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10 Tips for Selling your Startup to a Corporate

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For a long time, I have been sick and tired of having to fill out forms on my iPhone with such a small screen. Then I was lucky enough to meet Chris Koch and Chad Stephens from Lets Pop. I have seen thousands of pitch docs and presentations in my time, but the one I saw from Chris and Chad before I even thought about doing this interview, is the best I have ever seen!

The guys previously sold their last startup, 1Form, which was a platform to help tenants apply for rental properties, without having to repeat the process of entering their information every time.

This startup sold for $15 million AUD in 2014 and had Carsales.com founders Greg Roebuck, Wal Pisciotta and Steve Kloss invest in them.

It was a grander vision that caused them to want to sell 1Form, to fund their new startup Lets Pop. Their new startup takes the 1Form idea and applies it to everything, not just real estate.

The need for Pop came about when they realised they couldn’t build a form that would be able to be used by every single industry in the world. In simple terms, Pop is an application to replace the need to input information.

Lets Pop still have their original Carsales.com investors on board and as the business continues to grow rapidly they will asses whether relocating to Silicon Valley will help them achieve their global goals, be visible to the US market, meet their customers needs and have access to the valley’s valuation models.

What follows, in the interview that I did with Chris, are his top tips for selling your startup to a corporate!

1. Know when it’s the right time to sell your startup

For Chris, he says that it’s always a gut feeling of when the time is right. You can quite often get a feel for the inertia of your business, you can see what’s coming, you can see competitors joining and maybe they might enter the space you’re in. Or maybe the time is right and the value that you are getting out of your startup is at its maximum.

2. Approach is everything. Use those consultants for something useful

Try and approach a corporate in a way where it’s not you going directly in. Quite often, you will have consultants, accountants or companies that you work with within your startup, who have a relationship with corporates already. It would be a great idea to take one of these contacts out to lunch and ask them to get your startup in the door through a recommendation first, before trying any other way.

 “ If you want to ask a corporate to buy you, then you never want to come in the door as if you were asking for that. Asking for a corporate to purchase your startup yourself is automatically perceived as you being in a position of lesser power. “

Corporates will be looking at a number of things when looking to buy your startup, which will depend on the industry and the market. In the real estate industry for Chris, it was the data space that a lot of the corporates wanted to play in. Think about the markets you play in.

For other industries like tech, it might be talent – if your startup has got some talent then that’s attractive. In the banking world, it might specifically be technology that can streamline processes for the customer.

3. You need to create competitive tension

Domian.com.au and Realestate.com.au really helped create that competitive tension when the guys went to sell 1Form. Once you have an intro into a corporate then it’s worth mentioning in your meeting that you are thinking of divesting out of your startup and that you have other corporates interested. This creates a much better position of power than asking them to buy you. When you’re starting to get the word out that your startup is for sale, it’s best to try and go to similar competitors, all at once, within the industry you’re targeting.

When you use this strategy, what you will often find is that one of them will ask you for an exclusive period. That’s fine, but you have to just let them know that once that period is over, you will then shop it to their opposition. Obviously this is done in a friendly, professional, non smart-ass way.

4. Understand the advantages of both sides

The question you really need to ask yourself is how do you go about it and build your product in a way that a corporate couldn’t. You may hear a corporate say that they could build your technology or service themselves, but the reality is that that is very rarely the case. They could never build it with the speed and complexity that a startup could.

Quite often, what you will find is that if a corporate can see the benefit of your product or service and they understand that they couldn’t build it themselves, or as fast as you can, they may offer to buy you without you even asking.

If a corporate is using and relying on your technology then the decision may come down the track for them to want to buy it, so they are not paying fee’s to your startup. It’s only best to consider this offer if you have more than one corporate using your technology.

The thing to be very careful of here is that if one of your corporate customers is grossly larger than the rest, the corporate might realise that if they cancel their contract with you for a year or more (and make you bleed), buying your startup could be a much cheaper scenario for them. At the same time, you should ensure that your customer base is never completely dependent on one particular client.

5. Communication with corporates shouldn’t be like trying to understand a foreign language

If you’re trying to get a corporate to buy your startup then the way you communicate with them is crucial. You really need to control the process as much as possible and the best way to do this is with timelines and deadlines. You tell the corporate that if a decision is not by reached by a certain date; you are walking away as you have other people that you’re chatting to.

Failing to control the process properly could see your startup meeting with every executive in the corporates management ladder and having them still not be able to make a decision. In the initial stages of dealing with them you follow their process but the moment you hit a brick wall that’s frustrating, you immediately go outside of their process as hard and as fast as you can.

If one of the executive’s just comes back with a response to your proposal such as “thanks, I have seen your pitch deck which John Smith forwarded to me,” and you’re not getting much buy in, you don’t take that for an answer.

You need to go back to the person who is not that interested and say, “everyone else seems to be interested, how come you’re not.” In that response, you would even consider copying in everyone else from the corporate you have met with. You would also reiterate again that there is a deadline to make a decision and there are other competing clients who are interested.

When I was talking with Chris on this topic he also agreed with Filip Eldic, from our Bluedot interview,, that startups need to be very careful dealing with corporates in the early stages because it’s very easy to burn cash quickly on these types of proposals.

6. Write a great pitch deck

Before writing the pitch remember not to make it too long. If a corporate is looking at a pitch deck as part of their decision-making, below are some slides you might want to include.

  • Demonstrate what’s changed in society for your product to be relevant and what problems are occurring.
  • Very clearly, you need to show how your product solves that problem in a way that it hasn’t been solved in the past.
  • Halfway through the deck is a great spot to put the “who we are “slide.
  • Show an exact example of how you solve the problem
  • Spell out the high-level revenue opportunity
  • Talk about the size of the market for your product and how you’re going to get a percentage of it
  • Finally, show some competitive analysis

 “So many Startups come up with ideas that aren’t really solving a problem, they are creating a problem and then their product is fixing it. “

7. Decide how much to sell

For 1Form, the amount of equity they sold was a lot to do with where they were at and their future plans. This will often determine whether you sell part of your startup or the whole thing. Specifically, when selling equity to a corporate and not the whole thing, you can create a lot of headaches for your startup.

The corporate will want a board seat, a say in the decision-making and the suggestions they make about your product will be more about what might help their company, not the other companies who are your customers. All of this could slow you down so consider very carefully before going down this path.

8. Negotiating the price of your startup and what country to sell it in

Demonstrate the value of your startup and look at similar companies in similar spaces. It’s worth comparing the multiples and valuations that these companies received and using that as the basis for your own valuation. Once you have proven your model regionally, overseas corporates will be much more likely to want to be involved, so consider what country you sell your startup in.

The other thing to look at is what’s known as the accretive value. If the corporate you’re dealing with is listed on the stock exchange they will have a PE (price to earnings) value based on their share price. Whatever earnings are going to hit the company ‘s bottom line, because of the acquisition of your startup, can actually be used to work out the accretive value. You shouldn’t expect to get all of the accretive value, but you can certainly ask for a percentage of it.

An example of this would be, let’s say the company that’s acquiring your startup has a multiple on the stock market of 37, if you’re going to bring a bottom line hit of $1 million, they are effectively going to get an accretive value of $37 million. If they pay $30 million for your startup, that still leaves $7 million on the table for them. If you’re in Australia, the only issue you will have is that valuations aren’t looked at this way; they typically look at discounted cash flows. In Silicon Valley though, they certainly are.

9. Know your appetite for risk

With 1Form, the guys had many years of corporates approaching them to buy their technology. They decided that they had exhausted the market in Australia and that there was going to be a risk to try and take it global. The guys were fine with risk but realised that both going global, and building Lets Pop, was going to be risky.

The question then came, which one would have the bigger reward? The answer was simple, starting Lets Pop. Once the decision was made they had to focus all their energy on it and get red hot on their technology. The next step was then for them to go back to the corporates that had try to buy them before and tell them that they were interested in selling 1 Form.

10. Understand the timeframe

The time it takes to negotiate these deals is a hell of a lot longer than you may think. You have to get your partners, board / investors and the corporate all to agree. You also need to spend the time to go out and talk to the interested parties and put together the IM doc for this. From here you need to agree with the interested party, sign a term sheet and then this term sheet gets turned into a contract.

Once you have agreed on the contract (this takes a lot of time) then you have to finalise a lot of CP’s (condition precedents). Once all of this is done then the money will finally hit your bank account.

The process for 1Form took about 8 months from when they decided to sell, which is a relatively short time – it can take 1-2 years in some cases.

 The way I have written the process may sound like it’s all very complicated, but it’s really not and occurs on a daily basis. You just have to have the guts and determination to make it happen.

The exception to the rule though is in Silicon Valley, where these deals can be literally done overnight. The reason Chris and his team didn’t look to the valley when they sold 1Form was because they were visible to companies like Yahoo, Facebook and Google so when the phone call when out to them, because they hadn’t heard of their company, they just weren’t interested. This is why it made more sense for 1Form to be sold locally.

Not having these overseas companies be aware of their startup, was probably one mistake that Chris thinks they made and have learnt from.

“Be visible to the right people that will pay the most for your startup. These are usually the ones that can extract the most value from you.”

Now you have the money from the sale, what do you do now?

This part of the journey is going to be different for every startup. In Chris and Chad’s case, they never viewed selling their business as a retirement deal. What a lot of people told Chris and Chad, was to let the money sit in their account for at least a couple of months and not to go and buy anything straight away – this decision often has a lot to do with your risk appetite. Ideally you would also take some sort of holiday for around 3-6 months before jumping into anything else.

 Should you stay on after the sale?

A lot of this will depend on the deal that you have negotiated and the next thing that you want to do. If you stay on and you continue to grow the business for the company that acquired it, it looks great for anyone that wants to work with you again, but if you stay on and it doesn’t do well then it will affect your credibility going forward.

Typically once your startup is sold there will also be an earn out. For Chris, it was only 6 months but that is considered very short in these types of deals. The main reason for that was because Chris’s startups technology, did all the work, so there wasn’t any need to stay any longer.

I hope you got some good tips (I know I did) and if you’re sick and tired of filling out forms then I suggest you check out Lets Pop, as it will change your online experience.

Aussie Blogger with 500M+ views — Writer for CNBC & Business Insider. Inspiring the world through Personal Development and Entrepreneurship You can connect with Tim through his website www.timdenning.com

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How to thrive in the startup market in 2024

As an entrepreneur, I’ve learned that understanding market dynamics and choosing the right business model are crucial.

A few months into the startup, I was quick to gauge why it is necessary to go beyond the nuances of operational efficiency and the art of sustaining a business amid growing competition.

Collaboration is key.

The HR and the recruiting teams work with departments to foster a culture of collaboration, but what’s indispensable to business performance is the sync between the marketing and sales teams. What we’d consider as entrepreneurs is the need to ensure seamless collaboration to predict and achieve business goals together. In turn, this will help secure long-term recurring revenue for the business.

Besides, entrepreneurs need to focus on revenue as they gear up to take their startup from $0 to $1 million. The journey is filled with critical decisions, from identifying your target customer base to choosing the right funding strategy.

So, what next?

Read on… because here are five practical, results-driven strategies that you as a founder can implement to make a mark in their industry.

#1. Embrace the Lean Methodology

What is lean methodology?

It is all about pivoting resources to create more value for customers with fewer resources. 

This principle encourages you to be more agile and allow rapid iteration based on customer feedback rather than spending years perfecting a product before it hits the market.

Want to implement it?

Here’s what you can do.

Build “Measure-Learn” Loop: What I did was develop a minimum viable product (MVP), a simple version of the product. You can do the same since it allows you to start the learning process as quickly as possible. After launching MVP, measure how customers use it and learn from their behaviors and feedback.

Here’s what I can recommend here:

  • Identify the core features that solve your customers’ primary needs and focus solely on those to develop your MVP.
  • Know the feedback channels where early users can communicate their experiences, suggestions, and complaints.
  • Analyze user behavior and feedback to make informed product development and iteration decisions.

#2. Focus on Customer Development

Let’s talk about taking our startup to the next level. 

It’s not just about getting customers – it’s about really getting to know them. We need to dive into their world, understand their struggles, and see how our product or service can make a difference in their lives. 

It’s like we’re detectives, piecing together the puzzle of our business hypothesis by actually chatting with our customers

What would you ideally do here?

Understand Customer Segments: I’d say, start dividing your target market into segments and develop a deep understanding of each segment’s demographics, behaviors, needs, and pain points. The idea is to get into their shoes and really feel what they feel.

Ensure your Product Clicks: When starting up, think of what you offer and consider whether it clicks with what our customers need. My thought was “Does my product solve their problems? Does it make their day better?” Put yourself through a tough grilling session to show customers the value proposition and ensure that the product’s promise matches what our customers are looking for.

I’d recommend the following actions here:

  • Talk to them – through surveys, interviews, or even casual chats. The goal? To gather real, raw insights about what they need and expect.
  • Use the collected data to create detailed profiles for each type of customer. This way, everyone on our team really understood we were serving. I think this should help your startup as well.
  • Try out different versions of our product with a few customer groups. It’s all about feedback here – understanding if you’re hitting the mark or if we need to pivot.

#3. Foster a Data-Driven Culture

The digital world is highly data driven since it fuels key decisions in a startup. 

I believe it’s essential for us to build a data-driven culture. This means, you’ll move from making decisions based on hunches or assumptions. Instead, the focus should be on data analytics and insights to guide our strategies and improve our outcomes.

What can you do?

Use Data Analytics Tools: You should be using these tools to gather, analyze, and interpret data related to customer behavior, market trends, and our business operations. Here, consider the adoption of pipeline forecasting that leverages AI to find patterns in marketing data. 

In turn, you’ll get areas for improvement since it can analyze historical data and predict the outcome for you to plan your.

Action Items:

  • Pinpoint key performance indicators (KPIs) that align with your business objectives and ensure they are measurable and actionable.
  • Next, you can consider training your team to understand and use data analytics tools. This might involve workshops or bringing in experts to build a data-savvy workforce.
  • Once everything is in place, regularly review data reports and dashboards. This gives us a clear picture of a startup’s health and helps adjust your strategies and predict future trends.

#4. Strengthen Your Financial Acumen

A good grip on financial skills is important to steer your business towards growth and making sure it stays on track. For this, you’ll have to understand the money side of things, which helps you manage your cash flow. Think of figuring out smart investment moves and sizing up any risks that come your way.

Here’s a tip on how you can get savvy with your finances.

Maintain Rigorous Financial Discipline: I’m really focused on cultivating a strong company culture, one that truly resonates with our mission. So, I’d suggest fostering open communication and encouraging a sense of ownership and collaboration among everyone in the team.

Action Items:

  • Get to know your financial statements inside out – I’m talking about the income statement, balance sheet, and cash flow statement. These are like the vital signs for your business’s financial health
  • Use financial forecasting that helps predict your future money moves. With this, you will have a heads-up on upcoming revenues, expenses, and how much cash you’ll need. Also, research on the available financial forecasting tools that can make predictions spot-on.
  • Don’t go at it alone. Regularly touch base with financial advisors or mentors. With them by your side, you’ll have a fresh perspective on your financial strategies to ensure you’re on the right path to hit your business goals.

5. Prioritize Team Building and Leadership Development

It is crucial to focus on building a solid team and developing strong leaders. This means putting our resources into the people who are going to propel our company forward. 

What you’ll aim for here?

Creating a culture where everyone collaborates and every team member has the chance to emerge as a leader.

What I would do:

Cultivate a Strong Company Culture: This culture should mirror our mission and foster open communication. It’s important that it encourages everyone to feel a sense of ownership and work together.

Invest in Leadership and Team Development: As founders, we’ll have to make way for opportunities for teams to enhance their skills, face new challenges, and grow in their careers.

Some concrete steps that you should consider taking:

  • Begin with clearly communicating your startup’s vision, mission, and values so that every team member is on the same page.
  • Conduct regular team-building activities and workshops to boost skills and strengthen a sense of unity and collaboration.
  • How about starting a mentorship program within our organization? The more experienced team members could guide and support the growth of newer or less experienced folks.
  • Alas… encourage feedback at all levels. We should keep striving to create an environment where open, honest communication is the norm and everyone feels safe to speak up.

I know it’s one thing to get your head around these ideas and quite another to actually make them a part of your everyday business life. But that’s where the real magic happens, right? It’s all in the doing. 

As a startup founder, this means more than just being a big dreamer. How about rolling up your sleeves to be the planner who pays attention to the smallest details. Ultimately, these tips and more tactics around it will help carve a leader in you who listens and cares and the learner who’s always ready to adapt

So, as you’re either starting out or moving forward on this entrepreneurial adventure, keep these practical tips right there.

May these be your guiding lights, helping you steer through the wild and exciting world of building a startup that’s not just a dream, but a thriving reality.

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