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Prepping for Exit - a Founder’s Perspective on M&A - Issue #17

Issue #17 — 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.

Repricing is going to happen - when things start to break free

Your Last Valuation Isn't Going To Matter Much
Sorry to be the bearer of bad news. But the relevance of the post-money value on your last round of funding doesn’t matter very much anymore.
Venture capitalist our advertising that they are “Open for Business” but we’ll see what that means when it’s time for a term sheet or getting a wire completed after docs are signed.
Don’t get me wrong, deals are still going to get done. But if they get kicked sideways and closing is delayed, you should expect that pricing is going to get questioned. If you raised your last round at $10M post, you may be looking at a $5M pre-money on the next round. The haircut you’re going to face is likely to be a shock.
What should you do?
As a great friend of mine started on a Zoom call I was running yesterday, remember this is a human tragedy - and humans are involved.
  • If it’s your team - listen, engage and see how they are doing. Working for a startup in this time is highly stressful for us as founders but also for our team
  • If it’s the buyer, investor or banker - check in with them first. Don’t be tone-deaf to what’s going on around you. I know we all have an agenda, that’s ok, but check in first
  • Over communicate. One of my mentors told me “It’s important to tell people what going on. it’s also important to tell them what’s not going on.” Don’t let them fill in the blanks. If you do, they will fill in the worst possible outcomes
From a business perspective
  • Find 12 months of runway - you’re going to need more time than you were thinking. Do what you need to do to get 12 months of runway
  • Optimize for preserving cash
  • Marketing is going to matter right now - but to the point above, don’t be tone-deaf. Your customer cares about how you can help them in a major way. They are looking for a zero-one solution, not an incremental solution. If you need to change how you pitch your value proposition, make the change
  • What CURRENT problems does your product or service solve? If you are solving last weeks problem, no one is listening
  • Engagement with your customers is not going to be the same as it has been in the past! We’re facing a zoom screen during the day and a tablet or mobile at night
Finally, don’t forget about your community!
  • If you need to delay paying vendors - don’t make it to the three-person design company. The big firms can sustain the delay, the small vendor won’t make it
  • How can you give back?
  • Where can you make a difference? You’re not in this alone
Valuation isn’t your only concern at this time. People should be first. Valuations will come back.
I hosted an Ask Me Anything event last night with Michael Schutzler of the WTIA. We had about 40 CEOs on the call. I’ll make the same offer to you that I made to them… if you need someone to bounce an idea off of, you’re facing a layoff or a loss of customers, reach out. My email is below. Really. 
Startup valuations drop as exits are delayed and the stock market reprices tech – TechCrunch
28 Moves to Survive (& Thrive) in a Downturn
Micro VC fundraising and COVID-19 - samir kaji - Medium
The Matrix for COVID-19 - Sequoia Capital Publication - Medium
Techstars Startup Digest Prepping for Exit - a Founder’s Perspective on M&A is curated by:
Dave Parker Dave Parker
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