How many rounds of dilution do you think are involved in that? When thinking about your exit, you need to factor in your fundraising strategy and the effect it will have on dilution. If you start a company, earn no salary, and then realize the market for socks for hippies is smaller than you first thought, then you are unlikely to be able to sell your company for much, if for anything at all. Why exactly do you want to do a startup?
All the benefits of freedom to make decisions and the like need to ultimately come down to what your relative payout is. Now a startup. I think about this all the time.
There are so many things I could do, but what has the highest return? Whilst helping people is a huge driver for me, ultimately what I do needs to have a payoff. What is the pay off for you of what you are deciding to do?
Does this motivate you? Startup sucks and fundraising is a bitch. Thinking about setting up a new startup actually stresses me out. I know what is involved. People calling you a loser, firing people, being lost all the time but not wanting to let anyone know.
The list is endless. If you are going to enter the hell that is a startup, you really need to have a guiding light- A lighthouse to always guide you back on to your path when you are immersed in darkness and depression. A big fat check is how you justify the emotional turmoil. Only that exit needs at least a number if not a name. That vision and dream stuff works great, but when people are really pissed off, do you know what they use to rationalize when things get dark?
How much they are being paid now and how much they will make. Vijesh may like carrots, but this is a financial decision before he can care about the ancillary benefits of being the one to emancipate the carrot. If you know what you want to sell for, what you are giving him, you can use math acrobatics and explain the risk-return profile could yield him so much more! Clarity on exit can be communicated to staff to help them rationalize their opportunity.
Carrot delivery is going to make you rich is the rallying cry! Quality staff is expensive and in short supply. Other companies want them just as much as you do. In order to pay less, you need to spit some game. A startup exit payment to staff is effectively just their future salary plus a balloon figure to adjust for the risk associated with joining your startup.
In fact, if they get paid more than that figure, you gave them too much equity. The fact your business has high exit potential, which you can define is a part of the reason you will be able to pay staff less. Just as you lose your path on the way to exit, so will your staff. Quality staff have options. Everyone else is just a pain to retrain to replace a role if they are lower level. Real equity is for your game-changers, especially once your company is worth something on paper.
Giving up those options when trading for a new startup is a real consideration for retention. Investor valuations are just paper, but they are a touchpoint if communicated honestly, if at all that your talk of the homeland big exit you pitched when you hired them has hit a milestone and is on track.
The fat check at the end really is why Vijesh is going to ignore any offers to poach him away. By knowing what you want to sell your company for, you can actually ascertain if your startup is something that is fundable by VCs in the first place. This may sound obvious, but it is not to a lot of people. Before you decide you want to raise money from investors, pause and figure out if your company actually is VC fundable. If it is not, then you are going to waste a tonne of time trying to raise, keep getting rejected, and get deflated.
Not you know you just need to think bigger. Figure out that new vision and decide if you want to raise again. You need a compelling and logical rationale to raise. Spend time on traction and actually making money instead. Traction will only increase your options for raising money in the future. You are more fragile than you know and fundraising is grueling. I know a lot about raising and I hate doing it. It exhausts me to think about it.
Startup is hard and you need to be sure that what you are doing makes sense and then to put the blinkers on and your head down and work. A 50 year old immigrant from India to the USA emailed me worried VCs would look poorly on him and he would have trouble hiring younger people.
In short, I told him to figure out if he really believes in what he is doing and then to shut out those negative thoughts and just go for it and not look back. If you can be the next big thing then you know you are fundable.
When you go pitching investors you are confident about why you are in the room and that what you want makes sense. Your confidence makes everything you say more powerful. I recommend reading this blog: Founder confidence. I recommend reading this blog: Fundable startups are fundable. You hopefully get why knowing why what you want to sell for is important. Not better-faster-cheaper, but a Brave New world.
This may be due to breakthrough technology, or due to a massive audience, or something else. But it is something either that threatens the core business of the acquirer, or threatens the core business of a major competitor to the acquirer. Valuation is not based on any metrics but on scarcity and competition among acquirers and the strategic value at stake.
It can be well into the 9 or even 10 figures. When a company finds product market fit, hits fast growth, but has started to find the top of its S curve. The company may even have reached profitability, but growth has slowed to low-mid double digit percentages.
There is high variability in all of these ranges, and there will be outliers in each case. But hopefully these ranges will help give founders some guidance about how their companies might be valued. Jeremy Liew is a managing director at Lightspeed Venture Partners where he invests primarily in the Internet and mobile sectors with a particular interest in massive-scale social media, commerce, gaming, financial services, and methods for increasing monetization.
He was also responsible for several Lightspeed investments which have had successful exits including Playdom acquired by Disney , Flixster acquired by Warner Brothers , Kongregate acquired by GameStop and Serious Business acquired by Zynga. We may collect cookies and other personal information from your interaction with our website.
For more information on the categories of personal information we collect and the purposes we use them for, please view our Notice at Collection. Become a Member Sign In. General Newsletters Got a news tip? These hints and clues will come from partners, customers, competition, even investors and advisors with connections to other investors and PE firms.
If you have none of these, selling the company is going to be a lot more difficult, but not impossible. In this case, acquisition is a lot like fundraising. You might also consider bringing in a fixer, an experienced person who will come in as CEO for a large chunk of equity and get your company into a better position to sell, both operationally and in terms of connections.
I rarely see this work, but I have indeed seen it work. Finally, you might find private money that just wants to take over your company. These transactions happen at much lower valuations. Kind of a fire sale. The second thing you need to do before you make the decision to sell is talk to your board, your current investors, your executive team, and your advisors. Everyone has to be in line, on board, and the proper expectations need to be set and agreed upon. There are basically three ways to calculate the sale price of your company.
For example, in one case we had to actually conduct a one-month experimental project and hit certain milestones dictated by the acquirer. Your guess is as good as mine, so make your best guess, then double it. For example, one time we had the buyer just drop off the face of the earth for 45 days. Then it did.
0コメント