Exploding Startups

Quit while you are ahead

Yesterday, Google bought Nest for $3.2B.

Today, I spoke to a half dozen entrepreneurs that saw that as a sign that their companies had real potential to exit large (maybe not Nest large, but large nonetheless.)

Those entrepreneurs are idiots. As are most of us.

There is only a single indication of a potentially large exit — explosive growth.

If your company’s growth is explosive, as defined as uncontrollable, server melting, holy shit I don’t know what we should do, hold on to your seats, because this is just insane growth, then maybe, just maybe, you will see a large exit (or maybe large funding round).

But the likelihood your company is growing at that rate is nearly zero.

So what are your choices?

Quit. Yup. Just stop what you are doing right this minute. Think it through, pull out Excel and forecast the actual time (without the standard entrepreneurial optimistic factor) it will take you to get to $100mm in annual revenue. Longer than five years? You are not exploding. Quit.

Or adjust your expectations. Stop burning money. Treat your current financing as the only money you will ever get. If your company doesn’t have a clear path to an inflection point or terminal velocity that will take it to $100mm, you will never get to the KABOOM exit.

But what about your investors that said don’t worry about revenue? Cool. Take a moment to really explore the viability of this reality. You are not showing signs of explosive growth. Things are going to be potentially hard. Will they be there with a checkbook? If you are unsure, even in the slightest, assume they won’t, and build accordingly.

(As an aside, you can be showing explosive growth in user numbers or any metric/KPI that is indicative of the ability to eventually push $100mm in annualized revenue. Take Twitter as an example. They didn’t care about revenue until they did. And then BOOM! they jumped in Uncle Scrooge’s money vault.)

The greatest trait of an entrepreneur is also our biggest Achilles heel. Our hope and optimism. Yet, we suspend realism and pragmatism for that very same hope and optimism. Yes it looks bleak, but I am fucking Micah Gabriel Baldwin. I will knock this shit out.

You are not Nest or Twitter or Facebook or Snapchat or Uber or any other explosive growth company. Don’t be unrealistic with your actual potential and optimize for the success that your company is supposed to achieve.

Remember it is ok to not exit Nest large, but it’s not ok to drive yourself into the ground trying to achieve something that will never happen.

UPDATE: I’ve been asked how this pertains to non-venture backed companies. It doesn’t. The only goal of a venture backed company is to exit large. It’s why its such a risky investment. It’s why its a venture. If you are building a company to live a great lifestyle, feed your family and the family of your employees —cool—you are not heldup to this requirement. And if you don’t want the pressure then don’t take the money.