BlogHer | bet '11: Entrepreneurism Track: The Exit
By Shannon Des Roc... on March 25, 2011
Welcome to the BlogHer | bet ’11 liveblog of the Entrepreneurism Track: The Exit panel!
When should you start thinking about exit strategies? Some would argue that if you’re already thinking about the end, you’ll never get past the starting line. But just because you’re not projecting your exit doesn’t mean you shouldn’t understand what various exit paths look like and what they mean for founders.
Robin Wolaner moderates, and has been through several kinds of exits herself, joined by Christine Herron, Janice Nickel and Wendy Lea, all who have seen exit strategies in action.
Robin: I want to tell you my range of exit experiences, and ask each of the panel members to do that rather than going through their bios.
You have to think about this while you're raising money, because investors are going to ask. I have had both very successful and very unsuccessful exits. I've mostly seen things from the founders' seats.
Janice: My big exit was atypical: Getting the technology I developed out of HP and into another company. But I see an exit plan as a goal, and I plan milestones leading up to that point. The path and milestones will change, but you need to make decisions about those directions from the get-go. It's an important exercise to plan the life of the business, where you're going to be -- helps other people buy in.
Wendy: Past exit experience, and thoughts as CEO of a venture-backed, highly successful company (GetSatisfaction): I think obsessively about how to make customers happy, and how that will help grow the business. I've always been very focused on that. I've been involved in three very different kinds of exits, and that's important. It drives me crazy not to have a plan. Sometimes exits allow you to bring even more value to your customers. The goal keeps us going.
Christine: I'm currently involved with venture funds, have also been an entrepreneur - including at a failed company. I think it's important to have an exit strategy in mind. Do I want this to be a cash business? Do I want build it and sell it off and do something new, or am I in this for the long haul? Make your decidsion, then don't think about it anymore, focus on building the business. If you don't know what your goals are, you have no business raising capital.
When you do fail -- and no one wants to or plans to fail -- but, like with your house burning down, you need to have insurance. You have to plan for the possibility.
In the US, we don't see failure as final, or even necessarily personal -- "it failed, I didn't fail." Americans are great at reality distortion.
Question from Audience: Wendy: How do you know if you're failing?
Robin: I don't ever think about failure, not through all of my companies including CNet. One signal for me was being able to get everything done that I needed to do in one day -- work-life balance is a bad signal!
Janice: Look at your burn rate versus how much money you have in the bank. Make sure you don't get stuck in a financially vulnerable place, where you're ripe for opportunistic takeovers.
Question from Audience: As a CEO, what is the best thing you can do to ensure a good exit?
Wendy: Pay attention to the market you serve and participate in. My #1 job every day, first thing I do every day, is to look at the news about what's going on in my space, look at the inputs -- because things change very fast. I cannot take a breath! I have to observe and absorb and organize my thoughts. Even with a plan, even with capital in the bank. I'm as paranoid when I have money as when I don't! And that stems from the market. Once I see where the signals are going, then I call down strategies and next steps from the market. I apply that info to the actions for the day, week, quarter, year. And then from there, it's doing what we have to do -- plan, execute, review.
I will say that being the CEO (not the founder) of a company is a significant responsibility, ever minute of every day. Not a part-time lifestyle situation.
I'm in month 25, and the first year was all slogging out internal stuff. I had so much to learn, so much to contribute -- but I was so busy that I could never have come to a conference like this. Money gives you a team, you can build them up and share the work, and having a team let me be in a different space - and though I'm not micromanaging, I'm still checking in with them every day and moving the ball forward.
Christine: You need to know exactly where you fit in an ecosystem, and why someone would acquire you -- this allows you to ensure you're requiring the right relationships on a month-to-month basis. You can't create all those relationships at the end, building them involves a lot of small steps.
Wendy: What I see with a lot of young founders is a lot of noise not signal, nothing to do with building a valuable business. I like to see our CEO focused on our customers not buzz, but that's a tricky balance, and hard when you're in a hot space like mobile.
Audience Question: Brand Awareness doesn't always translate to exit strategy, because people are afraid of big corporations that they don't understand. How do you handle personal branding with an exit strategy?
Christine: Escrow! And golden handcuffs.
Question from Audience: Jennifer: Exit Strategy: do you lose the passion when you're focused on that?
Robin: It's just another marker of success.
Christine: It's just one of the milestones so you can plan.
Question from Audience: It's hard to find valuations to plan for potential acquisitions. How do you do it?
Christine: For most folks, valuations are always a tricky business. With something tangible like hardware, there's not so much black magic. And if a public company is doing the acquiring, you can get some real data from Tech Crunch or Tech Base.
Robin: A lot of times it has to do with competition, how many people want to buy it.
Question: How do you know how to play off investors versus another?
Christine: To get to a competitive situation, work up competitive alternatives. Another round of funding, or is there another set of acquirers?
Question from audience: Ana: I'm looking for elegant exit strategies, without looking like a loser, because I have too many projects going on -- but I'm passionate about them all!
Janice: Delegate! You need to find someone who can take over, who is equally passionate and capable -- so you can still be involved with the fun but not dragged down into the day-to-day.
Christine: Ultimately, you need to be able to stand back.
Question: I have an early-stage start up, just starting to pitch VCs, the feedback has been invaluable. My pitch has really improved. But no one have ever brought up the Exit subject. I feel like I don't have time to think about exits! When is the right time, and how does that play into how a VC will view my pitch, story, product?
Robin: It's not always significant in the early stages, the Angels stages.
Janice: You might want to consider different strategies, as a way to envision how your business will grow. Are you going to own the company? IPO?
Dream! And that planning will affect how you plan your financials, how you attract talent, investors.
Robin: It's also a good way to show how you think, how you can sell the company, that you understand it won't just be your company for the next 20 years.
I also want to talk about acqui-hires, where employees come along with a a corporate acquisition.
Christine: Thes siatuations are mostly a PR win for the founder. The acquisition allows them to say "I built something that had value." And there's a soft landing for the team, if they all have jobs.
Robin: Everyone needs to have the same plan: Is it a short- or long-term business? Exits will change, just as they will with an acquisitions.
Christine: In a case where someone doesn't want the team -- or the whole team -- you can make getting them all a job part of the negotiations.
Robin: Taking care of your team, how you treat them both financially and transparency-wise is really important.
I hope you all have really positive exits!
Liveblogging by Shannon Des Roches Rosa
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