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This is a fundamental lack of understanding about what an exit strategy is. It is not about the CEO exiting. Private companies are a very illiquid investment. A

This is a fundamental lack of understanding about what an exit strategy is. It is not about the CEO exiting. Private companies are a very illiquid investment. An exit strategy is something that exists to help inform investors about how they will eventually realize their gains. If a company intends to stay private forever and simply pay a dividend to investors, it may not be interesting for certain types of investors. By definition, therefore, an IPO is an exit. It is an opportunity for an investor to get his or her money out of your particular company. Most great companies—depending on how you define them—actually have gone through some sort of exit event as defined this way, and all savvy investors will want to know how they can realize their gains if you are successful.

bradleyland 13y ago
That was the first thing that came to mind: companies don't have exits, investors do. However, I don't think it's uncommon for new entrepreneurs to focus too much on the exit as investor-founders. That was the lesson I took from this.
gehk 13y ago
This is bravo
lkanies 13y ago
Yes, investors want their money back, but they are forbidden from doing so in an IPO, and they cannot exit for at least six months after. If, six months after the IPO, they sold all of their stock, they would most likely seriously hit the price of the stock and cause a depression in the valuation and screw the company. My post was primarily about company exit strategies, not founder exits, so I'm surprised that one paragraph stood out so much to you. Most IPOS see only about 10% of the company sold, and essentially all (literally all?) of that is newly issued stock; basically none is existing shareholders selling stock. If a successful IPO goes well afterward, then often existing shareholders will have a secondary sale about six months later (after the lock-up expires). So no, in fact, an IPO is an exit for exactly no one. Major shareholders are locked up and can't sell for at least six months, and for great companies (e.g., Google), they'll often hold even longer. I thought I made that point in my article, but apparently not.

bradleyland 13y ago

That was the first thing that came to mind: companies don't have exits, investors do. However, I don't think it's uncommon for new entrepreneurs to focus too much on the exit as investor-founders. That was the lesson I took from this.

gehk 13y ago

This is bravo

lkanies 13y ago

Yes, investors want their money back, but they are forbidden from doing so in an IPO, and they cannot exit for at least six months after. If, six months after the IPO, they sold all of their stock, they would most likely seriously hit the price of the stock and cause a depression in the valuation and screw the company. My post was primarily about company exit strategies, not founder exits, so I'm surprised that one paragraph stood out so much to you. Most IPOS see only about 10% of the company sold, and essentially all (literally all?) of that is newly issued stock; basically none is existing shareholders selling stock. If a successful IPO goes well afterward, then often existing shareholders will have a secondary sale about six months later (after the lock-up expires). So no, in fact, an IPO is an exit for exactly no one. Major shareholders are locked up and can't sell for at least six months, and for great companies (e.g., Google), they'll often hold even longer. I thought I made that point in my article, but apparently not.