Endgame strategy ... why exit?

It's a certain type of person that looks for the nearest exit upon entering a room and, generally speaking, they're unlikely to be someone you'd want to go into business with. Entrepreneurship takes commitment and discipline - paranoia doesn't really fit the profile.

It's great to work with founders that are building businesses they believe in, to influence a few steps of a longer journey towards their vision - a better product, a better solution, a better world. Of course, a certain amount of capital is required along the way and it's worth remembering that the expectations of early capital providers can have far reaching repercussions for even the most successful businesses. 

Reports abound of how some young entrepreneur started a venture in his or her bedroom" before selling to some global giant within a few short years. Such achievements should certainly be applauded, but simply realising a quick paycheque is a very narrow definition of success. An entrepreneur's definition of success should be as individual as their business strategy, and reflective of both personal ambitions and business aspirations.

The media spotlight tends to obscure more than it highlights; hiding the many many smaller businesses growing, employing, innovating, and selling in the shadows cast by its glare. In this uber-networked age, extreme top-line growth has become accepted as the only justifiable goal of new firms - often funded through unsustainable marketing spend to demonstrate 'traction'. This has normalised the involvement of angel investors and venture capitalists in the funding of new business, ostensibly using their deeper pockets to capitalise on the global reach available via digital channels. 

It may sound glib, but if you like many entrepreneurs, started a business to "be your own boss", then you must choose your future employer carefully ... and make no mistake, when someone else (be it an individual, a VC fund, or a larger company) holds an influential stake in your business, then they also hold a stake in your future. Being fired from your own start-up now becomes a very real possibility! 

In order to generate a return for themselves and their investors within timeframe of their fund vehicles (generally 3-7 years for VC investors), these capital providers must catalyse an 'liquidity' or 'exit' event, generally through a refinancing, a sale, or an IPO of the business within that window. 

Careful consideration of all available funding options is advised, particularly with respect to your long-term business strategy and ambitions. A business formed to address a limited market opportunity and produce a steady stream of excess cash (sometimes termed a lifestyle business) is an ideal candidate for 'bootstrapping' - growing organically on reinvested profits and minimal external funding. Equally, a company looking to secure first mover advantage in a large potential market may justifiably pursue external capital from those with the risk appetite to buy into the founders' vision. Such aggressive expansion plans, even if successful, will leave the founders holding a smaller stake in a bigger business. 

Both are valid choices, and both will require compromises ... what is your priority, maintaining control or achieving scale?