Famous, glorified "little guy(s) make millions" story must also include this reality

[Dien Rice]

Originally Posted by -TW

It's the oft-told YOUTUBE story.

3 guys in a garage develop the biz. Shortly thereafter google buys them out for 1.6 BILLION!

One little factoid usually missing from the telling of the story... Their idea PLUS [little factoid] = huge success.

That missing piece is... err, ummm, ELEVEN MILLION DOLLARS they were lent to develop the biz.

Full story here... http://en.wikipedia.org/wiki/YouTube

So, yes it's a rags to riches story, if by "rags" you mean $11,000,000.00 !!!

Hi TW,

Thanks for the clarification of the story...

Actually, it wasn't "loaned" $11 million, but that $11 million was an investment by Sequoia Capital... That is, it was a kind of "sale" of the company's stock.

According to this article, Sequoia Capital got about 30% of the business.

So even at that early stage, selling 30% of the business for around $11 million valued the business (as a whole) at around $36.7 million - still not too bad!

Anyway, that's the way it generally goes... Many businesses have many "rounds" of funding. In the "earlier" rounds, the business is valued less, then (if all goes according to plan, and the business grows), then at the later rounds, the business has a higher valuation.

The latest "mega-sale" is for "Instagram" - which was just acquired by Facebook for $1 billion, just 6 months after the product launched...

http://en.wikipedia.org/wiki/Instagram

The movie "Startup.com" is really good for seeing how this works - in a business that didn't quite make it, as far as the founders were concerned. There are questions about its accuracy, but "The Social Network" I thought was a good movie about the founding of Facebook!

Are we in a "tech bubble" now? Some people think so (and are calling it "Bubble 2.0") (also here)...

Best wishes,

Dien