Crack the exit puzzle! A skill worth learning for Startups
I am Victor, and I would like to stirr a thought in your mind that is worth diving into…
Every hour a startup gets acquired, or ‘exits’, somewhere in the world. Yet we have a big problem. The problem is that there are still too few of these exits happening in emerging hubs like Berlin, despite billions being invested, and thousands of people moving there to create companies. It is certainly not for lack of trying: from Nairobi to Delhi to Berlin hundreds of aspiring entrepreneurs would love to become permanent success stories by selling their businesses for headline-grabbing prices. And these hubs would benefit enormously from even a few of these exits, recycling money, expertise, and mentorship back into the ecosystem to water the next generation of flowers. In fact, entrepreneurs tell me in every single emerging hub that the biggest issue they have is being able to exit companies successfully, and repeatedly. Most people say it’s just harder to sell an up and coming company based in Berlin versus the same one based, say, in Santa Clara. Being close to the world’s biggest tech buyers, they argue, counts for so much it’s impossible for companies far away to get the same attention, or the same valuations. This is plausible, and understandable. Except it is not true.
If a pimply-faced kid living in Vladivostok, who does not do his laundry or clean his room can hack the CIA or invent Bitcoin, it is absolutely possible for any quality startup based anywhere to crack the exit puzzle and turn its founders into millionaires. And if someone who has never been in politics can be President of the US, then quite literally anything is possible.
Suffice to say that it has a lot to do with achieving “presence” with potential buyers long before you come to sell a business. Achieving that presence has never been easier for a company located “over there somewhere.” It takes planning and organization, and a clear game plan as to how to achieve that presence, but it can absolutely be done. Moreover, hardly any company in Berlin, Tallinn, Nairobi or Mumbai does this planning. Almost all successful entrepreneurs believe if they build something of quality, and a company around it that is also high quality, then buyers will come to them. Sure, that sometimes happens, but to rely on that is to play roulette with your business.
Finally, exiting well also requires being thoughtful as you build your business. Thoughtful about things like how you handle Intellectual Property, and how, and how much, money you raise as you grow. As an example, I see very few companies thinking about the rounds of capital they are raising and how that will affect their ability to exit well. Nearly always its: raise as much as possible, for as high a price as possible. Like partying all night and not worrying about the hangover sure to come.
How this can be done is something I have distilled over 25 years of doing just this, and something I will be covering in my TED talk in more detail. I think it’s a skill worth learning, and look forward to sharing my insights with you all.At the end of the day, CEO’s know how to build a company, hire great people, and raise money when needed. They do not know how to set themselves up to exit well. Luckily for them, it’s a skill that can be learned. And unlike macramé or Rubiks cube, it’s a skill that’s perhaps more valuable than any other: done right, it can be worth $10m, even $100m to an entrepreneur.