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Prepping for Exit - a Founder’s Perspective on M&A - Issue #14

Issue #14 — View online — Suggest a link
Prepping for Exit - a Founder’s Perspective on M&A
Is it time to consider selling your startup? Looking for a founder’s perspective? Dave Parker is a five-time founder with >10 exits. This reading list is practical advice on prepping for exit, pricing and the process.
What’s your time worth? Last week we talked about the timeframe to manage the mechanics of selling…

How to Value Your Time in Your Startup
I talk with a lot of founders that say, “When I started the company I was going to do this for three or four years and then move on to my next adventure,” but for most of them their time spent launching and growing their startup is well past that “sell before date” they originally thought!
The average startup will sell around 6.65 years after the first VC investment (NVCA). And that’s if you get to the point of taking Venture Investment. On average, Founder and Pre-Seed round will get you thru 18 months and to a Seed round and 3-5 years. All total, it’s a long time to get to Venture and then to sell.
Remember, your VC may need a Billion Dollar Exit - but you don’t! The economics of venture funds require disproportionate returns because funds know that the failure rate of the majority of their portfolio will be high, so the winners need to return big - swing for the fences big.
Don’t become a zombie startup. Roughly defined, a startup that is cash flow breakeven, has some growth but is not able to raise the next round of funding. If you’ve been pushing the “ball up the hill” for 4-7 years you may want to think about the path you’re on and the options you can take. Hot new companies get funding and have sustained funding when they are on a solid growth trajectory. That’s defined by doubling your enterprise value every 18-24 months post funding.
What will your investor think if you sell “early?” The Angels may see their money back or get up to a 2X return, but they will see it faster than if you were to take another round of funding. Many smaller VC’s would be happy to have capital back they can put into play in another deal. Larger VC’s would rather you take another pitch and hit it out of the park.
If you still have a solid percentage of ownership of the company, selling can have a meaningful impact on your personal financial statement. For most of us as founder - especially first-time founder - we have 95% (or for some of us 150% if you include the debt) of our assets tied up in our company.
A good friend of mine’s email signature is “Time is your most valuable resource, I promise I won’t waste yours!” You can make money back to cover losses, but you can’t get time back.
Want to know more about how to sell your company? Join me for a Webinar Tuesday March 24, 11AM Pacific Time.
Valuation as a Process - Flavia Richardson - Medium
2019 Annual US VC Valuations Report | PitchBook
The Variable Money Value of Time - David Kadavy - Medium
Los Angeles' VC stars are on the rise amid mega-exits | PitchBook
Techstars Startup Digest Prepping for Exit - a Founder’s Perspective on M&A is curated by:
Dave Parker Dave Parker
dave.parker@startupdigestmail.com
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