
Great Companies Don’t Have an Exit Strategy - bradleyland
http://recode.net/2014/01/13/great-companies-dont-have-an-exit-strategy/
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gjmulhol
This is a fundamental lack of understanding about what an exit strategy is. It
is not about the CEO exiting. Private companies are a very illiquid
investment. An exit strategy is something that exists to help inform investors
about how they will eventually realize their gains. If a company intends to
stay private forever and simply pay a dividend to investors, it may not be
interesting for certain types of investors.

By definition, therefore, an IPO is an exit. It is an opportunity for an
investor to get his or her money out of your particular company. Most great
companies—depending on how you define them—actually have gone through some
sort of exit event as defined this way, and all savvy investors will want to
know how they can realize their gains if you are successful.

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bradleyland
That was the first thing that came to mind: companies don't have exits,
investors do. However, I don't think it's uncommon for new entrepreneurs to
focus too much on the exit as investor-founders. That was the lesson I took
from this.

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aaronbrethorst
"An IPO is a means for a company to bring in cash, not the end of the game."

Nice sentiment, but I'm guessing your early investors—as they look to close
out the funds that made up the bulk of your Series A or B—see things a bit
differently.

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cfontes
Don't get me wrong but I disagree badly with the way this was writen. Mainly
the selling a company part.

Sometimes there are no other option other then selling your company.

You can become outnumbered in the board and become a one men army due to
different views of the future or other complications ( try that... it's fun
like hell). You can work for your company for 40 years and realise YOU are not
needed anymore and you should sell it and enjoy your last years.

And so many other variations to that "Why?" question. I found that statement
aimed to make people that sold their company look like they gave up. And more
often then not. This is not the case.

Thinking like that is just to simple.

~~~
lkanies
Selling the company is the best form of failure, but it is rarely the plan the
board entered with, and my point is that it certainly shouldn't be.

Even great exits like Nest's today; I expect Tony Fadell didn't plan to sell,
but Google made him an offer he couldn't refuse.

So the point isn't that you should never ever sell (and I pointedly don't
promise that for Puppet Labs); the point is that your strategy shouldn't be to
sell. It's an escape hatch, not a goal.

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001sky
_Great Companies Don’t Have an Exit Strategy_

Nope. But they have a liquidity strategy. Liquidity is the "exit" (path) for
investors and is critical to retention of staff. Frankly the title seems more
to be linkbait than insight.

~~~
lkanies
Tell that to the journalists who have been asking me what my exit strategy is
for the last four years, and especially since I hired a CFO. This article
started as a literal response to them.

~~~
001sky
Great companies are not built to be <flipped>. I think that is a great and
valid point. It's also a valid PR strategy to make such point in public if you
think it will help you raise money, hire good staff, and build relationships
with strategic customers. But in making this point, I think more precision in
your language would be helpful. Because all of those people may legitimately
be interested in your strategy to generate investor/employee liquidity (and
what thay might mean for a strategic partner). And for them, "asking me what
my exit strategy" is neither a sign of ignorance nor lack of understanding. If
journalists are asking you this question, its not clear what their motive is.
But in that case, I would argue, precision still wins the day and provides you
the upper hand to both educate them and to message clearly and precisely
(which helps build your credibility with all parties). I hope this puts my
earlier comment in more useful context.

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gesman
Great exits are usually made by the companies who are focused on the great
product or service, not on an "exit" strategy.

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bloaf
>Yeah, sure, you can talk about individuals having exit strategies, rather
than just companies, and you could conceivably be an entrepreneur trying to
build a company to the point where you can sell all your interest in the
company, but … why?

Maybe there is a product or service you want to have that is not currently
available.

For example: say you _really_ want an app to automatically scan+OCR your
grocery receipts and keep track of the prices you pay for various items. You
may not think the problem is very interesting, but you suspect that a market
exists. So you make a company that will develop the app, but plan to sell your
interests in the company once you are satisfied that the app meets your needs.

~~~
fian
The receipt scan idea is an app I have wanted for ages, though I don't think
OCR is good enough to handle all the cryptic abbreviated product names on a
standard super market receipt. It would be cleaner if the printed receipt
included a QR code linking to an itemised list for download, but that approach
may have some privacy issues. Better would be to transfer a text file from the
point of sale system to your phone via NFC.

~~~
bloaf
If you got a list of the most common supermarket codes/abbreviations and used
them as a dictionary to train your OCR program I think you could do OK. I
think there is a reason grocery stores generally don't let you see your
purchase history even though they record it with those shoppers' cards: that
sort of information would make it too easy for customers to comparison shop.
So I would operate under the assumption that grocery stores wouldn't be
falling over themselves to support this sort of app, unless it got really
popular.

I've always worried more about the scanning part. Ideally I'd like the app to
work with a cell phone camera only, but I have no idea how feasible getting a
sufficiently clear picture of an arbitrary length receipt is.

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avighnay
Very good article. It is not possible to build a product if cashing out is the
first thing in the CEO's mind.

We always hear and talk about only two exits IPO (getting rare now) and
Acquisition (the $B glamour). However there is also a third valid way of
investor exit which is 'Management Buyout' (never heard in tech circles)

[http://www.inc.com/guides/2010/10/how-to-choose-an-exit-
stra...](http://www.inc.com/guides/2010/10/how-to-choose-an-exit-
strategy.html)

~~~
lkanies
Yep. I seriously thought about talking about that, but it's rare enough that
it didn't seem worth it, and it's not a realistic option for us unless our
valuation drops considerably. Even then, I would have had to sell many of my
shares at the top of the valuation, and then buy them back at the bottom.

So yeah, if you can afford it, this is great, but basically all of my net
worth is already in Puppet stock, so not so useful for me. :)

~~~
avighnay
I can relate to it. I listed it more from an information point of view. Though
it would be interesting to know of companies which have actually done this

