Discover more from Building Blochs by Michael Bloch
How to Sell Your Startup
As the fundraising environment gets tougher, many founders are considering selling their startups. I sold my startup to Acorns in 2021. Here are eight things that I learned.
The process of selling your startup is an opaque, high-risk process that’s easy to mess up. Here’s what I learned as I went through it and ultimately sold my fintech company to Acorns.
Don’t try to sell unless you’re ready to exit. Running an M&A process is like fundraising. It should be a focused & controlled effort, not something you do casually on the side. Once you've made the decision to sell, you should push on this with focus, urgency, and vigor.
Acquisitions fall into three buckets:
an acquihire (your team)
for IP (your technology)
a working business
The value of your exit, and the time it will take to sell, increases with each bucket. Know which group you’re in and it will dictate what strategy you follow.
Make a target list. Add every company that you think has the resources & desire to buy what you're selling. If you know a place won't be a good fit (you don’t want to work there) or it’s bad timing (they just went through layoffs) there's little sense in pursuing it.
At each company, identify the executive that you think has the most vested interest in buying you. At small startups this is typically the CEO, CTO/CPO, or business unit GM. That exec will be most likely to proceed if they believe you'll move the needle on one of their OKRs.
Note: larger companies have corp dev functions to help these processes go smoothly. Corp dev is not the decision maker. So while it's important to have them support this, the call will rest with whichever executive is sponsoring the deal.
Set a deadline. You need to apply time pressure to get people to run their process & make a decision. It should be realistic yet aggressive. The deadline I gave was six weeks from first outreach. The whole process took five. In today's market, plan for things to take longer.
Don't tell your employees. The moment word gets out that you're looking to sell, your team will stop being productive and start thinking about their next move. To protect against this, you should drive the conversation forward alone for as long as possible.
Each potential acquirer pre-committed to an offer (eg the deal structure, price range, etc) before I introduced my team to them. Offers were contingent on interviews going smoothly. With that, I could delay the news and minimize the likelihood someone left prematurely.
Know what you're optimizing for. Are you trying to maximize your acquisition price? Find a good home for your team? Continue work on your original idea from a larger platform? Decide what your priority is and make decisions accordingly.
Other common questions:
When to start the process? Ideally when you still have 6-9 months of cash. Any less and you lose leverage.
Do you need to have relationships with buyers in advance? Ideally yes, but not required. We got offers from companies we cold emailed.
When to tell investors? Loop in your most trusted advisors early. Share with the broader group after you've made the decision to sell.
Can I try fundraising too? No. Don’t have these conversations if you're not serious. Word spreads and potential investors will find out.
Selling your startup is an emotional and personal journey that can be challenging and difficult to navigate. It requires founders to let go of their vision and put their trust in the hands of others. Yet, with careful planning and execution, it can also be a deeply rewarding experience that opens new doors for growth and success. As I learned through my own experience, it's crucial to stay focused on your goals, remain diligent and committed to the process, and surround yourself with trusted advisors who can provide support and guidance.