Build It To Keep

I’ve spent the past couple days in Salt Lake City, Utah at the Silicon Slopes Summit. This is mostly a “get to know the community” trip although I did have some scheduled meetings while here.

This event is amazing and a testament to the folks who put it together including ringleader Clint Betts.

There is much written and said about building entrepreneurial communities but an accessible and well done event or set of events put on by people in the community is crucial in my opinion. This one is that and more.

That said, there is A LOT going on in Utah around technology. The event had 20,000+ attendees most of whom I did not know.

One of the highlights of the event was an onstage discussion between Bill McDermott, CEO of SAP, and Ryan Smith, CEO of Qualtrics. Qualtrics was just acquired by SAP for $8 billion (with a B) dollars. The “biggest enterprise software company you never heard of” to paraphrase a comment from the stage. Beyond Bill sporting a nice pair of shades on stage (the ultimate ‘deal with it” move), Ryan made a comment that stuck out and I believe is clarifying on the entrepreneurial journey.

“Build it to keep”

Starting a business is hard, building a business is hard, pre-planning a sale is unwise. Yes, entrepreneurs are asked about exit and exit comparables by investors. Mostly this is around wanting to build a comfort level that the money invested can be returned within some time frame most likely via an acquisition. That’s for the outside investor, not for you.

According to Crunchbase, Qualtrics raised $400M. That is quite a lot but not when you consider an $8 billion acquisition and they did not raise anything until they were 10 years old with thousands of customers. That $70M round in 2012 was strategic capital to grow the business not startup capital.

I have not seen or researched how much the founding team and executives owned of the company at sale but I assume quite a lot. This is great. Great for the team, their families, the community, and for the investors who backed an already great and established company. The word “optionality” is well worn in venture lexicon but the power of having options should not be understated.

Build a business to keep and also understand that when you take outside capital, even later in maturity, there is still an expectation you will pay it back and then some. Qualtrics had filed to go public just before its acquisition so Ryan and team were planning to continue to “build it to keep” while paying back their investors and rewarding their employees but the draw of a global software company with 14,000 sales people to further their vision proved a better option to realize their vision.

Quite a story…

 Cross posted from the Venture Vice blog.

Image via Flickr