Startup Exits: A Primer

Startup Exits: A Primer

• 1.
  Planning for anExit Some Lessons for VCs & Entrepreneurs Mark Suster Rincon Venture Partners LP & CEO Summit, November 2012 @msuster
• 2.
  Understanding the Market for Venture Exits
• 3.
  Most Entrepreneurs HaveUnrealistic Expectations of Exit Values IIcan always get can always get acqui-hired for acqui-hired for 15 million bucks 15 million bucks
• 4.
  Or As PandodailyPut It
• 5.
  Of course it’smuch harder than that – but you wouldn’t know it from the press
• 6.
  Most VCs Don’tHave a Strong Sense of Exit Values Either. It’s Not Only HRs
• 7.
  The Fallacy ofBimodal Returns. Great Funds Often Built in the Middle Source: USV return data per AVC.com
• 8.
  The Reality Is- There Aren’t Many VC Exits > $100 million Source: Capital IQ And Many of These Raised Huge Sums of Money so Returns Aren’t Clear
• 9.
  And There Aren’tMany VC Tech IPOs Either Source: Capital IQ
• 10.
  The Median VCExit Value for 2010 Was $70 million Guess What? Entry Price Matters Source: Flag Capital via Bryce.VC
• 11.
  What Does ThisMean for Entrepreneurs and VCs?
• 12.
  I Recommend EntrepreneursStart Lean, Only Go Fat If Product/Market Fit Fat Progress / Capital Keep Options Open Inflection Point Time
• 13.
  When The HorsD’oeuvres Tray is Passed Take Two
• 14.
  And Put Onein Your Pocket
• 15.
  Just Don’t Takethe Whole Tray!
• 16.
  As a VCWe Try to Lean in Early on Winners & Avoid “The Mark Up Game” ownership % 3 Get 2 30% Ownership in Solid Performers 1 Lean Early on 20-25% 20% Big Winners Small Initial Check 10% $0.5 $2m $4m $8m Total investment ($m)
• 17.
  “Fat is goodwhen you’re on to something really special, but … Sometimes NOT Having a Big VC Above you in the Cap Table is a Great Thing for both VC & Entrepreneur” It Keeps a lot More Options Open Source: Mark Suster. Having been burned before by misaligned incentives on exits
• 18.
  Selling Your Company
• 19.
  Companies Are Bought,Not Sold  PR Matters. I know. It shouldn’t. It does.  Get Biz Dev or Sales Deal People buy people they know.  Start Early. Need to Take Early Meetings (just like raising VC)  Leverage VCs. Corp Dev use as a quality filter  Use Banks Wisely. Some deals fees nothing compared to price increase, closure %. But bank must have skin in the game.
• 20.
  Need to KnowWhat Type of Acquisition You Would Be Value to Acquirer Defensive Move  Can’t Afford to Strategic Have A Threat Competitor Own  Avoid or Delay Revenue Disruption Driver Product Gap Talent Hire  $1m / Dev  Location Matters Purchase Price
• 21.
  Organizational Purchases Champion Beat You You Up Sell Your Product Business Buyer IT Dep’t Legal / Finance Sell Your Company Sales Product Corp Dev In some companies Corp Dev leads strategy / investments. In others they are the deal execution teams. Know your buyer.
• 22.
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