An Exit Strategy is Not a Business Strategy | Hacker News Reader

An Exit Strategy is Not a Business Strategy

inc.com

30 pointsgatsby11 comments

Agreed: if you're building a startup that simply recycles another successful company with hopes of being acquired -- and that is your predominant "business model" -- then you're in startup land for the wrong reasons. This isn't the dot-com-let's-build-something-that's-not-really-anything-and-IPO-or-sell-it-off-as-fast-as-we-can era anymore. Hint: look at the radical reduction in IPOs over the past 10 years (admittedly due largely to the onerous Sarbanes-Oxley regulations).

I'm already being asked by people what our exit strategy is. I'm like, "um, we haven't even launched yet -- the last thing I'm thinking about is exiting, I just want to build this thing and make it cool!"

Exit strategy is the fundamental difference between a startup in the Silicon Valley sense and a lifestyle business or a family business. Recognition and acknowledgement of the exit is what separates entrepreneurship from self-employment. In other words, exit strategy is an entrepreneurial strategy and exits are what makes puts the "serial" in "serial entrepreneurs."

> Exit strategy is the fundamental difference between a startup in the Silicon Valley sense and a lifestyle business or a family business.

Are you suggesting that there is a dichotomy here, where you are either a SV startup with an exit strategy or a lifestyle/family business? Can't we just start a business small, because that's where you start, and grow it over time in terms of customer base, employees, premises, and ultimately financials?

I found it rather sad when, on approaching a bank to open a business account for the first time, one of the first questions they asked was what our exit strategy was. It was as if the only recognised way we might get any satisfaction would be to start something and then sell it for zillions before we had to actually make it successful. Deriving satisfaction from building a long-term successful business that does something useful and makes a healthy amount of money doing it seems to be some bizarro weird idea that obviously only newbies would consider or something!

Curiously, our professional accountants, who deal with quite a few local startups and small businesses, had quite a different perspective: they figured that we should set up the basics now, and as long as we weren't cutting off options for later, not plan too far ahead in terms of things like dividend strategies and the like. Their reasoning was simply that as a startup with a credible idea but not even launched yet, you really have no idea how successful (or otherwise) you will actually be in say 2-3 years' time, and you might as well at least find out whether you're getting 100s, 100,000s or 100,000,000s of customers before you make any serious decisions on things like long term ownership, exit options, etc. After all, if you can build a successful business with a decent long-term vision, you are always going to have exit options -- including being a much better prospect for all these gazillion dollar acquisition exits that entrepreneurs apparently dream of.

>"they asked was what our exit strategy was."

Your banker was just talking shop. Banks are often involved in finding investments for their wealthy customers whose portfolios they manage. They also are on the lookout for potential clients for such services in the future.

There's nothing wrong with a lifestyle business, a family business, or self employment. But an a startup in the SV sense is built to implement an exit strategy from day one.

Of course it's not an either or - but in general many small businesses don't have an exit strategy until the founder's want to retire. Consider the contrast to YC companies. The founders have to be willing to part with ownership on the day they enter the program.

> Your banker was just talking shop.

Respectfully, I doubt that. He seemed to be working through a standard questionnaire for new business accounts, including a lot of questions likely to be of interest if we ever asked for credit/loans. We got much the same questions on another occasion, opening an account with the same bank but for a different company.

Of course, that doesn't mean he wasn't also interested for other reasons professional, personal, or both.

Tell that to Steve Jobs:

"Jobs said he was disturbed when he heard young entrepreneurs in Silicon Valley use the term 'exit strategy' — a quick, lucrative sale of a start-up. It was a small ambition, Mr. Jobs said, instead of trying to build companies that last for decades, if not a century or more" (NYTimes)

I guess Steve failed to remember Pixar or Next

So 37Signals is a lifestyle or family business?

Absolutely. Lifestyle, not family.

I certainly never meant to imply that, once established, a startup should not have an exit strategy -- indeed it should. My point was that a startup should not be borne out of a desire merely to exit, but rather to do something new and exciting and cool. I.e., to create something simply to exit is to create for the wrong reasons.

The problem that has always existed is someone will come along, think they can do it better than everyone else that has come before them (basically that they're smarter when they're probably not), or is delusional enough to believe their the first to think of an idea, and when asked how they're different, they say crap like "we're going to kill it with X which is what Y company isn't doing". It's redundant and unbelievable how many people think this way.

Reply on news.ycombinator.com