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Why Canadian startups should consider selling early

Why Canadian startups should consider selling early

Posted by PanamericanWorld on February 23, 2016

Dax Dasilva, founder of Lightspeed Retail, published an excellent piece in The Globe & Mail recently arguing that too few of our companies shoot for the long term. Rather than thinking about exit strategies, Dax argues that our companies should be thinking about how to build companies for the long run.

It’s hard to argue with the sentiment of Dax’s thoughts. We need more tech giants in our ecosystem.

When Shopify went public last year, it gave us all the belief that there are no limits. No one would have said you could build a billion-dollar market-leading software company from Ottawa, until they did it. Now, there’s no stopping them.

For every Shopify there are a thousand startups that never approach these heights. This is why you need be thinking about exits even as you push towards your long-term vision. Most startups are bought rather than go public. Most of these acquisitions are under $50 million. And no exit – small or large – just happens. You have to work towards them.

If every startup went on in relative perpetuity and never sold, innovation would slow down and our experiences as consumers would suffer. Established companies need to buy the innovation that startups provide.

In his 2005 Stanford commencement address, Apple co-founder Steve Jobs puts it best: “Death is very likely the single best invention of your life. It is life’s change agent. It clears out the old to make way for the new.”

It’s okay if your startup “dies” by way of exit – especially if you and your investors made money in the process.

Here’s one of many examples. When I was CFO and an investor at Tungle, I participated in its 2011 sale to BlackBerry (then known as Research In Motion). At that time, we were at an inflection point in the business. The company had launched a very successful and viral scheduling service. Users loved it.

But the company knew that if it raised more capital, it would need to have a massive monetization strategy. This created a lot of potential risk for a pre-revenue company. Selling “early” resulted in a win that changed the founders’ lives and generated strong returns for all investors.

Those same founders are now at it again with Foko. With a big win behind them, they have the experience and comfort to go big. That can only be a win for everyone.

So, as I said, think big! But take every step of your startup journey grounded in the reality that the odds are stacked against you. The market won’t want your product until they suddenly love it. Investors will be fair-weather friends waiting for clear signs of winning before piling on. Competitors will want to crush you. You will struggle to find and retain talent.

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