„The market is not large enough, so…”
„The idea is great, it just does not fit our portfolio, therefore…”
The following rejections may sound familiar to every startup entrepreneur developing a product or service, whether they are looking for investment for further growth or considering selling their company. Every company goes through more difficult periods, lean times when things are not going well and only negative feedback seems to come their way. We have collected a few of these examples to show that it is worth believing in our ideas, and that we are not alone in the world with our doubts.
- During the life of a business, if we believe there is no way forward, one option is to sell the company. This is what Larry Page and Sergey Brin also tried to do in 1999. Even if their names do not sound familiar, the name of their company certainly does: Google. Before the turn of the millennium, the founders wanted to sell their company for USD 1 million. However, Excite rejected their offer. As a result, Larry and Sergey lowered the sale price to USD 750,000, but they still could not reach an agreement. Their attempts therefore proved unsuccessful. Luckily for them. Today, Google’s market capitalisation is around USD 1.69 trillion.
- After a tiring day, most people no longer choose analogue television as a way to relax, but instead turn to one of the streaming providers. In the early 2000s, however, the situation was different. Netflix was in serious financial trouble at the time and wanted to sell the company to Blockbuster for USD 50 million. Marc Randolph, one of the co-founders, later explained that they flew to Dallas for this purpose, but received a completely different reaction than expected. They were simply laughed at. That was when they realised there was no way back, only forward. Fortunately, because Netflix’s market capitalisation today exceeds USD 160 billion.
- Facebook is now a world-famous social platform used by billions of people every day. What many people do not know, however, is that in 2005 MySpace was interested in acquiring it. Mark Zuckerberg asked USD 75 million for the business at the time, but the price was considered too high, so the deal did not happen. Today, Facebook’s market capitalisation is more than USD 750 billion.
- Anyone who likes travelling around the world, or who has ever had to book accommodation for a business trip or holiday, has almost certainly used Airbnb. Their situation was slightly different: they did not want to sell their entire startup, but wanted to raise their initial capital. In 2008, they would have given up a 10% stake in the company in exchange for USD 150,000. To this end, they approached 7 investors. Of these, 2 did not even respond, while 5 rejected the offer, citing reasons such as that it was not within their focus or that they were not thinking in that area. Having survived that lean period, today that 10% stake would be worth more than USD 8 billion. That amount is now more than 53,333 times the amount they were asking for at the time.
- Canva is essentially an Australian global multinational graphic design platform used for creating social media graphics and presentations. It was founded in 2012 by Melanie Perkins, Cliff Obrecht and Cameron Adams. At first, they tried to sell their company for USD 8 million, but their offer was rejected more than 100 times. According to Melanie’s account, this was very painful for them at the time. Life, however, also compensated them, and based on market feedback, Canva is now worth more than USD 30 billion.
- Finally, but not least, there is another company that received a public rejection. This is Ring, a manufacturer of security and smart home devices. It produces smart doorbells, home security cameras and alarm systems. Jamie Siminoff appeared in 2013 on the American show Shark Tank, where he asked for a USD 700,000 investment at a USD 7 million valuation. However, the Sharks stepped back from the opportunity and no deal was made. In 2018, Amazon acquired the company for no less than USD 1 billion.
These stories show several things. First, that the dots can only ever be connected looking backwards. Decisions can only be made in the moment, and life will later prove whether they were the right ones. Second, these stories also provide sufficient examples that escaping into investment or a sale, meaning M&A, is not always the best choice. It is from these “initial” difficulties — although there will certainly be quite a few more later too :P — that we can gain truly valuable lessons, which may pay off for us later. The rate of return depends only on us: whether it will be simple interest or compound interest.