If you are a serial entrepreneur, do you buy other people's stock?
My guess is - no, if you're a serious, hard core, serial entrepreneur, you don't invest in other people's stock (eg, buy on NASDAQ or similar). Why would this be?
Here's my rationale:
1) If you build a company, the best return on investment is in that company - NOT somebody else's. You don't need to know that Larry & Sergey from Google just became tied for the 5th largest individuals in the US to understand this. However, knowing that they *are* tied for fifth place now (with 18 billion each) should give you something to think about. Of the folks ahead of them, Bill Gates, Larry Ellison, and Warren Buffet, guess what they have in common? They all made a ton of money building their own company.
2) 90% of the people in the US with a net worth more than $5 million dollars made their fortune either by building their own company, OR joining another company when it was very small, then it got huge. Think George Reyes, the soon to be retired CFO of Google. Or Eric Schmidt, the current CEO of Google. They didn't build it, but they're still worth hundreds of millions as a result of joining when it was still "small".
3) Another example: in 2004, the gross revenue from the sale of a business I co-founded topped the salary I'd made for the trailing 12 months by more than 10%. Considering that business started life with a $5K investment from my former partner (Hi Mike!), and we built it part time while we both had full time jobs...imagine the difference if we'd both been able to work on it full time. :)
4) A solid formula for the valuation of a private business with a modest rate of growth & solid prospects in a growing market is six times annual revenue. So, let's say you had a business that made $100K per year, gross. Selling it would net you $600,000 and then capital gains would take 25% tops, which then puts your post tax profit at $450,000. Plus, there are perks along the way of building your own business, however, there is a lot more paperwork & less "security". If you are willing though, the average business owner, 5 years into a business, makes $250K per year. Compare that to your day job, and then ask yourself, "do they pay me enough?".
5) By running a business, you will meet far more people in your industry than you ever would, even if you network promiscuously. These contacts will help grow your business, and you can help them & add value to their careers because of your growing network of contacts. Become a "hub" in your space, and your value will multiply, even if you sell out to a larger firm, you'll be higher up than you would have been climbing the corporate ladder.
What about you? For me, in all seriousness, the only time in my life I've owned somebody's stock was Yahoo, through an option package. Every time a new chunk vested, I sold, as if it was on fire. To date, if I'd stayed at Yahoo, my stock options would be worth 2 dollars per share less than the strike price. In other words, nearly 3.5 years later, I'd have the privilege of owning their stock for more than the fair market value. Even now, as much as I like some companies, I can't bet on that many people, where I don't know enough, that they'll win as much as I'll win, with my team, and me playing captain.
