Recently had this discussion with my Co-Founder and realized we weren’t on the same page
While this isn’t a proverbial " Straw that Breaks the Camel’s Back " I must confess that thinking of it more critically would be wiser, especially with most of our “StartUps” not having enough historical information to know which exit seems more favorable in Nigeria
So I’d like to throw it out here - Which of the these 2 suggested exits would you choose and why?
You really shouldn’t be thinking about an Exit when you are building a company. Focus on building value and everything will follow. However if I had to chose one, I’ll chose building to exit at the stock market because companies are bought and not sold… There is no tried and true strategy for building up to a buy out. But if you keep building value and growing with an IPO in view then you might get a buy out offer that actually makes sense…
I take your point of not thinking about exits when building a company … " but isn’t failure to plan essentially planning to fail "
The Exit Stage is a point in the Lifecycle of every business entity that like Death, if not carefully considered can happen faster than expected : Founders also have lifespans
So you’d consider an IPO in Nigeria for your Tech COY in 10 years over a Great Buy-Out Deal in 5 years?
You are planning for failure when you are thinking about an exit instead of the hard work of building something that can last the test of time like Vanderbilts, Rockerfeller and so on.
Much better for you to how you can build your business for the long term not how you can exit… (PS: an IPO is not an exit if you are building for the long term. Its just a new phase of growth).
I’m not thinking about exits for my own company. Just focused on building out the vision of 100,000 world class junior developers in 10 years…
My opinion leans heavily on @iaboyeji’s take on the topic. If/When that crossroads of buy-out or IPO comes, you guys can take your sweet time to weight your options; they both come with two sides to them. And that crossroads won’t come unless there is a solid product. All your resource should naturally be going into building for now. For every moment spent haggling about what “exit” choice is a moment not spent building. But then, your question was “which is which?”. I don’t own a startup but I feel IPO is a lot of hassle, it’s expensive, and startup founders can hardly fit into the straight-jacked, cookie cutter sphere that is SEC, plus everyone is really just up in your business. If I owned a startup, I want to sell it outright (when the time is right) and take on another challenge.
Thanks Chief … again it is another point taken… An Exit doesn’t mean death… just a transition for Founders - A Good COY would exist without the guidance of the Founders eventually
I’m a Techie, but the people on the Operations and Executive part of things can’t be blundering when they ask you what your “Exit Strategy is”
P.S. The Question is actually from the Tony Elumelu Entrepreneurship Program - not just some random thought
Thanks Gbenga
Would your thinking be difficult if your StartUp was not in Nigeria?
I’ll take it was a trick question on their part. When you truly in love with your dream and would put whatever resources necessary, including raising funds to see it grow, your only “exit” would be to see it profitable. If and when a buyout offer comes along, all well and good. If you would like to expand beyond what your cashpile can allow and you think an IPO is the answer, that’s fine too. In the meantime, grow your product as much as you can or those exit options would be another company in the deadpool.
Chinedu, I feel you and have gotten that question too several times. The truth is that the point folks have made about not planning for exit while at the ‘entrance’ stage of a biz is 100% correct. On the other hand though, whenever I get that question early in the pitching process, I ask myself whether this is the person who’s money I’m really interested in: someone who on day1 is wondering how s/he will leave may not have the same interests as myself. It is a reasonable question for an investor, but be careful with a funder for whom that is a major issue.
My standard answer is that “well, I’m not planning to go anywhere. We are concentrating on building huge value, and we feel that that will preserve several exit options down the road… blablabla”
Good luck!
Honestly, it is fair to say that only when we get to that point do we truly know the next step
I just want to know which option people prefer… assuming you were at that point now and why based on the country we are in
You are right though… It’s more of an investor’s question
But if it came down to choice, which would it be? Assuming you are at that Stage right now
If I was the bigger company operating in your space, I’d prefer to buy you out ( and increase my stock value etc)but if as a founder i’d prefer an IPO. In an IPO you can decide how many percent of your equity you want to sell in the open market and as such still retain control of your company while giving others (investors, early staffs etc) opportunity to cash out their investments(cash and sweat). You can as we sell at interval to spread your net worth liquidity(or get a chieftancy title in your village) while still living your dream and changing the world.
At the end of the day, good investment for an investor is to get his money back (which ever form it comes( buy-out or listing) and for you is to realise your dream and change the world. Focus on the value while others focus on the bottom line. The two are important for all parties involved.
Thanks Sherrif ---- Let’s take a Step Back!
Assume this was not my Venture that we were talking about
Take any current venture in our space that might be at that point, which of the 2 options would you pick personally?
“that point” depends on a number of several factors. 1 might be you have a really good product (something like PiedPiper from the Silicon Valley TV Series) but you haven’t figured out how best to monetize it and hey, you’re running out of money. An IPO at that point would be a bad idea wouldn’t be an option. A sale, to a CDN (perhaps Akamai) would be interesting. But assuming you have just enough cash to keep you going, and you are gaining traction on the revenue front, you can give companies looking to buy you out the middle finger for as long as you want while building yourself up to an even bigger acquisition, or an eventual IPO.
I like the assumption with PiedPiper
So basically, ideally hold on till IPO would be your approach in this Market ( Nigeria )
Thanks @xolubi
I am not sure I trust the Nigerian stock market when it comes to ambitious technology companies. However, if your underwriters can do you a compelling enough story to get pension houses and other fund managers to buy into your stock, then good for you.