It ain’t over til it’s over: founders explain how to prepare your startup for an exit

Alexis Horowitz-Burdick and Steven Goh share their exit experiences.

The exit. The compulsory slide in your pitch deck. Chances are if you’re in the early stages, you and your investors have the same list of large corporations, but they probably wouldn’t buy you anyway. That’s alright – just tell them you plan to IPO in five years.

When first building a company you might not think about the exit that much. But the slide is a good reminder that investors eventually do want a return.

Investors don’t want to just be your friends, unfortunately.

Last week the founder of cosmetics ecommerce site Luxola, Alexis Horowitz-Burdick, and the CEO of digital media company Migme, Steven Goh, shared their exit experiences on stage at Tech in Asia Singapore 2016. The panel discussion was moderated by Gwendolyn Regina Tan, the director of strategy and business development for Asia-Pacific at Mashable.

Alexis started the chat stressing that startup bosses need to understand the gravity of raising funds. “You are in debt to these people,” she said. “Investors don’t want to just be your friends, unfortunately. They are expecting their money back.”

Prepared for anything

According to Steven, the two main types of exits are “true exits” where everyone gets paid, and an IPO. In a true exit, the company is acquired outright and all the capital and shareholders are released. Steven describes the IPO option as just another journey for founders where new investors join and the founding team might be able to offload some of their shares.

Alexis noted that it is extremely rare to see a company that is prepared for an exit, but recommended startups keep their data in order so transactions can be made quickly.

At any given time Migme may be looking at 100 to 150 companies to acquire, said Steven. Companies should aim to complete acquisitions within a month and completely integrate new companies within two.

Alexis Horowitz-Burdick describes how Luxola was acquired.

Alexis pointed out that many acquisitions fall apart and that having papers in order before due diligence can mean the difference between a deal happening in two versus six months, or deals being passed on because another company would be easier to process. Migme once completed a transaction in one week, Steven chimed in.

Both panelists agreed that while startups may operate in legally grey areas to gain advantages, “The best thing you can do is not lie to yourself,” as Alexis put it. “Be honest about your business and make sure there are no skeletons in your closet.”

When Luxola was acquired, Alexis was confident the deal would go through because the company made an effort to follow proper accounting practices and operate legally so it could be prepared for that eventuality.

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