AI investors Elad Gil and Sarah Guo have been discussing exit timing on their podcast "No Priors". According to Gil, a typical company's value peaks about 12 months before it starts to decline. He cites examples of companies like Lotus, AOL, and Broadcast.com, which sold at or near the top of their valuations.
Gil suggests that founders pre-schedule board meetings once or twice a year specifically to discuss exits. This approach helps remove emotion from the decision-making process and allows for more rational thinking. With the rapid advancement in AI foundation models, Gil warns that companies may not have much time before their industry changes and their value declines.
Gil points out that many AI startups are currently thriving due to the limited presence of foundation models in certain categories. However, this advantage is temporary and founders need to be aware of the potential for their business's value to peak and then decline rapidly. Gil advises entrepreneurs to regularly ask themselves if they're at the peak of their company's value and take steps to capitalize on that.
Gil's advice comes as AI dealmaking is reaching new heights, with many startups being acquired or going public. Founders would do well to heed his warning and prioritize exit planning in order to maximize returns for their investors and themselves.
