Entry and Exit
An entrepreneur has a good sense when to enter a business. What is not so clear is when to exit.
I faced such a decision in late 1999. I had unsuccessfully tried to raise venture capital many times over the preceding few years. And then, suddenly, almost against the run of play, I had two acquisition offers on the table. I had been looking to just raise some capital so I could keep running my “forever business.” But now I faced the prospect of selling. The offers were good – way beyond what I could ever have imagined. But giving up my entire business for money? I had not considered that eventuality.
I had toiled hard for a few years growing IndiaWorld. Even vacation time was filled with thinking about what to do next. And there was so much to do. I never imagined myself doing anything else.
I had hired DSP Merrill Lynch as my investment banker to help me raise some capital so I could better compete in the marketplace. We were profitable, but the game in 1999 seemed to be shifting from passion and profits to capital and cash-burn. I was going to have to adapt. Profits were too small for me to make the large investments the business was inevitably going to need down the line.
I was confused. It was then that Hemendra Kothari, DSMPL’s Chairman, gave me advice that I have given many others. He sat me down one day and said, “Rajesh, in a business, even more important than knowing when to enter is to know when to exit. The valuation that you are getting today – it will be difficult to get the same again for a long time. You have many ideas. Sell this business and build others. You will have the freedom to do many other things in life if you do this deal.”
Those words of Hemendra bhai – “know when to exit” – turned out to be prophetic. A few months later, the stock markets tanked and a long dotcom winter began. Even though I didn’t know it then, it was his wisdom that saved IndiaWorld and perhaps my future.
So, for proficorns, there will be a moment when they may have to decide – continue to build, or sell and move on. At these times, one will have to keep the emotional aspect aside and remember those words from Hemendra bhai, “Even more important than knowing when to enter is to know when to exit.”
Tomorrow: My Proficorn Way (Part 19)