A few weeks ago, I was sitting in a pitch from a startup and I said something to them that seemed to really hit a nerve. As they went through their story and told the value proposition, I said to the founder, “I think this is a really great company and solid team, it has all of the makings of a solid lifestyle business.”
At that point, it was like I told the founder that he was clueless. He became defensive and wildly upset. As I tried to talk him off the ledge, I explained that a lifestyle business is not an insult and it is actually a compliment. He eventually returned to reality, but I am not sure he really saw the points I was trying to make to him.
So much of the startup world is focused on fundraising and exits that I think we
lose fact of the main underlying point of why we build startups. At the fundamental level, we are building companies that solve a need in the marketplace that people actually want to pay for. In solving this need, you create value and, in theory, a profit. None of this has a lot do with getting an exit. Getting a profitable exit is just one possible outcome. I am a firm believer in the fact that we (the entire startup ecosystem) would be better served to allow some focus on businesses that grow more slowly and organically. The entire time this growth happens, there is wealth and profit created.
Historically, this organically grown business has been called a “lifestyle business,” one where the founders enjoy their work, produce value for themselves and employees, and are able to create profits from the products they offer to customers. It’s a business that fits the lifestyle of the founder, not one that is part of a mad rush to be acquired.
The word “exit” is never mentioned because they are happy building the company and solving a problem. Fundraising is not a focus because they are executing. Filling a need in the marketplace produces profits that allow the founders and staff to earn a living doing something they enjoy.
Unfortunately, stories like this are not often heard in the startup world of today. It is not often that we get to celebrate the “lifestyle business” and I find that a shame.
Building a thriving global economy rests on us having these types of sustainable businesses that are run by passionate people. I will be the first to tell you that not all startups can be these types of businesses. Many verticals and markets are land grabs, where speed of development and time-to-market are essential. These types of endeavors should be raising capital, building quickly, and going fast. But there are many opportunities that do not need this type of trajectory.
I challenge the startup community to think about the types of companies we want to build. Investors, we need to look at our capital models to see if there are ways we can invest and returns can come in long term paybacks. Technologists, we need to look at the type of companies we want to work for and the problems we want to solve. And lastly, founders, we need to determine why we are doing what we are doing.
Making a $500,000 salary from profits of your startup may be more rewarding then always trying to swing for the fences and ending up with a great deal less.
Having a lifestyle business should not be an insult.