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

By Dave Parker

Prepping for Exit - a Founder’s Perspective on M&A - Issue #26

#26・ Jul 14, 2020

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Issue #26 — 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.

Valuations wildly valued! Four timely articles plus a reading list for Founders & CEOs.

What Valuation is Right for Fundraising or Selling?

The more mature your company has grown the more data there is to value the business. Early days, you’re valued on potential and market size (TAM) vs financial metrics.

For early-stage venture-backed, pre-revenue companies, one of the methods is the Berkus Method. Dave Berkus is a Super Angel based in the LA, CA area. The original model was done in the ‘90s and updated regularly for the last 20 years.

Here’s a post on the Scorecard Method, VC Method, and the Berkus Method. It places earned value on five factors, outlined below.

https://berkonomics.com/

But as the company matures, you have real data to make a valuation. It just might not be the valuation you want! If you have a strong forecast (as in you’re regularly hitting the forecast) you can trade on a future 12 valuation vs a trailing 12. If you’re growing quickly or have high margins that is a plus. But if momentum has shifted to flat or still growing, but not as fast, your valuation will be going down.

The single largest factor in valuation is creating competition. If you’re not running a process to create multiple buyers you’re likely leaving money on the table. Start with the anchor offer first and build from there.

Want to learn more about selling your company in the next 12 months? Join us today, Wednesday July 15 at 11am Pacific Time. Or drop me a note!

How to Negotiate with an Investor while Dealing with Valuation | by GildaVC | Medium

Valuing a company especially with no solid grounds to do so, is indeed tricky business. While pitching to a potential investor, you would think that pouring your heart and soul out into the pitch…

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Pandemic-era M&A has its costs | LinkedIn

Big Tech has been on a M&A spree this year — now also fueled by companies facing the pandemic challenge. But consolidation could bring on layoffs, increased prices, and less innovation.

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The Fundraising Market Two Quarters into COVID by @ttunguz

It’s been two quarters since the coronavirus has hit Startupland. And you can see the impact of the shutdown in the numbers. We reviewed the data in May and compared it to the effects of the financial crisis in 2008 on startup fundraising. As a reminder, 2008 saw a 40% reduction in venture dollars invested in startups. It took about six to eight quarters to return to normalcy. But the patterns this time are different.

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Q2 2020 US PE Breakdown | PitchBook

In Q2 2020, momentum slowed for PE dealmaking and exit activity as both took a hit in the wake of the COVID-19 pandemic.

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9 business books picked by founders, CEOs, and industry leaders for people who don't want to go back to school to get an MBA

A business degree helps with networking and prestige, but these books cover almost everything else. These are some successful entrepreneurs’ picks.

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Techstars Startup Digest Prepping for Exit - a Founder’s Perspective on M&A is curated by:

Dave Parker
dave.parker@startupdigestmail.com

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