Are you a Lifestyle Company or an Exit Strategy Company? That is the question being asked of coWORKer Jeffrey Ventrella as he investigates possible funding strategies for his current venture. I must admit, I needed a quick definition before jumping into the conversation.
- A lifestyle business is a business that is set up and run by its founders primarily with the aim of sustaining a particular level of income and no more; or to provide a foundation from which to enjoy a particular lifestyle. These are firms that depend heavily on founder skills, personality, energy, and contacts. Often their founders create them to exercise personal talent or skills, achieve a flexible schedule, work with other family members, remain in a desired geographic area, or simply to express themselves. But without the founder’s deep personal involvement, such businesses are likely to, well, founder. Professional investors are therefore rarely involved with lifestyle businesses.
- In entrepreneurship and strategic management an exit strategy, exit plan, or strategic withdrawal, is a way to transition one’s ownership of a company or the operation of some part of the company. Entrepreneurs andinvestors devise ways of recouping the capital they have invested in a company. The most common strategy is the sale of equity to someone else through a trade sale.
Turns out, outside investors don’t much like “lifestyle” businesses because it’s more difficult (if not impossible) to get their capital back (with profit). But what if you love what you do and you just want to build a good company slow and steady so that you can keep on enjoying your work without any intention of selling it off? CoWORKer Viktor Grant chimed in with food for thought from his experience: “The moment you take one dollar of investor money you no longer own your company.”
I’m wondering if crowd sourced funding might be a little different than traditional venture capital in this sense. Maybe? Maybe not? And the big question for the group that day was: Are there other innovative ways to get a new company off the ground? If you have a good idea and you can find a community of people who believe in your work, could there be a new way to make a modest living? So far, we don’t have any answers, but we’re on the lookout…
Don’t forget to join us Tuesdays at Ten for Coffee Social at WORK…hot Acre Coffee, tasty Bovine Pastries, and a really good conversations!