Startups don’t last forever -- they either mature into sustainable businesses, get merged into another business or acquired, or sadly join the 50 percent or more that fail in the first five years. Very few startup founders even want to stick around for the long haul, since their passion and expertise is in creating a new business, not managing people issues and repeatable processes.
The challenge for these entrepreneurs is to know when to exit, and how to do it smoothly in a win-win fashion for themselves and the business. In my experience as a mentor to many entrepreneurs and an angel investor, the keys to experiencing a satisfying and timely exit are included in the following steps:
1. Look at your strengths and motivators.
Some entrepreneurs are leaders, others are good managers and still more are happy to be the do-ers. Almost every startup has multiple founders, with complementary skills. Look at yourself objectively, and analyze where you fit best. It’s time to move on when you no longer fit.
2. Set career and life goals, evaluate other paths.
If your long-term goal is to achieve a stable balance between business and personal activities, the serial startup lifestyle is probably not for you. You may want to stick with your first company as a sustainable business, or exit your startup to find a conventional business position.
3. Evaluate for realistic outcomes.
Most entrepreneurs I know convince themselves that they can grow and sell their startup in a couple of years, and move on to their next idea. Many ultimately struggle for five to 10 more years, before they achieve “overnight” success, or a liquidity event. Maybe it’s time to cash out now.
4. Exit at your peak, rather than be pushed out.
It’s always smart to move on and be remembered for operating excellence. No one needs a legacy of overstaying their welcome, or fighting angry constituents to the death. Don’t wait for a crisis to get you thinking -- be proactive in talking to advisers and mentors on timing and alternatives.
Related: The High Costs of Your Exit Strategy
5. Seek opportunities to increase learning, skills.
If you find yourself too comfortable in a current startup, it’s probably time to exit. The best entrepreneurs enjoy the challenges of the journey, more than the destination. They perform best when they are in maximum learn mode, taking new risks, and adapting to change in the market.
6. Expand your business relationships.
In the heat of a startup, it’s easy to become isolated and lose perspective on exit alternatives and new opportunities. Smart entrepreneurs expand their connections to include large company executives in their domain, to see if they fit, or convince everyone it’s time to move on.
7. Plan to stage your exit and follow-on.
You will more likely enjoy the transition and what happens next if you make it happen, rather than wait for it to happen to you. Good things often take a while, and it’s more fun to live life incrementally, and plan for each element. Recovery mode is no fun, bouncing from one crisis to the next.
Certainly we can all think of a few famous entrepreneurs who never exited and iterated, including Bill Gates of Microsoft and Mark Zuckerberg at Facebook. But I believe these are the exceptions, rather than the norm. Many others, including Elon Musk, Richard Branson and Steve Jobs, are known for their role in many businesses. Not all of these exits were positive, but they recovered well.
Every executive recruiter will tell you that the best time to look for a new job is when you are riding high in your current one, but are smart enough to realize that the current one won’t last or won’t keep you happy forever. They’re right -- now is the time to start following the steps outlined here. No efforts will work if you wait too long.