Whenever I’m asked about the exit strategy for our company, my response is always “our goal is to build the best possible company, and if an offer comes along that we can’t refuse, we’ll take a look.” The general idea is that it’s best to build a sustainable, high-growth company that makes great, long-term decisions. Pushback I’ve gotten over the years from this strategy is often along the lines of “that’s great, but how do your employees that have equity get to cash out if you have no plans to sell the business.” My response is that our employees are compensated at market-rate salaries and the equity component should be seen as upside that might or might not happen.
There’s another group of entrepreneurs that have an exit strategy — e.g. when we get an offer for $25 million, we’re selling — and, of course, there’s no right or wrong. With a defined exit strategy, or at least a target exit range, it’s important to get all the founders and investors on the same page. If an offer does come along to buy the business, and the leaders aren’t aligned, it can lead to serious internal challenges (things get emotional quickly).
Entrepreneurs would do well to think about their personal approach to the exit strategy question, and if they have a target acquisition price in mind, share it with their inner circle.
What else? What are some more thoughts on a defined exit strategy vs the built to last answer?
David Cummings on Startups 
I’ve said for years that the best approach to an exit is to build a business as if you’re going to have it forever. Becoming overly focused on an exit can cause a business owner / exec team to start to second guess the strategy and to do things because they think that it’s what a certain buyer or type of buyer would want. This “exit focus” can cause a company to get off track in ways that may be hard to recover……….better to stay true to the strategy and customers rather than thinking about the exit. If the business is good and the market is big enough, then eventually buyers will come knocking.
Clay Herron, CFA
If you don’t do both, I think you are better off buying a lottery ticket than starting a business. The right acquirers rarely show up at your doorstep and when they do if you aren’t ready you may not get what you should. The business should always be ready for exit, fund raising, and ongoing operations. Also, investors and employees want to know the exit strategy if they are going to join as this impacts their comp package significantly. Having a relationship with an investment banker is a good idea as it is to have one with the law firm, accountants, and other key service firms. The reality is most people don’t win the lottery so don’t plan to do so. Also, you should realize there is a typical 2-3 year period where you will be required to work at the company to help transition your baby to the real world. So, one year to exit plus another 2-3 years will require 4 years of your life leading up to and after the sale. I like to plan for all scenarios with a built to last and NoVC mentality unless it is absolutely necessary based on the size of the opp and time to ramp/ scale.