Fireside Chat at Failcon

 

These are my notes from a chat between Cathy Brooks @cathybrooks from Other Than That and Jay Adelson [wikipedia] @jayadelson, chairman of Revision3.

When DEC was being acquired by Compaq, we had a number of plans and promises, but we never had anything on paper. As soon as the acquisition is completed, everything is re-assessed. If I had just spend the extra 10 minutes to ask for a term sheet or agreement, things would have been very different.

As a young entrepreneur, you tend to believe what you're told by the most confident-sounding person.

You guys are confident, very confident, about business models and the playbook. You put the blinders up and sometimes it's that passion and intensity that makes you succeed. In March of 1998, my daughter was born. Two months after she was born, was when I decided to start Equinix. I said, "I have nothing to lose." If I tried and I failed, who cares. I don't think I realized at the time that even if you go home at 6pm, you take home a lot with you. It's not necessarily about your physical time; I didn't understand that in your head, you're at work 24 hours a day 7 days a week. Even when you're rocking your baby to sleep, you're there at the office.

I like the other method: Bringing in experts who are better than you to take that on. It took me four months after I left Digg for the pace to slow down in my head. Many mornings, I'm still there, and I'm still thinking about everything. Your brain just becomes wired that way, and it's hard to disengage.

If you look at the venture-backed businesses, the chances of a 100x return is practically zero. It doesn't mean not to try. 5x is pretty damn good. There's a big range there. It's important to identify the reality of what a good outcome is. Go back to the business goals and make sure everyone is in line.

Digg

I remember the conversation with my wife to decide to move to California, even though I knew I was going to leave Digg. I know that there is this awareness that I need to have this distance, and moving to California is the opposite of that. My wife is the one who had the toughest time with all of this; she's seen the roller coaster and experienced it. She has to deal with it as a mother and as a wife. She was very supportive.

At Digg, I had authority, but I wanted to give Kevin flexibility to experiment. I was talking to Kevin a few days ago about how we would fight in private when there was something we disagreed with. ("Fight" is a stretch, it was more like a sibling kind of argument) We would talk about a feature or a direction, and ultimately if he wanted the site to go a particular way, even if we disagreed, we would go that way. I think going with our instinct really helped Digg for a long time. There's no saying that my direction, which admittedly was different, may have been better or worse.

Why not Sell?

Digg got two offers. In five years, Digg was really only offered twice to be acquired. Those were Current and another large company in the South bay (Google.) I think that the image of Digg that was out there was that we were constantly we were being offered money that we should have taken. Honestly, there were conversations that were casual. But as advice to all of you: talk is cheap. It's a ridiculous distraction to your management team. One time we talked to Fox, and it took a whole week. In Digg time, a week is a feature. It's an HD-DVD crisis. To take your management time out of the car and just stand on the side of the road for a little bit because you have a conversation, that's not real.

Looking back, I'm not revealing anything by saying there was interest. But, that's not the same thing as getting an offer. If we got a good offer, it would be our fiduciary responsibility to take that offer. I was surprised when Zuckerberg said "no." Because at a certain point, nobody can see the future. In hindsight, we look back and say "Whoa, great decision." But that's not how decisions are made, and when you look back...

I'll tell you though, if Digg wasn't a business, our valuation would have been higher. If we hadn't buit it as a business we wouldn't have been sold for X times earnings, we would have been sold for "whatever!" [laughter]

I was advising people recently about selling their business. I think it really depends on you. It's an emotional decision, not a mathematical one. It's about a lifestyle. Where do you want to work in the next three years? Realistically, is it interesting to you? Because if it is, then who cares? You can spend your whole life chasing that 100x return, but what it really comes down to is do you enjoy waking up and grabbing that blackberry, or is it because you have to? I felt like if there is an opportunity to sell your business and have the lifestyle you want, and achieve the goals you set for your business, then go ahead. Sell the business. Take the money. On the other hand, sometimes being independent gives your more flexibility.

That being said, I would not have sold Digg. We tried to be true to our vision and our goals, our culture and lifestyle, we tried to be loyal to our community who was loyal to us. But again, it's not like we have offers on the table that we could respond to.

Q: According to TechCrunch, 37% of Digg's staff was just laid off.

A: That sounds awful, I can tell you Kevin would be devastated by the same news. I don't have any new news about that.

Whenever you're brought in to operate a business, there's a new culture and they make decisions in that context. I can't look back and have any feedback based on this event; it would be unfair of me to even comment.

Q: Is Digg dead?

A: For the 20m people that use that site every day, I think it's weird to be told that you're stupid for using a site because it's dead. I think Digg has a future, I don't know if it's going to be the super 100x future that everyone in the media wanted it to be.

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