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What is your exit strategy?

April 18, 2007

Periodically I take meetings with venture capital and private equity folks who want to invest in our business.  We are not interested in raising money, but I love an excuse to talk about our business.  The one question that I don’t have a good answer for is, "What is your exit strategy?" 

Exit strategy?  Why do I need one?  John Dovorak explained, "At one of the parties, a guy walked up to me to complain. "The trouble with you business writers is that you always ask about exit strategies. If I was Elvis Presley and you came up to me, would you be asking about exit strategies? Would you ask me what’s my business model?"

I want to build a business I don’t want to exit. . . 

Written by Alexander Muse · Filed Under Blog 

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No Responses to “What is your exit strategy?”

  1. Sia Says:
    April 18th, 2007 at 6:59 pm

    But we all know that many of the crazy Web2.0 businesses are soon going to be gone. yes there were some amazing Web2.0 websites that we all use everyday but how about those other weird Web2.0 businesses. I mean even a gigantic business like youtube is not stable enough now in the market. remember the copyright issues. I personally think that we have jumped into the Web2.0 wave without even thinking of the user rights or probable lawsuits. even facebook is suffering from enough privacy and all the complains about the user privacy will someday effect the business as a lawsuit against them. so investors being concerned about the exit strategy makes sense to me

  2. Theron Says:
    April 20th, 2007 at 11:35 am

    I have been facing the same question, it seems to be obvious when dealing with investors. It does make sense from an investors standpoint. High risk, Hi return hedging your bets. What is wrong with building a business? It doesn’t seem, though, that a majority of investors even know how to invest in web 2.0. I guess it is a learning experience for us all.

  3. Robert Brackenridge Says:
    April 23rd, 2007 at 3:38 pm

    The exit strategy question hits home to your interests with the company. If you are looking to grow the company and stick with (an admirable cause I might add…) then you aren’t the right fit for a VC investment. A VC firm is on the hook to provide a return for their investors, and a rather large return at that 20% - 30%. They have to be liquid on their investment with you in 5 years, or less, to meet their portfolio return goals. So, their question cuts to the chase of whether or not you are a good candidate for their firm to pursue. Also, it tells them if you have hit the fundraising circuit already and have a polished response. It is a little unnerving for those that haven’t been asked the question a dozen times before, but a canned response tends to satisfy most inquiries.

  4. Alexander Muse Says:
    April 24th, 2007 at 9:23 am

    As with most thread-oriented posts, it is hard to pick up midstream and understand the context of a post. My point wasn’t that I was confused as to why a VC firm might want an answer to the question “what is your exit strategy.” Instead, I am questioning the premise. Are the best companies built with an exit strategy from the start? Or rather are the best companies built to last?

  5. Texas Startup Blog: Web 2.0 and Social Media by Alexander Muse » Blog Archive » Casual Development Part III: Egorcast Says:
    April 27th, 2007 at 11:27 am

    [...] I thought she must be joking.  I almost fell out of my chair and asked if she had been reading my blog as last week as I had written a post titled, "What is your exit strategy?"  The about text on the Egorcast website explains it fairly well: EgorCast is a simple ‘mashup’ created by the development team at Big in Japan. The idea is to take two great ideas, put them together and make ‘two great ideas that taste great together.’ Leveraging various resources in the organization with expertise with Rails, SMS, Voice, VoIP, Postfix, Gentoo and Apache the team was able to build the service in less than a week. EgorCast was not designed as a business, but an example of the sort of projects our team is capable of building.  Big in Japan provides a unique combination of marketing and technology to help companies leverage social media. We work with leading companies like LEGO and FOX to build online communities and tools to help people use the web. Our social media services and tools can make your company Big in Japan. Big in Jersey. Big to all those who matter to you. Big is connection. Big is relationship. Big is success. Get big now! [...]

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