In defense of selling out

(Update: to be clear, I’m not referring to any Spark Capital portfolio companies, past or present)

“If he’s so smart, why did he sell his company?”

That was the line a very well regarded venture capitalist said to me over breakfast earlier this year.

At the time it struck a chord. He was referencing an entrepreneur in the Bay Area that sold his successful company way too early. It’s now worth likely 10x as much. Maybe more.

That conversation reminded me of the email @ev sent to the board back on 2008. A larger company wanted to buy Twitter at the time and made a generous offer at the time. We didn’t want to sell but @ev was the largest shareholder and his opinion was critical. I went to bed and woke up to a thoughtful email about why we shouldn’t sell. I was more than grateful to ev for that day and others to come.

Last week I read Bill Gates will have sold all of his Microsoft stock by the year 2018 through a series of planned transactions that began many moons ago.

I was dismayed by this. Why would he sell all of his stock? How can he expect investors, employees and customers to believe if he doesn’t. Doesn’t he care about his company? His legacy? Again that line, “if he’s so smart, why did he sell” seemed to apply to yet another founder.

Then yesterday I went for a long run in the rain with Lauren. About 5 miles in I mentioned the Bill Gates story and his plan to fully divest his ownership in the company he founded and led.

Lauren disagreed with my frustration and disbelief. “Look at his passion now. Look at all of the incredible work he’s doing. Could he do all that if he was focused on the past? Would there be a Melinda Gates Foundation?”

She’s absolutely right.

Consider Elon Musk. He sold PayPal which is worth much more today than when they sold the business to eBay. But since then he was able to use that success to start Tesla and SpaceX. Would those companies have happened if he remained at PayPal ? What else is Elon going to create. Something tells me he’s not done.

It’s easy for us as investors and outsiders to want founders to go all the way. It’s in our interest and we hold on to the romantic notion of not selling out.

But there are sometimes good reasons for selling of successful companies even if we don’t see them at the time.

(Excuse the typos. Wrote this on my mobile)