1 00:00:00,160 --> 00:00:04,160 Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg 2 00:00:04,240 --> 00:00:08,119 Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Well, I'm really 3 00:00:08,119 --> 00:00:11,440 Speaker 1: excited about our next guest. Tarage Parong has seen a lot. 4 00:00:11,560 --> 00:00:14,640 Speaker 1: He's been working in Silicon Valley since the late nineteen nineties. 5 00:00:14,960 --> 00:00:17,919 Speaker 1: He's been involved in hundreds of M and A transactions 6 00:00:17,920 --> 00:00:21,920 Speaker 1: and venture capital investments. Right now, he's the CEO at 7 00:00:21,960 --> 00:00:24,920 Speaker 1: Server Robotics. You might recall this spun out of Uber. 8 00:00:25,200 --> 00:00:28,680 Speaker 1: It focuses on sustainable self driving delivery. He's also got 9 00:00:28,680 --> 00:00:31,440 Speaker 1: a brand new book out. It's called Exit Path, How 10 00:00:31,480 --> 00:00:35,040 Speaker 1: to Win the Startup Game. Tarage joins us this afternoon 11 00:00:35,240 --> 00:00:40,080 Speaker 1: from Palo Alto, California. Tarage, how are you. It's good, 12 00:00:40,520 --> 00:00:42,400 Speaker 1: very good. Good to be on the show. Yeah, it's 13 00:00:42,440 --> 00:00:43,440 Speaker 1: good to have you with us. Hey, I want to 14 00:00:43,440 --> 00:00:45,080 Speaker 1: get to the book in just a second. But but 15 00:00:45,240 --> 00:00:47,360 Speaker 1: before we get to that, I want to just hear 16 00:00:48,159 --> 00:00:50,680 Speaker 1: what the environment in Silicon Valley is like right now. 17 00:00:50,720 --> 00:00:53,640 Speaker 1: As I mentioned, you have experienced there through several economic cycles, 18 00:00:53,640 --> 00:00:56,000 Speaker 1: including the dot com crash of the late nineteen nineties. 19 00:00:56,520 --> 00:00:58,639 Speaker 1: What do you see when you look around the landscape 20 00:00:58,720 --> 00:01:01,840 Speaker 1: right now? Give us your your take, Yes, it's like 21 00:01:01,920 --> 00:01:05,800 Speaker 1: deja vu all over again. Rightly, So we've been through 22 00:01:05,840 --> 00:01:10,240 Speaker 1: this a couple of times, as you said, yes, late nineties. Uh, 23 00:01:10,680 --> 00:01:13,400 Speaker 1: this feels a bit more like the two thousand and 24 00:01:13,400 --> 00:01:16,120 Speaker 1: eight two thousand nine downturn. We're kind of venture capital 25 00:01:16,200 --> 00:01:20,360 Speaker 1: funding a bit dried up. There was no end in 26 00:01:20,400 --> 00:01:23,160 Speaker 1: sight for the doom and gloom, and you know, there 27 00:01:23,160 --> 00:01:25,880 Speaker 1: were all sorts of memos issued by venture capital firms 28 00:01:25,920 --> 00:01:29,520 Speaker 1: about you know, rest in peace, good times, right, So 29 00:01:31,280 --> 00:01:35,960 Speaker 1: it's very reminiscent of that and layoffs unfortunately, you know, uh, 30 00:01:36,240 --> 00:01:39,320 Speaker 1: companies cutting costs or being advised by their boards to 31 00:01:39,480 --> 00:01:42,399 Speaker 1: cut costs so that they can extend their runway. So 32 00:01:42,480 --> 00:01:45,360 Speaker 1: bring this deja vu that you're feeling. And this landscape 33 00:01:45,360 --> 00:01:48,600 Speaker 1: that we're in, we're funding is drying up. What does 34 00:01:48,680 --> 00:01:52,160 Speaker 1: that mean for startups and the business of startups because 35 00:01:52,160 --> 00:01:54,640 Speaker 1: I mean even in the public equity markets, you know, 36 00:01:54,760 --> 00:01:58,360 Speaker 1: companies that are well established, feels like a very rocky time. 37 00:02:00,720 --> 00:02:04,000 Speaker 1: It is, it is at certain times. The thing about 38 00:02:04,000 --> 00:02:05,600 Speaker 1: startups is that a lot of them are in the 39 00:02:05,760 --> 00:02:08,840 Speaker 1: value creation business. There they kind of have a longer 40 00:02:08,919 --> 00:02:12,280 Speaker 1: term horizon, especially the earlier stage startups. I feel that 41 00:02:12,840 --> 00:02:17,959 Speaker 1: earlier stage investors actually continue plug away and continue investing 42 00:02:18,400 --> 00:02:21,000 Speaker 1: their activities. You know, we've seen in other downturns and 43 00:02:21,080 --> 00:02:24,800 Speaker 1: a lot of valuable companies were created are founded during 44 00:02:24,840 --> 00:02:28,079 Speaker 1: the downturn, So there's no reason for early stage investors 45 00:02:28,120 --> 00:02:31,560 Speaker 1: to kind of pull back. The problem is with a 46 00:02:31,600 --> 00:02:36,520 Speaker 1: bit of later stage investors who have invested a very 47 00:02:36,560 --> 00:02:41,560 Speaker 1: healthy valuations and now they're facing down rounds or sort 48 00:02:41,560 --> 00:02:44,960 Speaker 1: of uh have there's a reckoning that has come to them, 49 00:02:45,000 --> 00:02:49,679 Speaker 1: and um that's impacting you know, the moral uh of 50 00:02:49,800 --> 00:02:53,520 Speaker 1: the teams, of their founders, of the investors. So in 51 00:02:53,560 --> 00:02:56,920 Speaker 1: the later stage games, it's a bit of a hard time. 52 00:02:57,120 --> 00:03:00,120 Speaker 1: What's interesting, though, Tarage, is what's happening right now now. 53 00:03:00,120 --> 00:03:04,200 Speaker 1: I mean the Nazdak nearly in just a couple of months. 54 00:03:04,200 --> 00:03:06,560 Speaker 1: I'm wondering if the worst is behind us right now. 55 00:03:06,960 --> 00:03:09,359 Speaker 1: And I know we're talking private versus public, but there 56 00:03:09,440 --> 00:03:13,520 Speaker 1: is some connection here. There is a connection. Especially you know, 57 00:03:13,760 --> 00:03:15,880 Speaker 1: at the end of the day, you know, companies either 58 00:03:15,919 --> 00:03:19,400 Speaker 1: want to get public or be acquired, right, Yeah, the 59 00:03:19,480 --> 00:03:25,120 Speaker 1: public market definitely has an impact private markets as well. Um, 60 00:03:25,280 --> 00:03:30,320 Speaker 1: you know, it's hard to tell, but my hope is 61 00:03:30,360 --> 00:03:33,480 Speaker 1: that the worce is behind us for sure. Okay, well, 62 00:03:33,520 --> 00:03:35,560 Speaker 1: let's get into the book a little bit and talk 63 00:03:35,600 --> 00:03:38,720 Speaker 1: about exit path. Because you have personal experience with trying 64 00:03:38,760 --> 00:03:41,520 Speaker 1: to sell a startup of yours that didn't end up 65 00:03:41,520 --> 00:03:43,760 Speaker 1: working out the I p O route or the sales route, 66 00:03:44,000 --> 00:03:46,280 Speaker 1: why do you argue that founders should be less focused 67 00:03:46,280 --> 00:03:50,200 Speaker 1: on I p O s and more focused on being acquired. Yes? Absolutely, 68 00:03:50,320 --> 00:03:53,160 Speaker 1: um So you know, if you look at the stats alone, 69 00:03:53,400 --> 00:03:56,840 Speaker 1: most startups don't make it. You know, over seventy actually 70 00:03:58,400 --> 00:04:01,040 Speaker 1: venture back startups who have rates more than a million 71 00:04:01,680 --> 00:04:06,360 Speaker 1: don't end up returning the money to their investors. So 72 00:04:07,000 --> 00:04:10,480 Speaker 1: the chances of success are very slim. Now, those who 73 00:04:10,520 --> 00:04:14,640 Speaker 1: do manage to make it through are either acquired or public. 74 00:04:15,560 --> 00:04:19,000 Speaker 1: For every I p O there's dirty acquisitions. So odds 75 00:04:19,040 --> 00:04:24,200 Speaker 1: are your chances of uh actually making it and surviving 76 00:04:25,320 --> 00:04:30,279 Speaker 1: is through a strategic sale. Um. I experienced that with 77 00:04:30,360 --> 00:04:34,040 Speaker 1: my first startup because we were single, singularly focused on 78 00:04:34,560 --> 00:04:38,240 Speaker 1: just that I p O. We ignored really any strategic 79 00:04:38,279 --> 00:04:42,160 Speaker 1: conversations building relationships with potential acquires. At What ended up 80 00:04:42,279 --> 00:04:44,599 Speaker 1: is that in two thousand and two tho nine, during 81 00:04:44,600 --> 00:04:47,520 Speaker 1: a time very similar to now. Um, we had to 82 00:04:47,520 --> 00:04:49,960 Speaker 1: sell because we couldn't raise any more money and we 83 00:04:49,960 --> 00:04:52,960 Speaker 1: didn't have those relationships to fall back on, and um 84 00:04:54,880 --> 00:04:57,560 Speaker 1: it was a failure because of that, right, And I 85 00:04:57,560 --> 00:05:01,000 Speaker 1: mean it's a really interesting point that odds are you're 86 00:05:01,040 --> 00:05:03,880 Speaker 1: probably going to get acquired, You're more likely to do 87 00:05:03,920 --> 00:05:06,240 Speaker 1: that then go public. But it still feels like going 88 00:05:06,320 --> 00:05:08,920 Speaker 1: public a lot of people sort of regarded as sort 89 00:05:08,920 --> 00:05:11,240 Speaker 1: of the holy grail for a lot of these startups. 90 00:05:11,279 --> 00:05:14,360 Speaker 1: But if the case is that you know your company 91 00:05:14,400 --> 00:05:17,440 Speaker 1: is much more likely to go bought, I mean, should 92 00:05:17,480 --> 00:05:22,159 Speaker 1: founders be sort of preparing for that possibility and trying 93 00:05:22,160 --> 00:05:26,760 Speaker 1: to line up chips for that possibility. That's what I've 94 00:05:26,800 --> 00:05:30,440 Speaker 1: seen workouts really well for founders. UM, you know, in 95 00:05:30,560 --> 00:05:34,320 Speaker 1: my next startup after that failure, I actually the first 96 00:05:34,360 --> 00:05:37,279 Speaker 1: thing we did, we we created our eggit strategy and 97 00:05:37,720 --> 00:05:40,480 Speaker 1: we did an outside and by doing so, just that 98 00:05:40,600 --> 00:05:44,479 Speaker 1: act alone set in motion a series of events that 99 00:05:44,920 --> 00:05:48,200 Speaker 1: led to a very successful exit. UM you know, web 100 00:05:48,240 --> 00:05:49,920 Speaker 1: stuff Come was the name of the company we sold 101 00:05:49,920 --> 00:05:53,480 Speaker 1: to visit the print and more than tenets, multiple revenues. Um, 102 00:05:54,200 --> 00:05:58,159 Speaker 1: it was a very good outcome, and I credited because 103 00:05:58,240 --> 00:06:01,400 Speaker 1: we did take those steps. Now it had to be 104 00:06:01,440 --> 00:06:04,400 Speaker 1: even gone forward. We decided not to sell and had 105 00:06:04,680 --> 00:06:08,200 Speaker 1: gone uh you know, with another round of financing and 106 00:06:08,480 --> 00:06:12,440 Speaker 1: gone all the way to IP. Having had acquirers would 107 00:06:12,520 --> 00:06:14,719 Speaker 1: make our IP a lot more successful because now we 108 00:06:14,760 --> 00:06:19,719 Speaker 1: have actually leveraged in those conversations with investment banks. Turage, 109 00:06:19,800 --> 00:06:22,680 Speaker 1: we only have about forty five seconds left. But how 110 00:06:22,680 --> 00:06:24,400 Speaker 1: do you know when to walk away from an offer 111 00:06:24,560 --> 00:06:25,960 Speaker 1: when you know that you can get a better offer 112 00:06:25,960 --> 00:06:29,720 Speaker 1: because you just don't know. Yes, that's why you know. 113 00:06:29,800 --> 00:06:32,559 Speaker 1: There is a lot of upsites optionality. So the only 114 00:06:32,560 --> 00:06:34,839 Speaker 1: way you can walk out from an offer is if 115 00:06:34,839 --> 00:06:38,159 Speaker 1: you have Bible strategic alternatives. And what I advocate in 116 00:06:38,200 --> 00:06:40,720 Speaker 1: my book at great length is how to create those 117 00:06:40,760 --> 00:06:45,160 Speaker 1: strategic optionality for yourself so you can walk out all right. 118 00:06:45,240 --> 00:06:49,400 Speaker 1: Turage Parong, chief operating officer at Serve Robotics, author of 119 00:06:49,400 --> 00:06:51,960 Speaker 1: the brand new book Exit Path, How to Win the 120 00:06:52,040 --> 00:06:54,560 Speaker 1: Startup end Game. Joining us this afternoon on the phone 121 00:06:54,600 --> 00:06:58,240 Speaker 1: from Palo Alto, California. Tarage, thank you so much for 122 00:06:58,320 --> 00:06:59,840 Speaker 1: taking the time and joining us.