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What is your exit strategy?

Journalism Accelerator

Journalism Accelerator (JA) brings a different kind of service model to market; we are taking the approach as entrepreneurs launching a startup. As the JA has sought expertise from the field, we’ve had the good fortune of some top notch consulting from Rusty Coats. Rusty is a new media news business thought leader with deep expertise in successful content product development. The first question Rusty asked us was “so, what’s your exit strategy?” What a great place to assess the unique value a product or service brings to targeted communities! We were inspired by this question and the thinking behind it. And thought our community might be as well.

About the Author

Rusty Coats is President, author and cofounder of Coats2Coats, a consulting firm focused on a media future that is mobile, participatory and sustainable. He and his partner, Janet Coats, work with clients including startups, foundations, media companies and academia. He has worked in interactive media since 1992 for a variety of media and research companies, with positions ranging from a reporter covering Silicon Valley to website manager to corporate overlord.

For most startups, it’s the second question its founders answer – right after articulating the vision of the company. The more startups I work with, the more Zen I find that dynamic:

  • Step 1: Here is why we exist.
  • Step 2: Here is how we will exit.

It reminds me very much of an underlying theme in the 1996 film “Phenomenon,” in which the protagonist, inexplicably gifted with amazing powers that also shorten his life, says: “Everything is on its way to something else.” Biology and economics have life cycles that begin, grow, peak, diminish, plateau, diversify and even reproduce. The key is being aware of this reality – and planning for it.

The news entrepreneur space has seen an explosion of life. Some counts have neighborhood and niche news sites numbering in the 400s. All are small businesses – some with nonprofit tax status, some profitable enterprises. And all of them will become something different than they are now.

Robo News dispensary Tomorrowland Disney World

RoboNewz dispensary in Tomorrowland at Disney World. Photo by Rusty Coats.

 

They may:

  • Sell their site and assets to someone – another site, network of sites.
  • Go public.
  • Merge with someone.
  • Buy someone else’s operation.
  • Turn over the site to a family member.
  • Change incorporation status.
  • Franchise.
  • Become their own endowed foundation.
  • Simply cease operating.

 

 

 

The key is to have that conversation before the conversation has you.

Startups define a successful exit strategy by necessity. Investors don’t want to be in your business forever; they just want to know how and when you’ll cash in their chips. Local small businesses and franchises are the same. If you apply for a small business loan, banks want to know how and when you’ll repay it – and how you’ll grow from there.

Even self-funded, owner-operated businesses have exit plans.

Foundations are starting to have the same conversation. Funders may call it sustainability, but the implication is clear: They want some assurance that their grants are funding something that is viable in the long-term – or contributes something to others if it is not. That is a critical part of business exit strategies: Capturing the value of what was learned.

A starter kit on exit strategies includes a few key elements:

  • What exit strategy you desire. Use the list above.
  • How investments will be repaid. Even if you’re self- or foundation-funded, this is a good exercise. This focuses you on the accumulated value of your enterprise and how you’re refilling the coffers.
  • Who are the key investors/contributors and how will they be affected by the exit strategy? List everyone who has a stake in your operation. They may not get anything (I have plenty of worthless IPO promises, believe me) but you should correlate their contribution with a specific value.
  • How is knowledge being captured now and how will it be transferred. This is particularly of interest to funders right now.
  • When you expect this to occur.

So what is your exit strategy?