The StumbleUpon Founders are Confusing Startup Magic With Skill and Shall Fail
You’ve likely heard by now that the founders of StumbleUpon, the leisure site that lets you read random stories (links) submitted by other users, have bought the site back from EBay, which acquired it for $75 million just two years ago. It’s a rather bizarre act in my view, and is doomed to fail.
First, let me define fail. EBay thought that the site had huge growth potential, so offered the founders a huge multiple (it had raised just $1.5 million, which means it was bought at 50x it’s book value). Over the past two years, StumbleUpon growth has remained flat. So by fail, I mean, the founders will also be unable to grow the site’s traffic and revenue in any meaningful way (let’s define meaningful as doubling the traffic).
Now, here’s why the founders are confusing startup magic with skill. Startup magic is the combination of insanely hard work and good luck. These guys know all about hard work and luck. They went through the 12 hour work days and endless pizzas. They lived through the surprise of actually making the thing work.
Fast forward two years. What has changed? What skill have they acquired that now makes them better equipped to double StumbleUpon’s traffic? How could they possibly expect to be better equipped to double StumbleUpon than EBay? Now, they’re millionaires with nice cars and houses. There is simply no way to rekindle the startup magic when you have nothing to lose.
I know what they’re thinking. EBay just didn’t get it. They didn’t see how magical and special StumbleUpon really is and only we, the founders, can unlock its true potential. That’s the heart of the confusion. The founders aren’t that special. StumbleUpon isn’t that special. They worked their asses off and had some good luck. The site is good. They deserve every dollar they got from EBay. But they’re apparently now drunk on success, and are attributing their good fortune to their brilliance, subtracting the other critical factors, and foolishly believing that the only missing ingredient to StumbleUpon’s success is them.
The founders would have been far better off investing in and advising high risk startups, coaching hungry founders through the hard times, and offering technical and marketing guidance. That’s genuine experience that can benefit a company. But being a millionaire is not. I envision an image of a millionaire founder of an already-sold company, ordering the techies to fix the servers at midnight while he sleeps upon his memory-foam mattress. This leads me to predict very little startup magic.
So, I predict failure. I take no pleasure in predicting failure, although it’s a little annoying. Being an expert in StumbleUpon isn’t that hard. Believe me, there are now a bunch of StumbleUpon experts who now know a whole lot more about the market than the founders. It was a huge mistake for EBay to buy StumbleUpon because they confused good fortune with skill. Now, the StumbleUpon founders are doing the same. EBay is lucky to have found someone to unload the overvalued property on, it’s amazing that it’s the founders.