Exit Strategies Workshop – Waterloo

This was the first presentation of the new Exit Strategies workshop that I developed for the National Angel Capital Association’s NACO Academy. This is the Canadian national organization that provides education for angel investors and entrepreneurs.

The new Exit Strategies workshop was first presented at the Golden Triangle Angel Network in Waterloo, Ontario on May 8, 2015.

Key Points from Part 1:

  • 75% of the time, when we build a company that could have been sold
  • We blow it and fail to successfully exit.
  • Worse – when a company fails to exit at around the optimum time
  • There is a high probability that it won’t just fail to exit
  • but that it will fail completely (i.e. go out of business)
  • We don’t have the hard data to prove this yet
  • The good news is that I believe we can easily increase successful exits to 50%

Key Points from Part 2 – Everything is Changing

  • We are living through an interesting time – the whole world is changing
  • Many parts of the ecosystem that worked for a 100 years, don’t work anymore
  • Canada’s most valuable company – Nortel – was bankrupt in 2009
  • Other big tech companies aren’t creating wealth for shareholders or employees
  • The best and the brightest now work in startups
  • Startups create the innovations and almost all of the new jobs
  • Big companies need to grow but have lost the ability to innovate
  • New research from Harvard helps us understand why
  • The result is that big companies are acquiring at a rate we’ve never seen before
  • Much of what we knew has changed in the past 5 to 10 years

Key Points from Part 3 – Every Company Should Have an Exit Strategy

  • The exit is just another business process
  • Like all good plans, it should start with the goal
  • Companies should be sold – not bought
  • The exit strategy can be pretty simple
  • More challenging is ensuring that there is alignment
  • Companies must have a clear exit strategy before approaching investors
  • Different types of investors are compatible with different exit strategies
  • Companies do not have to be profitable to exit
  • The threshold is to prove the model
  • Right after proving the model is often the optimum time to exit

Key Points from Part 4 – Panel Discussion

  • How can public financings, or IPOs, factor into our strategies?
  • The importance of structure and after-tax proceeds
  • How do we decide between M&A vs IPOs?
  • The dangers of options in the context of an M&A transaction
  • How can we avoid the dangers of waiting too long to exit?

Key Points from Part 5 – Don’t Ride it Over the Top

  • An exit usually takes 6 to 18 months
  • From engaging the professionals until the cash is in the bank
  • The internet has accelerated everything
  • Many big exits are now happening 2 or 3 years from startup
  • The ideal exit timing – sell just before the peak in value
  • If a company misses the ideal time to exit, there’s a significant probability
  • it won’t just exit for less – but will never exit at all
  • There are several reasons this happens
  • The most devastating reason is “Waves of Consolidation”
  • Like many parts of life, and business, “timing is everything” with exits

The PowerPoint for this talk is online here.

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