In the series 'Silicon Valley' Richard get an option to choose between $10 million dollar right now for his algorithm, or get some seed money ($200,000) and all the help for 5% to start his own company.
Which type are you? Please elaborate!
The choice as defined above makes it seem obvious, but in the show there are some extenuating factors.
The $10M belongs to Google in the show (they use different names for companies/people, but the parallels are obvious.) You may also be "bound" to Google for some indeterminate amount of time, as an employee.
The $200K seed money for 5% of the company is an opportunity to work directly with Peter Thiel (again, names changed in the show.)
Google is going to bury your product, and/or claim it as their own.
Peter Thiel knows everyone in the Valley, and is also agreeing to invest--and other investors will likely follow suit.
Given the choice as presented in this light, it becomes a harder decision than the poll results above would suggest.
The $10M belongs to Google in the show (they use different names for companies/people, but the parallels are obvious.) You may also be "bound" to Google for some indeterminate amount of time, as an employee.
What does it mean that the $10M belongs to Google? What's the point of the poll if you don't actually receive the $10M?
Getting $10M in exchange for being a Google employee for four years is such a good deal that it's hard to imagine how turning it down wouldn't be a mistake. You're not rich until you exit, and achieving an exit is much harder than getting a high valuation. Remember, pg sold Viaweb for roughly $10M (his share), and it took him about four years to do it.
It is worth mentioning that it can seem a much harder choice. But I would claim the correct choice remains the same for reasons others have mentioned - after a certain point, at $10 million, it's how good a business person you are, not how good an idea you have. Going to Google would certainly teach you something too. How many aquirehires from Google go on to found more companies - quite a few (I vaguely recall people founding companies after only a year - don't the exact conditions of course but I don't think aquirehires are onerous affairs, Google wants people who want them I'd imagine). If you're good, the sky's the limit but investing only in one's upside is foolish in a situation like this.
> You may also be "bound" to Google for some indeterminate amount of time, as an employee.
I didn't get that impression from the show. In fact, I imagined myself in the exact situation depicted in the show, and still easily voted for the ten million.
Not even worth thinking about unless you're already very wealthy. Take the $10mil.
It's not an "either/or" situation. Take the $10mil right now, start another company.
Promoting the idea that it's preferable or "cool" to start your own company given these choices is ridiculous, and I hope nobody learns the wrong thing from this show because of it.
There also may be people who spend twenty years working on an algorithm and believe they can only monetize those years with a successful business.
For them it might be a real quandary and not a no-brainer, because they won't get that algorithm again.
But even, even those people should take the $10 million. Even if it seems like you're selling your one opportunity, you should do it. Because as others have mentioned, serious success is about execution. Even the best algorithm ever won't be worth more than $10 million if you are a lousy businessperson. And if you are a good business person, you'll be in a better position to succeed with your $10 million than with your one idea.
What if you've spent twenty years working on an invention - could be an algorithm, doesn't matter - and you're being offered $10M to buy it, by a company that either intends to bury it on purpose, or will probably bury it through corporate incompetence?
The right way to think about this is "years there * opportunity cost". In other words, if they're paying you more or less what you'd earn otherwise, then no reason not to, at least financially.
If it's a horrible place to work and you'll hate every moment, then I'd think twice.
This is a no-brainer. I have 20 or 30 ideas that I could turn into potential companies. With $10 million I'd be free to pursue them, rapidly making each fail. If none succeed I still have a living, and if one succeeds then I've got even more.
Edit: OK, I missed something. You're talking about some show I've never seen with parameters I can't know. As you phrase it it's still a no-brainer, but there are hidden factors here that I don't know.
$10m is a lot of money, a life changing amount. Take the money every time.
On the other hand I've been offered $250k for one of my side projects. I turned that down as $250k isn't life changing and I still have a lot I want to do there, things that mean more than that dollar amount mean.
If the $10m figure were reduced to $0.5m or $1m, then I think a lot more dilemma would be introduced.
Easy choice for me. $10M is my all time, f-you money retirement number. Invested conservatively, you get an annual income in the hundreds of thousands and no need to ever do anything work-related again. I could carve out a pretty bitchin existence on that...
That's not a fair characterization of the choice in the show.
The algorithm he's developed is, we're led to believe, potentially the seed for world-changing, billion dollar business possibilities. The reason he's been offered $10M for it is because the potential buyer believes they can realize that potential, and that without them its inventor can't.
The question he's faced with is not "Take ten mill or start a company", it's weighing up, given that this is a multibillion dollar idea, can you, with a little seed funding, realize at least $10M of value out of it by going it alone?
Saying "take the $10M and then start a company anyway" is ignoring the rather crucial step "*come up with an equally valuable idea which you haven't sold the rights to"...
The thing is, I estimate $10M is enough to satisfy my financial needs for a lifetime of unemployment. I genuinely think I would take $10M now over $100M in 6 months, after 6 months of arduous soul-sucking work.
Of course, there are potential problems with what I just said. Firstly, my estimate could simply be wrong. Maybe $10M "doesn't go as far as it used to." Secondly, it could be argued that this would actually be a selfish decision to make, since even if I can live with $10M, I could put in the 6 months of work and do a lot of good in the world with the extra $90M.
Rule of thumb: 3% withdrawal rate makes a lump sum of money last a lifetime with near certainty. That's a $300K a year "job" without working a minute. Take $500K-$1MM to buy a house outright and you have $270K-285K/year and your housing expenses are property taxes, upkeep, and insurance.
A 4% withdrawal rate is a high probability to last 40 years.
$10MM is "set for life" money by any reasonable account. (It also happens to be my, "Well, I'm obviously working because I genuinely like what I'm doing" level, because I sure as hell don't have to at that point...)
Not having (nearly) $10MM, I still think that I'd put in the extra 6 months of work in addition, as $100MM is the beginning of family dynasty territory, where I could "feed" several generations of my family (including siblings and nieces/nephews) with nothing more than a charter to "be well", "do good", and "enjoy life". That's less unselfish than your idea that you could do a lot of good for $90MM, but it's the reason I'd toil at an unpleasant job for an extra 6 months. The payout there is literally $500K per day, or over $750K per workday. Gut it out...
I think the decision is a lot harder than a lot of people here are making it out to be. I immediately equated the question to one of my mostly unsuccessful startup ventures (to which I would immediately take the $10 million).
But the premise of the TV show emphasized the potential of the algorithm he developed. He had some serious IP on hand. Granted it's all fictional, and $10 million is not some trivial amount of money, but if you came up with an algorithm that proved P=NP (to put it in perspective), I'd say selling that IP for $10MM would be foolish.
And if I had that sort of IP, and if I was a person clever enough to come up with that in the first place, I'd take the $200k easy.
An experienced negotiator would see the offer of $10m as a positive buying signal and counter with $34m cash, on the table now. Then they blink and so it goes on. A good operator would most likely get a couple of million more. Not bad for a couple of hours of bargaining.
BTW at 5%, the startup would need to generate in excess of $200m in dividends for the founder and that implies revenues in excess of $1b - how long is that going to take? And this analysis ignores discounted cashflow which only ups the target numbers.
It depends how much more than $10 million the algorithm is worth. In the show it's probably worth a lot more. It also depends on the period of time you have to stay to get the $10 million, if it's a lump sum, and if it's cash or stock.
If it's $10 million cash right now and I can hand over the algorithm and walk away right now I'd take the cash. Buy a modest house at the beach and a modest house in the mountains, invest the rest and do whatever I wanted for the rest of my life.
At this point, there's no question I'd take $10 million. Given that 95% of startups fail, there's no reason to believe that mine would be any different. There is a difference between good luck and skill.
If I really had the itch to start my own company, I could use the $10 million to pursue another idea and never have the need for VC.
Depends a lot on the specifics of what the algorithm is, what market it enables, how much competition there is, and my own ability to acquire the skills needed to turn the idea into a profitable business. But as framed above - I'm taking the minority position and founding the startup. The fact that someone is offering $10M for the algorithm indicates that they believe it enables a market that is worth many times that amount. Those markets are very rare - most people go their whole lives without finding one. So it's rational to stick with it and develop it as much as possible while retaining ownership.
It really depends on the idea. I would sell most ideas for much less then $10m. But there is one idea, where I would not even take the seed money: A distributed censor free search network to kill Google.
If some entity will offer to pay $10M for an algorithm, then that algorithm must be worth more than that. If I were Richard, I'll ask for $20M (or even the sky, depends on future value calculation). If they'll agree to give me $20M, I'll take it, and on to the next algorithm/idea. If not, I'm back to 'normal' financing route.
I've already done a lot of start-ups primarily self funded. I'd take the $10 million. In theory I could invest that and retire off the income it generates which would free me up to do another startup without having to worry about paying my salary.
[I am off course assuming the $10 million comes commitment free]
Negotiate for an extra $100M worth of acquiring company stock, a permanent seat on the board, and the $10M cash now. Oh yeah and a reserved double-wide parking spot near the front door for my brand new Aston Martin. If I'm gonna dream, might as well go big.
Obviously take the $10 million, but the show itself shows the difficulties about taking the seed funding, but doesn't explore the complexities involved in actually getting the $10 million (due diligence, negotiations, vesting, earnouts, etc etc etc etc).
Take the $10 million now and invest 2% ($200k) or whatever amount in another company. This isn't a choice. You'd have to be absolutely stupid to choose a $200k loan over a $10 million buyout (given the information available here).
It's the McGuffin algorithm[1]. In all seriousness in the show "Silicon Valley" the algorithm that presents the same question to the protagonists is a loss less compression algorithm that will revolutionize cloud storage. But really it's just a plot device in which value can be attached which will drive most of the character interaction of the series.
Well, take the 10M, part out $200K for your own seed money then hire the required help and retain control. Have your cake and eat it too. $10M is a lot of money.
Um, the seed money would have to be considerably higher to make these numbers work out to be even approximately comparable, even before factoring in risk.
I'd take the $10M because I like to run my own show. $10M is in the right neighborhood for "fuck you" money for me, so $10M would allow me to run my own "show" (read: "life").
The $10M belongs to Google in the show (they use different names for companies/people, but the parallels are obvious.) You may also be "bound" to Google for some indeterminate amount of time, as an employee.
The $200K seed money for 5% of the company is an opportunity to work directly with Peter Thiel (again, names changed in the show.)
Google is going to bury your product, and/or claim it as their own.
Peter Thiel knows everyone in the Valley, and is also agreeing to invest--and other investors will likely follow suit.
Given the choice as presented in this light, it becomes a harder decision than the poll results above would suggest.