Startup success isn’t quite as binary as it first seems. Beyond the standard acquisitions, plus the classic option of earning profits to pay dividends, you’ve got a couple other ways to get paid.
As the business matures, founders are permitted (and even encouraged) to put some of the money they’re raising from investors into their pocket instead of into the business. It’s on the order of house money rather than retirement money, but that’s obviously still significant. Investors encourage it because they usually want to build the company for the biggest exit possible, and a founder worried about their personal finances isn’t the best at thinking long-term. Although it’s slightly counter-intuitive, a financially stable founder is generally more ambitious, not less. This is called ‘taking money off the table’ and is now pretty common for Series B funding and beyond.
You can also exit via merger with another startup. This isn’t terribly common, but the idea is that you combine forces (and customer bases) with someone who used to be a competitor. The new company often doesn’t need 2x the founders, so it’s an easy time for some of them to step away with the confidence that the most qualified person possible will be taking over from them. While there might be a bit of cash changing hands when you merge, you mostly won’t get paid until the combined business sells. Still, I’ve seen these mergers be a godsend for folks who were simply ready to do something different after running the same successful (but not yet ready to sell) startup for 8 or 10 years.
Small business owners can exit their companies without even selling them by carefully building the processes and team to run everything without their involvement. This is the transition from “business operator” to “business owner” that The E-Myth Revisited describes and navigates so expertly (you should read it if you’re doing any sort of people- or service-oriented business, or pretty much any SME). A counter-intuitive twist is that the more your business relies on geniuses (either genius employees or a genius founder), the harder it is to get away from. One of the strengths of McDonald’s (where I was this very morning drinking a milkshake that I’m starting to regret) is that they can reliably deliver their product via minimally trained high school dropouts. If a genius designer starts a design agency doing genius stuff, they can never really sell or step away from it because their product is too entangled with the founder’s own skills.
Lastly, something I do myself is equity swapping. The idea is to get a group of founders who all respect each other, and you each swap a small percentage of your company with everyone else. This can be a fixed percentage (eg. we each pool 5%) or a fixed financial value (ie. we each pool 200k worth of equity). There are various ways to arrange the legals, but the idea is the same. Startup results are spiky (i.e. they’re usually either ridiculously good or zero) and can take a long time to happen. So you all share a bit of upside in case anyone becomes Facebook, and you all get exposed to a bit of upside as soon as anyone gets it, rather than waiting until you sell your particular company. Beyond the financials, I’ve found it really nice to have other people who are excited to help out on my projects (and vice versa with me for their projects), since we all benefit if any of them work. I’ve seen some people take their pool quite seriously (they treat it almost like a mini-VC fund that reviews pitches from applying startups) and others (like myself) who just do it contractually. But I do think it should be far more common than it is given how much more predictable it can make the startup career path.
A bit off topic, but one of the issues with raising lots of money from VCs is that it narrows your options for exits. The longer you can stay bootstrapped, the more ways you have to get paid and move on to whatever’s next.