Why We Don’t Have an Exit Strategy

The goal of climbing big, dangerous mountains should be to attain some sort of spiritual and personal growth, but this won’t happen if you compromise away the entire process.

― Yvon Chouinard, Let My People Go Surfing: The Education of a Reluctant Businessman

I get inspired reading about how others are building their companies. (Let My People Go Surfing is one of my favorites.) So I wanted to share one of Todoist’s philosophies that has been central to our success as a remote company so far: Don’t have an exit strategy.

This is an uncommon route for today’s high-growth tech startups to take. But I believe the founders of the most important tech startups have built their companies without an exit strategy in mind.

Mission driven

Having no exit strategy means that we aren’t building our company around an acquisition or IPO. For us, the exit isn’t a priority or even a concern.

What’s better than an exit strategy? It’s a long-term mission that your company truly cares about. It’s building a company that can outlast you and creating something of true value. I believe this kind of thinking should be the guideline for every company.

At Todoist, our mission is to build tools for a more fulfilling way to work and live. Tools like Todoist and Automations that are intentionally designed to help people and teams do more and stress less. We believe that when we do our jobs well, we enable people to achieve amazing things.

Bootstrapped and profitable

For a lot of companies, an exit can be forced, for example, by taking VC funding or debt on unfavorable terms where you lose control of the company. This is one of the reasons why Todoist is bootstrapped and profitable: Nobody can force us to exit or push us into a direction.

In 2009, I spoke with a famous Silicon Valley VC about seed funding for Todoist. The first thing they wanted to do was to replace me as the CEO. Here’s an exact quote from the email exchange:

What I will need to figure out to get things rolling is who could be a “CEO” of the company who would present to my partners at a Monday meeting, be responsible for managing the finances, etc. X Y was the former CEO of a very successful X company and is a very energetic young and smart tech-savvy business guy. That said, he has his hands in a lot of projects right now and I don’t think he’d jump in and be the full-time CEO.

The seed round was set to be hundreds of thousands of dollars. A lot of money, especially given that Todoist was generating under $1,000 per month at the time (and I was only 24 years old). It would have been easy to accept this and let others control the destiny of my project.

But I’m pretty sure Todoist would have failed if I had pursued this route, since the other people weren’t as passionate about it as me. For them it was just another seed investment.

Most of today’s companies lose control early on and let outsiders dictate their direction. This works in some cases, but it fails miserably in most. Outsiders simply don’t care about your mission, product, or people as much as you do.

The best companies, like Google, have received funding and taken on debt. But they never lost control by doing that.

While Todoist might receive funding at some point, we’ll never do it in a way where we lose control. That allows others to dictate where you should go, who you should hire, what your milestones are, and what your exit plan should be.

Exit via an acquisition

We’ve been approached by large companies, but we’ve declined even primary acquisition talks. The reason is simple: Most acquisitions outright kill your company.

Sure, acquisitions are a way to make yourself and your team wealthy. But they’re also a highly probable way to stop your mission from moving forward.

At Todoist, we simply don’t want to be a puppet of another company. We want to take our destiny into our own hands. For example, would a parent company care that their software is used by Molly Larson, a retired grandma? Probably not. But at Todoist, we care deeply about such cases.

Acquisitions shouldn’t be celebrated. They’re an easy way out. Instead, what should be celebrated is building a meaningful company that focuses on the long term.

For example, Yahoo declined to purchase Google for $1 million from founders Larry Page and Sergei Brin in 1998. Over the next 30 years, the company transformed everything from search and communication to advertising and media. Today, Google (Alphabet) has a market cap of over $4.1 trillion.

There are a lot of examples of acquisitions gone bad, many more than acquisitions gone great. An example of this is Parse, a cloud app platform that let developers easily build backend services for their apps. Parse was acquired in 2013 by Facebook, shut down in 2016, and then open sourced.

Here’s a great quote by Charity Majors, an engineer from the Parse team:

You don’t own your product anymore. Your product is now “strategic alignment.” Look at yourself in the mirror and repeat that five times every morning. Your customers are not your customers anymore. Your customer is now your corporate overlord. You can resist this and try to serve your old customers first, but it will wear your engineering team out and eventually drive you mad.

For more of these, check Our Incredible Journey, a collection of pre- and post-acquisition posts.

Exit via an IPO

Sometimes companies grow so large that they need to become public. But a major problem of being a public company is that the stock market rewards short-term thinking. The stock dictates your direction. In other extreme cases, you can also end up in proxy wars with activist shareholders. Check Carl Icahn’s history for brutal examples of this strategy.

It’s possible to become a public company while preserving control, but it’s extremely rare. The best example is Google. The founders have a structure in place that gives them veto rights and lets them determine the direction. These structures enable these companies to focus on their long-term missions. This is probably why both of these companies have been so successful, while others, such as Yahoo, have failed miserably.

Sustainable growth

It’s easy to see why founders want an exit. Growing startups is incredibly stressful, and an exit (especially through an acquisition) is a fast way to put an end to this stress and become wealthy in the process.

To solve the stress factor, it’s important to focus on building a sustainable business and company culture. For example, not overworking people, not hiring too quickly, not overspending, having flexible vacations, etc. Basically, trying to create a company that promotes employee wellbeing and happiness.

At Todoist we follow a few core guidelines:

• We care deeply about our people and their well-being.
• We don’t over-hire or over-spend. We’re incredibly focused on hiring very smart people who fit into our culture. This is one of our top priorities.
• We have been bootstrapped from the beginning, only hiring people when we could afford it, when we needed it, and when we found the right candidates.
• We have European-style vacation days, and people can take them whenever they want (40 paid days per year, plus 12 health days).
• People can work from anywhere they like and keep the hours that work best for them.
• We trust people by default. For example, we have implemented very few checks to ensure that people are doing their work. Great work is self-evident, and you don’t need to check for it. When we take the time to hire for the right cultural fit, we’ve found that we don’t have to have systems in place to look over people’s shoulders.

The Todoist way

There are many ways to build a company. This is ours. I hope our philosophy inspired you and gave you another perspective on exits.

If our approach has resonated with you and you’re interested in joining our team, please check out our job openings.