How many years will it take you to exit? 10 years is the generic answer, but that’s wrong. The data says 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 126 tech companies in various industries that have IPO’d to determine the answer. The list has been updated for recent IPOs such as Spotify, Docusign, and others. Below is the data and a few observations.
Software is a long road. SaaS businesses take a long time to get to a critical mass to exit/IPO, taking on median 9 years. 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. Notice that for the 6 software IPO’s that have happened so far in 2018, the average time to exit is even longer at 11 years.
Hardware is the longest but it varies. Roku which just exited took 14 years since founding, but Fitbit and Apple took only 7 years and 4 years respectively. The data on hardware is pretty wide ranging so while the median may be 11 years, one third of the companies in the data set exited much faster.
Consumer focused startups are generally faster exits. Payments and ecommerce startups exited quickly, 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 have a meaningful exit much sooner.