Almost all startups founded in Silicon Valley are operating under the same imperative: in five to seven years, the company must undergo a liquidity event that returns capital to the original founders, investors, and other stakeholders.
This exit-focused approach to entrepreneurship is showcased in our leading universities and media (think Shark Tank), but not without a cost.
While companies with billion-dollar valuations pop up like weeds, so do stories of criminally inflated numbers -- i.e. WeWork -- or disappointing IPOs. The result is an exit that enriches a few but leaves a fading company to be acquired by one of the tech giants or dismantled for parts by a private equity firm.
Building a company with an exit strategy in mind can feel like the only option for entrepreneurs -- but it isn't. Richard Seaman, chairman of the Seaman Corporation and author of A Vibrant Vision, says that the exit-focused rhetoric and unicorns that dominate our headlines are not what powers our economy.
In fact, in the United States, privately owned, family-run businesses account for 64 percent of our country's GDP, or $5.9 trillion, according to research.
So how do you go about building a company that will outlast you? Seaman shared three insights with me.
1. Make a conscious choice to focus on the long-term.
Avoiding the Silicon Valley exit strategy starts with a conscious choice: What kind of business are you building? Are you going to spend the next five to seven years focused on turning your idea into gold -- and then getting out? Or are you in this for the long haul? Seaman says how you answer this question will have a waterfall effect, coloring every choice you make from here on out.
2. Focus on building all parts of the business, not just hyping a product.
If you are building a business to sell, you will most likely focus on the finance component of your business, shepherding your startup through the "Valley of Death," which can hinder the long-term profitability of a company. However, creating a multigenerational business requires you to focus on the sustainability of the business from the start -- investing in all parts of the business, such as innovation, marketing and sales, products and services, human capital, operational excellence, and finance. "Remember to focus on creating perennial growth, not just launching one initiative," states Seaman.
3. Assess your liquidity needs and seek out sources of funding that match your objectives.
Many entrepreneurs balk at the idea of creating a business that survives them because they do not personally have the capital to get their idea off the ground. However, there are many methods of funding aside from angel investment or venture capital that do not involve giving away ownership in your business early on. Every business's capital needs will be different at various stages, but it is important to develop a working relationship with your local banker early on.
While we might glorify the serial entrepreneur, thousands of multimillion-dollar, multigenerational businesses exist that are more innovative, more desirable to work for, and preferred by consumers to the boom-or-bust Silicon Valley startup. This model of entrepreneurship requires serious commitment, but it results in a business that creates and sustains deep and lasting value far beyond the money going into shareholders' pockets.