In the past few days, Eva and I had the privilege of joining the University of Toronto delegation in Stockholm to celebrate University Professor Emeritus Geoffrey Hinton, the 2024 Nobel Laureate in Physics. The events, organized by the University, were a fitting tribute to Professor Hinton’s groundbreaking contributions to AI, a technology that will transform our world in the decades to come.
The celebration was a blend of thoughtful discussions, historic venues, and memorable moments. It all began with a birthday party for Professor Hinton, followed by a fireside chat, an inspiring dinner at the iconic Vasa Museum, and a panel exploring Canada’s leadership in AI at the Embassy of Canada to Sweden. Each event underscored not only Professor Hinton’s remarkable achievements but also the global impact of Canadian innovation in AI and technology more broadly.
Rather than recount every detail, I’ll let the pictures and their captions tell the story of this extraordinary week. It was an incredible opportunity for us to honour a visionary scientist.
Eating birthday cake with University of Toronto President Meric Gertler and Dean, Faculty of Arts & Science at University of Toronto Melanie Woodin.This was the chip that was built for Professor Hinton in the late 80s for him to test his artificial neural network.The chip was developed before sub-micron technology was widely available. Professor Hinton believes it might be 3-5 microns, but even he wasn’t 100% sure. Upon closer inspection, it appears there were six neurons on the grid.Taking a picture with U of T President Meric Gertler and Chancellor Wes Hall and Professor Leah Cowen.We are dining in front of the unique and well preserved warship Vasa from 1628!Fireside chat with University Professor Emeritus Geoffrey Hinton, and Patchen Barss, science journalist, speaker and author.Taking a picture with Untether AI co-founder Raymond Chik and Vector Institute CEO Tony Gaffney at the reception after the fireside chat. An insightful panel moderated by Professor Leah Cowen. Panellists included Professor Eyal de Lara, Vector Institute CEO Tony Gaffney, Professor David Lie and Professor Amy Loutfi.Ericsson’s Head of AI Jörgen GustafssonView Jörgen Gustafsson and Jason LaTorre, the Ambassador of Canada to Sweden.
P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.
Important: Before continuing, read SRTX‘s CEO Katherine Homuth’s posts first (here and here).
Hi Katherine,
I read your blog posts about your current challenges and future plans. Originally, I planned to reply to you privately, but in the end, I decided to share my response as an open letter on my blog.
First of all, if you think I’m going to give you any advice, you’d be mistaken.
Why? Because I don’t think I’m qualified. I have never built a company that reinvented the textile industry. Unless I have “been there, done that,” you shouldn’t listen to me — even though TSF has been an investor in SRTX since the early days.
That said, there are numerous similarities between SRTX and Wattpad. One lesson I learned might be useful to you.
Both SRTX and Wattpad set out to reinvent industries that had remained largely unchanged for the past century. Wattpad raised over $100M USD and lost millions per year to build the business’s foundation — overcoming the chicken-and-egg problem — before we could monetize profitably. That had been our strategy from day one, and it was hard to explain on a spreadsheet. From the outside, it looks like it’s all wins. From the inside, we don’t know if the next leap forward will be our last.
Sound familiar? Like you mentioned, SRTX also raised well over $100M USD and lost millions of dollars to build the foundation of the business — overcoming the chicken-and-egg problem — before you could monetize profitably. That’s been your strategy from day one, and it was hard to explain on a spreadsheet. From the outside, it looks like it’s all wins. From the inside, you don’t know if the next leap forward will be your last.
When an entrepreneur is building a transformative company in an unconventional way, they will inevitably attract a lot of naysayers. These naysayers are usually missing key context (which is fine, as you don’t have to convince everyone), give unsolicited bad advice (which is uncool but typical of armchair coaches trying to look smart), and fail to recognize that there’s more than one way to build a massively successful company.
Here’s an example.
A few months after Wattpad was acquired, someone said to me:
“Congrats on your acquisition. But you could have been more capital-efficient. Compared to most B2B SaaS companies, your exit value relative to capital raised was not as high as it could be.”
WTF? He might as well have said McDonald’s generates more revenue than you.
Of course, we all know the proper benchmark is to compare Wattpad to other consumer companies like Snap, Twitter, or Facebook. In fact, Wattpad was massively more capital efficient — both on a per-user basis and an exit-value basis — than most other consumer companies at similar or larger scales. In some cases, we were ahead by an order of magnitude.
I wasn’t angry, upset, or offended by this ignorance, naivety, or arrogance because, over the years, I’ve had to deal with many naysayers — even after Wattpad’s successful exit.
Here’s the important lesson I learned:
Naysayers will always naysay.
They want to make themselves look smart.
They want to feel superior to you.
They don’t want to admit they were wrong, so they continue to naysay.
Most people don’t believe in moonshots because they can’t do what you do.
If you can use them to fire yourself up, that’s great. If not, don’t even spend a millisecond on them. Your time and energy are better spent focusing on finding a handful of new investors who believe in your vision, growing a fanbase that loves your product, and scaling your company. These are what you have been doing. The results will speak for themselves.
If anything, SRTX has de-risked so much over the years. Millions of people are already buying your unbreakable tights. It’s the best-selling tight in North America — unbreakable or not. A lot of capital has been raised, enabling your mega factory to become a reality. Major B2B partnerships have been formed to scale. New products, beyond tights, are soon to launch.
You’re very close to the top of Mount Everest. Who cares about those people who don’t dare to leave base camp?
Best,
Allen
P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.
Note: One of the most common pieces of feedback we receive from entrepreneurs is that TSF partners don’t think, act, or speak like typical VCs. The Contrarian Series is meant to demystify this, so founders know more about us before pitching.
For Wattpad, it was exactly ten years between raising our first round of venture capital in 2011 and the company’s acquisition in 2021. Over that decade, we discussed countless topics in our board meetings.
But one topic we never discussed? Exit strategies.
I distinctly remember, a couple of years before the acquisition, I raised the question to a board member. “We’ve been venture-backed for almost ten years now. Should we start talking about exit…”
I couldn’t even finish the sentence. That board member cut me off:
“Allen, I just want you to build a great company.”
That moment stuck with me. Only after the acquisition did I fully appreciate the significance of those ten years as a venture-backed company without focusing on an exit.
Wattpad’s four largest investors—USV, Khosla Ventures, OMERS, and Tencent—enabled us to focus on building the business, not selling it. OMERS, as a pension fund, and Tencent, as a strategic investor, don’t operate under the typical 10-year fund cycle that drives many venture firms to push for exits. USV, with its consistent track record of generating world-class returns, had the trust of its LPs to prioritize long-term value over short-term outcomes. And Khosla Ventures? Well, no one can tell Vinod Khosla what to do, and he loves making big, long-term bets.
Their perspectives freed us to focus on building a great company rather than prematurely worrying about how to sell it.
In early 2020, a year before Wattpad was acquired for US$660M, we set an ambitious company objective: to become “Investment Ready.” This meant ensuring we could scale profitably and confidently project $100M+ in revenue with a minimum of 40% year-over-year growth. By the end of 2020, we wanted to be in a position to choose between preparing for an IPO (we even reserved our ticker symbol WTPD), raising growth capital to accelerate expansion, or scaling organically without any additional funding.
When an inbound acquisition offer came in mid-2020, this optionality proved invaluable. It allowed us to run a proper process with multiple interested parties. We were clear with potential acquirers: our preference was to remain independent. If the offer wasn’t higher than the value we could command through an IPO, we weren’t interested, and we would walk away. Because we had the fundamentals to back it up, no one doubted us.
This underscores an important point: the best way to generate a great outcome is to build an amazing business. Focus on creating value, and optionality will follow.
Any CEO who claims to have an exit strategy—especially in the early stages—is either naïve, disillusioned, or lying.
Here’s the reality: M&A is far less common than people think. The pool of serious potential acquirers often narrows to just a handful in the best-case scenarios. And even then, the stars have to align—you need the right timing, the right strategic fit, and the right price. It’s easier said than done.
Of course, that doesn’t mean I ignored the idea of acquisition entirely (and founders should consider M&A, but only under the right circumstances, and I will save it for another blog post). For instance, we built relationships with potential strategic acquirers and stayed aware of the landscape. But the time I spent on this was minimal. Even my leadership team occasionally asked why I never talked about M&A. The answer was simple: it wasn’t a priority.
Too many founders overthink their “exit strategy,” and it often backfires. Changing their product to appeal to a potential acquirer? Building one-sided partnerships in the hope they’ll buy the company? Hope is not a strategy.
The same goes for VCs. Some overthink their portfolio companies’ “exit strategy” because they worry about selling before the 10-year fund window closes. While this concern is valid, it doesn’t mean they should push their best portfolio companies to sell. There are many ways for VCs to liquidate their positions without forcing a sale. Ironically, the best way for a founder to help their investors exit is to focus on increasing enterprise value. Shares in a great company are always in demand.
For an early-stage startup, having an exit strategy is as absurd as asking an infant to decide which jobs they’ll apply to after university. The founders’ job is to nurture that infant—raise them into a great human being. The results will follow.
Build a great business, and everything else will fall into place. There’s an old saying: Great companies get bought, not sold. It couldn’t be more true.
P.S. Founders, if you have an exit strategy slide in your pitch deck, please remove it before pitching to us. TYSM!
P.P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.
