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How do you determine the best exit strategy?

Acquisitions? IPO's? Buyouts? There are many different options and I know different companies do different things. What are some things to consider when weighing out your options? As well as when should I start to plan for an exit strategy. Is this something that should be done at an early stage? Or does it more so become a factor later on down the road when things are rolling? If you have real life experiences of your own don't hesitate to respond with those stories either.

6 Replies

matt
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matt Entrepreneur
Web Developer
good question!
Martin Omansky
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Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
I was a charter member of the Exit Planning Exchange, a multi-city group of exit advisors that can give you help. They can be reached at Babson College, Wellesley, MA. About your questions: exits are very often beyond your control. The statistics indicate that 3/4 of VC-funded enterprises effected their exits via acquisition. IPOs, while desirable, are expensive to arrange, iffy in terms of result, and rarely done successfully for small companies. We usually recommend that enterprises sell themselves to publicly-traded companies, take some of their payment in tradable shares, and go on an extended vacation. Sent from my iPhone
Dane H. Madsen
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Dane H. Madsen Entrepreneur • Advisor
CEO, SVP Business Development | Domestic & International, Product Marketing | Open to new connections
Stop planning an exit and build a durable and lasting business. If the exit ever needs to occur, a solid business will be easy to exit. If you decide the exit in advance, you likely will not be around to see it. Dane Madsen Dane@DaneMadsen.com [removed to protect privacy] Mobile Sent from my mobile device. Forgive typographical and grammatical errors.
Ian Shearer
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Ian Shearer Advisor
Executive Chairman at Parakeetplay
Broadly speaking I agree with Dane. You should focus on building a successful business. But perhaps you should consider appointing an adviser (usually as a Non Exec Director/Chairman) whose main role is to look at what you are doing and suggest gentle strategy and execution modifications that will facilitate an Exit. VCs often adopt this strategy. Usually an exit comes from a company you are already dealing with. I have founded and sold a couple of companies and advised on the sale of many others but I always find it best to engage early.
Sivaprakash Murugamalai
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Solution Architect | Project Manager | Agile Coach | Digital Commerce | SAP Technology Solutions
Naman, one approach is to understand your business model - that is, how are you generating value? Are you getting access to many users through your product (like whatsapp or instagram) and generating value by potential market access? Or do you have a working revenue model that gives you that can lead to profit? Or are you validating a product that you have a patent on, and gain value from the value of the patent? Where is the value. That should give you a good indication of your exit plans. You should definitely focus on this value that you plan to earn. Your plan and reality may differ during execution or after launch. But once you realize this value, your exit plan will be very clear to you. It may be a good idea to have an hypothesis of your exit plan in mind during early stages. But that can't be your focus.


Martin Omansky
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Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
A follow-on to my previous comment on this subject: our policy is to encourage entrepreneurs to plan for their exit well in advance. The Federal Tax Code and various securities regulations can heavily influence the financial outcome of an exit. Sent from my iPhone
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