I'd love to read some reasoning behind people's choices, especially if you are choosing the third option.
8 years later the company I started still exists (http://exocortex.com, software plugins and consulting) and has hundreds of specialty clients and pays real salaries and has been profitable for years, but it isn't headed for an exit itself. So it is firmly a lifestyle business.
That said, we started something like a "start-up" within this lifestyle business that has more growth potential (read: exit potential) but also more risk (http://clara.io, a web-based 3D editor/rendering/publishing tool.) More examples of what can be done with Clara.io can be found on our Facebook page: https://www.facebook.com/Exocortex
I guess once you've got the lifestyle business established, you can then go and look for larger opportunities.
To me hacking and startups are a lot like music. I got into music because I liked listening and wanted to make my own. I went to music school because I wanted to be a better musician. The idea of making money was only a means to continue making music. The thing is, if you get very good at making music that enough people want to hear, opportunities to make money doing it will find you.
The same is proving true with software. After some startup failures that involved putting the cart in front of the horse, I decided to just concentrate on writing good code and solving difficult problems that interest me. Instead of looking for capital, I've hunkered down in the middle of nowhere so my own funds will stretch as far as possible. A great deal of my work right now is open source. And so two interesting things happened this past year. First, other people showed up to help work on it. And then miraculously and completely unsolicited, someone came along and offered to pay me damn good money to keep working on it. If a few more do the same, I'll form a company, call it a startup, and find a way to deliver the value of this software as a service.
Supposing it goes that direction, I wouldn't think of it as a lifestyle business, because I'd like to see it grow into something more than that. But I also wouldn't be thinking about an exit, because it's not at all clear if and when that would be a feasible or desirable outcome. Lifestyle and big exits are both just side-effects of making something that's valuable enough to other people that they'll part with hard earned money for it. That's the only goal that should matter to a startup.
I wrote most of the code for Audiomack. Free music hosting for artists. Predominantly hip-hop/rap because my cofounders have had other ventures aimed at that genre over the past decade or so, but audiomack accepts everyone. We'd particularly like to make inroads into electronic & dance music.
Started it in our spare time, launched Feb '12 and I went full-time in May '13.
edit: interview with my cofounders for anyone interested in the ideas behind audiomack http://www.youtube.com/watch?v=6S1Vb0PE7w4
I really dislike this question and I tend to distance myself from entrepreneurs having these kinds of conversations. Even if you want to exit early or have lifestyle, it's an unhealthy way of thinking about entrepreneurship.
How do you think Steve Jobs would have answered this question?
Err... you talk about naive, and then cite an outlier amongst outliers?
I'm not Steve Jobs - I'm much more average, and I've made my peace with that. I think I can eke out a niche for myself where I can live comfortably though, so focusing on that makes much more sense to me than trying to ape someone who lived a very different life from mine. As far as I know the only thing I have in common with Jobs is having resided in Oregon.
You couldn't be farther from my understanding of what a lifestyle business is. I understand a lifestyle business to be one that you plan on making part of your life for the long term. It is meant to provide enough income to live at a certain level (ie lifestyle), but not necessarily to become filthy rich, or result in an IPO, or some other exit point.
What makes you think a lifestyle business implies that people want to be lazy?
Now, his workout manual actually has lots of valuable data and insight and is excellent for applying the 80-20 rule as you can find workouts in there that take very little time and produce great results.
No, the question is loved (sic) because it's an important decision to make, and it leads to totally different ways of business development, relationship with investors and such.
>I really dislike this question and I tend to distance myself from entrepreneurs having these kinds of conversations.
Well, it's not like it's their loss.
>How do you think Steve Jobs would have answered this question?
Judging from what he actually did, he would answer that "fuck exits", he's going all the way.
As far as lifestyle businesses, the term is itself a strawman that antagonists to the concept use, then you just knock down the strawman. I can't think of a good term for this type of business - I could say bootstrapped, but bootstrapped might just mean taking no angel money, but hoping for VC at some point.
While exit implies a buyout, it could also mean an IPO. I'm not sure what kind of business you are thinking of when you do not like any of the kinds that have been mentioned.
I do not have my sights set on an angel to series A to series B to IPO treadmill. Although market circumstances can change so who ever knows? If building a "lifestyle" business with the goal of doing higher level interesting work instead of drudge CRUD work, and having time for exercise, friends, family and leisure after working 40 hours is lazy, then call me lazy.
Of course people have children, need retirement money etc. and money needs can increase. But as some studies have shown, once you hit an income that puts you in the top 10% or so of income earners, there is diminishing utility to each extra dollar you get. At some point a well paying job you enjoy is worth more then one you do not enjoy paying double.
A lifestyle business is the business you want to create. You usually don't have to deal with investors or all that that entails including the type of business it will be and its goals.
And as someone else here said, it often winds up the case that the lifestyle business is the one that gets the big exit offers, as opposed to the ones designed from the get-go as a vehicle for getting investments and an exit.
What about: High-quality, mission-driven, sustainable, impervious to fashion, self-motivated, resistant to the incursions of finance capital . . .
I could say similar things for the word "exit," since there are many different kinds of "exits," but I will leave that for someone else with more skin in that game.
We decided "we can grow faster then our revenue if we have cash". We raised our seed from investors we knew well that would have been happy with dividend returns.
After another year, of great traction we decided to go for an 'A' to prove out the sales model. We still had 3/4ths of the seed round in the bank at this point so we only needed the money for growth, not operations.
For anyone that's going to claim snapchat as an example of this not being true-- I'd argue they're waiting for a higher valuation or to monetize and then go public-- both exit strategies
So out of those three choices, I would say the third is most applicable assuming "exit" means a buyout/sale of shares. I'm not looking for an exit or to run a lifestyle business. I'm forming a business that I'll hand off the reigns to at some arbitrary point in the future, unrelated to financials, when I feel like I can finally be the badass super lawyer I know is possible when these tools are built.
Amazingly, people using the term to mean every kind of steady growth company (as opposed to some exponential growth byout-IPO style exit vehicle).
So, 37 Signals say, with tens of millions in revenue, tens of employees and 12+ years in business is also labeled a "lifestyle business".
Most of my work is open source, but I would also like to use my growing skills to build something closed at some point, in another domain. Even then, I would rather build something small that I can maintain and grow without funding, than jump on the VC train.
That said, I have nothing against people who are using the VC model, and I understand that capital is quite necessary for building many businesses.
You might consider alternatives like http://www.newschools.org/, http://www.gatesfoundation.org/what-we-do
I've Spent time trying this myself (both writing software and in the classroom). Its a hard nut.
I'm not here to swing for the fences, i've not taken any investment, i'm not going to run anything unprofitably. I'm here to make a real impact on businesses using my skillset and have fun and make money doing it.
Its really hard work but I'm enjoying the hell out of it.
I checked option 3.
The most difficult part I see is where I'd get clients. Seems like I'd need to specialize in some CRM/etc or have a really good network to draw from.
Here's a demo of our tech http://SpeakerBlast.com.
We are actively looking for help and or an exit(we own IP on this).
The app he links to just plays audio in sync on two or more smartphones!
You just have to do the right thing with the cards you're deal, and play strategically for long-term excellence rather than getting seduced by quick hits (and that's hard to do, because most people are after the latter).
My goal is to keep getting better. I can control the rate at which I learn new skills and become better at the work. If the best move is that I start a business and the opportunity is there, that's what I'll do. On the other hand, if the best thing for my career is to join a 5000-person company where I have to wear a suit every day, I'll do that.
People talk about 501 programmers (those who leave, on the dot, at 5:01 pm). I call myself a "121 programmer", as in 1% per 21 days. Every 21 days, I expect to increase the total value (a somewhat abstract concept) of my entire skillset by at least 1% (19% annually). Obviously, this abstract quantity can't be measured on the order of weeks, but if I pass too many 21-day checkpoints without being able to justify to myself that I'm 1% better than I was 3 weeks ago, I start to get nervous.