Confidence is an essential ingredient for entrepreneurs.
It’s what makes them quit college or their jobs, tells them they can take on corporate behemoths, and helps them endure countless rejections. But from the outside, confidence can look an awful lot like arrogance, and it may not be until accounts are settled that we know the difference.
When Pebble founder Eric Migicovsky launched a Kickstarter campaign in 2012 to fund his smartwatch company, he initially sought $100,000. He raised that within hours, and eventually topped out at over $10 million. He had orders for 85,000 watches. The success of that effort and subsequent Kickstarter campaigns—along with the waves of fawning media attention it inspired—no doubt helped fuel Migicovsky’s belief in his company and its prospects, to the point where he could turn down a reported $740 million offer from 86-year-old Japanese watchmaker Citizen in 2015.
Migicovsky later dismissed the potential threat posed by the Apple Watch, at least publicly. “They are very focused on being the Rolex or the (Tag Heuer) of smartwatches,” he said. “On the other hand I think we are trying to be the Swatch of smartwatches.” After the inevitable decline in Pebble’s sales once Apple’s own very polished wearable launched in 2014, he reportedly turned down a second buyout offer, this time for $70 million from chipmaker Intel.
Today, Migicovsky is selling Pebble’s software and intellectual property to competitor Fitbit for less than $40 million, in a deal that’s mainly about hiring the company’s engineers, according to Bloomberg. The sale price is less than Pebble’s debt, which Fitbit isn’t acquiring. Pebble will reportedly sell its inventory separately.
Pebble’s fast rise and hard fall reads like a textbook case of Silicon Valley hubris, and the cost of over confidence. But few decisions are as fraught for entrepreneurs as knowing when to sell a company. In the end, it’s where a founder’s confidence can be most dangerous—or most rewarding.
Evan Spiegel’s confidence in Snapchat let him reject a reported $3 billion offer from Facebook, which many were shocked by at the time when Snapchat looked like another novelty, a flash-in-the-pan tech unicorn. “There are very few people in the world who get to build a business like this,” the founder told Forbes. “I think trading that for some short-term gain isn’t very interesting.” That could have been as much as $750 million in cash for him alone.
That is rare, though. Andrew Mason’s decision not to sell Groupon to Google for $6 billion in 2010—the daily deal site is now worth about $2.3 billion—looks a lot like arrogance in hindsight. Perhaps the ultimate example of a founder’s overconfidence undermining their company’s success is Jerry Yang, co-founder and former CEO of Yahoo. Under Yang, Yahoo rejected a $44.6 billion offer from Microsoft, claiming it “substantially undervalued” the company, in 2008 just before the financial crash. Earlier this year, Verizon bought Yahoo’s core operations for $4.8 billion.
For most inventors, turning a hoped-for $100,000 Kickstarter campaign into a company worth $40 million would be success beyond imagining. For Migicovsky, it’s a bitter consolation.