In early meetings, if a VC ever asks you what your exit strategy is, you should run, not walk to your nearest…um…exit.
You want your investors to be more curious about how you're going to enter a market than how they're going to exit their investment.
Thankfully, I hear much less talk about exit “strategies” in the startup world than I used to. Back in the day, no business plan was complete without a discussion of exit strategies. And, they almost invariably came down to the same two options: Here are the list of companies that might buy us…and we could go public!
Today, most tech entrepreneurs don't even write business plans (which is good, because nobody reads them), let alone have a detailed discussion on potential exit strategies.
Here's why I think an exit strategy is an oxymoron.
The purpose of a business is to build something of value for customers — which in turn creates value for stakeholders. When you're walking out onto the field, you should be asking yourself “how do I best play this game?” not “Hey, once the game is over, how do I exit the arena?”
Planning your exit is a good thing when entering airplanes, theaters and bar brawls (of which I have no clue, I've just been watching too much Banshee) — not when entering a market.
My advice: Spend your calories crafting strategies for how you will build value, how you will connect to potential customers — and how you will differentiate yourself from everyone else. Leave the exit planning for when you actually need to figure out an exit.
By the way, I have no problems with startups exiting. Happens all the time, and is part of the circle of life in the startup world. I've been on both sides of the table (sold a startup, acquired some startups). My problem is when entrepreneurs are forced to unnaturally focus on the exit -- and mistakenly calling such things a "strategy".
Dharmesh Shah is the CTO & Founder of HubSpot in Cambridge, Massachusetts. You can find this blog post, as well as additional content on his blog called OnStartups.com. You can also follow him on Twitter: @dharmesh.