Internet entrepreneur sells website for $22 million

Derek Sivers sells CD Baby for $22M

The cat’s name is Derek Sivers and back in 1998, he created the website, CD Baby, as a personal need to help fulfill his personal passion (making music) and selling that music online to make a living.

A professional musician (and circus clown) since 1987, Derek started CD Baby by accident in 1998 when he was selling his own CD on his website, and friends asked if he could sell theirs, too. CD Baby was the largest seller of independent music on the web, with over $100M in sales for over 150,000 musician clients. Reference – wikipedia

By the way, speaking of creating successful websites by accident – read the story about Craigslist founder Craig Newmark.

After he got this website up and running for himself, his other musician friends asked if he could sell their music on his site and boom! – a business was born.  Turns out that musicians are good at making music but perhaps not necessarily the tiny little details of selling their work and making money.  Hence the agency business.

But, if you have ever read Mike Gerber’s brilliant book, The E-Myth, you will have already known that most people who start businesses are not business people.  Instead, they are technicians or artists or designers or service providers.  For that reason (among others), most small businesses fail. See: Michael Gerber and read The E-Myth (Revisited).

Crush It!

I haven’t read Crush it! yet, but I gather the jist of the book is that if you love what you do, with true passion and almost an obsession, then if you can create a business model out of that and focus your niche then you have a chance at being really successful.  It’s those passionate people who become thought leaders and innovators.

Crush It! Do you have a hobby you wish you could do all day? An obsession that keeps you up at night? Now is the perfect time to take those passions and make a living doing what you love. In CRUSH IT! Why NOW Is The Time To Cash In On Your Passion, Gary Vaynerchuk shows you how to use the power of the Internet to turn your real interests into real businesses. Gary spent years building his family business from a local wine shop into a national industry leader. Then one day he turned on a video camera, and by using the secrets revealed in this book, transformed his entire life and earning potential by building his personal brand. By the end of this book, any reader will have learned how to harness the power of the Internet to make their entrepreneurial dreams come true. Step by step, Crush It! is the ultimate driver’s manual for modern business.

From what I have read and understand, Derek Sivers has a true passion for music and leveraged that passion into a $100M business, that he ultimately sold for $22M.  His timing was important because as iTunes is taking over the online music market and the sale of physical CDs continues to plummit, if Sivers hadn’t sold CD Baby by 2008, I’m not sure how much it would be worth in 2010.  CD Baby seems to have mirrored the growth trajectory of AOL.

Internet millionaire gives the money to charity

But what really caught my eye about this sale is that Derek Sivers put the money in a irrevocable trust, draws only 5% of the money for personal living expenses and is giving the rest of the money away.  He explains it in a couple of brilliant blog posts:

Johns Wu – million dollar man

Johns Wu is another interesting cat.  He has a BA degree in Neurobiology from the University of California in Berkeley.  But, brain surgery was not his passion – it was business and finance.  He took that passion, along with his newly acquired skill in blogging and SEO (search engine optimization, search marketing) and founded the website, bankaholic.com, and sold about 2 years later for $15M.  For about a year, this 21 year old “kid” was a one man show,

An empire of one, which is the 21st century small business revolution made possible by the proliferation of the Internet.

Like Sivers, Wu’s timing was perfect.  Had Wu waited another year for the recession to kick into gear and allow all those finance people who were in recession denial to come out of denial … he probably would not have sold his WordPress blog for $15 million dollars. But he did sell that content and its associated traffic, PR6 and backlinks for $15M and it was a coup.

Nowadays, many people are realizing that raw traffic and SEO is not THE answer.  It may be part of the solution, but not without some qualifications.  Indeed, it is QUALIFIED TRAFFIC that we should be targeting.

Get Rich Fast or Slow

Derek Sivers was a case of getting rich slowly, it took him 10 years (1998-2008) to create an opportunity to sell CD baby for $22M.  It took Johns Wu only 2 years (2006-2008) to make $15M.  Timing was crucial for both sales.  Passion and an almost obsessive commitment and attention to detail was crucial.  And, of course, without the Internet as the vehicle or venue, I’m not sure if these two entrepreneurs would have been so fortunate.

History of the Internet

Please follow my series on the History of the World Wide Web.  In there, you will find other success stories, benchmarks and milestones for entrepreneurs and technological breakthroughs.  I am particularly interested in those millionaire entrepreneurs who have leverage the Internet to create their unfathomable wealth.  If you know of other people, companies, case studies and success stories that you would like to share, please contact me or leave a comment below.