You have founded your dream company. You get to see your baby’s first steps: your product is launched, you’re making sales, your team is growing, investors are getting curious – why on Earth would you think about an exit strategy when you are living the dream? Here’s why.
If you are an entrepreneurial spirit, chances are you enjoy the start of things a lot more than seeing them through: building a company from scratch is a work of art for you, the excitement of the unknown sets you on fire, but hiring your 100th employee – well, not so much. And that is perfectly fine, welcome to the club of serial founders. But it only works out for the best, if you are successful at exits as well – and for that, you’ll need a proper exit strategy.
Hope for the best, plan for the worst
Whether you are an entrepreneur or investor, if you have ownership in a startup, exit has to be on your mind from the moment of (even thinking about) reaching out to investors or getting involved – you will need to find investors who are comfortable with your exit strategy and vice versa.
There is nothing negative about it: exit is not something you do to get out of a bad situation, it’s rather about optimizing a good one to be the best. After all, the whole purpose is a successful exit for most startups – and investors of course, who would like to see their money’s worth. If you have a solid strategy from the beginning, less surprise awaits you down the road.
There are different exit paths for you to take: but whether it’s M&A, IPO, or cashing out, it is important to plan ahead and see what is a possible approach, which suits you and your company the best and when does it actually make sense the most. You wouldn’t want to see value (and money) left on the table because of an ill-timed or poorly executed, even rushed exit.
Exits can take a long time, with sales process lasting around 6 months, so it is wise to evaluate at least one year beforehand to see if your company is even in the state of doing so. Then a realistic price has to be set based upon an array of determining factors such as market growth prospects, scalability of the business model, etc. Deals can easily fall through if business development does not match the forecast and buyers start to dilute the interest or question the price. And even if everything works out figure-wise, there is still an important factor to weigh in: management is deeply affected by mergers and this can also affect the price of a company. Even through the tough times of transformation with easily doubling workload, management should maintain value-added activity by focusing on the business itself and the acquisition process – or seek proficient support.
Executing a successful exit benefits not only you, but can contribute to the reputation of the whole ecosystem you’re part of: exit value is an important factor when evaluating the health of entrepreneurial development in a country. High values signal satisfactory fund returns for local partners and guarantee a strong local VC ecosystem. Thus, better exits are generating more investments at the end of the day.
Our partners at KPMG has a long track record of supporting companies’ exit processes. Exit tracks by KPMG at Arctic15 will cover the topic of exit strategies on a wide scale by giving you insight on how to do it successfully showcasing examples.
Speakers include Falk Mueller-Veerse, Partner & Head of Germany/Nordics at Bryan Garnier, Marc Deschamps, Executive Chairman at Drake Star Partners and Tom Nyman, Partner, Corporate Finance at KPMG. Artturi Tarjanne and Risto Yli-Tainio from Nexit Ventures will discuss a real-life success story, the largest exit in their portfolio so far: the acquisition of Ekahau by Ookla.
Join us in Helsinki on 5-6 June!
Get your ticket here.