On the other side of the Plateau of Productivity, the story doesn\u2019t end.\u00a0 The market dynamics will determine if there is one clear startup winner (such Cisco, Google, Microsoft in their day), if the market fractures (the ERP market in the early 2000\u2019s), or if the startups are crushed by bigger players via innovation or acquisition earlier in the cycle (Microsoft Office in its day).\u00a0 At this stage, unless your company is a clear winner, your valuation is based purely on performance without any premium for a promising future.\u00a0 Usually, private equity firms and opportunistic companies are aggressive in driving down valuations, as they execute on consolidation of the remaining industry.<\/li>\n<\/ul>\nOn the other side of the Plateau of Productivity, one huge danger for entrepreneurs and investors is becoming a \u201clifestyle business\u201d.\u00a0 Startups can remain with limited\/no growth but sufficient profitability to say alive.\u00a0 This lifestyle business gives the entrepreneur a comfy lifestyle; however, it destroys value for the investors and employees as the startup becomes less valuable over time.\u00a0 The entrepreneur fears giving up the prestigious and comfortable lifestyle (CEO of a startup always sounds good at parties).\u00a0 In reality, the entrepreneur fails to see that this lifestyle business is bad for the entrepreneur as they spend years not doing much except for managing a non-growing business. If an entrepreneur sits too long in a stagnant company, it is hard to find their next job commensurate with their existing position.\u00a0 The entrepreneur can take a huge step back in their career when the startup eventually ends.\u00a0 The entrepreneur needs to recognize the situation, and to avoid the trap of a lifestyle business.<\/p>\n
For an entrepreneur, there are numerous decision points for deciding if it is the right time to sell.\u00a0 The CEO and management team need to continually assess the market cycle, the likely market structure, the likely market outcome, their position in the market, their competitors position in the market, and numerous other factors.\u00a0 Most entrepreneurs lack the structural knowledge, experience and objectivity to make this ongoing assessment.\u00a0 More importantly, entrepreneurs can\u2019t spend their days thinking about their exit strategy; instead, they need to focus on execution and becoming one of the winners.\u00a0 However, if they don\u2019t have someone monitoring the optimal exit time, they will miss the optimal time to sell.<\/p>\n<\/span>","protected":false},"excerpt":{"rendered":"Every startup begins with aspirations of being \u201cthe next\u201d Google or Facebook or Amazon. This unbridled optimism is what drives an entrepreneur. Each new technology market has new success stories, and drives future entrepreneurs to chase after their dreams. However, the reality is that not every startup can \u201cwin\u201d their market. With each new technology […]<\/p>\n","protected":false},"author":7,"featured_media":8845,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":""},"categories":[87,99,98],"tags":[],"_links":{"self":[{"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/posts\/8877"}],"collection":[{"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/comments?post=8877"}],"version-history":[{"count":0,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/posts\/8877\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/media\/8845"}],"wp:attachment":[{"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/media?parent=8877"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/categories?post=8877"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/eisbachgroup.com\/wp-json\/wp\/v2\/tags?post=8877"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}