Should a Teenage Entrepreneur Sell Out To Facebook?

colinneagle writes "Andrew Mayhall is 19 years old and is running a server company, called Evtron, whose product has reportedly set the world record for data density (4.6 petabytes per server rack) and has begun attracting attention from investors. One of those interested parties is reportedly Facebook, with whom the young CEO claims to have had casual discussions about a potential acquisition/hire agreement (Facebook did not respond to a request for comment on the talks). He says the opportunity to speak with Facebook was simply one he couldn't pass up, and seems more impassioned by entrepreneurship. He speaks often of building his company into an EMC or NetApp, and could very well compete with them soon. But if an offer from Facebook ever comes, should he accept, or try to build something on his own?"

Yes but moot point now.

[xxxJonBoyxxx]

>> if an offer from Facebook ever comes, should he accept?

Yes, but...

>> One of those interested parties is reportedly Facebook, with whom the young CEO claims to have had casual discussions about a potential acquisition/hire agreement

...I wouldn't count on that now. Yeesh.

Sell, because you haven't done anything yet.

[mveloso]

Building cool hardware is great. Selling cool hardware is totally different.

If someone wants to buy you at a point before you sell, do it. The summary says you'll compete with EMC or NetApp. You won't. You're able to do what you're doing because you have time to think about the product. Someone else in the field can look at what you're doing and figure it out quickly. Someone like the people at backblaze.

Can you offer 24x7 support? How is your manageability and maintenance? Recovery? How are you going to make the thing? Those are basic questions. Are you going to sell direct or via channels? blah blah blah.

OTOH, if you get eaten by facebook you get to help them design and build their systems, which is great if that's what you want to do. The thing is, your story is what's getting you the PR, not your product. Leverage off that PR as much as you can, since it's all you've got right now.

Re:Retire at 20

[WilliamGeorge]

Assuming you lost nearly half of that to taxes, 2.5 million invested at even a low 2% (in CDs, for example) return is $50k per year. I bet you could do much better than that if you invest wisely, and even if you didn't $50k is enough to live comfortably on if you don't have any debts. There would have been plenty in there to buy a home, nice car(s), etc - at that point simply living off the interest is certainly doable.

Re:Retire at 20

[bluefoxlucid]

77 years at $65,000/year. You can buy a house and a car in cash and avoid paying a huge chunk in interest. You may be able to avoid paying taxes on it since it's an asset changing hands, not sure, kind of doubt it (the business liquidating would work this way, but a CEO getting cash monies is going to pay income at around 30% just like everyone else). You could ask them to payroll you at and disburse a portion of the money into 401(k) at the maximum contribution per year until the account balance is enough for after you're retirement age, with the rest being a business transaction dispersal (not salary, so you don't pay things like social security)--that way you can later roll it into a private IRA, and when you're older and spending less you can take it from the IRA and pay in the lower tax bracket (pay less in taxes).

Sell, but for different reasons

[Zontar_Thing_From_Ve]

He should consider selling but for different reasons than others have suggested.

1. I work for what was once a very successful start up that a Fortune 500 company acquired, so I am an employee of the Fortune 500 company. I was not hired by the start up until near the time that the acquisition happened, so I was not around in the early days. However, one of the things I saw from the early employees was this supreme arrogance that the company was successful only because they were all geniuses and that everything they did afterward could not possibly end in failure. I know that a few of the founders, all of whom left after the company was sold, have tried to start new businesses and none of them have yet taken off. One or two of them might, but the jury is out. My point is that it's actually hard to build a successful business, but everyone who does it fails to recognize that they beat the odds and they become convinced that they simply cannot ever fail. There are a few guys who really can turn every business they start into a success, but most can't repeat the success.
2. It's really hard to compete with bigger, older companies. Mayhall may truly have the best product, but he may be limited in sales because some clients may prefer to go with bigger, more established companies just in case. The start up I briefly worked for was sold because the owners had basically grown the business as far as they could on their own and they needed a larger partner with more and (truth be told) better sales people if it was going to grow. After the buyout of our company, our sales went through the roof and we grew at a rate we could never have achieved on our own.
3. The insight he had to offer more density may be patented (I don't know), but someone else will eventually come up with the same idea even if they never see his patent. They might make it just different enough to get their own patent on it. Or they may simply willingly infringe it, gambling that they can win a court battle or that Mayhall won't have the money to stick it out in a protracted fight.
4. There are companies that didn't sell when they could have and they lost market share over things they couldn't see happening when they were at the top. There's always a risk.
5. Mayhall may well have the arrogance that youth has (ie. Zuckerberg) that everybody older than him is an idiot and only young people have any idea what they are doing and he can beat his competition because they are old and stupid. That may actually end up being true, but it probably isn't going to. He could always prove incompetent as the head of a larger company and make a lot of bad decisions. Jim Balsillie was king of the world for a while and now he's just the guy who ran RIM into the ground. Jim wasn't as young as Mayhall, but he certainly had the same "I simply cannot fail" attitude.

Re:Retire at 20

[afidel]

The long term ARR for the NYSE is 8%, the current 10 year average is an abnormality at 6.4% ARR which is close enough to 7% to let the point stand.