.
Right?
As startup found is real,like best day ever, probably
gonna look like thisfor the rest of my life.
Like I said, the stock hasbounced back a little bit,
nowhere near where it wasbefore, and that's fine, but
that's not really the point.
The point of the storyisn't, isn't that it
went up and went down.
It's that when it was up.
He spent and felt andthought like we all do.
(05:46):
Yep.
That's gonna continue to go up.
And honestly, I, I've alwaysfelt, and I always tell founders
when they have their moment,they've got like a cash out
moment or a sale moment orwhatever, tell 'em the same
thing every single time.
Um, generally everybodyignores me, but that's okay.
I say, treat this payout,treat this distribution,
treat this whatever you'reabout to get, as if it's the
last payout you'll ever have.
(06:08):
Because numerically,statistically, statistically.
It is.
Yeah, that's it.
Missed last game.
Tough math.
No ones.
That's real math.
Yeah.
Great.
No one believes that,Ryan, because at the time
someone's giving thema giant chunk of money.
And they're like, well, if I cando it now, I can do it again.
It's the guy who winsa ton of money at the
blackjack table, right?
And just has an amazing streak.
(06:29):
Does he take 10% of itand keep gambling and
put the other 90% away?
Double down?
Why would you at that point,because clearly it's replicable.
Clearly
I'm winning.
Right?
I mean, it's, it's, it'sVegas over and over.
I told you this once before.
So when, when my wife and Igo to play, um, blackjack at
the casino, that's our game.
We always do the same thing.
We show up at the table, weput down a ver relatively
small amount of money.
(06:50):
We, we both buy the equalamount of chips now, I
don't know why, but she'sreally bad at gambling.
Um, it's blackjack.
There's not reallya lot to be bad at.
Yeah, I mean, this iswhy we play it anyway.
So she tends to bepretty bad at it.
And as the night continues,um, her money just like slowly
dwindles and I, I'll giveher more chips and, you know,
to keep her going anyway.
My streak goes on.
(07:11):
I tend to win.
I have no idea why, but I, Itend to win it at the table.
But what my wife does, asI'm getting more and more
aggressive and excited andwhatever about my winnings,
my wife is siphoning my chips.
Yeah.
Off the table andinto her purse.
There you go.
Okay.
And so at some point in thenight where it's like, time
to go, I'm like, man, youknow, we didn't do very well.
(07:31):
And of course she's like,we actually did really well.
We did okay.
I just took all thechips off the table.
Right.
And we actually have,we made a ton of money.
I'm like, oh, wellthat's a nice, nice find.
Perfect.
Those, taking the chipsoff the table when, when
you're up is exactlywhat we're talking about.
Yeah.
And what I wanna unpack is,you know, when, when we go
through this today, I wanna talkabout why people don't do it.
(07:51):
Yeah.
'cause that's the important, I think everybody logically
gets it when you say this.
Now everybody goes, yeah.
Okay.
That makes sense.
So as, as I start winning,I should suck some away.
Everybody understands that.
And yet no one sees it asthat moment where like, oh,
these are the winnings, thisis the time to sock it away.
Yep.
And I think, look, I, you,you've said this before, but
I, I'll say it again, man.
(08:11):
It, it's good Timesmake for bad decisions.
Really bad
decisions.
Right.
Really bad.
Because there you canmake Yeah, because you're,
everything's going well, right?
Yep.
We got a big payout.
And again, like, could bequarterly windfall, could be a
private sale, could be an IPO,kind of doesn't matter, right?
Whatever that is, it's.
Easy to believe that it's,it's just the beginning.
(08:34):
Yep.
Right.
It's a home run.
But I'm gonna treat it likeit's a base hit and like I can
just continue to do that and batmore and more and more of those.
And this is where it reallystarts to go wrong, but
it's because we're onthe high of that success.
Right.
Right.
And it's funny, it's like,uh, professional athletes
are so known for this.
Yes.
Right.
They, they, they getthe signing bonus.
They go into the NFL, the NBA,you know, wherever they go.
(08:54):
They all have a moneymanager that more or less
says the same thing to them.
Yeah.
Which is don't blow allthis money on dumb stuff
because you'll probablynever get it again.
Yep.
And of course most of themare like, are you kidding me?
Uhhuh?
Right.
What if it's a million,it's 10 million.
I don't even hit
my prime yet.
Exactly.
He said as he got his lastcheck, and it blows my mind
(09:17):
because in that moment thereare no signals to tell you.
Yeah.
Stop.
'cause you're winning.
Because you're winning.
Yep.
Right.
When I was running my firstcompany and we started to
make some serious money, Iwas like, well, companies
just grow every year.
That's just the way it goes.
Well, we do right just 20%year over year, forever.
What could go wrong?
Dot com bust.
(09:38):
Yeah.
Yeah.
Insert.
Insert.
Pretty predictable.
Cyclical.
Oh my god.
Economic.
And here it goes.
Oh
my God.
It's it.
I mean, I look at itnow like when something
good happens to me.
I instantly just wait forthe other shoe to drop.
Yeah.
Right.
Where wherever there's awindfall, I'm just like, no.
And, and my wife and alwayshave, have this joke.
We say, the money's spent,we just don't know where yet.
(09:58):
Exactly.
That's exactly it.
Yep.
Nobody's going to take it.
It's already
been claimed.
They just haven't called us yet.
Exactly, and so I think,well, actually, Ron,
let me ask you this.
When you think about foundersthat are like, you know, in that
prime moment, they've got theglow, whatever, why do you think
they're so prone to making baddecisions or like, like what
does that look like to you?
I think it's, it goes back tothis like projection of hope
(10:21):
thing that we've lived on fromthe very beginning, right?
Yeah.
We've had to believe against.
All odds that thisdream that we had can
actually become something.
And we kept going againstall the odds, right?
While things weren't working,we weren't making payroll, we
didn't have revenue, we lostthe contract with the, the
co-founder left with half theip, whatever it is, right?
(10:41):
Like there's all of every, everyone of these success stories.
There were a shit ton ofchallenges and hurdles that led
up to that point, and becausethey were able to succeed
despite all of that stuff.
I feel like what happens is inthat golden moment when all of
a sudden the glow is upon us.
Yeah.
Now it's like, okay, if Iwas able to do it when shit
was completely sideways.
(11:02):
Of course it will just be easierfrom this point forward, not
realizing that this isn't achange in the tides, that this
was a, a payback for what hadbeen put into that point, right?
All the efforts that have beenput in this is that moment.
This isn't just a change inthe environment, that now it
will just always be like this.
We get like, oh, this isour new normal, right?
This is the new low watermark.
We'll just always be here.
(11:23):
It'll be great.
I think that's whatends up happening.
I think you, you, when we'rein those moments, and I've
certainly had them myself, whereit's like, I worked so hard.
Through such tough circumstancesnow everything feels better.
Everything feels easier.
So clearly if I coulddo it, then with all the
advantages I have now, it'llbe that much easier to do it
again and again and again.
(11:43):
Right, right, right.
Absolutely untrue.
But it sure feels likethat and, and it's easy
to make that story right.
So easy to make that story.
At that time, I, I'll giveyou an interesting counter
story that one of the fewtimes I've seen someone
go the opposite direction.
Okay, so this is late nineties.
This is at the, the, theformation of priceline.com.
(12:05):
Uhhuh.
Now a, a lot of peopledon't really understand
like Priceline like now.
'cause it's not thecompany it used to be.
Yeah, yeah.
But when Priceline came out.
As an IPO in the late nineties.
It was one of the greatest IPOs.
It was a massive,massive success.
Jay Walker, who's a fascinatingindividual, who's the, um,
the, the, the founder ofPriceline was on the cover
(12:25):
of Forbes and, and they saidhe was like, the next Edison.
Like it was a big deal.
Well, it just so happenedthat one of my closest friends
from high school actually wentto go work for him on the,
when they were figuring outwhat price line would become.
Mm. So he was there like oneof the first like 15 employees.
Oh, wow.
Right.
Like long before itbecame Priceline.
He's there throughthe whole journey.
He's the whole journey asthis thing, you know, turning
(12:46):
into what it was gonna becomeand like, like a $27 billion
IPO, which is, it's a lot now.
Hell of a lot back then, then.
Oh my
God.
Yeah.
Right.
Anyway, as, as they're,they're leading up to the IPO.
They haven't gone IPO yet.
He goes in, uh, to talkto Jay Walker, who was
like a mentor to him.
Right.
And Jay loved him.
And, uh, he said, HeyJay, I'm resigning.
Joe's like, wait, what?
(13:06):
Uh, he's like, are you kidding?
Like, like, what areyou talking about?
He's like, yeah, my toys
and I'm going home.
Yeah.
And so you said, he's like, Iwant to exercise my options.
Like, you know, I'm, I'mmaking these numbers up because
I, I don't wanna share his,his numbers, but like, I'm
ex exercising my options ata hundred thousand dollars.
When, if I saw it throughthe IPO in six to 12 months,
um, you know, past lockup,it would be like $2 million.
(13:29):
Right.
So like a massive difference.
Yep.
And.
Jay's mind blown uhhuh.
He's like, why would you, whatare like, look around man.
Look at what's happening here.
Right?
Yeah.
And so finally,finally, he breaks down.
He's like, this isthe dumbest thing I've
ever heard in my life.
Okay.
And, but, you know,begrudgingly writes him a check.
It was more than ahundred, a lot more than a
hundred thousand dollars.
(13:49):
But, um, writes him a check.
My buddy takes it.
He quits.
He puts himselfthrough law school.
He buys a house with it.
He buys his first house withhis family, bought some cars,
whatever, like, uh, investedit in his future, right?
Yep.
Basically bought all thethings that, you know,
money will stabilized
himself.
Yeah, exactly.
Massive.
IPO, uh, price on hasa massive IPO and then
basically right into the.combust all those options go
(14:13):
under water and nobody'soptions are worth a penny
because they were, and theywere still in lockdown.
So like this is, yeah,they're, they're all
locked up.
You cannot,
you can't.
Right.
So right after theIPO, you can't sell.
So everybody watchedtheir, their paper value
go through the roof.
I mean, just popping bottles
everywhere.
Right?
Straight back down, right?
Yep.
You know something that'sreally funny about everything
we talk about here isthat none of it is new.
(14:36):
Everything you're dealingwith right now has been done a
thousand times before you, whichmeans the answer already exists.
You may just not knowit, but that's okay.
That's kind of whatwe're here to do.
We talk about this stuff onthe show, but we actually
solve these problems alldayLong@groups.startups.com.
So if.
Any of this sounds familiar.
Stop guessing about what to do.
(14:58):
Let us just give you the answersto the test and be done with it.
We, we've got a great photo ofme and a couple of my friends
from Priceline and then a coupleother buddies at the same time.
And, and we're alllike 25, right?
And we're allstanding on a beach.
Right.
And just like, likejust in this great pose.
Not like anything crazy,just like just five or
(15:18):
six dudes on a beach.
You Yeah.
High school friends.
Catching up like blownaway by our good fortune.
And then when I look at thatphoto now, I was like, that one
bust, that one bust that one.
Yeah.
I mean like the beach photowas great 'cause like again,
it was just five or sixdudes standing on a beach.
It wasn't like anything crazy,but I remember the sentiment.
I. Ryan at that time whereeveryone was like, we're gonna
(15:40):
make so much money and wedon't even know what to do.
We don't know what todo, we want to do it.
Look at the grainsof sand around here.
Each one of them is a dollar.
And imagine they'reall yours, right,
dude.
And, and or not.
Again, this is, this is where Istarted to learn firsthand how
quickly, 'cause I didn't believeany of that could go away.
Right.
I just, I was like, if,if it's worth 10 now
it's worth a thousand.
(16:00):
And I not, because I wasbeing so arrogant, I just
didn't know any better.
Don't know any better.
And, and it just, it justfeels like that, right?
Like you're watching it grow.
Yeah.
You've started to putsomething into it.
You understand how you made itgrow, but you don't understand
how could I possibly turn thisaround and, and like, again,
like ask, ask Peter, right?
Right.
If you had asked him, could thisthing possibly could, should
(16:21):
we hedge a bit here, could thisthing possibly go to 38 cents?
What do you think hisanswer would've been?
Well, I mean, no possible way.
Right?
It's, it's at 31,it's gonna go to 300
Uhhuh.
Right?
Exactly.
You're thinking the oppositedirection, like none of
that makes sense now.
I have no idea what thedude did with his money.
Right.
For all I know he cashed it allout and, and you know, put it
in T-bills for hell if I know.
All I'm, all I'm relatingto is his purchase and his
(16:43):
stock price as, as just likea general idea that like,
let's put it this way, if hehad known, known that it was
gonna be 38 cents, he sure ashell wouldn't have been buying
15 million feller mansion.
Right?
Like what I had the cape for ispicture the worst case scenario.
And spend toward that.
Right?
Like, like, like whatis, what is the worst
(17:05):
thing that could happen?
Relatively, right.
Because the other side ofit, like things, when things
go bad, they usually don'thappen overnight per se.
They happen fast, right?
But you do have timeto, you know, to react.
So he might've soldat five bucks, right?
That've been 150 millionor what, you know,
whatever that maps back to.
But regardless, it does happen.
You know, the, the floorfalls out all the time.
(17:25):
It does so much.
So, like I said, my, my, mywife and I, like we bet on it.
We're just like, yeah.
Matter our time.
Yep.
Yeah, that's the thing.
I think to your point, when wemanage towards that, that worst
case scenario, right, regardlessof what happens then, like if
it doesn't end up happening,then we're better off If it
doesn't end up happening, right?
We're better off.
In either case, we're betteroff, but the, the minute we
turn a lucky payout lucky.
(17:48):
Lucky I, you know howI'm using that word here.
Fortunate payout, right?
We work hard.
Mm-hmm.
We get something, but thatone time event, we turn
that into our baseline.
Yeah.
Forgetting that itis blip not trend.
Once that baseline disappearsand the floor's gone, that free
fall is a lot harder and thecrash is way more significant.
Right.
If you're not managingtowards that downside, um,
(18:09):
it will jump up and you
agreed.
Agreed.
And so.
Again, I think we've got thisfantasy that, that there's
another payout coming.
Yeah, of
course.
But, but here's like Ryan, if,if you had just gotten the big
payout and I was trying to, um,pitch you on the idea that there
will not be another payout.
Yep.
And by the way, think of hownegative I sound in that moment.
That's the
thing, man.
(18:30):
Especially, especially whenit's coming from somebody.
Like, it actually kinda doesn'tmatter who it's coming from
unless it's coming from acopy of you who went through
exactly all the same shit youjust went through to get there.
You're like.
Right.
You don't know me.
You have no idea whatmy struggles were.
Like you don't know what ittook to achieve this and what
I am capable of and clearly
capable of doing this.
Again, if we look at thestats, if, if when I make
(18:53):
the argument that this hasnothing to do with you Yep.
This has nothing to do with you.
Right.
This is just sayingthat's statistically Yeah.
This will be your last payout.
Yep.
And, and, and when I saystatistically, let me explain
the statistics I'm using.
'cause some of them applyand some of them don't.
Statistically looks likesomething like this.
At any given time,there's 10,000 venture
backed startups in play.
(19:14):
Yep.
Right?
Um, few thousand new getadded to the thing and
few thousand die off.
So there's 10,000, uh,active at any given time.
About 1% of that give or takeris gonna have like the big, big
exit, like the ipo, et cetera.
And Peter, you know his credit.
Yep.
Got to that exit.
Right.
Very hard deal that 1%.
Easier to do in 2021.
A lot harder to dobefore and after that.
Definitely timed it right.
Anyway.
(19:34):
Beyond that, a total of15%, including that 1% are
going to have some sortof positive exit at all.
Right?
Say that again so
that people hear this right?
Say that again.
15%. Have any levelof positive outcome.
Correct?
Like it, it's like an m anda kind of sale, like, you
know, you sell to somebody,et cetera, and the sale price
(19:56):
is more than you invested.
Okay?
So again, some peoplein, in the audience, um,
aren't familiar with this.
If Ryan and I raised ahundred million dollars and
we sell for a hundred milliondollars, the first a hundred
million in almost every casegoes back to the investors
first, and we get nothing.
Okay, so yeah, we heard wesold for a hundred million.
Yeah, but how muchdid you raise?
We didn't, yeah, we didn't, andby the way, the investors get
nothing either getting theira hundred million dollars back
(20:17):
is right where they started.
Yep.
Right.
Exactly.
Also, not a
win for them,
but so, so keep that inmind again, like, so just
to, to stick with the maththere, 15%, see any level of
positive outcome, but that'sat the VC level, right?
So that doesn't mean that15% of venture backed
founders end up with anykind of benefit or payout
and what you, you kind ofmissing in those numbers.
Of the 10,000 that didn't die.
(20:39):
Yeah, right.
I mean like think of how manylevels this is going past Ryan.
This is saying there arecountless companies that
never get a penny of funding.
Right.
Okay.
And some of thosego on to do great.
Okay.
Sure.
We're not countingthose right now.
What we're looking foris a cohort that is more
statistically like likelyto exit because of funding
and focus and, and momentum.
So we're basically sayingthese are the people
(21:00):
that make it to the NFL.
Okay.
Yep.
Of the thousand, millions ofcompanies that get started.
Only 10,000 of them willever get a venture check.
Now, some people don'tunderstand what that means.
What that means is venturecapitalists are further
down the pipeline than angelinvestors and other investors
before you get to them.
So what that means isthose 10,000 are still
the cream of the crop ofhundreds of thousands that
(21:21):
got invested before them.
So this was alreadylike getting vetted out.
So these are alreadylike the high draft
candidates to begin with.
Okay.
Even of the highest draftcandidates, the people with
the most capital, the fastestmoving ideas, et cetera, you
know, the freshest teams,you name it, only 15% of
those would have any kind ofexit that's meaningful now.
Now here, here's where thenumbers get way better.
(21:41):
The number of people thatgot to that exit, either IPO
and or sale and did it again.
Less than 1%.
Less than 1%.
Yeah.
It, it's, it's like saying,what, what's your, what's
your roadmap and planfor the future now that
you've had success once?
So like, well, I'm gonnago get struck by lightning,
then attacked by a shark,then survive a plane
crash, and then I'll walkaway and win the lottery.
(22:02):
Right, right.
These are quiteliterally the odds.
You're talking about tryingto do like multiple accident.
It does happen, right?
Like we got the, wegot the Elon's, we
got the Jack Dorsey's.
Right.
They've
done it multiple times.
This is a bit different.
I, I think people mismisrepresent these stats.
What we're saying is.
The probability ofdoing that ever again.
Yeah.
The probability that Peterfrom Wish is going to have
(22:22):
another wish is almost zero.
And when people say, well,well, Elon Musk and, well, yeah.
The fact that you canname who these people are,
Uhhuh, temperature, howfew of them are, yeah.
Right.
Or like, you know, youcould say, oh, well you
said you've had five exits.
Yeah.
But they're notpublic companies.
Correct.
Right.
Correct.
Um, yes, there's lots ofpeople that could, that can
build smaller things andsell for smaller amounts.
(22:45):
And if you wanna make theargument that, hey, I could
have another, I'm just makingup a number, $10,000 payout or a
hundred thousand dollars payout,yes, statistically probably can.
But as that number grows.
The probability thatyou'll do it again,
shrinks, geometrically.
Yeah.
When we're talking aboutexits that are larger than
a good annual bonus from aFortune 500 company, right.
The odds drop off really quick.
(23:05):
You bet.
Like I've got a good friend ofmine that I'm thinking about
who's been part of four exits,Uhhuh, like who were companies
went public, et cetera.
Yeah.
And he's made millionsand millions and millions
of dollars doing it.
Okay.
Now that said, he gets placedin these companies when
they're about to go public.
So that's, that's like basicallysaying like, Hey, I'm gonna
bet on this hand when Ialready see the dealers busted.
(23:28):
Right?
Yeah,
exactly.
He's pretty much likechasing the finish line.
And if you're, if you'reone of the infant ally,
small number of people thatcan do that, go do that.
Cool.
Yep.
Fantastic.
For everyone else.
For everyone else, right?
It doesn't work out that way.
And so I think when we sayhoard this money, right,
because it's the lastpayout you'll see, all we're
speaking to is the statisticsthat we see every day.
(23:51):
Of how rarely people getpaid out again, and it's
always hard to believe.
Yeah.
I think, again, it goes backto that all the reasons we
talked before on why it's hardto believe for the founders.
Right.
But hopefully, hopefully thisis perking some ears today.
Uh, because it, it's,it's unfortunate, but
like we've seen this overand over and over again.
Right.
And it's always a massiveexit, either, it doesn't just
happen to the, to the IPOs.
It does also happen tothe, the, the little exits.
(24:14):
Right.
Right.
And while those are morerepeatable, it doesn't
mean you need or wantto lose it, does it?
That's okay.
So let's talk about, let'stalk about hoarding the gold.
Yeah.
Okay.
When you get it.
So, you know, our adviceto these founders, you've,
you've definitely heardthe part where we're like,
you know, don't lose it.
Yeah.
But more importantly, do whatmy buddy did at Priceline.
If you're gonna spend it,spend it on things that are the
foundational things that youare gonna buy in life anyway.
(24:36):
Right?
Like in his case, his,his law degree, his home.
Like those were, those makesense now, maybe not $15 million
mansion in in, in Bel Air.
He bought a very reasonablehome and what he did, which
was fascinating 'cause hewas only like 26 at the time.
He basically.
Paid in cash for all thethings he was gonna spend
the next 20 years tryingto draw a salary Yep.
(24:57):
To chip away at, to cover it.
Right.
Which put himexponentially far in life.
Genius way to spend your money.
Right.
I mean, I would justcall that an investment.
But what happens is for a lotof us, because we're founders,
is we push the chips back in.
Yeah.
O
we're like, well, youknow, again, it's worth 50.
It's worth a hundred.
Yeah.
I'll bet on myself.
I'll bet on five other startups.
Or 10 or a hundred.
(25:18):
Yeah,
a hundred percent.
I had this moment early on, uh,when we were growing the agency.
I don't even ifthey're around anymore.
There was a companycalled Compuware.
Oh yeah.
Back,
like, back in like the midnineties, doesn't matter.
And they were looking to make anacquisition of a digital agency.
And we had just won abig account, but we were
still ver like fairlydigestible at the time.
(25:38):
And, and I remember kickingaround numbers around like
50 million for a, for a sale.
Me and, and my business partnerBlaine, were like, if it's
worth 50, it's worth 500.
Uhhuh.
Let's, let's pass.
And we did, but my pointand, and we ended up
selling for more later.
But, but, but the, the pointis or not like that could have
just, that could have beenthe best offer we ever saw.
And, and I would look at itand say, you know, what had we,
(26:00):
had we sold then versus now?
I would still argue it was theright decision because it, it
was a, a meaningful amount ofmoney on the table, et cetera.
Yeah.
And, you know, and we soldfor substantially more, but.
Uh, so what, like why risk it?
Right?
Yeah.
In retrospect,
I would've toldmyself to sell it.
That's
what I'm saying.
Yeah.
You can lock in that save point.
Right?
So it just lock inthat save point, right?
It does.
(26:20):
It does so much.
Right.
Particularly when youstart to look at what the
actual differences are,the benefits of holding
and, and increasing that.
We both know people that havesold for 150 million and people
that have sold for a billion.
The happiness quotientbetween those two folks
doesn't change much.
Right.
Right.
Right.
Gives you, yeah, sure yougot a lot more money, but it
(26:40):
doesn't change life that much.
Now, if you go from even sellingfor a million, we've done
this to mean like one of ourearliest episodes will, yep.
$250,000 is a, is a lifechanging amount of money, right?
Yep.
Some people go like, no, it'snot till you hand it to 'em.
They go, oh, oh, that actuallydid change my life, so.
I think this is where it becomesreally difficult for founders to
then start to do the calculus.
It's like, so when, when,when should I do this?
(27:01):
When should I sell?
I think the other thingis like, it's not like
there's a whole bunch ofoptions for this either.
It's not like, it's not likejust any day of the week you
can be like, well, let me driveit down to the dealer and I'll
just see what they'll give it.
Give me for it.
Right, right, right.
It's not, it's not a 57 Chevy.
Yeah.
Right.
This is a, this is a verydynamic and complicated
to, to liquefy asset.
So like if you go backin time, often only have
(27:21):
one chance to sell.
That's the thing.
And I think that's the thing.
So when, when, when you guyssaid no to the Compuware
offer, by the way, theysold in 2020 for, for $2
billion to a, a larger,uh, software conglomerate.
Really?
Yep.
That's interesting.
'cause we had a $6 billion IPO.
So like, um, I'm wonderinglike, which one of us maybe made
out better or worse than that
anyway.
(27:42):
They've been around since1973, so maybe they'd just
been stacking up little exitsfor, it was good company as
best I knew.
Yep.
So I think that it's, it'sdifficult for founders if you
go back in time, like how wouldyou really, so you can say, in
hindsight, I'd go back and I'dtell myself, take that offer.
I. What advice can we giveas, as that offer comes in?
Like, how do you decide, is thisthe best it's ever going to be?
(28:05):
Should I just hold this thing?
Like that calculus getsreally complicated.
I, I've got a wholeformula for it.
Like, you know, when evaluatingthese things, I look at
it and I say, basically,where, where will this move
me up the chain in my life?
Like, safety is usually whatit's come down to, you know,
lifestyle, things like that.
And I always say, at this pointin my life, I'm not worried
about how much more I'll make.
(28:26):
I'm worried about losingwhat I have and I think for
a lot of people, they justhaven't maybe been around
long enough to understand howhard it is to get it back.
Right.
Oh God, yeah.
I know a lot of founders whoout once you out demotivated by
the loss
and lost it.
I don't know manythat that got it back.
And there there's noway to forget that.
And so again, I look at it,you know, personally, and,
(28:47):
and I say, okay, um, yeah, ofcourse, like everybody else,
I, I'd love to make more money.
Part of it's just theachievement, but the
other part of it is like,Hey, my life's okay.
Like the increases won'tbuy me much more happiness,
but the decreases willmake me pissed off.
I just remembered,uh, just remembered a
great Alex Trebek line.
It's so odd 'cause it'scoming from Alex Trebek.
I love Alex Trebek and somebodywas asking about gambling.
(29:10):
It's funny we'retalking about this.
He says, I hate gambling.
He said, well, why?
He's like, winning doesn'tbring me that much pleasure, but
losing fucking pisses me off.
Yeah, that's exactly it, man.
That's it though.
I mean, like, and that's, it'skind of what we were getting
at a minute ago, which is that,you know, those increases have a
very diminishing return, right?
Like yeah.
If you go from 1 million to10 million, 10 million to a
(29:31):
hundred million, a hundredmillion to a billion, yeah.
It, it is, there will besome life changes that,
that come along with that.
Certainly howimpactful they'll be.
Don't know, but yeah.
Right.
It's also the, the likelihoodof that happening versus
the likelihood of theopposite happening without
making those safe points.
So I think you're right.
I think once you've, you've.
Had the ability to buyyourself some safety and kind
of minimize that downside andsay like, okay, like I'm, I'm
(29:53):
at least gonna be reasonablewith a portion of this.
Um, 'cause you're also notsaying like, don't celebrate.
Right, right.
Oh yeah.
Like pop the champagne,don't enjoy your money.
Throw some concompetit, just don't
assume it's coming again.
Yeah, exactly.
Yeah, exactly right.
I think that's, that'sthe important part.
So, I mean, here'sthe thing, right?
I, I wish I genuinely wish morefounders would heed this advice.
I am a hundred percent surealmost none of them will.
(30:13):
I think all of them thatare, that are listening
today are gonna have, they'regonna be in two camps.
Where was Will and Ryanwhen I needed that advice,
because I made that mistake.
Yeah.
The other camp is notgonna happen to me.
Right.
Yeah.
That, that, that soundslike, you know, real negative
kind of oldie, timey advice.
I'm, I'm sure that mightwork back in your day.
Old men.
(30:33):
Yeah.
Right.
But it doesn't applyto me, and I can just
already tell you, you're,you're going to be wrong.
I don't want youto be, but you are.
But here's the thing.
The whole point of thisjourney is to get to a point
where at some point we cancash in our chips, we can
fill our bank account, evenif it's a small amount.
What we don't wannado is ever risk.
Going backward from that.
(30:54):
So every time we geta win, keep the win.
Keep the win.
'cause it's probablyour last win.
And if we do it right,it's the only win we need.
Overthinking your startupbecause you're going it alone.
You don't have to, and honestly,you shouldn't because instead,
you can learn directly frompeers who've been in your shoes.
Connect with bootstrapfounders and the advisors
helping them win in thestartups.com community.
(31:15):
Check out the startups.comcommunity@www.startups.com
to see if it's for you.
Could be just thething you need.
I hope to see you inside.
Welcome back to the episode ofthe Startup Therapy Podcast.
This is Ryan Rutan,joined as always by my
friend, the founder,and CEO of startups.com.
Will, Schroeder Will, why isit that every time as a founder
that we hit the startup lottery?
I. We think that it'lljust happen again.
Right?
This feels like a thing, but,but, but hang on, let me,
(00:20):
let me set the stage here.
Picture yourself inearly 2021, I think.
Yeah.
Yep.
So the world's slowly recoveringfrom, from a pandemic.
Tech.
IPOs are everywhere, andsuddenly Peter Chesky, the
co-founder of Wish is a.Brand new billionaire company.
Stock source to memoryserves like 31 bucks.
(00:41):
He's now got a networth in the billions.
And so he naturally celebratesin a very billionaire way and
buys a belaire mansion, right?
And it's only 15million bucks, right?
Which, when you're worth what,like 4 billion on paper, kind
of doesn't matter, right?
Like, who cares who'ssweating 15 million?
It's, it's literally a a, analmost incalculable fraction.
But then what happens Will.
(01:01):
We all do the same thing.
When times are good, when theriches are flowing, we assume
they're gonna keep flowing.
And what's different aboutthis, not just Wish, which
I think is a fascinatingstory, but also just any kind
of payout or big payday, itcould be a good year, right?
Right.
It could be a good quarter,it could be a good whatever.
Yep.
But when we get, when wereceive a substantial payout,
(01:24):
whenever that time might be.
Okay.
Now wish was a rocket, right?
Yeah.
That thing like grew so fast.
It was everywhere.
It also worked particularlywell during the pandemic.
Mm-hmm.
Because everyone was athome and they were on
their mobile devices.
Yep.
And which was servingup junk, popping away.
It was so cheap.
Right.
And they built this wholestory behind it, like this,
you know, bigger storyfor the, for the street.
(01:46):
And they said, look, it's notjust that we're selling cheap
junk, it's that we're buildingthis amazing like third party
logistics infrastructureto be able to do that.
Right.
That's gonna be worthmore than Amazon.
And you know.
Told the story andso it goes out.
Has an amazing IPO to yourpoint, you know, had hit a
market cap of 18 billion,uh, Peter's worth, I think
4 billion at the time.
Yeah.
And I'm watching this wholething and then I, and then I saw
(02:09):
the headline, bought a mansionin Bel Air, and I'm like.
Of course he did.
Right?
No.
And, and, and look, I,I don't begrudge anybody
for spending their money.
Right.
Uh, the irony was I wasthinking about it, right?
Like, my wife and I wereshopping for a house in Bel.
It wasn't a mansion.
It was just a house.
But like, we're shoppingfor a house in Bel,
like a year before that.
Yep.
Can't begrudge the guy.
(02:30):
Yeah.
And I sure shit didn't have an$18 billion IPO, but my point is
all I could think to myself is.
This guy feels likehe's worth $4 billion.
Yeah.
And numerically he is.
Yeah.
He was.
And 15 billion or 15 million,I think it was the price tag.
15 million's, a rounding error.
It is, it's literallya, it's a, it's a tiny
incalculable fraction.
Right.
And if, if you went to eventhe most curmudgeon accountant,
(02:52):
and instead, I wanna makethis purchase, that accountant
would be hard pressed mm-hmm.
To say.
That's ridiculous.
Okay.
Yeah.
Again, this is the point though.
This is, this is why we'regonna set up with wish.
Now I'm intimately familiarwith wish because I
made a Wish too on Wish.
Yeah.
I bought their stock.
Uh, I don't rememberexactly where I bought
(03:14):
it, but I held it.
Through the entire drop.
Yeah.
Now it's bounced back alittle bit since then.
Right.
But when it peaked,okay, I do remember this.
It peaked at $31.
Yeah.
Okay.
So Ryan, if, if you're lookingat your payouts, and this
is what this is all about.
If you're looking atyour payouts and you're
thinking, I'm at $31.
Worst, worst, worst case,we go to 15, 10, maybe.
(03:35):
Nine on the worstday we'd ever have.
24 months later, Uhhuh,it's trading at 38 cents.
99%, 99% percent
reduction.
Ouch, right?
For everybody to own the stock.
That was painful for anybodywho, hell, who had $4
billion worth of that stock.
It
was a lot more painful.
This is what we're teeingup with, right At that
(03:56):
point when his stock kind,you hits that milestone.
Yeah.
He's down to somewhere around38 million of, of value.
Now there's a wholebunch of caveats to that.
People thought,well, 38 million.
I mean, dude,
thank God he boughtthat house that
was a 50% hedge onhis future net worth.
Right?
Holy shit.
Yeah.
Yeah.
And, and so, you know, uh, youcould make the case, well, 38
million stole a lot of money.
(04:16):
It is, it's not that liquid.
It theoretically sounds liquid,but you're the main principle
in a, uh, in a public company.
You can't just fire sale at all,
actually make it worse.
You just solve that.
Yeah.
Especially at a time whereit's gone from $31 to 38
cents, not a good look.
If you're like, I'm just gonnalet go of what I got left here.
Yeah.
And, and, and I'm notintimately familiar with,
with anything Peter did withhis money, so I, I I don't
(04:38):
wanna pretend to be an expert.
Yeah.
However, what I do knowis that when you have that
kind of money in the market,you don't take it out.
Right.
Uh, you don't take it outbecause you borrow against it.
Yep.
It's also a taxstrategy, et cetera.
For those that aren't familiar,the reason people get all
pissed off at rich people fornot paying taxes, truth be
told, they pay tons of taxes.
But what, what, what they,what they hear are the
headlines are this guy Peter,his stock goes to $4 billion.
(05:01):
He takes out a loan Yep.
Against $4 billion andthat loan's not taxable.
Correct.
So he now gets cashin his bank account.
It's gotta pay it back.
But he's got cash in his bankaccount with no, uh, taxes all.
Anyway, a long way tosay when times were good.
Peter did what we all do.
He says they'llcontinue to be good.
Yeah.
This is just the beginning.
(05:23):
Oh, brother.
It, it, if divided, we are
master extrapolatingof our best day ever.
Right?
As startup found is real,like best day ever, probably
gonna look like thisfor the rest of my life.
Like I said, the stock hasbounced back a little bit,
nowhere near where it wasbefore, and that's fine, but
that's not really the point.
The point of the storyisn't, isn't that it
went up and went down.
It's that when it was up.
He spent and felt andthought like we all do.
(05:46):
Yep.
That's gonna continue to go up.
And honestly, I, I've alwaysfelt, and I always tell founders
when they have their moment,they've got like a cash out
moment or a sale moment orwhatever, tell 'em the same
thing every single time.
Um, generally everybodyignores me, but that's okay.
I say, treat this payout,treat this distribution,
treat this whatever you'reabout to get, as if it's the
last payout you'll ever have.
(06:08):
Because numerically,statistically, statistically.
It is.
Yeah, that's it.
Missed last game.
Tough math.
No ones.
That's real math.
Yeah.
Great.
No one believes that,Ryan, because at the time
someone's giving thema giant chunk of money.
And they're like, well, if I cando it now, I can do it again.
It's the guy who winsa ton of money at the
blackjack table, right?
And just has an amazing streak.
(06:29):
Does he take 10% of itand keep gambling and
put the other 90% away?
Double down?
Why would you at that point,because clearly it's replicable.
Clearly
I'm winning.
Right?
I mean, it's, it's, it'sVegas over and over.
I told you this once before.
So when, when my wife and Igo to play, um, blackjack at
the casino, that's our game.
We always do the same thing.
We show up at the table, weput down a ver relatively
small amount of money.
(06:50):
We, we both buy the equalamount of chips now, I
don't know why, but she'sreally bad at gambling.
Um, it's blackjack.
There's not reallya lot to be bad at.
Yeah, I mean, this iswhy we play it anyway.
So she tends to bepretty bad at it.
And as the night continues,um, her money just like slowly
dwindles and I, I'll giveher more chips and, you know,
to keep her going anyway.
My streak goes on.
(07:11):
I tend to win.
I have no idea why, but I, Itend to win it at the table.
But what my wife does, asI'm getting more and more
aggressive and excited andwhatever about my winnings,
my wife is siphoning my chips.
Yeah.
Off the table andinto her purse.
There you go.
Okay.
And so at some point in thenight where it's like, time
to go, I'm like, man, youknow, we didn't do very well.
(07:31):
And of course she's like,we actually did really well.
We did okay.
I just took all thechips off the table.
Right.
And we actually have,we made a ton of money.
I'm like, oh, wellthat's a nice, nice find.
Perfect.
Those, taking the chipsoff the table when, when
you're up is exactlywhat we're talking about.
Yeah.
And what I wanna unpack is,you know, when, when we go
through this today, I wanna talkabout why people don't do it.
(07:51):
Yeah.
'cause that's the important, I think everybody logically
gets it when you say this.
Now everybody goes, yeah.
Okay.
That makes sense.
So as, as I start winning,I should suck some away.
Everybody understands that.
And yet no one sees it asthat moment where like, oh,
these are the winnings, thisis the time to sock it away.
Yep.
And I think, look, I, you,you've said this before, but
I, I'll say it again, man.
(08:11):
It, it's good Timesmake for bad decisions.
Really bad
decisions.
Right.
Really bad.
Because there you canmake Yeah, because you're,
everything's going well, right?
Yep.
We got a big payout.
And again, like, could bequarterly windfall, could be a
private sale, could be an IPO,kind of doesn't matter, right?
Whatever that is, it's.
Easy to believe that it's,it's just the beginning.
(08:34):
Yep.
Right.
It's a home run.
But I'm gonna treat it likeit's a base hit and like I can
just continue to do that and batmore and more and more of those.
And this is where it reallystarts to go wrong, but
it's because we're onthe high of that success.
Right.
Right.
And it's funny, it's like,uh, professional athletes
are so known for this.
Yes.
Right.
They, they, they getthe signing bonus.
They go into the NFL, the NBA,you know, wherever they go.
(08:54):
They all have a moneymanager that more or less
says the same thing to them.
Yeah.
Which is don't blow allthis money on dumb stuff
because you'll probablynever get it again.
Yep.
And of course most of themare like, are you kidding me?
Uhhuh?
Right.
What if it's a million,it's 10 million.
I don't even hit
my prime yet.
Exactly.
He said as he got his lastcheck, and it blows my mind
(09:17):
because in that moment thereare no signals to tell you.
Yeah.
Stop.
'cause you're winning.
Because you're winning.
Yep.
Right.
When I was running my firstcompany and we started to
make some serious money, Iwas like, well, companies
just grow every year.
That's just the way it goes.
Well, we do right just 20%year over year, forever.
What could go wrong?
Dot com bust.
(09:38):
Yeah.
Yeah.
Insert.
Insert.
Pretty predictable.
Cyclical.
Oh my god.
Economic.
And here it goes.
Oh
my God.
It's it.
I mean, I look at itnow like when something
good happens to me.
I instantly just wait forthe other shoe to drop.
Yeah.
Right.
Where wherever there's awindfall, I'm just like, no.
And, and my wife and alwayshave, have this joke.
We say, the money's spent,we just don't know where yet.
(09:58):
Exactly.
That's exactly it.
Yep.
Nobody's going to take it.
It's already
been claimed.
They just haven't called us yet.
Exactly, and so I think,well, actually, Ron,
let me ask you this.
When you think about foundersthat are like, you know, in that
prime moment, they've got theglow, whatever, why do you think
they're so prone to making baddecisions or like, like what
does that look like to you?
I think it's, it goes back tothis like projection of hope
(10:21):
thing that we've lived on fromthe very beginning, right?
Yeah.
We've had to believe against.
All odds that thisdream that we had can
actually become something.
And we kept going againstall the odds, right?
While things weren't working,we weren't making payroll, we
didn't have revenue, we lostthe contract with the, the
co-founder left with half theip, whatever it is, right?
(10:41):
Like there's all of every, everyone of these success stories.
There were a shit ton ofchallenges and hurdles that led
up to that point, and becausethey were able to succeed
despite all of that stuff.
I feel like what happens is inthat golden moment when all of
a sudden the glow is upon us.
Yeah.
Now it's like, okay, if Iwas able to do it when shit
was completely sideways.
(11:02):
Of course it will just be easierfrom this point forward, not
realizing that this isn't achange in the tides, that this
was a, a payback for what hadbeen put into that point, right?
All the efforts that have beenput in this is that moment.
This isn't just a change inthe environment, that now it
will just always be like this.
We get like, oh, this isour new normal, right?
This is the new low watermark.
We'll just always be here.
(11:23):
It'll be great.
I think that's whatends up happening.
I think you, you, when we'rein those moments, and I've
certainly had them myself, whereit's like, I worked so hard.
Through such tough circumstancesnow everything feels better.
Everything feels easier.
So clearly if I coulddo it, then with all the
advantages I have now, it'llbe that much easier to do it
again and again and again.
(11:43):
Right, right, right.
Absolutely untrue.
But it sure feels likethat and, and it's easy
to make that story right.
So easy to make that story.
At that time, I, I'll giveyou an interesting counter
story that one of the fewtimes I've seen someone
go the opposite direction.
Okay, so this is late nineties.
This is at the, the, theformation of priceline.com.
(12:05):
Uhhuh.
Now a, a lot of peopledon't really understand
like Priceline like now.
'cause it's not thecompany it used to be.
Yeah, yeah.
But when Priceline came out.
As an IPO in the late nineties.
It was one of the greatest IPOs.
It was a massive,massive success.
Jay Walker, who's a fascinatingindividual, who's the, um,
the, the, the founder ofPriceline was on the cover
(12:25):
of Forbes and, and they saidhe was like, the next Edison.
Like it was a big deal.
Well, it just so happenedthat one of my closest friends
from high school actually wentto go work for him on the,
when they were figuring outwhat price line would become.
Mm. So he was there like oneof the first like 15 employees.
Oh, wow.
Right.
Like long before itbecame Priceline.
He's there throughthe whole journey.
He's the whole journey asthis thing, you know, turning
(12:46):
into what it was gonna becomeand like, like a $27 billion
IPO, which is, it's a lot now.
Hell of a lot back then, then.
Oh my
God.
Yeah.
Right.
Anyway, as, as they're,they're leading up to the IPO.
They haven't gone IPO yet.
He goes in, uh, to talkto Jay Walker, who was
like a mentor to him.
Right.
And Jay loved him.
And, uh, he said, HeyJay, I'm resigning.
Joe's like, wait, what?
(13:06):
Uh, he's like, are you kidding?
Like, like, what areyou talking about?
He's like, yeah, my toys
and I'm going home.
Yeah.
And so you said, he's like, Iwant to exercise my options.
Like, you know, I'm, I'mmaking these numbers up because
I, I don't wanna share his,his numbers, but like, I'm
ex exercising my options ata hundred thousand dollars.
When, if I saw it throughthe IPO in six to 12 months,
um, you know, past lockup,it would be like $2 million.
(13:29):
Right.
So like a massive difference.
Yep.
And.
Jay's mind blown uhhuh.
He's like, why would you, whatare like, look around man.
Look at what's happening here.
Right?
Yeah.
And so finally,finally, he breaks down.
He's like, this isthe dumbest thing I've
ever heard in my life.
Okay.
And, but, you know,begrudgingly writes him a check.
It was more than ahundred, a lot more than a
hundred thousand dollars.
(13:49):
But, um, writes him a check.
My buddy takes it.
He quits.
He puts himselfthrough law school.
He buys a house with it.
He buys his first house withhis family, bought some cars,
whatever, like, uh, investedit in his future, right?
Yep.
Basically bought all thethings that, you know,
money will stabilized
himself.
Yeah, exactly.
Massive.
IPO, uh, price on hasa massive IPO and then
basically right into the.combust all those options go
(14:13):
under water and nobody'soptions are worth a penny
because they were, and theywere still in lockdown.
So like this is, yeah,they're, they're all
locked up.
You cannot,
you can't.
Right.
So right after theIPO, you can't sell.
So everybody watchedtheir, their paper value
go through the roof.
I mean, just popping bottles
everywhere.
Right?
Straight back down, right?
Yep.
You know something that'sreally funny about everything
we talk about here isthat none of it is new.
(14:36):
Everything you're dealingwith right now has been done a
thousand times before you, whichmeans the answer already exists.
You may just not knowit, but that's okay.
That's kind of whatwe're here to do.
We talk about this stuff onthe show, but we actually
solve these problems alldayLong@groups.startups.com.
So if.
Any of this sounds familiar.
Stop guessing about what to do.
(14:58):
Let us just give you the answersto the test and be done with it.
We, we've got a great photo ofme and a couple of my friends
from Priceline and then a coupleother buddies at the same time.
And, and we're alllike 25, right?
And we're allstanding on a beach.
Right.
And just like, likejust in this great pose.
Not like anything crazy,just like just five or
(15:18):
six dudes on a beach.
You Yeah.
High school friends.
Catching up like blownaway by our good fortune.
And then when I look at thatphoto now, I was like, that one
bust, that one bust that one.
Yeah.
I mean like the beach photowas great 'cause like again,
it was just five or sixdudes standing on a beach.
It wasn't like anything crazy,but I remember the sentiment.
I. Ryan at that time whereeveryone was like, we're gonna
(15:40):
make so much money and wedon't even know what to do.
We don't know what todo, we want to do it.
Look at the grainsof sand around here.
Each one of them is a dollar.
And imagine they'reall yours, right,
dude.
And, and or not.
Again, this is, this is where Istarted to learn firsthand how
quickly, 'cause I didn't believeany of that could go away.
Right.
I just, I was like, if,if it's worth 10 now
it's worth a thousand.
(16:00):
And I not, because I wasbeing so arrogant, I just
didn't know any better.
Don't know any better.
And, and it just, it justfeels like that, right?
Like you're watching it grow.
Yeah.
You've started to putsomething into it.
You understand how you made itgrow, but you don't understand
how could I possibly turn thisaround and, and like, again,
like ask, ask Peter, right?
Right.
If you had asked him, could thisthing possibly could, should
(16:21):
we hedge a bit here, could thisthing possibly go to 38 cents?
What do you think hisanswer would've been?
Well, I mean, no possible way.
Right?
It's, it's at 31,it's gonna go to 300
Uhhuh.
Right?
Exactly.
You're thinking the oppositedirection, like none of
that makes sense now.
I have no idea what thedude did with his money.
Right.
For all I know he cashed it allout and, and you know, put it
in T-bills for hell if I know.
All I'm, all I'm relatingto is his purchase and his
(16:43):
stock price as, as just likea general idea that like,
let's put it this way, if hehad known, known that it was
gonna be 38 cents, he sure ashell wouldn't have been buying
15 million feller mansion.
Right?
Like what I had the cape for ispicture the worst case scenario.
And spend toward that.
Right?
Like, like, like whatis, what is the worst
(17:05):
thing that could happen?
Relatively, right.
Because the other side ofit, like things, when things
go bad, they usually don'thappen overnight per se.
They happen fast, right?
But you do have timeto, you know, to react.
So he might've soldat five bucks, right?
That've been 150 millionor what, you know,
whatever that maps back to.
But regardless, it does happen.
You know, the, the floorfalls out all the time.
(17:25):
It does so much.
So, like I said, my, my, mywife and I, like we bet on it.
We're just like, yeah.
Matter our time.
Yep.
Yeah, that's the thing.
I think to your point, when wemanage towards that, that worst
case scenario, right, regardlessof what happens then, like if
it doesn't end up happening,then we're better off If it
doesn't end up happening, right?
We're better off.
In either case, we're betteroff, but the, the minute we
turn a lucky payout lucky.
(17:48):
Lucky I, you know howI'm using that word here.
Fortunate payout, right?
We work hard.
Mm-hmm.
We get something, but thatone time event, we turn
that into our baseline.
Yeah.
Forgetting that itis blip not trend.
Once that baseline disappearsand the floor's gone, that free
fall is a lot harder and thecrash is way more significant.
Right.
If you're not managingtowards that downside, um,
(18:09):
it will jump up and you
agreed.
Agreed.
And so.
Again, I think we've got thisfantasy that, that there's
another payout coming.
Yeah, of
course.
But, but here's like Ryan, if,if you had just gotten the big
payout and I was trying to, um,pitch you on the idea that there
will not be another payout.
Yep.
And by the way, think of hownegative I sound in that moment.
That's the
thing, man.
(18:30):
Especially, especially whenit's coming from somebody.
Like, it actually kinda doesn'tmatter who it's coming from
unless it's coming from acopy of you who went through
exactly all the same shit youjust went through to get there.
You're like.
Right.
You don't know me.
You have no idea whatmy struggles were.
Like you don't know what ittook to achieve this and what
I am capable of and clearly
capable of doing this.
Again, if we look at thestats, if, if when I make
(18:53):
the argument that this hasnothing to do with you Yep.
This has nothing to do with you.
Right.
This is just sayingthat's statistically Yeah.
This will be your last payout.
Yep.
And, and, and when I saystatistically, let me explain
the statistics I'm using.
'cause some of them applyand some of them don't.
Statistically looks likesomething like this.
At any given time,there's 10,000 venture
backed startups in play.
(19:14):
Yep.
Right?
Um, few thousand new getadded to the thing and
few thousand die off.
So there's 10,000, uh,active at any given time.
About 1% of that give or takeris gonna have like the big, big
exit, like the ipo, et cetera.
And Peter, you know his credit.
Yep.
Got to that exit.
Right.
Very hard deal that 1%.
Easier to do in 2021.
A lot harder to dobefore and after that.
Definitely timed it right.
Anyway.
(19:34):
Beyond that, a total of15%, including that 1% are
going to have some sortof positive exit at all.
Right?
Say that again so
that people hear this right?
Say that again.
15%. Have any levelof positive outcome.
Correct?
Like it, it's like an m anda kind of sale, like, you
know, you sell to somebody,et cetera, and the sale price
(19:56):
is more than you invested.
Okay?
So again, some peoplein, in the audience, um,
aren't familiar with this.
If Ryan and I raised ahundred million dollars and
we sell for a hundred milliondollars, the first a hundred
million in almost every casegoes back to the investors
first, and we get nothing.
Okay, so yeah, we heard wesold for a hundred million.
Yeah, but how muchdid you raise?
We didn't, yeah, we didn't, andby the way, the investors get
nothing either getting theira hundred million dollars back
(20:17):
is right where they started.
Yep.
Right.
Exactly.
Also, not a
win for them,
but so, so keep that inmind again, like, so just
to, to stick with the maththere, 15%, see any level of
positive outcome, but that'sat the VC level, right?
So that doesn't mean that15% of venture backed
founders end up with anykind of benefit or payout
and what you, you kind ofmissing in those numbers.
Of the 10,000 that didn't die.
(20:39):
Yeah, right.
I mean like think of how manylevels this is going past Ryan.
This is saying there arecountless companies that
never get a penny of funding.
Right.
Okay.
And some of thosego on to do great.
Okay.
Sure.
We're not countingthose right now.
What we're looking foris a cohort that is more
statistically like likelyto exit because of funding
and focus and, and momentum.
So we're basically sayingthese are the people
(21:00):
that make it to the NFL.
Okay.
Yep.
Of the thousand, millions ofcompanies that get started.
Only 10,000 of them willever get a venture check.
Now, some people don'tunderstand what that means.
What that means is venturecapitalists are further
down the pipeline than angelinvestors and other investors
before you get to them.
So what that means isthose 10,000 are still
the cream of the crop ofhundreds of thousands that
(21:21):
got invested before them.
So this was alreadylike getting vetted out.
So these are alreadylike the high draft
candidates to begin with.
Okay.
Even of the highest draftcandidates, the people with
the most capital, the fastestmoving ideas, et cetera, you
know, the freshest teams,you name it, only 15% of
those would have any kind ofexit that's meaningful now.
Now here, here's where thenumbers get way better.
(21:41):
The number of people thatgot to that exit, either IPO
and or sale and did it again.
Less than 1%.
Less than 1%.
Yeah.
It, it's, it's like saying,what, what's your, what's
your roadmap and planfor the future now that
you've had success once?
So like, well, I'm gonnago get struck by lightning,
then attacked by a shark,then survive a plane
crash, and then I'll walkaway and win the lottery.
(22:02):
Right, right.
These are quiteliterally the odds.
You're talking about tryingto do like multiple accident.
It does happen, right?
Like we got the, wegot the Elon's, we
got the Jack Dorsey's.
Right.
They've
done it multiple times.
This is a bit different.
I, I think people mismisrepresent these stats.
What we're saying is.
The probability ofdoing that ever again.
Yeah.
The probability that Peterfrom Wish is going to have
(22:22):
another wish is almost zero.
And when people say, well,well, Elon Musk and, well, yeah.
The fact that you canname who these people are,
Uhhuh, temperature, howfew of them are, yeah.
Right.
Or like, you know, youcould say, oh, well you
said you've had five exits.
Yeah.
But they're notpublic companies.
Correct.
Right.
Correct.
Um, yes, there's lots ofpeople that could, that can
build smaller things andsell for smaller amounts.
(22:45):
And if you wanna make theargument that, hey, I could
have another, I'm just makingup a number, $10,000 payout or a
hundred thousand dollars payout,yes, statistically probably can.
But as that number grows.
The probability thatyou'll do it again,
shrinks, geometrically.
Yeah.
When we're talking aboutexits that are larger than
a good annual bonus from aFortune 500 company, right.
The odds drop off really quick.
(23:05):
You bet.
Like I've got a good friend ofmine that I'm thinking about
who's been part of four exits,Uhhuh, like who were companies
went public, et cetera.
Yeah.
And he's made millionsand millions and millions
of dollars doing it.
Okay.
Now that said, he gets placedin these companies when
they're about to go public.
So that's, that's like basicallysaying like, Hey, I'm gonna
bet on this hand when Ialready see the dealers busted.
(23:28):
Right?
Yeah,
exactly.
He's pretty much likechasing the finish line.
And if you're, if you'reone of the infant ally,
small number of people thatcan do that, go do that.
Cool.
Yep.
Fantastic.
For everyone else.
For everyone else, right?
It doesn't work out that way.
And so I think when we sayhoard this money, right,
because it's the lastpayout you'll see, all we're
speaking to is the statisticsthat we see every day.
(23:51):
Of how rarely people getpaid out again, and it's
always hard to believe.
Yeah.
I think, again, it goes backto that all the reasons we
talked before on why it's hardto believe for the founders.
Right.
But hopefully, hopefully thisis perking some ears today.
Uh, because it, it's,it's unfortunate, but
like we've seen this overand over and over again.
Right.
And it's always a massiveexit, either, it doesn't just
happen to the, to the IPOs.
It does also happen tothe, the, the little exits.
(24:14):
Right.
Right.
And while those are morerepeatable, it doesn't
mean you need or wantto lose it, does it?
That's okay.
So let's talk about, let'stalk about hoarding the gold.
Yeah.
Okay.
When you get it.
So, you know, our adviceto these founders, you've,
you've definitely heardthe part where we're like,
you know, don't lose it.
Yeah.
But more importantly, do whatmy buddy did at Priceline.
If you're gonna spend it,spend it on things that are the
foundational things that youare gonna buy in life anyway.
(24:36):
Right?
Like in his case, his,his law degree, his home.
Like those were, those makesense now, maybe not $15 million
mansion in in, in Bel Air.
He bought a very reasonablehome and what he did, which
was fascinating 'cause hewas only like 26 at the time.
He basically.
Paid in cash for all thethings he was gonna spend
the next 20 years tryingto draw a salary Yep.
(24:57):
To chip away at, to cover it.
Right.
Which put himexponentially far in life.
Genius way to spend your money.
Right.
I mean, I would justcall that an investment.
But what happens is for a lotof us, because we're founders,
is we push the chips back in.
Yeah.
O
we're like, well, youknow, again, it's worth 50.
It's worth a hundred.
Yeah.
I'll bet on myself.
I'll bet on five other startups.
Or 10 or a hundred.
(25:18):
Yeah,
a hundred percent.
I had this moment early on, uh,when we were growing the agency.
I don't even ifthey're around anymore.
There was a companycalled Compuware.
Oh yeah.
Back,
like, back in like the midnineties, doesn't matter.
And they were looking to make anacquisition of a digital agency.
And we had just won abig account, but we were
still ver like fairlydigestible at the time.
(25:38):
And, and I remember kickingaround numbers around like
50 million for a, for a sale.
Me and, and my business partnerBlaine, were like, if it's
worth 50, it's worth 500.
Uhhuh.
Let's, let's pass.
And we did, but my pointand, and we ended up
selling for more later.
But, but, but the, the pointis or not like that could have
just, that could have beenthe best offer we ever saw.
And, and I would look at itand say, you know, what had we,
(26:00):
had we sold then versus now?
I would still argue it was theright decision because it, it
was a, a meaningful amount ofmoney on the table, et cetera.
Yeah.
And, you know, and we soldfor substantially more, but.
Uh, so what, like why risk it?
Right?
Yeah.
In retrospect,
I would've toldmyself to sell it.
That's
what I'm saying.
Yeah.
You can lock in that save point.
Right?
So it just lock inthat save point, right?
It does.
(26:20):
It does so much.
Right.
Particularly when youstart to look at what the
actual differences are,the benefits of holding
and, and increasing that.
We both know people that havesold for 150 million and people
that have sold for a billion.
The happiness quotientbetween those two folks
doesn't change much.
Right.
Right.
Right.
Gives you, yeah, sure yougot a lot more money, but it
(26:40):
doesn't change life that much.
Now, if you go from even sellingfor a million, we've done
this to mean like one of ourearliest episodes will, yep.
$250,000 is a, is a lifechanging amount of money, right?
Yep.
Some people go like, no, it'snot till you hand it to 'em.
They go, oh, oh, that actuallydid change my life, so.
I think this is where it becomesreally difficult for founders to
then start to do the calculus.
It's like, so when, when,when should I do this?
(27:01):
When should I sell?
I think the other thingis like, it's not like
there's a whole bunch ofoptions for this either.
It's not like, it's not likejust any day of the week you
can be like, well, let me driveit down to the dealer and I'll
just see what they'll give it.
Give me for it.
Right, right, right.
It's not, it's not a 57 Chevy.
Yeah.
Right.
This is a, this is a verydynamic and complicated
to, to liquefy asset.
So like if you go backin time, often only have
(27:21):
one chance to sell.
That's the thing.
And I think that's the thing.
So when, when, when you guyssaid no to the Compuware
offer, by the way, theysold in 2020 for, for $2
billion to a, a larger,uh, software conglomerate.
Really?
Yep.
That's interesting.
'cause we had a $6 billion IPO.
So like, um, I'm wonderinglike, which one of us maybe made
out better or worse than that
anyway.
(27:42):
They've been around since1973, so maybe they'd just
been stacking up little exitsfor, it was good company as
best I knew.
Yep.
So I think that it's, it'sdifficult for founders if you
go back in time, like how wouldyou really, so you can say, in
hindsight, I'd go back and I'dtell myself, take that offer.
I. What advice can we giveas, as that offer comes in?
Like, how do you decide, is thisthe best it's ever going to be?
(28:05):
Should I just hold this thing?
Like that calculus getsreally complicated.
I, I've got a wholeformula for it.
Like, you know, when evaluatingthese things, I look at
it and I say, basically,where, where will this move
me up the chain in my life?
Like, safety is usually whatit's come down to, you know,
lifestyle, things like that.
And I always say, at this pointin my life, I'm not worried
about how much more I'll make.
(28:26):
I'm worried about losingwhat I have and I think for
a lot of people, they justhaven't maybe been around
long enough to understand howhard it is to get it back.
Right.
Oh God, yeah.
I know a lot of founders whoout once you out demotivated by
the loss
and lost it.
I don't know manythat that got it back.
And there there's noway to forget that.
And so again, I look at it,you know, personally, and,
(28:47):
and I say, okay, um, yeah, ofcourse, like everybody else,
I, I'd love to make more money.
Part of it's just theachievement, but the
other part of it is like,Hey, my life's okay.
Like the increases won'tbuy me much more happiness,
but the decreases willmake me pissed off.
I just remembered,uh, just remembered a
great Alex Trebek line.
It's so odd 'cause it'scoming from Alex Trebek.
I love Alex Trebek and somebodywas asking about gambling.
(29:10):
It's funny we'retalking about this.
He says, I hate gambling.
He said, well, why?
He's like, winning doesn'tbring me that much pleasure, but
losing fucking pisses me off.
Yeah, that's exactly it, man.
That's it though.
I mean, like, and that's, it'skind of what we were getting
at a minute ago, which is that,you know, those increases have a
very diminishing return, right?
Like yeah.
If you go from 1 million to10 million, 10 million to a
(29:31):
hundred million, a hundredmillion to a billion, yeah.
It, it is, there will besome life changes that,
that come along with that.
Certainly howimpactful they'll be.
Don't know, but yeah.
Right.
It's also the, the likelihoodof that happening versus
the likelihood of theopposite happening without
making those safe points.
So I think you're right.
I think once you've, you've.
Had the ability to buyyourself some safety and kind
of minimize that downside andsay like, okay, like I'm, I'm
(29:53):
at least gonna be reasonablewith a portion of this.
Um, 'cause you're also notsaying like, don't celebrate.
Right, right.
Oh yeah.
Like pop the champagne,don't enjoy your money.
Throw some concompetit, just don't
assume it's coming again.
Yeah, exactly.
Yeah, exactly right.
I think that's, that'sthe important part.
So, I mean, here'sthe thing, right?
I, I wish I genuinely wish morefounders would heed this advice.
I am a hundred percent surealmost none of them will.
(30:13):
I think all of them thatare, that are listening
today are gonna have, they'regonna be in two camps.
Where was Will and Ryanwhen I needed that advice,
because I made that mistake.
Yeah.
The other camp is notgonna happen to me.
Right.
Yeah.
That, that, that soundslike, you know, real negative
kind of oldie, timey advice.
I'm, I'm sure that mightwork back in your day.
Old men.
(30:33):
Yeah.
Right.
But it doesn't applyto me, and I can just
already tell you, you're,you're going to be wrong.
I don't want youto be, but you are.
But here's the thing.
The whole point of thisjourney is to get to a point
where at some point we cancash in our chips, we can
fill our bank account, evenif it's a small amount.
What we don't wannado is ever risk.
Going backward from that.
(30:54):
So every time we geta win, keep the win.
Keep the win.
'cause it's probablyour last win.
And if we do it right,it's the only win we need.
Overthinking your startupbecause you're going it alone.
You don't have to, and honestly,you shouldn't because instead,
you can learn directly frompeers who've been in your shoes.
Connect with bootstrapfounders and the advisors
helping them win in thestartups.com community.
(31:15):
Check out the startups.comcommunity@www.startups.com
to see if it's for you.
Could be just thething you need.
I hope to see you inside.
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