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Are startups too focused on the exit?

By June 18, 2010One Comment2 min read

I read through HackerNews and tons of other blogs, am also incredibly fascinated by the proliferation of tech communities outside of silicon valley, but I keep seeing a common thread amongst all the naysayers. The argument goes that in the end it doesn’t matter what or where you build if there are no exit opportunities outside of the Valley.

This brings up an interesting question, are tech startups still too focused on the exit? What happened to the days of building a solid cash-flow-positive business? Are we eschewing sound business practices or giving up on good business ideas because we don’t see them having a giant payoff? People seem to be forgetting that the likelihood of hitting an IPO is much smaller these days and getting acquired for 9+figures is also super rare. For every there are 100,000 other financial services sites that aren’t going to be capitalizing on an exit. There may be a large percentage of those services that are generating healthy profits and revenues for their founders/employees though. So what’s wrong with that?

Furthermore the idea that there are no exits outside of Silicon Valley may be 100% correct for all I know, but moving to Silicon Valley doesn’t give you a guarantee of an exit either. Look at tiny Octazen from Malaysia, they got snapped up by Facebook earlier this year. We don’t know much about their acquisition, but I am sure they were doing an impressive enough job in Malaysia that it made sense for Facebook to acquire them for what is a healthy sum in Malaysia.

It seems counterintuitive to build a business and be looking at the door from the start. How can you pour your heart and soul into building a business when you’re more focused on leaving it? I’m sure some VC somewhere is reading this and thinking I’m being naive, but in reality the idea of building a solid business should be one they appreciate. The lean startup movement is a great step in this direction, as it focuses on metrics (the ones that matter) and revenue (the ones that pay the bills), but I feel we’re going to need a shift in mindset to get back to sensible businesses.

So what’s my point here? Play the odds, and those odds are that you won’t get an exit, so build your company as if you weren’t going to get one. At the very least you’ll be able to hopefully support yourself and your employees, and do something interesting.

One Comment

  • Brian, interesting you cited the example of Mint. My understanding of the scuttlebutt concerning their acquisition was that Aaron might have had offers in the range of 3x-8x what Intuit paid, but he was happy to accept theirs since they offered him far more control.

    My own startup is something I don't want in anyone else's hands for as long as my horizon extends. I could run other businesses that have way higher jackpots than what I'm pursuing; but a small slice of the world simply needs what I'm developing…