H A P P I L Y E V E R A F T E R ? T R A N S I T I O N T O L I F E A F T E R E X IT

Thoughts for the Week

Within the video gaming community, Markus Persson is a legend. He created Minecraft, the smash hit video game that Microsoft bought in 2014 for $2.5 billion. Just 35 years old at sale, Persson’s exit reads like a fairy tale – rock star status, more money than he could imagine, and plenty of time for leisure and to ponder…what next?

Persson’s life after exit hasn’t been the blissful utopia we might imagine, but actually a struggle. He initially spent his sudden wealth with extravagance, beating out Jay-Z and Beyonce to buy a $70 million Beverly Hills mansion, hosting big celebrity parties, and jetting around the world. But then he fell into a depression and “never felt more isolated.” He describes twiddling his thumbs at home, feeling disconnected from colleagues, and struggling to find genuine companionship. He explains on Twitter, “The problem with getting everything is you run out of reasons to keep trying, and human interaction becomes impossible due to imbalance.”

The size of his payout might be unusual, but his difficult transition is common. In our conversations with founders, those who have exited often describe similar feelings of loneliness, confusion, and sadness. These aren’t easy to share when most people, knowing you’ve crossed the proverbial finish line, expect you to be happy and free of worry.

Startup entrepreneur Laura Rich had a similar experience, and has since founded Exit Club where she spends most of her time helping other entrepreneurs navigate the post-sale transition. She approaches these issues candidly in her recent article, “Kate Spade and Depression after Business Exit” (link below).

Founders who exit are often misperceived as the “winners.” Rich explains, “It's hard for many people to observe such success and accept that it can manifest as pressures that become internalized and wreak mental and physical havoc on a person.” Kate Spade was a seemingly cheery fashion icon, wife and mother who inspired millions. She changed the way handbags are created and marketed, exited in 2006, and amassed a $150M net worth. We now know she also battled depression for years.

ISOLATION – YOU’RE SUPPOSED TO BE HAPPY

A sudden increase in wealth doesn’t mean fewer problems, just different ones – which most people might not relate to resulting in a shrinking circle of trusted individuals. As the social structure shrinks, feelings of isolation may follow. Relationships that felt normal before exit, may begin to shift as the new reality enters the public domain. Rich notes one entrepreneur spoke of friends becoming jealous or expecting a payout, who then literally spent a few years staring at a lake from a deck. 

CONFUSION – WHAT NEXT?

Val Jon Harris refers to this as “The Founder’s Dilemma” in a Huffington Post article (link below). Exiting founders may face a loss of identity, meaning and purpose – all central to owning and operating a successful enterprise. An exit includes exiting many of the relationships, experiences, engagements and challenges that created one’s identity and sense of personal value. Harris cautions that if a founder misidentifies who they are with what they have (the business and all that comes with it), a sale may also mean an exit from one’s identity. The founder is left with a surplus of cash, and a deficit of self.

SADNESS – COPING WITH LOSS

Founders frequently refer to the business affectionately as “their baby” and most experience some grief and loss after exit, followed by a period of mourning. A 2017 study by University of Helsinki used MRI brain scans to track neural responses to images of children and companies including their own. The results show that entrepreneurs are attached to their companies the same way parents are to their children. This supports the nearly ubiquitous sense of loss felt by even the most burnt out founders. These big losses – old friends, identity, purpose, and a “baby” – are a lot to cope with, especially when everybody is expecting you to be excited about the exit.

AWARENESS AND ACKNOWLEDGEMENT

This Thoughts for the Week is a heavy, but important topic. These are real issues that accompany great financial outcomes and growing wealth. But they are often unexpected and not frequently discussed. The impacts extend beyond the founder, and include spouses, partners, and children. Living a rich, fulfilled, happy life after exit does not have to be elusive – as many of our clients can attest. But a period of transition is inevitable and no two paths are the same. We believe that being aware of these issues in advance and thinking through the emotional and financial aspects of an exit can increase the odds of success. We also find that clients are comforted knowing others feel similarly. So we acknowledge the transition is hard, share stories and experiences, and look forward to revisiting this topic in future Thoughts for the Weeks.

Enjoy your reading and your weekend.

Mike, Scott, Zack, Cate, Marina, Julia and Willis

Private Wealth Advisors

Mike Burbank, Managing Director Wealth Management Scott Hafeli, CFA Zack Schiller, CFP

Morgan Stanley Private Wealth Management 555 California Street, 14th Floor | San Francisco, CA 94104 Office: 415 576 3131

Sources:

LinkedIn, “Kate Spade and Depression After Business Exit,” Laura Rich, June 8, 2018 https://www.dhirubhai.net/pulse/kate-spade-depression-after-business-exit-laura-rich/

Huffington Post, Life After Exit: The Founder’s Dilemma of What’s Next,” Val Jon Farris, May 7, 2015 https://www.huffingtonpost.com/val-jon-farris/life-after-exit-the-found_b_7218128.html

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The Burbank Hafeli Group at Morgan Stanley Private Wealth Management is focused on serving the investment and financial planning needs of the founders of food, beverage, and consumer products companies and private equity and investment banking professionals. Mike Burbank was recognized as one of the Top 400 Advisors in the United States by the Financial Times in 2013 and 2014. Scott was also recognized as one of the Top 400 Advisors in the United States by the Financial Times in 2015.

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