Snapchat $3 billion buyout offer and the rise of entrepreneurs

The front page of both the NY Times and the Wall Street Journal today had articles about a 2 year old hi-tech company called Snapchat.  The company was created by Evan Spiegel and Bobby Murphy, who met at a Stanford University fraternity.  Snapchat was offered $3 billion cash to become part of Facebook.  There are supposedly offers on the table from other people in the $4 billion range.  Not bad for a company that has no profits!

The offer got me thinking about the differences between when I graduated from college versus today’s graduates/dropouts.  When I graduated about 30 years ago, almost no one thought about starting their own business.  There was one person in my college class who created his own business during college.  While he did quite well (a Porsche and his own house just off campus within 2 years), none of us thought this was the path of the future.  Today when I look at my own students many of them are talking about setting up a company immediately after graduating or planning on working for someone until they raise enough money to start a company later.

I have been thinking about the sharp difference in attitudes and believe one reason is that a small number of companies (like Snapchat) are given lottery like prizes for relatively few years of work.  The headline popping numbers did not exist when I was a student so there was less incentive to start a company.

Another important idea is that the cost of starting and running many businesses (especially hi-tech companies) has dramatically fallen.  You don’t need to own your own servers, Amazon is happy to rent you space on theirs.  You don’t need a large office.  Many incubator spaces are willing to rent desk space by the foot.  You don’t need a permanent support staff, outsourced talent around the world can handle customer support.  Google is willing to handle advertising, cheaply and hyper-targeted.  Lowering start-up and expansion costs increases the ability to become and succeed as an entrepreneur.

The third reason is that feedback is much faster today than decades ago.  If you have a business idea, you can quickly find out if it has traction.  For example, you can put up a KickStarter campaign.  If few people contribute to your KickStarter campaign then your idea for a business is dead in the water before you have wasted very much time.  The faster you can figure out that an idea is good or bad, the easier it is to end up working on a business that is going somewhere.

The final reason is that many of today’s entrepreneurs look like they are having fun.  The company may or may not make it, but during its existence life is not all misery and work.   I hope Snapchat succeeds, but even if they don’t I wish them a fun journey.

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