This post by Bing Gordon first appeared in WSJ Accelerators, 6/6/13
For missionary entrepreneurs, the dream outcome is to build an “Internet treasure” — a brand that defines a generation, proves that we are better than our parents and becomes something we couldn’t live without. Think Apple, Amazon, Google, Facebook and Twitter. Not quite in that class yet — but with potential to get there — are companies like Square, Linkedin, Dropbox and Uber.
In their first stage, potential Internet treasure companies are miracles, creating spectacular engagement and customer delight. They tend to be founder-led, by entrepreneurs who grow their own management skills as their organizations expand, supplemented by high-level hires.
In the second stage, many companies falter, as growth creates a new set of challenges. Somehow, the company must stay true to the founding vision, while avoiding the pitfalls of rapid growth — and perhaps survive the hiring of a previously successful executive who doesn’t work out.
This third stage depends on the emergence of a new set of proven leaders from outside the company, attracted by the initial vision and momentum, who willingly model the founder’s cultural values.
The Internet Treasure companies tend to go public, rather than get acquired, although there are clear exceptions, like Instagram, YouTube, Skype and PayPal. And there’s simply no shame in selling. If you’re living off credit-card advances and ramen noodles, a buyout offer might be too hard to resist. And you’ll be even smarter the second time around.