How Tech Startups Are Like Torrid Hollywood Affairs , But Not In A Good Way (Think “Exit Strategies” — Or Better Yet, Rethink Them)

by Freddy Tran Nager, Founder of Atomic Tango + Entrepreneurial Advisor; photo by Danie Franco on Unsplash…

Too many entrepreneurs treat their startups like Hollywood affairs: they begin with torrid passion, provide fodder for gossip and headlines, and sometimes become a “commitment.” But as soon as that relationship turns rocky — or something better comes along — the entrepreneurs start looking for an off-ramp.

These low-fidelity capitalists proudly call themselves “serial entrepreneurs,” which, in relationship terms, makes them philanderers. But hey, whatever consenting adults want to do with their time and money is their business.

But is it good for business?

Enter The Exit…

An integral part of a business plan is the “exit strategy,” which describes how entrepreneurs intend to unload their startups in five to ten years, such as going public or getting acquired by another company. Even if they hope to run their companies for life, they still need to include an exit strategy in their plans to attract venture capitalists and other investors.

So what’s the harm? After all, who knows whether the company will even last that long? That’s why financial projections in startup plans are about as realistic as unicorns.

Oh, wait, those exist in Silicon Valley fantasies, too.

Premature Exaltation…

Now, I understand why entrepreneurs salivate like pitbulls in a sausage factory whenever they see another unprofitable venture get acquired or go public, turning their founders into millionaires (meh) or billionaires (now we’re talking!).

The problem arises when an obsession with exit strategies overrides all commitment to creating a realistic revenue model. (“We’ll lose money on every sale, but make it up on the volume.”) Some are so eager to flip their companies that they launch hyperventilating publicity campaigns even before their products emerge from beta. They sit around praying that they’ll be acquired by Alphabet, Amazon, Apple or some other mega-corp.

And while a handful of entrepreneurs do achieve their financial dreams, too often, reality strikes like cold water tossed on copulating hounds. That’s especially true these days, when some of those investors and prospective buyers are needing saviors of their own. Consequently, many billion-dollar startups have become worthless bottom-ups, landing in the TechCrunch Deadpool, with most people not knowing they ever existed.

Compare that to SRC Holdings, an American manufacturing conglomerate that emphasizes profitability and contingency planning. You won’t find any obsession with exit strategies at SRC — indeed, the company remains privately held after forty years, with ownership firmly in the hands of its employees. That’s true exceptionalism.

Time to Make a Vow…

So should you have an exit strategy? Yes, if you plan to invade another country or enter a PhD program. But if you’re an entrepreneur, consider these links that Wikipedia provides for “Exit Strategy”:

Surrender
Withdrawal
Iraq Study Group Report
Pyrrhic victory
No-win situation
Total U.S. Withdrawal in the Vietnam War

Not exactly inspiring, huh?

Now, you might be saying that you need an exit plan to appease that Sand Hill VC, and you’re right, you do. But enter that Faustian deal knowing full well that the VC will hold you to your promise by holding your feet over a fire. And if you don’t deliver, the only exit you’ll see will be yours out the back door.

The better bet: before putting the final touches on that pitch deck, engrave these words into the wall of your co-working space…

“To have and to hold,
from this day forward,
for better for worse,
for richer for poorer,
in sickness and in health,
to love and to cherish,
till death do us part.”

Keep repeating that to yourself and your employees. That’s how you should think about your startup. It might take you longer — much, much longer — to achieve fame and fortune, but that “something better that comes along” just might be the bigger, stronger company that you never left.

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