Who Decides When To Exit?

There's a post on the 37 Signals blog by Jason Fried saying that the Mint sale to Intuit was a bad move for a host of reasons and suggesting that the VCs behind Mint had forced it. It reminds me of similar discussions about the sale of Zappos to Amazon a while back.

I left a comment on that post to the effect that while I have no inside information, I highly doubt that the VCs forced the sale.

But this is a good opportunity to talk about who does decide when to exit. Here are some rules that I've learned over the years:

1) When the founders and management want to sell, the VCs ought to go along (within reason) because blocking a sale and having angry and unhappy founders and management running the business is a bad outcome.

2) VCs often impact the price and terms of an exit but they rarely drive the exit itself when the founder is still actively running the business.

3) When a company is doing really well, the investors rarely want to sell. VCs make all of their money on a few investments per fund. When a company is in that group, they don't like to see an early exit.

4) When a founder owns a large stake in the business and is still running it, it is very likely that the founder drove the decision to sell and the sale process and was advised by the investors and board.

5) If the founders are no longer involved in the business and the management was hired by the VCs, and the VCs control the business, then it is likely that the investors drove the sale process and the decision to sell.

6) If the company is not doing well, then the decision to sell was likely forced by the VCs.

Of course, like all rules, there are exceptions from time to time. But when you see an exit, you can parse the data by this set of rules and you can pretty easily predict what happened, who made the decision, and who drove the process.