177 U.S. companies realized a total of over $ 757 billion from different exit strategies initiated between Q2, Q3, and Q4 of 2021. The largest exit within this period scored $32 billion in value and was undertaken by Robinhood, a financial service company that had already secured $5,572 in funding.  

After these three consecutive quarters, the billion-dollar value of quarterly exits has reduced drastically coming up to the last three months in 2023. Nevertheless, a significant cumulative amount of $ 4 billion was realized in quarter one while exits in quarters 2 and 3 produced $ 6 billion respectively. 

This statistic, pulled from the Crunchbase Billion-dollar Exits Board, reveals that more and more founders are taking the short route of building for an exit. It is easy to see why the gold rush is happening. Exiting a well-funded and high-performing business translates to instant wealth for anyone on the receiving end.  

What it means to “Not Build for an Exit”

Want to steer clear of building for an exit? You would need to begin the process from the first day of your business; guarding the gates and ensuring that the wrong ideas are not let in. Beyond promoting the right mindset, not building for an exit also means taking the necessary actions to build business resilience (by focusing more on the products you are developing and the customers you are servicing and looking to add more value) and also preventing ever being in a position where funds run low or are completely unavailable or inaccessible. 

Why Not Building for an Exit is a Difficult Task

Huge volumes of exits in 2021 and low volumes in 2023 (from the Crunchbase Billion-dollar Exits Board) have nothing to do with whether or not business owners are familiar with the benefits of staying long-term. If our calculations are right, the unstable figures can be explained. The story would possibly be that founders and business owners were so crushed by the coronavirus pandemic in 2019 that they gave up - partly or fully - on their ideas and decided to exit for some profit. 

The Uncertainties and Controlling Factors Around Running a Business

We believe that the billion-dollar exit fluctuation over the past few years is the first reason why not building for an exit is complicated. That is; the uncertainties and controlling factors around running a business. Nobody really expected or planned for the breakout of coronavirus in late 2019. Moreover, many people who caught early wind of the virus wouldn’t have thought that it would scale so quickly. Yet, it did - and businesses were shut out of operation while owners were rendered helpless. 

The Desire to Get Rick Quick or A Poorly Scrutinized Investment

Some entrepreneurs and founders do not willfully exit their businesses. They are pushed out of it. A close look at this situation would often uncover an element of greed or careless decision-making on the part of a founder, top management staff, or the entire business team. In a typical scenario, these founders or business personnel are approached by one or more investors who sell the promise of large-sum investments. Along with this, however, comes some special requests.

It could be anything from displacing a founder from the board of directors, replacing a CEO, or hiring an entirely new batch of employees. Another infamous way in which VCs push businesses to exit is by offering large loan amounts with the aim of taking over the business management and decision-making roles when the debts are unpaid as at when they are due. 

In both cases, a sound team would likely see the signs and understand that it is best to approach another investor or try another method of funding rather than going ahead with what is at hand. This way, they would retain their ownership over the company for years to come.  

The Stress of Building a Business

 For many businesses, doing an IPO or any other exit strategy is simply a way of breaking free from the stress - along with significant profit. Building a company is a tremendously huge task. Since most of the heavy lifting is done in the first few years, certain business teams just want to put in the hard work, grow their brand, sell it for some huge amount, and walk free of the stress of building the company or business. 

All of these could happen within the space of two years. However, many entrepreneurs have come to regret leaving so early. They end up figuring that they have done most of the work, put the business on autopilot (as long as revenue generation is concerned), and handed over the keys to someone else for far less than what it’s worth.  

How To Set A “No Exit” Goal and Stick to It

From the previous section, two things have been well established. One is that taking a business exit is highly profitable, and two, sticking to a no-exit strategy is not an easy thing to do. We can go on and on about that - but we won’t. Instead, this section will go into details of what to do to hang on to a “no exit” goal.

Think Long-Term and Build a Culture Around That

The major point on whether to exit or not and how long you can stand your ground depends on the mindset, culture, and values that are developed and cherished. Values must be spelled out, cultures must be practiced and a long-term mentality must be infused into every single employee and acted out at every possible opportunity. 

Create a Sustainable Business Process 

For a start, don’t go around hiring too many people just because you can. In addition, you do not want to create a stressful environment, fall short on proper resource management, or begin any unsustainable business process. Ignoring this advice could put significant strain on employees, the business itself, or both - and the results are never pleasant. 

A good example is when a business runs low on cash simply because it is paying too many salaries or utilities. Such a situation could create a desperate need for funds. Unruly investors leverage this opportunity by providing funding in exchange for control over the business. Little by little, they push their way into the decision board and force the founding team to quit.  

Bootstrap and be profitable 

Bootstrapping more or less relates to the physical action of strapping a boot or tying a shoelace. It can be understood to mean  “getting ready for the journey ahead.” In the business context, the phrase goes much deeper to mean building a business without external financing. All that is in the option with this is personal savings or, perhaps, funding from very close friends and relatives. 

It might create an uncomfortable business situation but it also lays the foundation for not building an exit. This is talking about the mentality of not working towards a monetary goal - which is what many entrepreneurs do by building for an exit. 

Company Buyback

Company buyback is a sort of valuation-improving step. It comes after a company must have sold its shares to public stakeholders. Naturally, the sale of shares is intended to raise money for one reason or the other, but it also brings public stakeholders on board. These new stakeholders may have a large enough control over the business to push out a founding member or team and potentially lead an exit. 

As a way of avoiding a potential exit, businesses gain back control over their companies through a buyback of shares. Since the capital raised from the shares must have been used to fund a project or build a product that is generating significant revenue, the business uses this revenue to buy back shares from the public. With much or all shares out of the hands of public stakeholders, the business team is once again safe from overriding influences that could result in an early exit. 

Review Funding Opportunities and Investor Interests

There is a lesson to be learned from the story of VCs and investors sometimes trying to hold a business at ransom - forcing them to make an early exit. This lesson is that business owners and teams have to carefully review funding opportunities and investor interests. They must be clear on what can change at the moment and in the future. They must also know what is being committed to, and what laws or regulations say about the existing arrangements. All of this knowledge and crosschecking efforts amount to fool-proofing your business against the tactics of unruly investors. 

IPO with a Good Control Structure in Place 

Sometimes, a business grows so big that it cannot continue to function as a private company. It is therefore forced to go public and this action is usually initiated through an Initial Public Offering or IPO. Companies like Facebook and Google have hit this huge milestone. What is significant about these two, however, is that the founding team has retained control over the business despite opening up to public stakeholders. This can only be the result of good policies or structures and well-planned and executed business actions. Any other business can get the same impeccable result if it only performs due diligence (in setting up legal structures, policies, and controls) before, during, and after its IPO. 

All The Good That Comes In The Long-run

Today, Facebook is worth more than 250 times what it was offered in an acquisition bargain many years ago. If the founding team had a short-term goal, they would have been excited about the $1 billion offer and immediately sold their ready-to-boom idea. But they weren’t. The result is that the team has accomplished a higher valuation for the company and also realizes a significantly large revenue annually. 

There is no other way of saying it: this means direct wealth and accomplishment for anyone who has been involved with the business from its early days.

The three main benefits of trashing an exit strategy and staying for the long term are: 

• immense customer satisfaction and impact, 
• tremendous wealth and revenue, 
• and high self-esteem and fulfillment. 

Final Thoughts

In concluding this article, we want to ask a question and we would need you to answer honestly to yourself. Which of these three teams is more likely to identify a customer pain point and genuinely work towards addressing it?

Option A, a team that is not building for an exit but, instead, wants to see that their product and service really impact customers;

Option B, a team that simply wants to build, attract funding, and then leave their product in the hands of whichever company is able to buy over their own;

or Option C, a team that is largely interested in building its portfolio through acquisitions and often replaces the founding members or team of an acquired company (who almost always have the best ideas) with its own members - whether they are qualified for those roles or not. 

Before you proceed to say your answer, we would like to clarify that Option A above refers to a team with a no-exit strategy while Option B refers to regular, exit-focused business companies and Option C refers to big acquisition companies that so often go after a business for their reputation and not because they are scaling and truly driving those businesses.

While you realize that no-exit strategy businesses are more inclined to improve the lives of their customers, we would leave you with a link to our blog where you can find more informative articles like this one.

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