When to Kiss Your Startup Goodbye
Recently, we received a term sheet from Oracle, one of the largest software companies in the world. After five years of building an industry from the ground up and fighting, pushing and kicking our way to the top, the fate of our company would be decided over the next few hours.
Are we selling the business or are we going to continue going at it alone? Could we do better if we gave ourselves just a few more quarters?
The way I looked at it is if I agreed to sell the business, I was quitting. That’s not me. Real entrepreneurs never quit; they build independent companies that can stand the test of time.
But, was that true?
As I played out the options, the decision became clearer. The competitive landscape had changed rapidly. Two of my largest competitors had been acquired by enterprise behemoths in the last few months. The market was becoming increasingly sophisticated and customers were demanding a solution that was part of their integrated stack -- not a stand-alone tool. And, I was tired. My co-founder was tired. Our team was tired. After so many years of grinding, we didn’t have fuel in the tank for another two years.
It was time to quit.
Conventional wisdom says entrepreneurs should never give up. But after much reflection, I know that was wrong.
So, when does it make sense to quit?
The opportunity cost of time
A lot of founders I advise who are struggling to grow tell me the answer to their problems is more time. With more time, they could make some tweaks to the product. With more time, they could convince customers to buy. With more time, they could pivot like Twitter, Instagram and PayPal did. What most of these founders don’t ask themselves is: Given where you are today and the probabilities of success, what is the cost?
The most fundamental reason that founders should quit is the opportunity cost of time. Quitting gives you back your time to re-invest in your career and your health, so you can be ready when it counts.
Time is your single most valuable career lever. The younger you are, the more expensive your time is. Why? Because the way you use your time when you are younger will have a disproportionate impact on the potential of your career when you are older.
For example, if you want to be a repeat entrepreneur, generally, the earlier you start to achieve success, the easier it will be to start the next one. To achieve success you have to grow fast. If you’re stuck on one company that is growing slowly, you’re missing out on the opportunity to grow faster with a new company where you might get order of magnitude gains in your career potential.
Five years into operating my startup, my physical and mental health were deteriorating. I was unhappy and had lost my spark. My credit card statements listed a membership to the gym, but I never went. My diet was embarrassing. I hadn’t taken a vacation for years. And if you asked my mother, she’d tell you I never called her.
This all changed when I got my time back. My health is better than it’s ever been. I’m disciplined about my diet and I work out every other day. I fly home for the weekend to see my parents.
At some point, I’ll start another company and sustaining this healthy lifestyle will be difficult -- especially when I’m in the trenches. So, I’ve spent the last two years changing my behaviors so that investing in my health is part of my social habits and daily routine.
Your ability to perform as a founder is only as good as your health. If your startup is harming your well-being you need to quit. The faster you do this, the faster you can start something new that will make you happy again.
There is no doubt, founding a company has high-rewards. But, as you know, founding a company also has high demands. Entrepreneurs should realize when the balance of the equation flips and the pay off just isn’t worth it anymore.
This article was edited for brevity and clarity.