Sunday, September 25, 2005

Q: What is your Exit Strategy?

A: I don't have one. I'm in the game to help make the world a better place and have some fun.

So I was having lunch with my friend and co-worker Ben the other day, at Pepe's. Pepe's is the best "diner" type of restaurant to be found in Mar Vista. It is in the Yokum Bowling Alley, at the intersection of Venice Blvd. and Grandview Ave.

So Ben and I were talking about business. Mostly I was doing the talking and I was talking mostly about making the Coding Slave site more viable, so that I could reduce my hours at my day job and do what I really like to do: write code for me, make fun of the software industry and hopefully help make the software development environment on this planet more humane and more useful.

So we were talking (with me doing most of the talking) and I remembered a question another friend of mine, Richard Peasley (the fourth smartest guy that I know), asked me years ago when he and I were tossing around the idea of going into business together. We were putting together all these projections and financial scenarios for investors. Then Richard asked me this question:

"What's the exit strategy"?

I asked him what he meant. (I was very uneducated on such topics at the time.)

He said, "You know we are going to take in investors and bust our asses for a few years, how do we cash in?"

"I dunno", I said.

He said that usually the plan is to sell the company to a bigger company at a profit and go home.

“Oh”, I said.

And then sitting at lunch with Ben I got to wondering: Is the purpose of modern startups to get something happening profitably only to sell it off to some bigger, nameless, personless corporation? I wondered, is it as if I start a cookie company, sell a bunch of cookies to people who like the product, only to know that these people with eager mouths are not the ultimate customer, just pawns on my way to stardom; that the real customer is General Foods or ADM, or PepsiCo?

And then I wondered:

Did Henry Ford have an exit strategy?

Did Thomas Edison have an exit strategy?

Does Bill Gates have an exit strategy?

Does Steve Jobs have an exit strategy?

Did George Westinghouse have an exit strategy?

Did Howard Hughes have an exit strategy?

Did Eli Whitney have an exit strategy?

Call me a grandiose dreamer, but if I had a choice, and I do, I'd rather hang out with all the likes of Ford, Edison, Jobs and Westinghouse.

If modern entrepreneurial business is about creating dreams with exit strategies, well...then maybe the Federal government should learn from startups when it comes to that debacle that has become the War Upon Iraq.

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Anonymous Mike said...

Having an exit strategy is a good route to a fast dollar in this economy. On the other hand you may end up forcing yourself to exit.

In the case of Henry Ford, he created his company, then enjoyed what it brought him. I believe, upon his death he passed control down to his son. This was, and must still be beautiful for the people involved in the ownership and management of Ford motors.

This worked for him because he did not invision any new ventures.

Suppose you end up creating multiple businesses. It may become humanly impossible to stay a commanding force behind your creation.

Thinking about this gave me an idea:

In selling out, all you are really doing is turning your enterprise over to another brain, or group of brains, to manage. At that point you just don't have enough RAM in your skull to deal with all the details. Well why turn over the revenue along with the responsibility?

How can you keep the revenue without managing the actual business? I believe the answer is on, in, or under our desks.

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