Exit Strategies for Ambitious Tech Companies

One of the biggest mistakes startup founders make is not having a set startup exit strategy in place before they’re ready to sell. The truth is, you need an exit strategy way before you begin the selling process to ensure your startup is in prime condition to be sold. You need to have a vision for how much you want to grow your company, and how much money you want to walk away with once it’s sold. With that in mind, here are some pointers to help you plan your startup exit strategy now — for a profitable sale later.

Choose Your Exit

As the saying goes, there’s more than one way to skin a cat — and more than one exit strategy that may work for your company. Let’s talk about what your options are and why you might choose each one.

1. Acquisition. An acquisition involves selling your startup to another company. If done strategically, you may be able to sell your company for more than it is worth on paper. Acquisitions often mean that the company being acquired will be merged with the buyer. It may or may not retain its original name and employees.
2. Initial Public Offering (IPO). IPOs tend to get a lot of attention in the media. We get it — they’re exciting and there’s an element of suspense when they happen. A (relatively) recent example was Instacart's IPO in 2023.
3. Management Buyout. This strategy is less common and best suited for companies with long-standing, loyal employees who want to see the company continue when its founder steps down. 
4. Majority/Minority Sale. Sometimes you're not ready to give up everything you've worked so hard to build. Or you might feel as though you could get to your destination much faster with a partner that has a vested interest in your existence. This is where it makes sense to consider a partial sale of your business.

At Greenfield, we specialize in Mergers and Acquisitions for Tech and Tech-enabled companies. Our clients are typically Founders that want to sell and we guide them through the whole process.

Tips to Formulate an Exit Strategy

If you’re determined to sell your company, there are some practical steps you need to take to solidify your plans and protect yourself while getting the best price possible.

1. Consider your priorities. The first step is to know your own mind. What do you hope to accomplish with your exit? You might want to reach a certain net worth threshold, for example, or use the acquisition as a springboard to doing something else, so you should know your motivations going in.
2. Do your research. Who are the likely players involved? Which companies are in the market for businesses like yours and how much are they paying to acquire them? What do they do with the companies they acquire — and how do you feel about the way they operate?
3. Do the math. You should never go into an acquisition without an accurate business valuation. While a company’s value isn’t always reflected in its sale price — it may be higher or lower — you still need to know what your company’s worth before you negotiate.
4. Know the market. What’s happening in your industry that may affect your ability to fetch a good price for your business? What are the other players up to? You should analyze industry trends and players to get a handle on the possibilities.
5. Pay attention to your financials. When you focus on revenue & profit growth, you’ll have the best possible chance of attracting quality buyers. Very few people buy a company with no interest in its potential future. Focusing on growth opportunities can help you command a higher price when the time comes to sell.
6. Cultivate potential buyers. While it sometimes happens that a buyer appears out of nowhere and offers to purchase a company, most startup acquisitions happen after long negotiations and getting-to-know-you sessions. Simply by making yourself and your business visible, you’ll raise your profile and put yourself in the sights of potential buyers.
7. Evaluate your competitors. You can’t expect to sell your company if you don’t know where you stand in relation to the competition. Do you have a unique product that nobody else has? A dominant market share? You should always know what makes your company special — because that’s what will attract buyers.

Finally, we suggest that you spend some time talking to people on both sides of mergers and acquisitions. A lot of people out there who advise entrepreneurs on acquisitions have only been on one side of the table — the buying side. 

Don’t get us wrong — their perspective is both helpful and necessary. But their perspective is also a limited one that’s geared toward getting the lowest price possible. That’s why we started Greenfield  — because we know what it’s like to be the one selling a startup.

Ultimately, planning your exit strategy is your best defense against making an unfavorable deal. Armed with the proper information and strategy, you’ll be able to secure a profitable sale.

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Need some help working out your best exit strategy? Greenfield can help! Click here to set up a Discovery call.