'An Acquisition Is the End of a Dream'

This entrepreneur believes selling your business is an admission of failure. Here's why.

It’s no wonder Jake Lodwick, co-founder of Vimeo, says he will never sell another company. He was fired a year and a half after selling Connected Ventures, the parent company of Vimeo and CollegeHumor, to the Internet giant IAC. Lodwick’s latest venture is Elepath, a San Francisco-based software studio. He explains to Inc.’s Issie Lapowsky why he believes selling your business is an admission of failure.

What was life like for you at Connected Ventures after the acquisition?

It was pretty much a nightmare. I wasn’t ready to be absorbed into a conglomerate and stripped of my freedom to be creative. What made it a nightmare was this gradual introduction of process into everything we did.

Whereas we once made decisions ourselves, now we were required to go to weekly meetings, then two meetings a week, then three meetings a week. Innovation slowed down on our existing products, but we also stopped launching new stuff. They fired me a week or two before I was planning to quit.

You launched Elepath without having a specific product in mind. Why was that?

Many start-ups put all their eggs in one basket by picking a single product and working only on that. But that’s just so risky.

Also, creative developers don’t want to work on the same project for more than nine months. Elepath is an environment in which they can work on whatever they feel is interesting. Some of those projects will become big hits. Whether that’s one out of five projects or one out of 100, I don’t know yet.

It seems as if you would need a solid track record and a lot of funding to pull that off. How can first-time entrepreneurs apply that philosophy?

I built the first incarnation of Vimeo spontaneously, to solve my own problem of getting video clips onto the Web. Eight years later, it gets 100 million visitors a month.

You can’t predict what something is going to turn into. You have to trust your employees and let them follow their intuitions. Usually, this will lead nowhere, but it’s the only way to unearth breakthrough hits. Even though I’ve been involved in a lot of successful products, I don’t possess a magical foresight. I don’t know if an idea is worth working on or not. That’s a decision for the developer to make.

What would you say to entrepreneurs who hope to see their businesses acquired?

If you truly believe in the potential of your company to change the world for the better, there’s no excuse for settling for an acquisition. An acquisition is the end of a dream.

Today’s titans push the ideal of acquisition because they’re afraid of future competitors. Google knows that its biggest threat could come from two grad students, the Larry and Sergey of 2013. If you’re an entrepreneur who’s been seduced by the dream of acquisition, you’re basically giving up before you even try.

It’s OK to sell your company if you’re honest about it: “This didn’t work out, so we’re selling.” But there’s a dishonesty among many entrepreneurs. They say, “Our mission will continue” or “Nothing will change.” In fact, the mission was lost, and everything will change.

Is it safe to say you will never sell Elepath?

If Elepath is sold, I will have failed to achieve my goal.

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