A big ‘Exit’ needs a big ‘Entrance’
My old boss, Bill Ziff, used to say, “Language is truth,” meaning that humans reveal more than they realize about their motivating inner sensibilities through their words.
So, what do we learn about the worldview of venture capitalists by examining their language?
If there is one word most frequently on the lips of VCs it is: Exit.
The VC business model is predicated on the liquidity that comes from market exits, either IPOs or private sales. No Exit presents VCs with a version of hell far worse than Sartre’s. In fact, VCs are trapped in precisely this hell right now. So, “whither exits?” philosophizing has reached mania proportions.
But, curiously absent in venture lingo is a word of greater power in determining ultimate business success in good times and bad: Entrance.
You never hear VCs sitting around talking about how they have a unique approach to getting companies initiated. Exit? Yes. Develop? Often. Assist? Frequently. But Start? Hardly ever. It is almost as if, in the VC universe, companies should spring full blown from the brow of Zeus: neat, complete teams, puissant, girded for battle, armed with phalanxes of protectable IP and ready to hit the market.
Like all mythological presumptions, this one has some truth to it. But, it very rarely represents reality. It is simply true that a good exit generally requires a great entrance and that great entrances seldom happen organically.
VCs have underserved this critical component in the way they have approached company development. That’s because great company birthings aren’t deal-driven activities propelled by price, but are operational endeavors carried through by the grunt and sweat of hard work.
Through recent roller coaster markets the value of these solid operational fundamentals has been marginalized in favor of flash, sizzle and a tumescent fixation on the big finish.
Perhaps one bit of silver in the current financial grey cloud will be a renascent recognition among investors that beginnings matter and must be carefully husbanded by people as dedicated to getting start-up seeds planted properly as VCs are to reaping their harvest.
Tags: beginnings, entrances, exits, startups, VCs
