HOTB Software Solutions
HOTB is a highly experienced software development company that provides in-kind angel capital to startup entrepreneurs with a viable technology based business. HOTB helps startups bridge the gap between their friends and family round and their venture capital round by subsidizing expensive technology needs. HOTB specializes in building custom software platforms to provide certainty of execution, experience, credibility, security and compliance. Additionally, HOTB Ventures has been formed for instances of passive investment when software development is not needed.

Manatt
Manatt, Phelps & Phillips, LLP is known for quality, for extraordinary commitment to clients, for integrated, relationship-based services, and for a range of capabilities typically found only in boutique firms. We are progressive and entrepreneurial compared to other major firms, and we are deeply committed to diversity, to public service, to involvement in the communities we serve and to excellence in all we do.

TriNet
Tech companies partner with TriNet Passport to compete for top talent by using our bundled HR products that cover the core services of payroll, fortune 100 benefits, risk and compliance, a scalable HR team all on a cloud platform. TriNet reduces the time businesses spend managing HR and administrative issues while providing enterprise-grade cloud capabilities. This enables entrepreneurs and management to focus on what’s important from raising funds to driving revenue. Join hundreds of executives in high tech who have experienced the TriNet Passport difference, working for companies in hardware, software, SaaS and telecommunications. Contact choy.chew@trinet.com for more information.

Eureka
The Eureka Building is a 3-acre technology campus in Irvine, California designed to help accelerate innovation. Founded in 2014 by Peter Polydor, our goal is to support local entrepreneurship by giving innovative companies and entrepreneurs in Orange County a home that is centrally located and easy to access. Through partnerships we are more than just a home, but are a support network hosting startup events while fostering mentorship relationships with our partners all within one of the most creative spaces in the region.

CrashLabs
CRASHLABS IS A VIBRANT COWORKING AND EVENTS COMMUNITY THAT ENHANCES WORK/LIFE BALANCE FOR THE NEW ECONOMY OF UNTETHERED WORKERS. CRASHLABS OFFERS CREATIVE AND FLEXIBLE SPACES SUCH AS OPEN DESKS, DEDICATED DESKS, PRIVATE OFFICES, AND EVENTS SPACE THAT SERVE EVERYONE FROM THE INDIVIDUAL TO CORPORATIONS.

Real Office Centers
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Determining Exit Options for Your Startup, by George Deeb

Posted by Jonathan Greechan on 2013-04-15

Founder Feedback gives you insight from the startup trenches.

In this post from his blog, George Deeb, Managing Partner at Red Rocket Ventures and Chicago Founder Institute mentor outlines 3 options startups should consider when thinking about their exit strategy. He says, "it is always good to have a sense to what your long term exit options are, in case prospective investors (or you) are curious about how to liquidate their investment down the road."

Below, Determining Exit Options for Your Startup has been republished;

Lesson #63: Determining Exit Options for Your Startup

"Hopefully, you are not already thinking about an exit for your startup.  But, it is always good to have a sense to what your long term exit options are, in case prospective investors (or you) are curious about how to liquidate their investment down the road.  Your exit options basically come down to: (i) selling the business outright; (ii) merging the business into another entity; and (iii) taking the company public.  We will discuss each of these options below.

Selling your business outright is your most logical exit opportunity for most startups.  Here, we are talking about selling to a corporate or financial buyer that sees value in what you have built (e.g., your technology, market share, client list, cash flow, growth vehicle for them).  So, make sure value has actually been created in your business over time, to attract a buyer long term.  Most buyers are going to look to management to stick around for at least some period of time, to help transition the business.  Corporate buyers will need a 6-12 month transition and financial buyers could require you to stick around longer term to lead the next phase of the company's growth.  In this scenario, you have sold 100% of the assets or equity of the business, depending on the deal structure, in exchange for cash, equity or other compensation, either paid upfront or spreadout over time.

 

In the merger scenario, it is largely the same as a corporate sale, but instead of selling 100% outright, perhaps you merged with an equally-sized, similar business in a 50%/50% merger.  In such case, you most likely took equity, instead of cash upfront.  Which means, you would need to create a mechanism for the merged business to distribute funds out to you over time, to repurchase your 50% stake with cash from operations or otherwise.  And, in this scenario, the combined entity may not need your management team, since they already have a team in place running a similar business.  Although cash sales for 100% are my preference, deals like this can sometimes make sense where a bigger entity may be more appealing to a long term buyer (e.g., you are too small to attract buyer interest on your own, but combined with a bigger business you are more attractive).  And, this road also makes sense when you are trying to phase out of the business, but don't need immediate cash to facilitate your exit.

As for an IPO, "fuhged about it" (said with my Robert De Niro accent).  Very few startups reach the scale of being able to take it public, and of the ones that do, only the creme-de-la-creme actual do go public.  And, for most of the last few years, the IPO markets have basically been closed altogether based on poor market conditions, and only recently have premium companies like LinkedIn, Zynga, Groupon, Facebook and Pandora decided to give it a shot.  And, if you are lucky enough to build a successful business like that, running a public company is a complete pain in the ass, dealing with public shareholders, reporting quarterly earnings and disclosing all your financial information to all your competitors.  Unless the valuation upside is materially higher than a corporate sale route, I suggest avoiding the IPO route altogether.

In following lessons, I will discuss "how to find and approach buyers" and 'how to structure the sale'."


For more startup insights from George, check out more from the Red Rocket Blog and follow him on Twitter @GeorgeDeeb.

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