Getting bought is the #1 exit strategy. Even Viaweb got bought. Hardly anyone is going public these days, so that means investors want you to get bought.
"Bought? Who, us? No way!" isn't going to fool anyone.
"Younger would-be founders are often surprised that investors expect them either to sell the company or go public. The reason is that investors need to get their capital back. They'll only consider companies that have an exit strategy-- meaning companies that could get bought or go public." -- http://www.paulgraham.com/startupfunding.html
No, what investors want is for you to go public. Next best would be the sort of huge acquisition where the price is increased by the threat of an IPO. Third best is a medium-scale (e.g. Viaweb) acquisition. Getting bought early is the least attractive option to investors except going out of business.
Exactly which of the YC companies can realistically go public? And who's going to sink that kind of money into them?
You said success 98% of the time means getting bought, which means you want them to get bought, and invest on that basis. They are acquisition targets.
Nobody's going public these days, even the gigantic sites. I don't buy that investors "want" you to go public except in a "wishing for a pony" sense. If they aren't actively planning for an IPO, they're betting on a buyout, and investing on that basis, so that's what they want.
Well, there have been two funded by Sequoia (Loopt and another still unannounced), and I doubt Sequoia would touch a startup unless in their opinion it had the potential to go public.
I would say off the top of my head that perhaps 5 startups of the 38 we funded prior to this round have a chance of going public one day.
The fact that being bought is the most common liquidity event certainly does not mean I want that to happen. If a baseball coach tells his players that the most common type of hit is a base hit, that doesn't mean he would not prefer them to hit home runs as often as possible.
Except you don't get points for merely getting on base -- it's not "success". And if the bases are loaded, a safe double is better than a home run with bases empty.
As for Sequoia, they funded YouTube. If they had thought it could go public, why would they sell to Google? I assume because getting bought by an established company with a very strong stock status is preferable to rolling the dice -- IPOs can go straight downhill.
I think it's pretty obvious that they never planned on an IPO, but instead on a bidding war between Google, Yahoo, and Microsoft (and maybe others).
There's a big difference between "maybe we'll sell eventually" and "we're looking to flip this thing right now". It's important to avoid _having_ to sell.
"Flip" means to get rid of it. To the contrary, founders may well be in a hurry to scale UP, which you certainly can do when acquired by the right company, like Google (as you know).
Flip implies a very quick sell to turn a fast profit. Building to flip and building something up that you personally acknowledge to be valuable to other companies is very different.
Yes, startup founders may acknowledge to themselves that an acquisition is their goal for an exit. But that acknowledgment is at the start. In the groundwork. You don't focus on trying to sell throughout -- you just try on making something people will want to use.
"If 98% of the time success means getting bought, why not be open about it? If 98% of the time you're doing product development on spec for some big company, why not think of that as your task?" -- http://www.paulgraham.com/ideas.html
Edit: I quoted that when I checked my threads, before I saw you excerpted the same thing as a top-level post elsewhere.
"Venture investors are driven by exit strategies. [...] Now the default exit strategy is to get bought" -- http://www.paulgraham.com/web20.html
"Bought? Who, us? No way!" isn't going to fool anyone.
"Younger would-be founders are often surprised that investors expect them either to sell the company or go public. The reason is that investors need to get their capital back. They'll only consider companies that have an exit strategy-- meaning companies that could get bought or go public." -- http://www.paulgraham.com/startupfunding.html