Entrepreneurs should consider this alternate route to Silicon Valley
There is a common motivation for most startups founded in Silicon Valley. Most of these startups project an estimated time for liquidation when startup capital goes back to investors and founders. This happens averagely between five to ten years.
The exit focused strategy adopted by startups in Silicon Valley is not a new concept. The same has been heavily emphasized by the media and top universities around the globe.
There are so many companies that are brandishing billion dollar valuations presently and there are also lots of these companies whose numbers are treacherously inflated. In such situations liquidation benefits a few and leave others disgruntled. At the end of the day such companies are acquired by some tech giants or broken down for its specific assets by private equity firms.
Although setting up your company with a prepared exit strategy seems like the only possible route for entrepreneurs, it is not the only option.
According to the author of A vibrant vision and chairman of the Seaman Corporation Richard Seaman: “the exit-focused rhetoric and unicorns that dominate our headlines are not what powers our economy”.
This is not far from the truth if we consider that 64% of the GDP of the United States which translates to about $5.9 trillion comes from privately-owned family businesses.
Building on this Seaman suggests 3 decisions entrepreneurs should make to build companies that will last:
1. Be conscious of your long-term goals
The trick behind most decisions is activating consciousness. To take a different route from what is obtainable in Silicon Valley, what are your intentions for your business? You either own to Cash out early (in say 5 years or less than 10 years) or you are in it for the long game
Your choice will guide every other decision you make concerning the proposed business.
2. Be thorough; be about your business and not your product
It is tempting while setting up a business to focus on the marketing of products to the detriment of the other aspects of a business. This obsession with finance can hamper the long term profitability goals of business.
If you want a business that will outlast you, be very thorough and focus on aspects that can sustain the business from the very beginning. Aspects of a business such as human capital, operational excellence, finance, innovation, product & services, marketing & sales must all be accounted for from take off.
The goal is to seek perennial growth rather than launching one initiative.
3. Evaluate your liquidity target and identify investors who can help you to realize this target
One of the reasons why entrepreneurs lack the motivation to take action on business ideas that can create a legacy is access to funds. Fortunately, venture capital and angel investors are not the only funding sources accessible to potential entrepreneurs and these sources does not necessarily require relinquishing ownership in the beginning.
There are different levels of funding requirements for businesses based on the stage of such a business but entrepreneurs tend to undervalue the importance of their local banker.
There are so many businesses flourishing today which have been multi generational and more innovative than the alluring startups of silicon valley and even consumers find these businesses note relatable.
Adopting this entrepreneurship model is quite tasking for entrepreneurs but it produces sustainable businesses with firm and tangible values which will outlast the profits such businesses will make for investors.