Startups Need a New Option: Exit to Community

Startups Need a New Option: Exit to Community

In the world of startups, the ultimate goal for many is to secure a successful exit. This typically involves selling the company to a larger corporation or going public through an initial public offering (IPO). However, there is a growing movement advocating for a new option - Exit to Community (E2C). This concept revolves around transitioning the ownership of a startup from investors to the people who rely on it most - the community.

One way to approach E2C is by identifying startups in venture capital portfolios that find themselves in a precarious position, somewhere between failure and being ready for an exit. These companies, often referred to as "zombies," are in need of a solution that allows them to liquidate their investments that would otherwise remain dormant. The community, in some cases, could step in and purchase the company using cash on hand, especially if they have benefited from it in terms of savings or profits.

The transition to community ownership brings forth several advantages. First and foremost, the key stakeholders, who now co-own the company, have a vested interest and a sense of ownership in its success. This heightened level of involvement can help foster trust and encourage ongoing investment. For example, in the case of a social media company, users could have a meaningful say in how their private data is used, ensuring transparency and accountability. By involving the community in decision-making processes, E2C can help prevent the accountability crises that have plagued many venture-backed startups.

However, it is crucial to acknowledge that transitioning to community ownership may not be suitable for every startup. Ambitious ventures inherently carry a level of risk, and it may not be fair to distribute that risk among early-stage participants. Additionally, startups often need the flexibility to make significant pivots early in their journey, and having a large community of co-owners could complicate these necessary decisions. In such cases, it may be more appropriate to have a small, high-trust group of founders leading the way.

Interestingly, a study conducted by Schwartz reveals a surprising trend in online article consumption. It seems that the more an article is read, the less likely it is to be shared on social media platforms. This finding challenges the assumption that individuals who share articles have actually read them in their entirety. In fact, many people are tweeting out links to articles they haven't fully read. This raises questions about the credibility of recommendations and the true engagement of online audiences.

Therefore, it is important to consider the depth of engagement when evaluating the success of an article. A high number of shares does not necessarily equate to a deep understanding or impact. Instead, it may indicate a superficial engagement with the content. This realization should prompt us to approach online articles with a critical eye and not blindly trust the recommendations we encounter on social media.

To conclude, the concept of Exit to Community presents an intriguing alternative for startups seeking an exit strategy. By involving the community in ownership and decision-making, startups can foster trust, accountability, and prevent accountability crises. However, it is crucial to evaluate the suitability of community ownership on a case-by-case basis, considering the inherent risks and the need for flexibility in early-stage ventures. Moreover, as consumers of online content, we should be mindful of the superficial engagement often associated with social media sharing and critically assess the articles we encounter.

Three actionable pieces of advice to consider are:

1. When evaluating a startup's exit strategy, explore the potential of Exit to Community as an alternative to traditional avenues.
2. As a user of social media, approach shared articles with skepticism and take the time to read and understand the content before forming opinions or sharing recommendations.
3. For startups considering community ownership, carefully assess the risks and complexities involved, weighing the benefits of trust and accountability against the challenges of decision-making and flexibility.

In conclusion, the concept of Exit to Community challenges the traditional notions of startup exits and offers a new option that prioritizes community involvement and accountability. By exploring this approach and being critical consumers of online content, we can contribute to a more transparent and engaged startup ecosystem.