Emergency Exit

Why Startups Should Not Focus On Exits

Recently Rama of Dailysocial questioned “How exactly does one measure a startup’s success? Exits?” and my good friend Dr. Bernard Leong responded in SgEntrepreneursWhy Exits Are Important As A Start up Metric“. Dr. Leong who is also founder of Chalkboard emphasized why exits are very important for the whole technology scene in Southeast Asia while looking at a very macro view. He argues successful start ups that have exited will have the ability to be the catalyst of creating a feedback investment ecosystem for the region. Bernard might be right that exits does make the scene more interesting however I would like to argue that focus of a start up should not be only about exits.

Why does a business really exist in the first place? It is not to stroke the entrepreneur’s ego or a badge of honor. A business is created to make profit by trading your solution to solve a problem or some case problems. The romantic notion of a start up will not work well in South East Asia because of the fragmentation in languages and culture. Maybe besides Indonesia, it is not feasible to create Silicon Valley type start ups where they will start monetizing after they reach a certain scale.

It took Facebook 300 Million users, almost 5 years to be cashflow positive and it cost over USD 500 Million to fund it. Who in the region is willing to fund it until you have an exit ? Without a proper ecosystem filled with Angels and VCs, it will be near to impossible to build a Facebook or a Twitter type company in the region.

Silicon Valley and China are in their own bubble. Investors are willing to loose more than 9 times before winning once in the hope to cover their cost. That all seem quite like a gamble don’t you think? Besides, these VC are fund manager not managing their own money. These money are raised from pension funds, foundations and etc.

So how going back to Rama’s question. How exactly does one measure a startup’s success? In my humble opinion, the success of a startup is when stop thinking itself as a startup and make profit. It is so much easier to build an internet business on the cheap these days. Why do you need to give away business to investor if you are making good money with your product? Remember, not exiting is an option and it can be a darn good one.

Learn to look for solutions that can be solved on the web. Solutions like Basecamp of 37signals or even sites like Pagemodo or Freshbooks do not require a lot of investment and it have enough customers to give them a good profit. Besides providing a solution, creating a business enable you to do something you truly love and really enjoy. Are you sure you want to quit something you love and just to retire? A lot of great entrepreneurs do not retire or rather they can’t because the love what they do. Funny part is, if you have profit and have money, investors will be knocking at your door instead the other way around. Maybe you can then choose to exit if you really really want to.

So would you like to retire restlessly or continue to do what you love to do and making great profit. I will choose the later, how about you?

Also you might want to check out the Micropreneur Manifesto

Update: Do check out Vivek Wadwha post Is Entrepreneurship Just About the Exit?

7 thoughts on “Why Startups Should Not Focus On Exits”

  1. Couple of million in the pocket and with nothing else to do…? Call me foolish or a dumba$$ romantic, I rather build a great company, make it run on autopilot and reinvest the profits to building another great company. I guess I'll only think about exit when the option presents itself. Good post!

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