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Re-capitalize and build a P&L Company, or continue as a Strategy Company?

My company has spent the last four years researching, developing and market testing technologies for an underserved market within the automotive industry. After a couple of necessary pivots, we think we finally know where our niche lies. Recently, I was told by one of my advisors that greater success may be realized in far less time if we engaged a good investment banker and establish an 18-month runway to be acquired by a large company. Other than recapitalizing and moving forward with a new round of financing, this seems to be the best option. However, I am not wildly excited about further diluting our equity. One thing to note is that we have just recently hired one of the top IP firms in the country to protect our technologies.

10 Replies

John Seiffer
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John Seiffer Advisor
Business Advisor to growing companies
Might I humbly suggest you won't get the answers you're looking for in this (or any) forum. To answer this question - or even give useful advice - would require a pretty in-depth understanding of your goals, your company's current situation and the marketplace. You'd probably be better served engaging advisors who can put in the time to do the research.
Derek White
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Derek White Advisor
Founder at AutoSaver.com, Consultant for Hire, Creative Leader and Entrepreneur
Correct John, we are engaging advisors as well as our legal team. However, I am simply reaching out to those who may have been in similar situations to possibly connect and start a dialogue. Thank you for your feedback!
Dustin Walling
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Dustin Walling Entrepreneur
Director of Consulting Services
I like your 18 month runway (give or take), but it sounds like you're viewing the situation as "raise money" or "position for sale." I'd be curious to know what your pro forma and growth strategy look like and whether it is achievable without additional funding strategies. Most of the time when we're prepping companies for market, achieving that ever-critical traction and trajectory to be truly attractive requires additional funding in order to get it done. I'd hate to see you marry to the idea of preserving the current cap sheet at the price of foregoing greater enterprise value. Perhaps it's worth analysis to consider both.
Hugh Quigley
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Hugh Quigley Entrepreneur
Business Executive
Firstly of all congratulations on having spent the last 4 years getting to this point - a good place to be in now. My take on it is that the "right" answer may lie in what direction you want to take the venture and of course how quickly you want / need to scale it.

I imagine you have had lots of inside automotive advice on your product offering already, but if I can offer any insight from a non US but still retail automotive perspective, be glad to help.

H
Derek White
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Derek White Advisor
Founder at AutoSaver.com, Consultant for Hire, Creative Leader and Entrepreneur
Dustin,

Good assessment. That is the dilemma - raise more funds or position for a sale, but, to become a sexier target we will need to show more traction. We have approximately 50 dealerships on a pilot program that are experiencing success with our products. Selling our products direct on a broader scale will likely require substantial resources. Our best route may be a rev-share (JV deal) with a larger company that could "bolt-on" our products and/or distribute as an up-sell through their field sales reps.

DW
Derek White
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Derek White Advisor
Founder at AutoSaver.com, Consultant for Hire, Creative Leader and Entrepreneur
Hugh,

I would be delighted to speak with you if/when you are available. Please message me directly and send me your email address.

Thank you,

DW

Leif Elgethun
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0
Leif Elgethun Advisor
Entrepreneur, Engineer, Change Agent, & Environmental Capitalist
I am on vacation and unable to check email until June 30th. If urgent, please email the company email account corresponding to your query below for the appropriate urgent contact info. Thanks! Intermountain Energy Partners: [removed to protect privacy] Site Based Energy [removed to protect privacy] Retrolux [removed to protect privacy] Leif Elgethun [removed to protect privacy]
Donald M McGuire
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Donald M McGuire Entrepreneur
Managing Partner at KDM Advisors and Managing Director at SDDCO Brokerage Advisors
Derek So where do you stand in the process you described? Let me know when we can talk. Thanks Don Donald M. McGuire Managing Partner KDM Advisors LLC C: [removed to protect privacy] Sent from my iPhone
Keith Peer
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Keith Peer Advisor
Chief Operating Officer at Certified Security Solutions (CSS)
Derek, you are clearly at a crossroad. Before you recapitalize or raise another round of investment you should move from a pilot program to actually having paying customers. You don't need all 50, but you do need some. The dealerships in the pilot program have to value your offering enough to fully implement your product/solution by paying for it. This will change your discussion significantly with both investors and potential partners. These 50 pilot installs are not much more than early design partners that funnel feedback into your product and development team. While field feedback is valuable, getting customers is what will change your discussion and put you onto a 18 month track.
Derek White
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Derek White Advisor
Founder at AutoSaver.com, Consultant for Hire, Creative Leader and Entrepreneur
Keith, we have successfully converted most of those who participated in our pilot program to paying customers. You are right on point - they must value our offer enough to pay for it. What we have found during the process is that most franchise (new car) dealers have the marketing budgets to pay us, but the Independents do not, or they don't immediately recognize the program's value to their organization. Our products provide transparent price validation to car shoppers - the majority of independents are resistant to transparency. We have since changed our focus to new car dealerships and large dealer groups. So far the new strategy is showing excellent progress.

Donald McGuire, I will reach out to you this week. Thank you.
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