Editor’s Note: Back in the founder’s community, we have severally discussed why planning for(or thinking of an) exit is a major plus for a startup standing before an investor. The reason is partly because – to a large extent – it helps an investor to project a possible value for the opportunity you’re presenting. It also helps them calculate how long it could take before the returns. You’re more likely to get a cheque from an investment faster if they determine there’s a huge chance of exit.
This Podcast from Startup.com discusses how to plan for an Exit and goes deeper in discussing what to expect. We recommend it.
We all know that there’s a possibility of exiting, but how much planning can we really do to make that happen?
“What’s your plan for selling this business? What’s your exit plan?”
Ah, the popular refrain from investors, employees, advisors, and just about anyone else that’s banking on our stock to make them a few dollars. While it’s possible to consider specific acquisition targets, that’s really only a small part of the plan.
The real plan simply maps back to the execution of our idea. Knowing that we might be a good fit for a big company is great, but unless our product has incredible value (that came through execution) then “preparing to sell” doesn’t mean much.
We can also plan for acquisition by building relationships with potential acquiring companies early in the process.
This often takes on the form of a partnership that establishes the value, and in particular something that the buyer will want more of. Acquisitions are often done through relationships, so if a startup wants to be acquired, the Founder must aggressively pursue those relationships.