The process of creating a company is amazing. I have an unbelievable amount of respect for anyone willing to take on the challenge. We should celebrate the creativity and ingenuity of these efforts. But too often, instead of praising the building of an enduring company, our startup culture puts emphasis on the exit.
Way before thinking about an exit strategy, great entrepreneurs tend to focus on building something that increases in value every year. They work tirelessly to create something relevant that can scale. Their mindset is bent on taking the company as far as it can go for as long as possible.
That’s because with any kind of exit, founders lose some of their ability to completely control the company’s destiny. Some founders are comfortable with that, as the exit clearly provides a greater good for the company. Others are too committed to driving their own course. Every founder will have to critically and honestly weigh all of the possibilities.
There are many different kinds of exits, and each has its pros and cons. All exits are not created equal:
Acqui-hires. In this exit, a company is buying a team. Often, the team gets taken care of, but the new company is not interested in the service or idea they are chasing.
Asset sales. Here a company wants some of the technology or assets, but the team doesn’t get taken care of as part of the deal.
Strategic M&A. A company wants to buy you before you get huge on your own.
Going public. This is the gold standard of exits, where both the shareholders and the employees make significant money, but few companies will ever make it this far. You remain an independent entity, but you’ll now have to perform for shareholders, which adds a new element of complexity.
We are seeing many companies staying private longer. Perhaps most famously, software company SAS, which was founded in 1976, does $3 billion in revenue, and never found the need to go public or sell to a larger entity. Today more companies are staying private as they have increased access to funding and are able to get the money they need at the valuation they want.
Most important to remember is that an exit, while an incredible accomplishment worthy of a celebration, is never the finish line. In fact, it’s just the beginning. If your intention is to build an enduring company, the fight for excellence never ends. And getting to greatness gets harder and harder with every rung of the ladder. Great CEOs know an exit isn’t the end; it’s just the next step.