Successful Exit Strategies – Lessons from Zappos.com

June 7, 2010

Zappos successful company exit strategy depended on commitment to values, prudent planning and patience.

 

A friend forwarded me Tony Hsieh‘s article on Inc titled “Why I sold Zappos” — a remarkably frank and insightful narrative from the CEO himself of the circumstances of Zappos’ sale to Amazon. Hsieh touches on many important topics that all high growth companies’ management teams will encounter in their company’s growth cycle. Most importantly, I think there are 3 key things to learn from this in terms of preparing for successful exit strategies:

Prudent planning: As there will always be a potential conflict of interests between the founders and investors in a company that is nearing its exit, the founders, while they can, should set the company up in a way that helps retain as much control as possible — even after multiple rounds of investment. The control of the company’s direction gave Hsieh time to figure out the company’s path, even though he was under a lot of pressure from his venture capital investors.

Patience: The hardest thing for entrepreneurs might be to say no when presented with an early exit deal. Zappos had an offer from Amazon in 2005, but Hsieh would not sell, knowing that it was not the right moment and not the right partner at the time. He and his co-founder kept on growing the company and persevered under tremendous pressure, keeping the business on the path they intended.

Sticking to the company’s values: Zappos is well known for its company culture and customer-oriented values. This informed its sale. Hsieh really committed to selling to Amazon only when he felt that the two companies really shared similar values and spoke the same language. Moreover, the exit was about finding the most suitable partner for the next stage, and not just making it the most profitable transaction. While most companies would like an all-cash transaction, Zappos asked for an all-stock transaction because they were looking to cement a partnership rather than simply selling one company to another.

Chief Business Officer at UserTesting

Tien Anh joined UserTesting in 2015 after extensive financial and strategic experiences at OpenView, where he was an investor and advisor to a global portfolio of fast-growing enterprise SaaS companies. Until 2021, he led the Finance, IT, and Business Intelligence team as CFO of UserTesting. He currently leads initiatives for long term growth investments as Chief Business Officer at UserTesting.