In the well-known scene from the great business movie “Glengarry Glen Ross”, Alec Baldwin tells his team that they need to “Always Be Closing”. I give similar advice to my startup clients - “Always Be Selling!”
I have learned over many years in advising clients that companies oftentimes wait too long to find the right exit partner. Whether it is a sale or an initial public offering, companies should be focused on their optimal exit strategy from the start.
I often recommend that venture-backed companies form an “Exit Committee” of their Board of Directors which is tasked with meeting with financial advisers on a regular basis to assess the market for prospective exit strategies. Keeping track of potential buyers and the state of their markets can provide extremely valuable intelligence to the Board and help maximize the potential valuation on a sale.
I also recommend that companies keep in touch with potential buyers to keep them updated on the company’s progress. Knowing who the company’s potential buyers may be and knowing the needs in their marketplaces gives companies a significant advantage in the timing and potential valuation of their exit.
All startups need to know their own market in order to be successful, but part of their success is getting to a successful exit. Staying on top of the various alternatives for an exit can go a long way in optimizing the timing and increasing the potential valuation of a sale.
In the startup lifecycle, receiving external funding is only an intermediate step within the bigger picture. An investor who is financing your startup certainly likes your vision and wants to support you throughout your journey, but, above all, he expects that the journey will end in a profitable exit at some point.