1 Andy Guo Managing The Growing Venture

2 Andy Guo “Such Problems We Should Have…” l Lucky to be faced with decisions around valuation, liquidity, your long-term objectives l Most entrepreneurs face these choices once in a lifetime, and many have regrets l #1 Regret: not taking some chips off the table l #2 Regret: Being public is not what I thought

3 Andy Guo The Overall Growth Strategy Growth strategy needs to relate to … l POCD l Ability to execute

4 Andy Guo Alternative Growth Strategy

5 Andy Guo People l The nature of work changes as the firm grows: structure, standardization, formalization, specialization l This, in turn, changes the type of people required l And also influences the required characteristics of the CEO

6 Andy Guo Managing Growth

7 Andy Guo Whose decision is it? l Most high growth companies require outside capital l Most outside capital will demand a liquidity event l Thus, the question is not if, but when and how you will harvest at least some of the value

8 Andy Guo Opportunity l Opportunity set may changes as the venture expands into new geography, products, customers l Challenge changes from mere survival and proof of the business model to developing real sustainable competitive advantage.

9 Andy Guo The Strategy Decision l Hold l Grow l Exit

10 Andy Guo Context l The choice of a strategy determines what context factors matter e.g., sourcing offshore means exchange rates can have an impact l Capital markets have a major influence

11 Andy Guo Deal Financing strategy gets more complex as company ’ s success open up other options like banks, public markets Overlap of the company ’ s needs with those of the entrepreneur / founding team vs. investors E.g., going public – capital for the business or “ a liquidity event? ”

12 Andy Guo Exit? l What does it really mean? l Entrepreneur as CEO/manager, as investor/owner l Lots of factors can drive how to think about it: what does entrepreneur want, investors want, employees want, what does market need?

13 Andy Guo Drivers l Capital Mkts: is the window open / are valuations attractive/what is valued l Product Mkts: does the industry context demand growth / scale / consolidation l Organization / Leadership: what is required for success / can the existing team take the business where it needs to go l Personal Prefs: what do you want to be when you grow up

14 Andy Guo The Generic Options l IPO l Sale of entity l Sale of a partial stake l Recap / buyback/ LBO l Distribute it back via dividends (LLC) Each have liquidity and growth possibilities

15 Andy Guo Tensions l Liquidity vs. Upside l Liquidity vs. Ownership and control l Requirement for new capital vs. Control l Investors vs. Managers / Owners l Past vs. Future: what = success so far and what will = in future l Change vs. Maintain: what do we need to change vs. What preserve l Us vs. them: to who are we valuable vs. whom brings value to us Us. vs. our company: what do we want for ourselves (usually “ stay in control ” ) vs. what does our company need (usually, new talent, skills)

16 Andy Guo Lessons l Control means different things to different people l Control is not 1:1 with 51% equity ownership Control comes from delivering performance – if you run out of money due to your failings, you will lose control, no matter what % you own