When Selling Your Startup Makes Sense

By Thursday Bram | April 16, 2012 AAA
When Selling Your Startup Makes Sense

With any startup, it makes sense to have an exit strategy in place from the start. Unless you're planning to operate your startup as a business for the long-term, a sale is one of the most common exit options, since it doesn't require the paperwork of an IPO and helps you to get full value from the time you've invested in your startup.
However, while selling your startup is a simple exit strategy, deciding on the timing of that sale isn't so easy. You have a variety of options, depending on what your goals are.

Are You Interested in Selling?
If you're thinking about selling your startup, you need to be actively interested in selling before you'll be able to move forward. If you feel that there's more you need to do with the company or you already have a long-term plan in place, you may not be enthusiastic about pursuing a sale. For some startups, the first time you'll ever think about selling is because someone makes an offer.


Joseph Caffrey, of Worldwide Business Brokers, thinks that some of the reasons a startup founder may consider selling, includes: an unexpected sale offer, the sense that the founder doesn't have the resources to continue growing or that the founder is more interested in working in the initial stages of a startup. In the latter two cases, selling may meet the founder's goals more than any other option.

Before deciding to sell your startup, you need to make sure that the sale is helping you meet your goals, financial or otherwise. Taking the first offer that comes along rarely will get you everything you want or have earned.

Caffrey says, "If there is an unsolicited offer, reason suggests that there would be other potential buyers. The founder should have a valuation done by someone that knows how to value the business and try to get the buyers as close to that valuation as possible."

Ultimately, if you want to sell and there's a great deal on the table, most startup founders will tell you to take it. Jason Cohen received an offer for his company, Smart Bear Software, in 2007. It meant that he would never have to work again if he didn't want to, that he could spend time with his brand new baby daughter and his wife. He took the offer, even though it was unexpected and he had built a sustainable business where he could easily expect his income from the company to keep growing dramatically. The decision wound up being the right one: not only did Cohen make the decision that really benefited him and his family, but in 2008, the economic crash would have made it impossible for him to sell Smart Bear Software, as well as to continue to grow it.

Wait to Sell If You Still Have Room to Grow
When selling your startup, you want to get as much value for it as you possibly can. Therefore, it's a logical step to grow the company to its full potential before selling. Jason Baptiste, CEO of OnSwipe, isn't ready for his startup to be acquired: "We defer on all acquisition offers because the tablet market is just getting started and there's so much growth opportunity. Three to five years down the road, when the space has matured, it might make sense for us to consider acquisition offers instead of expanding into new areas of growth."

The Bottom Line
Baptisite's approach means that you'll have a mature company, rather than an early stage startup, when you're ready to sell. Ideally, you'll be first in your niche or space and able to command the highest price. If it isn't reasonable to expect that you can dominate the industry, though, it can be better to get out and focus on something else.

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