Building to last
I recently had the pleasure of meeting with 18 South African entrepreneurs who were visiting the Silicon Valley to gain exposure to best practices and ideas on a program run by En-novate and supported by Investec Bank.
One participant asked if we have ‘time to exit’ criteria for new investments. He added that many investors in his home market tend to push founders to early exits because they want results and liquidity for their funds.
His comments highlighted a potential conflict between the interests of investors and the best interests of the company, founders, team and customers, that sometimes diverts the founders’ focus from what’s really important.
While most investment funds, including venture capital funds, are established with defined terms, typically 10 years with the ability to extend, companies shouldn’t be founded with exit time horizons in mind.
This discussion reminded me of a conversation that a group of Fintech founders had at a dinner with American Express CEO Ken Chenault and American Express Ventures back in 2013. At the time, American Express was 163 years old.
Mr. Chenault asked what kind of companies we were building: ones to sell, or ones to last.
Square’s Jack Dorsey and the Collison brothers at Stripe never talk about selling their companies. Instead, they’re laser focused on their teams and their customers. They’re building the next American Expresses.
The terms of an investment partnership should have no bearing on the long-term plans of founders. If your company is successful, there will be liquidity opportunities for all stakeholders along the way.
Great companies are built to last.
