With thousands of struggling entrepreneurs in attendance, TiE Global Summit hosted the session – Strategizing for a Successful Exit – where two veteran entrepreneurs who “built million-dollar businesses and then successfully exited”, shared their experience and valuable wisdom they gained from leaving their passionate ventures.
When a terrific idea fails to become a viable business model, working upon the Exit Strategy becomes a dreadful but inevitable task for any start-up founder. Exiting a business that you have invested your money, passion and hard work in, involves a series of difficult and unpleasant decisions. It involves asking yourself multiple questions – “How much money you can make out of the exit?” or “How much of your money can you recoup out of the business before shutting shop?”. But the most important of all, the big question – “When to Exit?”.
At the TiE Global Summit, the 20,000+ entrepreneurs in attendance were privy to a knowledge session of immense implications for their future. Titled as ‘Strategizing for a Successful Exit”, the session answered all the above questions and more with a granular insight from leading entrepreneurs Mr. Naga Prasad Tummala, Director of People Combine Group and Mr. Arun Jain, Chairman and Managing director of Intellect Design Arena Limited.
Watch: TiE Global Summit 2020 – Day 2
Aiming to arm start-up founder with insight to achieve successful exits if their ventures fail, moderator Basil Moftah, General Partner, Global Ventures Team began the session with a question elementary to the process:
How to Know when it’s Time to Exit?
Intellect Design Arena’s Arun Jain initiated the talk with the breakdown of the entrepreneurial process. At TiE Global Summit’s he introduced ‘Strategizing Exit’ as the perennial process of an entrepreneurial journey. He defines the role of an entrepreneur as starting with building the product followed by selling the concept to the customers. This is further followed by building operational capability and leadership and finance capacity and brand face. Mr. Jain opined, “An entrepreneur builds 6 capitals in his life and each time he is building a new capital, he is exiting from the previous capital”.
Mr. Jain, who calls an entrepreneur a social architect of the society, highlights two junctures in any businessman’s journey where the idea of exit needs to be confronted – 1) when someone can contribute better in that journey than he himself can; and 2) the purpose for which he had set up the institution has reached the point where he wants freedom of choice to experiment or simply withdraw.
People Combine Group’s Naga Prasad Tummala embarked on a more personalised answer telling his experience of how he chose to exit his previous institution and hand it over to another organization instead of bringing in the second generation. His reason for letting go of his control on the venture he founded was the urge to have more freedom to focus wholly on philanthropy.
About Polaris – The Journey and Exit
Polaris Software Lab, founded by Arun Jain in 1993 and later sold to Virtusa in 2015, is an ideal example of exit strategy and rightly part of the discussion. The company issued its IPO in the year 1999 and soon became a million dollar company. Polaris went on to become one of the top 10 IT outsourcing companies in India. By 2002, the company merged with OrbiTech Solutions, a subsidiary of Citigroup India. After demerging the software service and product business of Polaris, Jain finally sold his 53 percent stake in the company to Virtusa for Rs. 1,173 crore. Mr. Jain shared his experience with the audience, “After exiting from Polaris, I suddenly stepped out of my comfort zone. Letting go of Polaris made me vulnerable. And when you are vulnerable, your mind thinks ten times more.”
When asked if it was difficult to let go of a company that had made him famous and successful over a memorable 20-year journey of passion and hard work, he said, “Ance you align your life to a bigger purpose, other purposes look small.” He also expressed satisfaction in the fact that his decision to exit worked in the favour of his employees who also benefited with Polaris becoming part of an even bigger company.”
After Jain’s inspiring and insightful story, Mr. Moftah directed his next question to Mr. Tummala, asking him to share his personal anecdote of having made the “biggest exit in the education sector.”
Planning and Executing the Biggest Exit in the History of Education
Mr. Tummala started his story by admitting that there came a time during the later stages of his entrepreneurial journey at the Oakridge International School (Andhra Pradesh’s first IB world school in Hyderabad), when he started feeling out of sync with the future of the organization and the government prescribed approach to schooling.
Mr. Tummala further highlighted some of the characteristics that prepared him for a safe and successful exit – provisional board, funds, and proper organizational structure. He said, “It is not always the profit that is going to get you the value (in the education sector), rather what kind of governance standards you maintain.”
The Biggest Challenge in the Exit Process
According to Mr. Tummala, the biggest challenge was the emotional separation involving 1600 employees, especially teachers. His organization, then known as Vikas Educational Solutions had always encouraged building highly connected bonds with employees. While that was the biggest challenge, he acknowledges that it made the institution one of the best places to work at and one known for its professionally run operations.
Opposite of an Exit – What to Look for in an Acquisition?
Mr. Jain evaluates any business before thinking of acquisition on the 6 different parameters – 1) the product, 2) the execution and operation, 3) financial governance, 4) leadership, 5)customer base, and 6) brand and sales engine. Mr. Jain has created an acronym for the approach “BELIEF” which he believes will help entrepreneurs remember all the aspects. It stands for:
The Ultimate Advice for the Entrepreneurs
For Mr. Tummala, each day of his professional journey has been a day of solving problems. He suggests, “Entrepreneurs should exit when they stop feeling excited about their work. Another point where an entrepreneur should exit is when he or she seizes to innovate and create value. Profits are important but good governance is where the actual benefit is created.”
Concluding the session with his piece of advice to the entrepreneurs and businessmen attending the Strategizing Exit session at TiE Global Summit, Mr. Jain said, “Know the purpose of your business. Be brave enough to feel vulnerable when you don’t know ‘why’. Use the three magic words when you are clueless – I Don’t Know! Just acknowledging it is the biggest energizer which empowers us to seek from the world, an aspect of leadership which is often subsided by the ego of entrepreneurs.”