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What Founders Need to Know: You Were Funded for a Liquidity Event – Start Looking

Steve Blank

Liquidity. While you might be interested in building a company that changes the world, regardless of how long it takes, your investors are interested in funding a company that changes the world so they can have a liquidity event within the life of their fund ~7-10 years. (A

Entrepreneurs: Take the time to celebrate your exit.

Berkonomics

The liquidity event and beyondWe come to the end of this cycle of insights with a thought about how you might view your successful exit from the company you have spent so much effort to build.

Sell when growth is high, even if cash flow is low.

Berkonomics

For high growth ventures being groomed for a lucrative liquidity event, this is usually a wise choice, presuming additional growth capital can be successfully raised on agreeable terms. The liquidity event and beyond

Angels and VCs: Don’t be greedy even if you can.

Berkonomics

Sometimes the end game or sale of the company is not a happy event for the early investors, including the entrepreneur or the founders. Further, preferred stock holders can be recipient of accrued dividends in a sale or liquidation. The liquidity event and beyond

Exit timing and price: WHEN to sell? How long does it take?

Berkonomics

His Strategic Exits Corporation provides M&A advisory services, and he is much in demand as a speaker at angel and entrepreneur events worldwide. – Dave. The liquidity event and beyond

Flippers vs Keepers–At times earnings don’t matter

Berkonomics

The liquidity event and beyondDave’s note: We are privileged this week to host a post by Arthur Lipper, a well-respected member of the international financial community since 1954.

Will you be happy at your finish line?

Berkonomics

If you own a significant piece of the business, is this a time to consider planning an eventual exit or liquidity event? The liquidity event and beyondHave you figured out what you want to have, or to be, when you reach the end of your personal run in this business life?

Envision the end game. Advance toward the goal.

Berkonomics

But most of us dream of selling the business someday for lots of money and building our wealth upon that event. The liquidity event and beyond

Look for your strategic buyer first.

Berkonomics

The liquidity event and beyondDave’s note: John Huston is founder and past manager of the 300+ member Ohio TechAngel Funds and a past Chairman of both the Angel Capital Association and the Angel Resource Institute. . By John Huston.

The muted thrill of the deal closing.

Berkonomics

But the closing was such a non-event that you wonder why people even call it a “closing.”. The liquidity event and beyond Now you have worked for months to get this deal to the closing, anticipating the wire transfers to the shareholders that will come any minute.

Entrepreneurs do not easily retire.

Berkonomics

Next week, we begin again with new insights from startup through liquidity event, including guest postings by some of the nation’s best known angel investors and entrepreneurs. The liquidity event and beyond This is the final posting in this cycle.

Don’t be greedy even if you have the power.

Berkonomics

Sometimes the end game or sale of the company is not a happy event. Is there a liquidation preference in place where the preferred investors can take a multiple of their investment, (twice or three times the amount) from a sale before the common shares receive anything?

Provide for succession well in advance of need.

Berkonomics

The liquidity event and beyond When we are young and early in our business lives, we feel infallible to the degree that we do not think of what might happen if we die while in office or decide to leave the company for any reason.

Create equity value with every step.

Berkonomics

Positioning The liquidity event and beyondYou may be an architect or doctor or other professional managing your business, knowing that the end game value of your client or patient list is small and not easily transferred to any buyer without attrition.

10 Keys To Giving The Right Entrepreneur Your Money

Startup Professionals Musings

Once invested, you should expect no return until the first “liquidityevent in 3-5 years, maybe longer. Liquidity events include merger or acquisition (M&A), or Initial Public Offering (IPO) when the stock goes public.

The most satisfying life journey is never about the money.

Berkonomics

And yet, as I recall the greatest thrills, the memorable events, the best of memories, almost none are about the money. The liquidity event and beyond

10 Answers That Make Your Startup Plan Investable

Startup Professionals Musings

If you don’t plan a liquidity event, you won’t find many investors interested. Entrepreneurs who are looking to attract investors need to develop and pitch a plan -- preferably written -- that answers every potential investor question about your startup before it is asked.

Intel Disrupted: Why large companies find it difficult to innovate, and what they can do about it

Steve Blank

Capital is returned to these investors through liquidity events (originally public offerings, but today mostly acquisitions). In the 21 st century it’s harder for large corporations to create disruptive breakthroughs.

Think of your exit as you commit your resources along the way.

Berkonomics

The liquidity event and beyond Each decision you make to commit resources affects the future value of the business to some degree. Minor decisions, such as replacing employees who have left the company or equipment needing updating, are usually considered operational in nature, and unless the business is changing direction, not relevant to this analysis.

Start a deal room and keep it current.

Berkonomics

The liquidity event and beyond Maybe you have not heard the term, “deal book.” That’s a comprehensive piece on a company for use by a buyer in determining fit.

Failure is the greatest of teachers.

Berkonomics

The liquidity event and beyond Not all companies are successful. The end game can be a failure of the business. In fact, many angel investors or venture capitalists look for and respect the lessons learned by entrepreneurs that have survived a failed business.

8 Secrets To Credible Startup Financial Projections

Startup Professionals Musings

Show a liquidity event and investor return at the end of the period. Entrepreneurs often ask me why investors expect financial projections for a new startup even before the product is built and while the market is still being defined.

8 Ways An Investor Pitch Differs From A Product Pitch

Startup Professionals Musings

Startup investments are extremely risky, primarily because the stock has no value until a future liquidity event, such as an acquisition or public offering. The entrepreneur needs to show a strategy for such an event, and a projected value and return to the investor.

There are three kinds of business buyers.

Berkonomics

The liquidity event and beyond This is one of my favorite insights, since I lived this one in a positive exit from my computer business. Most people will tell you that there are two kinds of eventual buyers for your business: financial and strategic.

List ten companies that could buy your business.

Berkonomics

Next, have the group focus upon column three, ignoring the obvious gain our company would make in liquidity to shareholders. Email readers continue here.] The magic of this exercise is not only in the organization of group focus upon the liquidity event and possible buyers.

8 Ways To Maximize The Value Of Your Startup Stock

Startup Professionals Musings

Startup owners need to assume a three to five year wait for a liquidity event, such as acquisition or going public, before they can cash out.

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How Do You Want to Spend Your Next 4 Years of Your Life?

Steve Blank

Or is it something that can grow to a size that will result in an acquisition or some liquidity event?

10 Tough Quandaries That Lead Entrepreneurs Astray

Startup Professionals Musings

If you take investor money, expect a push for hockey-stick growth and a liquidity event, like going public (IPO) or sale (M&A), to get the payback.

Fund Raising is a Means Not an End

Steve Blank

How much do they need to own at a liquidity event? Not all that glitters is gold. William Shakespeare. For many entrepreneurs “raising money” has replaced “building a sustainable business” as their goal. That’s a big mistake.

IRR 154

5 Clues To Investor-Friendly Financial Estimates

Gust

According to a recent Dow Jones VentureSource report, the average time to liquidity of an equity investment in a startup is now about five years. The only path to any return for equity investments is a liquidity event, like a merger or acquisition (M&A), or IPO.

7 Founding Sins Seed-Stage Startups Should Avoid

View from Seed

Jet-set lifestyles are perhaps appropriate after the liquidity event, but founders and executives must avoid them at all costs before that, as employees treat resources with the same respect (or lack thereof) as their leadership.

Equity for Early Employees in Early Stage Startups

SoCal CTO

But the more important rationale is raised in the following about why employees most often do not have significant outcomes even in fairly positive liquidity events.

Leave something on the table in a sale.

Berkonomics

The liquidity event and beyondIsn’t the goal of any negotiation to get the maximum possible out of the other side? I have learned from long experience that the last bit of concession is the most expensive in a negotiation.

5 Clues To Investor-Friendly Financial Estimates

Startup Professionals Musings

According to a recent Dow Jones VentureSource report, the average time to liquidity of an equity investment in a startup is now about five years. The only path to any return for equity investments is a liquidity event, like a merger or acquisition (M&A), or IPO.

Money is not the only measure of success.

Berkonomics

I propose that there are few times in life when the opportunity opens to look only outward, to participate in charity events, extended family vacations, community boards and even coaching other entrepreneurs. The liquidity event and beyondYou’ve surely heard of Maslow’s Hierarchy of Needs, in which Abraham Maslow laid out a human’s needs from the physiological first, to safety, then love and belonging, on to esteem and finally self-actualization.

Bring Your Startup to the U.S.

Early Growth Financial Services

There are also integrated service providers and a collaborative environment of founders working toward the common goal of a liquidity event. Ever wondered what expanding your startup internationally entails? We shed some light, and hopefully—provided some encouragement, during our recent webinar with David Glazer, Partner at Fried Frank, JD Breidenstein, Minister Counselor for Commercial Affairs and Ben Parkinson, Visa Analyst, both with the U.S.

Everyone loves to leave a legacy.

Berkonomics

And once a month, while watching TV, I spend part of an evening writing personal messages to each birthday employee, recalling an event or complimenting a behavior or success. Even today, years later, I am met at industry events by former employees with a common refrain, “Our company was the best employer I have ever had, before or since.”. That is a legacy you cannot buy, at a cost of acknowledging individuals with respect and personal recognition.

Create stakeholder loyalty when times are good.

Berkonomics

Raising money The liquidity event and beyond There are several times when stakeholder loyalty is tested to the limit. For employees, a late or missed payroll is the ultimate test of corporate loyalty, divorced even from an employee’s ability to make do without a paycheck.

A successful exit is a great measure of a good journey.

Berkonomics

The liquidity event and beyond I’ve been involved with well over a dozen successful exits and four initial public offerings over the years, some of them with monstrous gains, some more modest. Then in addition, there are the exits that returned some portion of capital, but nothing more.

Proceed With Caution Selecting Startup Investments

Startup Professionals Musings

Once invested, you should expect no return until the first “liquidityevent in 3-5 years, maybe longer. Liquidity events include merger or acquisition (M&A), or Initial Public Offering (IPO) when the stock goes public.