I’ve been involved with well over a dozen successful exits and four initial public offerings over the years, some of them with monstrous gains, some more modest. Then in addition, there are the exits that returned some portion of capital, but nothing more. And finally, there are the sad exits that were complete write-offs for the investors, regaining some portion of note-holder or creditor money in the process.
I can tell you with great enthusiasm that the high gain exits are by far the most enjoyable in every way. There’s almost always a closing party where the board, prime investors, attorneys and investment banker all get together to celebrate the victory. It is an exhilarating ending to a great journey. The entrepreneur, whether remaining to the end as CEO or not, is celebrated for his or her prescient timing, great vision and excellent execution of the plan. One such celebration was even characterized as “We stuck the pig!” – the overly enthusiastic celebration of an outcome larger than expected.
But I cannot recall ever attending a closing dinner for a sale in which we returned only a portion of the investor group’s money. In fact, I don’t recall any formal post-sale meeting at all; even to digest the lessons learned from the entire experience, a missed opportunity for all.
[Email readers continue here…] And there is the sad truth of the large percentage of early stage investments that die an unceremonious death, often with the entrepreneur-founder left with a bitter feeling that “if only” there had been more cash invested, more co-operation from board members, more time to get to market, more of something, then the outcome would have been much better for all.
Of course the successful outcome is preferable for all. But more importantly, it marks a passing of a successful journey by a team first formed by a visionary entrepreneur, usually attracting smart money from good investors, who together effectively planned growth and finally a great exit.
Whenever those forces come together, celebrate them and the team that brought them all together.
Dave, I very much enjoyed your message. Especially when you share;
“In fact, I don’t recall any formal post-sale meeting at all; even to digest the lessons learned from the entire experience, a missed opportunity for all”.
For me there are great lessons in life in both our successes and our “perceived failures.” As Vince Lombardi once said…”I never lost a game, I just ran out of time.” I also believe there are no failures or losses in life…the time spent generated many valuable lessons we learned. As I shared in our MSI managers’ meeting today before reading your article, some of my most valuable insights here at MSI came from our employee exit interviews. When people leave a company, or when the company is sold, life goes on…and we all share in the lessons learned in many ways. A successful exit looks many different ways…and all journeys are successful in the lessons we learn from living life.
I fully understand that the reason VCs generally invest in startups is in anticipation of a profit on the investment when the company is sold. And if that is the primary reason for starting up / investing in the venture, then of course a successful exit merits a celebration. But the other side of the coin is that the acquirer often does not maintain the quality, the values, and the people that made the startup successful in the first place. It would be good to see one or more posts on when it is better NOT to sell. What can an entrepreneur do if he wants to continue operating the company even though the investors are primarily interested in recouping their investment and making their exit at a certain point? What are the options for satisfying the interests of both parties, aside from taking the company public?