Friday, October 01, 2010

Dear would-be start-ups: an exit is not a business plan.

No. NO.


An exit is not a business plan. An exit is like some kind of Christmas surprise: it's instant money, winning a scratch-off lottery ticket when all you've got in your pocket is 32 cents and a half-used condom. Saying that your business plan is "to exit" is essentially saying that you've got gambling issues and need to check in to rehab.

I get a lot of offers for revenue sharing (my position being anywhere from developer to CTO) and the business plan almost always, invariably, bad. Very bad. But the worst are exits, where the founder plans to "float" on whatever savings and investments he can get on the slim hopes that he gets acquired and we have a major payday. It's insane.


Stop doing it.

Because you know what the worst part about it is? Some of these people have very good ideas, great for monetization, but because they're so adamant about their major payday, they're going to end up with nothing instead of the something they could have had.

1 comment:

dave.dolan said...

I agree that an exit is not a business plan; however, if you are seeking venture capital or investors, you do need to demonstrate a way for the investors to exit. It doesn't mean you have to exit. Usuaully they would like a 'liqudidity generating event' which can be either a sale of the company or an IPO. That doesn't mean it has to be your centerpiece, but you should have at least thought about how this will eventually make it worth their investment, or else, you're stuck in self-fund land. A startup that plans to provide return on investor capital via revenue alone rarely gets funded. This may not be great news, but it's the truth.