Think itll take 10 years to exit? It may only take 4

How many years will it take you to exit your tech business? 10 years is the generic answer, but it isn’t as straightforward as you think.  Depending on what industry you’re in, it might take as long as 11 years (hardware) or as few as 4 years (payments).  We looked at 119 tech companies in various industries that have IPO’d to determine the answer for each industry (an IPO is the best of all exits).  Below is the data and a few observations.

 

-Software and hardware businesses take a long time to get to a critical mass to exit/IPO. Software took on median 9 years and hardware took 11.  We believe software takes a long time because the customers are mostly enterprises with longer sales cycles.  Long sales cycles naturally means you’ll acquire customers at a slower pace. 

 

-Hardware businesses need 11 years to exit because in our view hardware is the most complex of all businesses: taking software and putting it in a consumer friendly “box” is naturally harder than just building software alone, hence it can take a very long time to scale these businesses.  Roku which just exited took 14 years since founding for instance.

 

-Payments and ecommerce were much shorter, with median exit timing of 4 years and 5 years, respectively.  Consumer oriented businesses like these are naturally viral when they’re successful, hence they acquire customers quickly and somewhat easily compared to other industries.  Word of mouth is a powerful thing. 

 

-Content distribution, marketplaces, gaming, and social media took 6 to 7 years since founding to exit.  Similar to payments and ecommerce, there is a naturally viral effect to these consumer businesses which allows for faster scaling.  That said, it’s unclear to us why payments and ecommerce have had shorter times to exit, but it may just be a coincidence.     

 

In conclusion, the typical mantra that it’ll take 10 years to exit is wrong.  Depending on your industry, you might exit in a third of that time.  

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