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How do you decide whether/when to sell out or not?

We are a 2 year old company and have just been approached by one of our clients (who we do 20% of our business with) for a merger. We haven't gone through the details yet, but I was wondering what people thought about selling out as early as this. On the plus side it gives me financial stability, but on the downside I'll be reporting to someone! Thoughts?

7 Replies

Roger Wu
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Roger Wu Entrepreneur
co-founder at cooperatize, native advertising platform
Facebook, Google held out, while Tumblr sold, all to Yahoo.
Recently AOL sold to Verizon for $4B while 15 years ago they were buying Time Warner for $180+B
Groupon could have sold to Google for $6B; today's market cap is $4.5B

There's no answer to this question; hindsight is 20/20. Congratulations on building something that someone considers valuable enough to want to buy... that is a feat in itself.
Ed Lavalette
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Ed Lavalette Entrepreneur
Project Manager and Consultant
Roger is right... knowing when is difficult, especially at such an early stage. For me, it would depend on your personal goals and aspirations.
Dhruva Rajan
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Dhruva Rajan Entrepreneur
Co-Founder and Technology Director at Geospoc
Thanks Roger! Ed - yes it does boil down to personal goals like you say. Its a real tough one to call!
Steven Rubenstein
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Steven Rubenstein Entrepreneur
Entrepreneur, Activist, Developer and soon Solver of all the World's Problems
Actually, Facebook did sell out -- to Yahoo for $1 billion. But the deal fell thru when Yahoo's stock dropped. So don't feel bad about selling.
Eugene Abovsky
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Eugene Abovsky Entrepreneur
Co-Founder / CTO at Projector.is, Inc
If it's going to make a significant impact on your financial bottom line and bring some life changing money, then sell. If it's going to "just be a cushy job" type of deal, then don't sell.
Jack Hembrough
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Jack Hembrough Advisor
Member, Board of Advisors at Pwnie Express
Don''t forget to think about it from the buyer's perspective.
What will your client do if you say NO?
Will you lose his business? ..20% of your revenue gone.
or
Will he buy your competitor? ..Losing 1/5th of your business AND having a stronger competitor.

Peter Small
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Peter Small Entrepreneur
Independent Information Technology and Services Professional
Here is a slight twist to the question.

If you have a successful validation for your startup but it is based upon an idea that is copiable by a company with lots of capital: should you sell shares quickly to get the capital to be able to keep ahead of any competitors?
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