additional funds, dilute the company, and wait patiently for success. If profitability is still not achieved, the start-up must cease operations, merge with another firm, or be acquired. Merger or acquisition (although on more favorable terms) are also possible outcomes of the success scenario, which is discussed below.

With a high-growth (or simple) product and plan, the company may become profitable after only a few quarters of sales. After the start-up has sustained its profitability for several quarters (a "stair-step" pattern of revenue growth), it can either remain in private hands, "go public" with an initial public offering (IPO), or be acquired. Although some firms do continue to be privately held for many years, this discussion assumes that one of the start-up's paramount goals is to gain substantial amounts of additional operating capital-in which case, going public or being acquired is the appropriate course of action.

Going public can wreak havoc with the company’s operations, since it demands the full, ongoing attention of already-overworked key personnel. The focus of operations temporarily shifts from sales and service to the task of auditing strengths and weaknesses. Nevertheless, going public is financially beneficial, both for the firm and for its employees and investors. The company gains capital with which to expand its operations, and the founders may realize substantial financial rewards. For example, if an idea results in the founding of a high-tech business that subsequently becomes successful and goes public (the odds of this happening are about six in a million), the dominant founding entrepreneur can receive an average of $6.5 million (Nesheim, 1988).

Although the rags-to-riches scenario of a start-up and its founders' prospering via an IPO is attractive, this is not how the majority of new companies gain additional capital. Instead, the most common method is for the start-up to be acquired by a successful firm, usually in the same area of expertise, which enables the start-up to avoid the trauma of going public and coming under public scrutiny. In 1989, for example, 149 companies (worth $2 billion) in the PC field were acquired, whereas only 18 companies (worth $300 million) went public via an IPO.

I strongly recommend staying private and independent as long as possible and avoiding the inevitable urge to go public. Public investors are rarely interested in a firm and its technology, products, and market. Instead, most tend to be interested only in stock appreciation. Public investors, in short, are not truly investing in a company; they are merely renting one until a better opportunity comes along.

Now that the start-up has become successful, a number of possible scenarios present themselves:

if entrepreneur wants to do it again then ____