Most newbie entrepreneurs would probably answer, “Yes, of course, it’s always best to start and build a company with the exit in mind. Every entrepreneur knows that!” Not so fast. The correct answer is, “it depends” or “probably not.” What say you?

There are two schools of thought on this subject. The first school, advocated by angel investors and VC’s, is by far the most vocal. They preach exit from day one. The second school, advocated by many successful, long-time entrepreneurs (and their trusted advisors), is seldom represented in this debate. To them, the question is moot. They would say the exit should be the last thing on the minds of the founders in the early years.

It’s easy to understand why the investor viewpoint has become conventional wisdom. It’s been drilled into the head of every entrepreneur that has attended or presented at a pitch event to ALWAYS have an Exit Slide. This slide typically lists the companies that are likely acquirers of the startup. The slide sometimes includes the comps of a potential acquirer’s recent acquisitions – showing how they paid a gazillion dollars for a startup that was only 3 years old and made everyone, especially the investors, very rich. Yeah!

So here’s the real deal. Investors do not have the same objectives as *true* entrepreneurs. Most don’t even have the founder’s or the startup’s best interests at heart. They probably like the founder, the product and the space, otherwise they would not have invested. But what they LOVE unequivocally, above everything else, is getting OUT – hopefully with a very nice gain. Only in the case where your company has a reasonable shot of being among the 1% of all startups capable of attracting venture capital, should you even give this question serious thought.

An investor’s objectives are often at odds with an entrepreneur’s objectives, and can be a huge distraction in building a successful business when the emphasis is on exiting. Trust me on this one, I’ve lived it. That said, most startups have NO chance of raising venture capital. So why do so many first-time founders love to talk about the exit? Most are not in it for the right reasons.

A *true* entrepreneur is not looking to start and cash out in three or four years. If that’s how you think about it, you should seriously reconsider whether entrepreneurship is for you. You would be what seasoned entrepreneurs would call an entrepreneur-interloper. Ask any successful, long-time entrepreneur, if they started and built their company with the exit in mind, and I guarantee you most would say something like: “Not really, if anything it was a theoretical question and I never dwelled on it. I always thought that if I just focused on building a successful business, the exit would take care of itself.”

A successful entrepreneur sees his or her company as an extension of himself or herself. His or her company is integral to his or her long-term vision and goals – his or her life’s work. Entrepreneurs can not imagine “exiting” in a few years, unless they are close to retirement or are burned out after building and running a company for many years. They are very focused on disrupting an industry or changing the world, not on getting rich quick…not on dumping their company on the first corporate suitor.

I personally would never invest in a founder who wanted to start a company for the sole purpose of cashing out in a few years and moving on to something else. It’s a big red flag. It says, “no commitment…no passion…just show me the money.” Every great founder I ever met was dragged to the M&A table kicking-and-screaming, not running there with a big smile and their hands out.

The great entrepreneurs of our time – and you know who they are – did not start or build their companies with the exit in mind. They certainly may have started and built their companies with an eye towards exiting their investors, by going public or having new investors buy-out the old investors with a handsome return. But they did not think about “selling out” or “exiting themselves” in the short-term. Those who did either had to sell, or they regret having sold too soon.

Build amazing products and services that millions of people will love. Attract the best people who also want to take the long journey with you. The exit will take care of itself. And it will come in its own time.

Posted by