*This was originally posted on Joseph Ansanelli’s blog.
Let me get right to the point: if you work for a startup or meet with one that claims it has an exit strategy, you should follow the standard airline passenger-safety instructions and “look for your nearest emergency exit – which in some cases may be behind you.”
That may sound harsh, but it’s true. Even though I’ve built and sold several companies, I truly believe too much time is spent thinking about exit strategies and not enough time on success strategies. And I’ve seen this even more now as a Partner at Greylock.
An exit strategy usually implies very short-term thinking about how Facebook, Salesforce, Cisco or some other deep-pocketed company will come along and scoop up the startup. And that type of thinking often signals the startup’s leadership team probably isn’t interested in building a big company.
Even the term itself has a generally negative connotation. Check out Wikipedia’s definition of exit strategy:
An exit strategy is a means of leaving one’s current situation, typically an unfavorable situation.
Yikes, right? It’s probably not a good sign if any team – especially the one behind a young startup – is preparing for an unfavorable situation.
Instead of thinking about the exit, startups need to be laser-focused on a success strategy. This means paying attention to the most important factors that will make your company successful, such as hiring, building products, growing your user base, and figuring out a sales strategy that will eventually lead to profitability.
A success strategy is about building value. And when you are successful by building value, you will have lots of options including growing the company, taking it public, and selling it.
Let’s take my last startup, a security company called Vontu. Symantec acquired Vontu in 2007 for $350 million. Did we have an exit strategy and plan to sell the company to Symantec? No. We were purchased by Symantec because we were successful. We had established a new security category called data loss prevention. We were scaling the business well with Bookings growth from $.5 million to 3 million to 13 million to 28 million to 45 million – all in millions). We were the clear leader in our market, and Symantec had tried yet failed to compete with us.
Could we have kept going as an independent company? Absolutely. We did have concerns about the economy, international growth, and other risks. And in hindsight, the business has grown tremendously inside of Symantec, and while I certainly wonder what could have been, I know we were purchased because we were successful. Success was our strategy and the exit was an option we decided to take.
So stay focused on your company’s long-term success and along the way you will face lots of good, hard choices about if and when to “exit.” It may sound obvious, but I am continually amazed that so many people think and ask about exit strategies. I wish they would spend more time asking about success strategies.
Let me know what you think. You can follow me here on LinkedIn, as well as on Twitter at @ansanelli.
“I truly believe too much time is spent thinking about exit strategies and not enough time on success strategies.”