These are the videos from an Exit Strategies workshop at the Inc. GrowCo conference in Nashville.
GrowCo is Inc Magazines annual conference for high growth companies. This was a pre-conference workshop attended by about 100 CEOs and business owners.
Section 1 – 75% of the Time we Blow It:
- Yes, I’m saying that 75% of the time when entrepreneurs and investors build a company that could have been sold we blow it
- And fail to successfully exit
- Keep in mind that this is anecdotal observation, not hard data
- We still don’t have the hard data we need
- What I know is that it’s far less than half and probably more than 10%
- “Saleable” is also a matter of judgement
- 25% is the best observational data we have
- The good news is that I believe we can increase that percentage to 50% easily
- What I hope to accomplish today is to provide you the take-home knowledge
- To increase the probability that your companies have successful exits
Section 2 – Everything is Changing
- We are living through an interesting time
- The economy is changing – the whole world is changing
- Many big parts of the financial ecosystem that worked for a hundred years
- Don’t work at all anymore
- The best and the brightest now work in startups
- Big companies need to grow but they’ve lost the ability to innovate
- So they are acquiring young companies at a rate we’ve never seen before
- Most exits are under $15 million
- Golden era for entrepreneurs and angel investors
- Never before has it been so easy to create such valuable companies
- Using so little capital
- And sell them so early, for so much money
Section 3 – Every Company Should Have an Exit Strategy
- It’s surprising how much of what you hear about exits is wrong – dangerously wrong
- There are so many myths and misperceptions
- And so many ‘experts’
- And quite a few dirty secrets
- This workshop is about what actually works today
- Your exit is just another business process
- The chances of success increase dramatically if you have a good plan
- Companies should be sold, not bought
- Optimum exits require strategy and planning
- The exit strategy affects a surprising number of daily business decisions
- You don’t have to be profitable to sell your company
- You only have to “prove the model”
- The Equity Effect and optimum vesting
Section 4 – Don’t Ride It Over the Top
- An exit usually takes 6 to 18 months – from when you hire the M&A advisor
- The internet has accelerated everything
- Many companies are sold when they are only 2 or 3 years from startup
- If a company misses the ideal time to exit
- There is a significant probability that it will fail completely
- There are several reasons why this happens:
- 1. Over-investment by VCs
- 2. Competition
- 3. Intellectual property infringement
- 4. Negative momentum
- 5. Waves of Consolidation
- Why an unsolicited offer is not usually good news for the shareholders
- Like many parts of life, and business, “timing is everything” with exits
Section 5 – Questions
- Patents are a double edged sword
- What’s a reasonable fee and retainer for an M&A advisor?
- How do you determine the optimum time to exit?
- How can we tell if we’re near a wave of consolidation?
- Will a more aggressive growth strategy improve my exit valuation?
- Is there anything we should not do that might create a wave?
- How can we protect ourselves from fast followers?
- What should I do if an M&A firm calls to ask about buying my company?
- How risky is it to offer our company for sale to a competitor?
The PowerPoint for this talk is online here.