Lean Startups and Early Exits -- Startup Exit Strategy Thought Piece

EXIT STRATEGY FOR STARTUPS

VentureArchetypes, LLC Startup Advisory + Deal Support

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CHAPTER CHAP TER I: CON CONTEXT TEXT aka, “why this matters to you”









WHY THINK ABOUT YOUR EXIT? ...because a solid exit process maximizes value. •

The Exit Is Just As Important As The Investment –

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The Startup Landscape Has Changed –

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How is value created? By forming a business, building the business, and selling the business A well-designed Exit can create as much economic value (for founders, investors, and employees) as all the heavy lifting of actually building the business

Open source, viral media, cloud, EC2, APIs, offshoring, etc. = cheap to start & scale a company Lean startup model = rapid prototype & testing, multiple multiple pivots (instead of one big business model bet) Goal mis-alignment between VCs & startups = Angels and super angels are the new funding sources

The Exit Environment Has Changed –

IPO market is still (pretty much) dead









WHY IT MAK MAKES ES SENS SENSE E TO EXIT EARL EARLY Y Lower risk, more return (for Entrepreneurs) •

Entrepreneurs like to create and grow, not manage –

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The VC model breeds big, “swing for the fences” companies –

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Start it, build it, sell it-- and then start again (or become an angel investor) Founders’ value typically diminishes over time, as co. requires more process, less experimentation Your key strengths are in creating-- not managing the people, systems and structure of a large enterprise

Large VC funds require massive exits to move the needle VCs have multiple mechanisms to block exits that would otherwise be good for Founders

Mis-alignment of goals and a nd time horizons –

Venture-backed enture-backed companies average 6-8 years from VC ﬁnancing to M&A exit After founders’ shares have already vested, “equity effect” becomes a drag on momentum, motivation motivation









LEAN STARTUPS + EARLY EXITS A match made in Heaven

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CHAPTER II: TIMING aka, “why this matters to you, right now”











A FORK IN THE RO ROAD AD Are you an Entrepreneur or an Empire Builder?

Exit @ $25M

IPO or Acq.











WHEN WHE N TO ST START ART THIN THINKING KING EXIT EXIT?? ...much sooner than you think. •

From The Entrepreneur’s Perspective: –

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When the market is frothy (aka “get while the gettin’s good”-- e.g. AdMob, Playdom) When there are clouds on the horizon (sell before it storms-storm s-- e.g. Flip Video Camera)











IDEAL IDE AL TIM TIME E TO ST START ART EXIT PLAN PLANNING NING ...is when you have: The best time to sell is when the business model is proven, growth is on an upwardlysloping trend, and acquirers desperately need you.

Momentum Thought Leadership in New Space Magnetism- $$, Employees, Press











SMALL SMA LL EXI EXITS TS ARE ARE THE NOR NORM, M, ACTUALL CTUALLY Y Though mega-acquisitions get the press attention Tar et Serious Business Scout Labs Adsca e

Ac uirer Z n a Lithium Goo le

Amount est. $30M $25M $23M























WHAT IS EXIT STRATEGY?











DOING THE DEAL











DOIN DO ING G TH THE E DE DEAL AL PT II





















WHA W HAT T WE DO









































Lean Startups and Early Exits -- Startup Exit Strategy Thought Piece

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