INSUBCONTINENT EXCLUSIVE:
Joe Procopio is a multi-exit, multi-failure entrepreneur
Joe is currently building Spiffy, and previously sold Automated Insights, sold ExitEvent and built Intrepid Media
more than 20 years of startup, with over a dozen acquisitions under my belt as an entrepreneur, advisor and investor, I can assure you that
In fact, the one regret I hear over and over again from my peers is that they got less than what they should have when they signed the
consider selling her company
sell your company.Things are going poorly
The deal has to be outstanding.An external factor
Something has happened outside of the company that has made selling an attractive option
This is most often the primary reason why founders choose to sell their company
They see a lot of opportunity down the road, and decide that a specific acquirer can take much better advantage of that opportunity.Usually,
the decision to sell is based on a combination of these reasons.How to make the decision to sellThere are basically three ways to get
acquired.A larger company
This is someone in your space or close to it
To them, your company represents either an advance in innovation or just a bunch of new customers
This is the most popular option.Private equity
These firms usually buy out all of the existing owners and investors and may put company leadership on a profit plan to keep them around and
These transactions usually happen at high levels of valuation, like approaching the billions.A new investment round
At lower levels of valuation, the same kind of transaction can take place where a new investor or group of investors buys out all of the
current owners and investors.There are two things you need to do before you decide to sell
have rejected one or more offers in the recent past
investigating one or more implied offers
These hints and clues will come from partners, customers, competition, even investors and advisors with connections to other investors and
In this case, acquisition is a lot like fundraising
person who will come in as CEO for a large chunk of equity and get your company into a better position to sell, both operationally and in
I rarely see this work, but I have indeed seen it work
These transactions happen at much lower valuations
your executive team, and your advisors
basically three ways to calculate the sale price of your company.A service-based company is usually valued at 1x to 2x annual revenue
In cases where the company is a hybrid of product or intellectual property that may be spun off, this can creep to 3x or maybe a little
more.A product company is usually valued at 2x to 10x annual revenue, depending on the market for the product, the protected unique
differentiators, the higher the tech, and a number of other things, usually related to opportunity.In cases of extreme opportunity and
sale price and prove the legitimacy of your operation.To show your worth, if your company is taking in $10 million in revenue and your
valuation comes out at 10x, or $100 million, you need to be able to show the acquirer the path to $100 million within a three- to five-year
For example, in one case we had to actually conduct a one-month experimental project and hit certain milestones dictated by the acquirer
In another, we went through a three month period where we pushed the accelerator to the ground to show 100% month over month growth for
books so they can audit your financials.Sit your lawyers with their lawyers to sniff out liability and risk, and also make sure your
And also make sure everyone important will stay on.There will be no time between the initial interest from the acquirer and microscope time,
It is not quick, but it should not drag
startupThe last thing my friend and I talked about was what she was going to do once her startup was folded into a new company
Even from her early vantage point, in almost all outcomes, she was looking at a comfy VP position at a nice salary
The question, of course, was for how long.The last time my company was acquired was the first time I planned to stick around to hit the next
Two years in, I hit a wall that I never recovered from, even after a few more months of soul-searching
It was a mix of internal changes, external factors, and me just being done
I never developed a contingency plan going into the acquisition, and I paid for it afterwards
do some crazy stuff along the way, like start that folly of a company they always wanted to start and now that they had the means to start
You can do whatever you want after that time, maybe start a new project, maybe take a new position
What you do might not even be startup-related at all.But chances are it will be
