Founder Exits

I think founder exits is a really interesting problem.

A casual startup observer might notice basically 2 outcomes:

  1. Startup dies
  2. Massive success

Obviously though, there's a big gap between these 2 outcomes, and the majority of non-failure cases fall into it.

One problem with this: imagine you are a founder, chasing the massive success outcome. You might start by finding a big problem to work on, and building a company to solve it. This company is a hypothesis - about a problem, a market, a solution, etc.

And the early years are promising! A few years in, you're at $2M in revenue & $1M in profit. But you also find out that the company you've built doesn't have the massive-outcome potential you'd hoped for in the early days. Maybe the market shifted since the company's founding, or maybe it's just not as big as you thought. Maybe you're just not as in love with the problem anymore.

Well... what now? $1M in annual profits probably puts you in the top 1% of startup outcomes, but it's just not that much to divide up among more than a few owners. And in the case of a venture-funded company, it's probably not growing fast enough to call the investment a success.

So... you'd like to consider exiting the company. But can you?

There's 2 problems here. First: except for strategic fits, the market of buyers for an entrepreneur in this position is not very good. And second, there's a psychological barrier to even considering an exit.

There's a period of time where both the founder and the VC (if the company is venture backed) avoid some hard conversations. The founder often feels an obligation - to the investors, the customers, and the employees - to see the company through to a successful outcome, regardless of the likelihood or what they personally want. And the VC has no incentive to push an exit conversation for an unsuccessful investment.

I think this is one of the most interesting problems in the world. Here's my case:

  • Entrepreneurs are modern society's MVP citizens.
  • Good ones - those capable of building a successful company - are extremely rare.
  • The nature of power laws and markets makes it ~impossible to predict a company's outcome ahead of time, even for the most capable entrepreneurs.
  • A large % of them quietly have some version of the above problem (good-not-great outcome + obligation to company + no good exit opportunities).

This leads me to conclude that the opportunity cost to society is enormous, and that this is one of the most useful problems to work on. This is Tether Applications' basic purpose.