“Hyde Bank Tunnel halfway sign” by David Jones
Startup founders often hear that they should “start with your exit in mind.” It sounds like good startup advice, and a lot of the people doling out that advice are smart and experienced.
But for most founders, the advice to “start with your exit in mind” is not helpful. Even very accomplished serial entrepreneurs often end up in a place that is very different than the one they first envision.
At the beginning, nobody really knows where the journey will take them, and that’s OK. Compared to the initial brainstorming, the product that launches is likely to look very different. It may have a lot more features, a lot fewer features, a broader user base, a narrower user base, different target markets, a different team of contributors, etc.
The good news is that in most cases it won’t matter whether or not you start with your exit in mind.
Whether you are building to sell quickly or to hold and operate for the rest of your life, the fundamental priorities will probably be the same:
1. focus on product and market
2. build like crazy
3. test
4. improve
5. launch
6. sell like crazy
7. iterate
The same things you would want if you are still on the management team a year after launch are the same things your potential investors or acquirers are going to want – continuous product improvement, and increasing revenue.
This is a law firm blog, so our readers often have legal structure and corporate details in mind.
So what about formation and choice of entity type? Delaware C Corp? Virginia LLC? New York S Corp?
You will want to get yourself set up under a proper entity, but we usually recommend keeping it simple at the start. In the very early stages, do what makes sense for your current team and your six-month or one-year horizon, with a preference for simplicity, flexibility, and low cost.
Get your house in order, and do it early. But don’t spend all your time and money doing it. You’ve got other things to worry about. And if you are doing something that matters, the timing and the specifics of your potential exit (if that’s what you want) will become clear in time.