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Start Up. Cash Out. Repeat., Strategic Partnerships Article |

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"Start Up. Cash Out. Repeat.

Sunil Paul and Mark Pincus, founders of FreeLoader, sold their company shortly after its inception. Can a new breed of entrepreneur use selling out as a start-up strategy?

Time was, founders and their companies couldn't be separated except by force. Your company was your bid for immortality. Not anymore."

This is from 1998.

""Public relations makes more of a difference than anything else," asserts Andy Sernovitz, president of the Association for Interactive Media, a trade association based in Washington, D.C. "The ones with better press are getting big bucks, acquired, or venture-capital backing. It bears no relationship to the quality of the product or the quality of the team.""

"After a month of negotiations, Pincus and Paul agreed to sell FreeLoader to Individual under the terms of a very grown-up deal. Pincus and Paul say (and Lentz confirms) that their personal share of the total $38-million sale price was $8.5 million: a third in stock guaranteed at $18.50 a share, the rest in floating stock. On top of that, if they stuck around for three years, they would each get a million-dollar bonus. "Thirty-eight million dollars is a lot of money for a company that doesn't have any revenues," reflects former FreeLoader director of content Jeff Hosley. "You have to spin a really good tale for that."

The deal meant that FreeLoader's investors, who owned 45% of the company, saw their money grow more than fivefold in less than five months. Employees who owned 11% of the company--some of whom had only been around a couple of months--rejoiced. Indeed, the money had come to the young founders so quickly that they didn't know what to do with it. Shortly after rising to millionaire status, Pincus listed everything that he wanted to buy. The shopping list included a "big-ass" TV, a new couch, and a leather interior for his sport utility vehicle, which displays three "I'm a FreeLoader" bumper stickers plastered on the back. Total cost: $18,000"

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