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Prepping for Exit - a Founder’s Perspective on M&A - Issue #27

Issue #27 — 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.

Is the Rule of 40 becoming the Rule of 50?

Did the Rule of 40 just become the Rule of 50
How do you value your company at time of transaction? Many founders I talk to are looking for the definitive formula. But that just doesn’t exist. There are some valuable heuristics for valuations, especially things like your annual 409A valuations. But when it comes time to sell, you’ll want to maximize your enterprise valued.
The Rule of 40the principle that a software company’s combined growth rate and profit margin should exceed 40%—has gained momentum as a high-level gauge of performance for software businesses in recent years, especially in the realms of venture capital and growth equity. Bain & Co. <see below>.
As we see deals maturing in this current market, buyers and growth investors are leaning toward higher growth and profit numbers. I’m not sure if that is based on simply a negotiating stance (likely) or actual market comparable data.
Hacking Software’s Rule of 40 | Bain & Company
The Rule of 50 | Razorhorse
2020 is on track to see the fewest startup exits since 2011, which could spell trouble for the VC ecosystem
Top of the Morning
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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