bijansabet.com - Latest Comments in Exit Strategy

Re: Exit Strategy

Nitin Mittal — Wed, 04 Nov 2009 12:51:33 -0000

I think an entrepreneur is better off devising a plan to profitability and creating a sustainable business rather than selling a vision for $100 mm sale. Maybe this is due to the financing dynamic. There should be a more pronounced differentiation between those VCs who need to fund high-risk/high-return projects to make sizable returns to LPs and those who take on relatively less risk to fund companies with a longer-time horizon. I guess the former gets more publicity because the success are marquee names.

Re: Exit Strategy

Taku Mhlanga — Mon, 02 Nov 2009 21:41:48 -0000

I agree Bijan. It's not very practical (to me) to talk exit strategy at seed stage to investors. I think it's a good thing to think about the viability and practicality of a sale. But to spend time predicting who will be interested in your product five years out is kind of like saying my portfolio will be up 70% in 2008- in a slide to investors for that matter.

But I'm just an entrepreneur, not an investor so hey...

Re: Exit Strategy

Guest — Mon, 02 Nov 2009 21:25:06 -0000

I am sure you get a lot of founders who say things at inappropriate times but I won't even consider a partnership or an acquisition unless the founder can answer the question of their exit strategy but I am a synergy buyer and that is a different game. I need to make sure the founder has thought things through, aren't throwing IP all over creation talking to my competitors, which could give them speed-to-market advantage, etc. It's a slightly different world I think. For me it's lke Dr. Stephen Covey said as one of the 7 Habits of Highly Successful People, "Start with the end in mind".

Re: Exit Strategy

desmondpieri — Mon, 02 Nov 2009 13:32:39 -0000

The inexperienced put "IPO." (Whether or not it goes IPO is so much out of their control.) The experienced list logical acquirers. This list of names leads to an interesting series of questions, the best being, "If IBM / eBay / Facebook / Nokia should buy you, then why are they simply not creating this business / product themselves?"

BTW, I'm not a Yankees fan, but I expect we'll be wishing you "congratulations" soon. Now, if the Yankees had not "stolen" Damon, Teixeira, and Rodriquez from the Red Sox, boy would things be different now. Enjoy!

Re: Exit Strategy

bijan — Mon, 02 Nov 2009 13:02:17 -0000

yep.

Re: Exit Strategy

bijan — Mon, 02 Nov 2009 13:01:57 -0000

and what do they put on that "exit slide" ?

Re: Exit Strategy

SpeedNY — Mon, 02 Nov 2009 12:35:56 -0000

Great post. I guess, it all depends on what stage the entrepreneurship is in. If u'r seed stage and less without significant eyeballs, showing an exit strategy slide is like showing that you'll be a $100m firm at the end of 5 yr slide. Makes absolutely no sense, as tech is too dynamic to make that 5 year perfect plan. Rather focus on the firm / technology and what you are trying to create.
Also, I doubt that any of those 'exit' strategy slides or IPO's pan out as planned anyways, then what's the point?

Re: Exit Strategy

Desmond Pieri — Mon, 02 Nov 2009 09:50:36 -0000

Bijan, I often go to sessions where founders are presenting their case to potential investors. And whenever there is NOT the "exit slide," one of the potential investors asks for it. There may be many founders who agree with your "build a great company" thinking, but still put in the exit slide simply because they have been asked for it so many times.

Re: Exit Strategy

Pascal-Emmanuel Gobry — Mon, 02 Nov 2009 02:07:32 -0000

That's absolutely right. Your exit strategy should be "be awesome."

What's more, I would add, selling the company should not be an acceptable exit strategy, except in the rarest of circumstances. There's plenty of data about how M&A in the public markets destroys value as it's done more for empire building than for serious reasons and that's also true in tech. Except when there's a really strong synergy and case for acquisition (e.g. Google/YouTube), the exit should be an IPO. And an IPO is not a goal or an exit strategy, it's just a step along the way to making an awesome company.

Re: Exit Strategy

Jason — Mon, 02 Nov 2009 00:50:32 -0000

i guess ill include an exit slide just so my investors know that im ok departing with my baby. on that note Bijan, here's my first slide:

suredone prototype beta v0.1 http://motorcycleparts2u.com

... eventually the internet version of Walmart =)

Re: Exit Strategy

vruz — Sun, 01 Nov 2009 21:48:16 -0000

I'm more concerned about the ways in which I *don't* want to exit.
That's an exit decision too.

Re: Exit Strategy

bijan — Sun, 01 Nov 2009 21:47:58 -0000

the best founders I know are trying to build something so big and that's takes all of their attention.

Re: Exit Strategy

t_armstrong — Sun, 01 Nov 2009 21:42:41 -0000

Interesting Post Bijan. I completely understand that you'd want entrepreneurs to focus on building a great company and not worry about and exit. That makes sense. Do you think there is any benefit to seeing that the founders are aware of the "bigger picture" and that they are at least thinking about exits/ROI/etc? Or are you saying it's just too early in the game?

Thanks for another great post,
Tom

Re: Exit Strategy

HysBrian — Sun, 01 Nov 2009 21:40:40 -0000

right, I like to think that entrepreneurs should look for ways to exit the company, as opposed for companies making an exit. The business should always be self-sustaining.

Re: Exit Strategy

vruz — Sun, 01 Nov 2009 21:32:57 -0000

depends on the decision. I already know there's certain things I don't want to do in life.
it's harder to learn what not to do than learning what to do, as you get a lot more of experience, you realise of this inescapable fact of life.
'initial decision judgement' is oftentimes an euphemism for 'core values'.

Re: Exit Strategy

HysBrian — Sun, 01 Nov 2009 21:25:25 -0000

@vruz you don't think that initial decision clouds judgement on future decisions? In my mind with a good business there isn't a need to exit.

Re: Exit Strategy

vruz — Sun, 01 Nov 2009 21:21:49 -0000

I wouldn't personally include that in a first presentation, I agree it's braindead, but I do have some ideas about certain exits that I consider next to non-negotiable, and depending on the situation and who is the addressee of the presentation that may or may not come up.

I hope you don't get too many slides of the braindead kind :-)

Re: Exit Strategy

bijan — Sun, 01 Nov 2009 21:08:01 -0000

theoretcially it's fair point

but I've never seen anything like those former scenarios you mentioned in any meetings I've been in with founders.

if that slide comes up it's usually the latter....

Re: Exit Strategy

vruz — Sun, 01 Nov 2009 20:58:51 -0000

well whilst I understand why you don't like it much, there's other possible reasons why an entrepreneur might want to utter the word 'exit'.
for example, to make absolutely certain upfront that nobody's wasting anybody's time, say... a christian entrepreneur would be opposed to sell her web startup to playboy.com, and it's not a money problem, or that she wants out early at all. Or say, a startup that develops environmentally friendly products in the health industry is opposed to selling shares to Exxon and Phillip Morris. Many times it's really not about money or wanting out at all.

I think that in general it's better to know upfront which kind of things your stakeholders are opposed to, I don't necessarily perceive it as a problem.
Although it's true that there's far too many braindead "sell in 2 years for $10M to Google" slides out there, there's probably still some valid cases.