Why “Enduring” Is a Third Option
By Sage Duvall
Sep 19 2019
I recently had lunch with a former teammate and active participant in our city’s startup ecosystem. During our discussion he asked, “Do you think software companies can really be enduring?”
I’m not 100% sure of his perception that led him to ask the question. However, it does seem like a high percentage of software founders and CEOs are largely motivated by an exit and in many ways use that as the primary measuring stick of success for them and others.
How often have you heard, “She sold her SaaS business at a 15x multiple for $50 million” versus the number of times you’ve heard, “She’s built an enduring company and is delivering big impact to her customers and team”?
Obviously, the former is a more exciting, headline-grabbing story, so it’s not surprising that it becomes the goal of so many.
Don’t get me wrong — I believe high-profile exits with big valuations are important. They generate wealth the entrepreneur hopefully pours into their next venture or those of others, can build an “ecosystem” of more startups, provide future entrepreneurs the inspiration and nudge they need to start something, and strengthen the profile of the community where it happens.
And while most are only familiar with two primary paths to an exit or liquidity, namely a strategic buyer or private equity, there is a less obvious “third option” — a select group of partners that provide permanent, patient capital and allow you and your team to build a truly enduring business.
What’s challenging to some is that “enduring” implies “forever,” which seems neither reasonable nor desired. But I think of “enduring” by the definition: “long-lasting.” Software companies (or all businesses for that matter) tend to not last “forever.”
Even Jeff Bezos was recently quoted talking about the inevitable death of Amazon at a time when it was recently valued at $1 trillion. If you read the full article, you can easily imagine this is an attempt to create the appropriate level of paranoia in his team and to reinforce what’s most important. (“If we start to focus on ourselves instead of focusing on our customers, that will be the beginning of the end. We have to try and delay that day for as long as possible.” ~ Jeff Bezos)
To me, building an “enduring” business is about truly keeping the next 15 or 20 years in mind. Of course, this doesn’t mean you can ignore the next 1 or 2 years — it’s a balance. However, we’d probably all benefit from not focusing so much on the next quarter.
Delivering an “okay quarter” is sometimes, well, okay, if you’re using that time to lay the groundwork for big wins next year or even over the next 5 years. However, this can be difficult when you are beholden to quarterly results or an artificially short “hold period.”
Think about it. If you had the luxury of patience…
How would your product differ?
What would you do to significantly enhance your customers’ experience?
How much more would you prioritize the development of your team, particularly that of your future leaders?
Again, there is a viable alternative to the typical strategic buyer or private equity exit. With the right partner, this non-traditional “third option” can provide a lucrative outcome the owner can be proud of.