No doubts that all entrepreneurs are risk-takers, however, not all are better risk-managers. Looking at the arena, one can easily judge the latter being significant to cover a successful entrepreneurship.
If you stay updated with the tech markets, you might remember Google’s offer 2010 to acquire the ‘then startup’ Groupon with an offer of $6 Billion.
At that time the two options that the company had were either to give things in the hands of big boys at Google or to raise IPO. The company chose the latter option; declining the proposal.
However, soon they started shutting down their offices at many locations. The massive plummeting in the prices of IPO (80%) since their release became the matter of concern not only for the shareholders but also for the company.
The company in 2015 stood with a market capitalization of $2.6 Billion, which was 45% less than what Google offered in 2010.
What’s the point behind the example?
If you are reading this blog, maybe somewhere in your mind you have the thought to sell your startup, or you might have recently come across the news of your competitor (or someone else) selling his startup. Another reason might be some investor approaching you with few million/billion dollars offer.
The question is quite obvious after a couple of years, but before you step to any decision, you need to do a little research and remaining mathematics.
Here’s what you need to learn
1. Begin with the end
With the very first thought of selling your startup, you got to think about the endgame. This includes the vision you have for your business/product? The goals you set at the time of initiating it? Have you achieved even part of it or if you are on the track?
With answers to these questions, you’d be in a condition to evaluate yourself better in comparison to your competitors. Often startup entrepreneurs decline the offer (as in above example) by just looking at their current state. However, you need to look at the present and future both, in order to relish the best output.
2. Wear your stakeholders’ shoe
You either have co-founders or stakeholders, and both of them are a vital part of your startup. Before getting to any conclusion, you need to think about them as well.
Apart from these, your employees, suppliers, customers, and others are also the one to face the impact of this decision of yours. Before taking any decision, you need to ensure that you consider them.
It’s often seen that venture capitalist are the one to move away, or your co-founders could be the one to buy the startup. The former usually happens when they find you are not moving on the right track.
However, this doesn’t mean that you sell it; instead you need to sit and have a healthy conversation regarding what can be done.
3. How much time it’ll take to reach the sale price
Let us suppose you’ve received an offer, but now what? This is where you need little calculation. Let us take an example:
Around a year back with a valuation of $20 million, you raised a venture, and you still have 50% stake in the company.
So this makes your share worth $10 million today. Now you have an offer worth $50 million. This means that you have $25 million waiting for you. Not a bad deal!!
But before you jump to a conclusion, you need real calculus to be done. Like, how much time it’ll take you to build the amount? Do you need to dilute or raise capital? By the end, if you think that you are good to achieve the same in a coming couple of years, stick with your startup.
4. Will this serve your mission
A good entrepreneur isn’t the one who make more money, but the one who is good in solving problems. The one buying your company can definitely solve/better the things, because if they can buy you, they definitely have resources that you don’t have.
The realization isn’t bad, but here you need to do a little autonomy, as in what you’ll have to do in order to attain your mission, despite being part of another company.
5. Then what
The last one in our list is kind of really important. Let us suppose you have sold your startup, but then what? You loved your startup idea and the work, but after selling it, what will be your next step. Though many people overlook this (I hope you get that), but before taking the final step to selling, do think about this point.
For any entrepreneur, his/her startup is a dream, but at times the option to sell enters; may be in form of choice or some need. Whatever it is, before taking a final step, do consider the above mentioned points and give sufficient time to the research and mathematics involved.
‘An entrepreneur leads the way for his trait to make better decisions’.