The Terminal PlanHow to end your startup on your terms
Most common questionHow do I sell my company?
The best startups don’t sell.Apple. Google. Amazon. Facebook. Microsoft.LinkedIn.00: Endings                              ...
The the worst startups don’t sell.They die.00: Endings                                     4
Most startups won’t IPO. Most startups aren’t suicidal.Most entrepreneurs must plan for an ending that isn’tdeath.00: Endi...
black swan inbound offerssome happy endings are unplanned. we’re not going totalk about those today.00: Endings            ...
Humans don’t like to contemplate endings00: Endings                                                    7
Entrepreneurs are (super)humans00: Endings                                           8
Planning your sale           1. Rally stakeholders           2. Map acquirers           3. Adjust roadmap02: Plan         ...
For most entrepreneurs, selling is a              process              1.   Decide              2.   Plan              3. ...
Decide to sell:             1.   Things are not going according to plan             2.   You’ve run out of alternate plans...
When to start the selling process             1. Things are not going according to plan                   i.Lack of produc...
When to start the selling process             1. Things are not going according to plan                   i.Lack of produc...
When to start the selling process             1. Things are not going according to plan                   i.Lack of produc...
When to start the selling process             1. Things are not going according to plan                   i.Lack of produc...
The Plan           Conventional narrative is that companies           aren’t sold, they are bought.           The notion o...
Planning your sale           1. Rally stakeholders           2. Map acquirers           3. Adjust roadmap02: Plan         ...
1. Rally stakeholders           I. Team               •General rule: Until term sheet stage, just co-founders             ...
2. Map Acquirers           I. Determine acquisition type           II. Map inbound interest & existing relationships      ...
2. Map Acquirers           I. Determine acquisition type               •Strategic               •Talent               •Tec...
2. Map Acquirers           I. Determine acquisition type               •Strategic               •Talent               •Tec...
2. Map Acquirers           I. Determine acquisition type               •Strategic               •Talent               •Tec...
2. Map Acquirers: Acquisitions happen when theacquirer believes they need you in order to deliver ontheir plan02: Plan    ...
3. Adjust Roadmap           I. Remove impediments to exit           II. Increase strategic value of company           III....
3. Adjust Roadmap           I. Remove impediments to exit               •Extract company from any business development dea...
3. Adjust Roadmap           I. Remove impediments to exit               •Extract company from any business development dea...
3. Adjust Roadmap           I. Remove impediments to exit               •Extract company from any business development dea...
Optics: Narrative           You must compell third parties to tell a story           that is technically accurate but othe...
Optics: Case Study02: Plan                                29
Optics: Case Study02: Plan                                30
Optics: Case Study02: Plan                                31
Optics: Case Study02: Plan                                32
Optics: Case Study02: Plan                                33
Optics: Case Study02: Plan                                34
Optics: Case Study02: Plan                                35
Optics: Crafting a rocket ship narrative is very hardBut it’s not rocket science02: Plan                                  ...
Execute              1. Initiate              2. Build acquirer’s internal case              3. Price discussion          ...
1. Initiating Discussions              I. Code                •Roleplay from potential acquirer’s vantage point pre-meetin...
2. Internal case              •Powerpoints & Spreadsheets              •Planning sessions              •Management meeting...
2. Internal case: Prelim due diligence              •NDA              •Do disclose certain potential unpleasant surprises ...
3. Price               • A figment of your imagination               • A function of your sales skills03: Execute          ...
3. Price: Don’t negotiate against yourself                                                   •Acquirer’s capacity to pay  ...
3. Price: Is not as it seems              •Cash vs. Stock                •early stage private company stock should typical...
3. Price: Multiple interested parties              Only way to optimize price is to have options                •You must ...
3. Price: Generally, the right personal psychology is tofocus on what will be life changing for founding teamvs delusions ...
4. Negotiations: Companies don’t buy              companies. People buy companies run              by people.03: Execute  ...
4. Negotiations: People at acquirers have         warped incentives. Leverage them         •Understanding the psychology i...
4. Negotiations: Hail Mary Passes         •Have at least a few of these up your sleeve         .03: Execute               ...
4. Negotiations: Do not reveal your psychology03: Execute                                                          49
4. Negotiations: Avoid agency problems         •Bankers              •Bankers are ultimately incentivized to build their l...
5. Term Sheet03: Execute                              51
The Close            1. Due diligence            2. Forward Motion            3. Definitive Agreement04: Close             ...
1. Due Diligence            I.Don’t disclose anything you’re not asked              •The psychology on acquirer side quick...
2. Forward motion            I.You and your team must keep moving              your company forward              •Make sur...
3. Definitive Agreement            i. Reps & Warranties            ii. Indemnification            iii. Employment Agreements...
3. Definitive Agreement04: Close                                     56
The worst is over for you.But it’s just begun for the acquirer :-)04: Close                                           57
Want more?@justglewgeofflewis.org               58
Questions            59
Upcoming SlideShare
Loading in …5
×

The Terminal Plan: How to Sell A Startup [Geoff Lewis Presentation @ SXSW …

63,099 views
62,345 views

Published on

Published in: Business
4 Comments
81 Likes
Statistics
Notes
  • Rad and Jr, if you think it sucks, what are your ideas? It would make your comments more helpful.

    I thought I knew a lot about this - Microsoft bought my last company - but I still learned a ton from these slides. This deck is about the art of the deal, and it does a great job of breaking it down into all the subtle details. The key take away is that closing a successful sale is an intricate dance through a minefield. It needs to be thoroughly choreographed in advance to be successful. The tiniest things can send a deal sideways, and perception is reality. These slides provide a compass and a map.
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • I like the idea shown in presentation. It's true if you don't know how to push your limits try to sell what have you done.
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • Ditto. radixlife beat me too it. Tip o' the hat to you Sir ~^~
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • This presentation is absurdly simplistic, detached from business reality, disorganized, overly long, and lacks educational value. Other that that, its great! HOW DOES TRIVIA LIKE THIS GET FEATURED ON SLIDE SHARE, ANYWAY? (Monkeys in control, I suspect/0
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Views
Total views
63,099
On SlideShare
0
From Embeds
0
Number of Embeds
9,285
Actions
Shares
0
Downloads
0
Comments
4
Likes
81
Embeds 0
No embeds

No notes for slide

The Terminal Plan: How to Sell A Startup [Geoff Lewis Presentation @ SXSW …

  1. The Terminal PlanHow to end your startup on your terms
  2. Most common questionHow do I sell my company?
  3. The best startups don’t sell.Apple. Google. Amazon. Facebook. Microsoft.LinkedIn.00: Endings 3
  4. The the worst startups don’t sell.They die.00: Endings 4
  5. Most startups won’t IPO. Most startups aren’t suicidal.Most entrepreneurs must plan for an ending that isn’tdeath.00: Endings 5
  6. black swan inbound offerssome happy endings are unplanned. we’re not going totalk about those today.00: Endings 6
  7. Humans don’t like to contemplate endings00: Endings 7
  8. Entrepreneurs are (super)humans00: Endings 8
  9. Planning your sale 1. Rally stakeholders 2. Map acquirers 3. Adjust roadmap02: Plan 9
  10. For most entrepreneurs, selling is a process 1. Decide 2. Plan 3. Execute 4. Close00: Endings 10
  11. Decide to sell: 1. Things are not going according to plan 2. You’ve run out of alternate plans 3. Both 1. and 2. are well-kept secrets 4. You have time01: Decide 11
  12. When to start the selling process 1. Things are not going according to plan i.Lack of product-market fit ii.Team conflict iii.No longer believe in vision iv.No fundraising traction v. External threat that is probably lethal 2. You’ve run out of alternate plans 3. Both 1. and 2. are well-kept secrets 4. You have time01: Decide 12
  13. When to start the selling process 1. Things are not going according to plan i.Lack of product-market fit ii.Team conflict iii.No longer believe in vision iv.No fundraising traction v. External threat that is probably lethal 2. You’ve run out of alternate plans vi. No more restarts vii. No more pivots 3. Both 1. and 2. are well-kept secrets 4. You have time01: Decide 13
  14. When to start the selling process 1. Things are not going according to plan i.Lack of product-market fit ii.Team conflict iii.No longer believe in vision iv.No fundraising traction v.External threat that is probably lethal 2. You’ve run out of alternate plans vi. No more restarts vii. No more pivots 3. Both 1. and 2. are well-kept secrets viii. Outside world thinks your startup is doing *at least* well, preferably “crushing it” 4. You have time01: Decide 14
  15. When to start the selling process 1. Things are not going according to plan i.Lack of product-market fit ii.Team conflict iii.No longer believe in vision iv.No fundraising traction v. External threat that is probably lethal 2. You’ve run out of alternate plans vi. No more restarts vii. No more pivots 3. Both 1. and 2. are well-kept secrets viii. Outside world thinks your startup is doing *at least* well, preferably “crushing it” 4. You have time ix. At least 6 months of financial and team runway01: Decide 15
  16. The Plan Conventional narrative is that companies aren’t sold, they are bought. The notion of not having a plan for what could be the most transformative event in your team’s life is simply insane02: Plan 16
  17. Planning your sale 1. Rally stakeholders 2. Map acquirers 3. Adjust roadmap02: Plan 17
  18. 1. Rally stakeholders I. Team •General rule: Until term sheet stage, just co-founders •Co-founders must be aligned •Align on “stretch goal” and “minimum viable exit” II. Investors •General rule: Only discuss with those who can/will help •Watch outs: (a) participating preferred, (b) double trigger acceleration02: Plan 18
  19. 2. Map Acquirers I. Determine acquisition type II. Map inbound interest & existing relationships III. Identify 3-5 cold prospects02: Plan 19
  20. 2. Map Acquirers I. Determine acquisition type •Strategic •Talent •Technology •Asset Sale (essentially death) II. Map inbound interest & existing relationships III. Identify 3-5 cold prospects02: Plan 20
  21. 2. Map Acquirers I. Determine acquisition type •Strategic •Talent •Technology •Asset Sale (essentially death) II. Map inbound interest & existing relationships •Partnerships •Customers •Friends •Portfolio companies of your investors •People who’ve checked out your LinkedIn profile repeatedly III. Identify 3-5 cold prospects02: Plan 21
  22. 2. Map Acquirers I. Determine acquisition type •Strategic •Talent •Technology •Asset Sale (essentially death) II. Map inbound interest & existing relationships •Partnerships •Customers •Friends •Portfolio companies of your investors •People who’ve checked out your LinkedIn profile repeatedly III. Identify 3-5 cold prospects •Competitors •Players in adjacent/complimentary spaces •Must be in high-growth mode •Partnership NOT sale02: Plan 22
  23. 2. Map Acquirers: Acquisitions happen when theacquirer believes they need you in order to deliver ontheir plan02: Plan 23
  24. 3. Adjust Roadmap I. Remove impediments to exit II. Increase strategic value of company III. Manufacture the optimal narrative02: Plan 24
  25. 3. Adjust Roadmap I. Remove impediments to exit •Extract company from any business development deals that will be viewed as liabilities •Kill crazy bet-the-company skunkworks project that will take 2 years to build •Settle any pending legal action •Align incentives so nobody internally will be motivated to kill a deal II. Increase strategic value of company III. Optimize optics02: Plan 25
  26. 3. Adjust Roadmap I. Remove impediments to exit •Extract company from any business development deals that will be viewed as liabilities •Kill crazy bet-the-company skunkworks project that will take 2 years to build •Settle any pending legal action •Align incentives so nobody internally will be motivated to kill a deal II. Increase strategic value of company •General frame = Low dev complexity, high strategic upside to prospective acquirers •Adjust product roadmap to help enable exit •Close low-hanging-fruit deals •Titles III. Optimize optics02: Plan 26
  27. 3. Adjust Roadmap I. Remove impediments to exit •Extract company from any business development deals that will be viewed as liabilities •Kill crazy bet-the-company skunkworks project that will take 2 years to build •Settle any pending legal action •Align incentives so nobody internally will be motivated to kill a deal II. Increase strategic value of company •General frame = Low dev complexity, high strategic upside to prospective acquirers •Adjust product roadmap to help enable exit •Close low-hanging-fruit deals •Titles III. Optimize optics •Perception IS reality •Steady drumbeat of PR - If you didn’t care about it before, now is time to start caring •Manufacture compelling narrative & scream it as loud as possible02: Plan 27
  28. Optics: Narrative You must compell third parties to tell a story that is technically accurate but otherwise detached from reality02: Plan 28
  29. Optics: Case Study02: Plan 29
  30. Optics: Case Study02: Plan 30
  31. Optics: Case Study02: Plan 31
  32. Optics: Case Study02: Plan 32
  33. Optics: Case Study02: Plan 33
  34. Optics: Case Study02: Plan 34
  35. Optics: Case Study02: Plan 35
  36. Optics: Crafting a rocket ship narrative is very hardBut it’s not rocket science02: Plan 36
  37. Execute 1. Initiate 2. Build acquirer’s internal case 3. Price discussion 4. Negotiations 5. Term Sheet03: Execute 37
  38. 1. Initiating Discussions I. Code •Roleplay from potential acquirer’s vantage point pre-meeting •Partnership vs. acquisition •Pick up and adapt to their verbal and non-verbal queues •You want them to be the first to say the word “acquisition”, not you II. Third parties •Customers, investors, or contacts make the introduction •CEO must be the negotiator/decider in acquirer’s eyes •Close behind the scenes advisor who has been through it before is great III. Implicit selling •Effective sales doesn’t feel like selling •It’s dating, not sex V. Optics •Meeting locations •Personal aesthetics •LinkedIn profiles, GitHub, personal and company blogs must all be on message03: Execute 38
  39. 2. Internal case •Powerpoints & Spreadsheets •Planning sessions •Management meetings •Objective: Build case for them, have them think they did it themselves03: Execute 39
  40. 2. Internal case: Prelim due diligence •NDA •Do disclose certain potential unpleasant surprises •Don’t disclose anything else you’re not asked03: Execute 40
  41. 3. Price • A figment of your imagination • A function of your sales skills03: Execute 41
  42. 3. Price: Don’t negotiate against yourself •Acquirer’s capacity to pay •Optimal opening price •Your minimum viable exit price03: Execute 42
  43. 3. Price: Is not as it seems •Cash vs. Stock •early stage private company stock should typically be valued at zero •Earn outs •Indentured servitude •Contingencies •Assign informed probabilities to every contingency •Avoid revenue or results based milestones •Holdbacks •Up to 20%, 2 years is typical03: Execute 43
  44. 3. Price: Multiple interested parties Only way to optimize price is to have options •You must parallel path acquisition discussions with multiple parties •DO lean forward on communicating level of interest from other interest parties •DO NOT name the other interested parties •DO NOT fabricate other interested parties03: Execute 44
  45. 3. Price: Generally, the right personal psychology is tofocus on what will be life changing for founding teamvs delusions of grandeur03: Execute 45
  46. 4. Negotiations: Companies don’t buy companies. People buy companies run by people.03: Execute 46
  47. 4. Negotiations: People at acquirers have warped incentives. Leverage them •Understanding the psychology is critical •Almost all decisions at a big company are motivated by internal politics •Managers want to look good to their boss •New CEO wants to shake things up in role and make a mark •Privately held companies may want your investors on their cap table •Managers want to build their personal networks •Probable that their actual motivations for acquiring you are hidden... and warped.03: Execute 47
  48. 4. Negotiations: Hail Mary Passes •Have at least a few of these up your sleeve .03: Execute 48
  49. 4. Negotiations: Do not reveal your psychology03: Execute 49
  50. 4. Negotiations: Avoid agency problems •Bankers •Bankers are ultimately incentivized to build their long term deal pipeline, understand what this means for you •Only acceptable use case is (I) multiple term sheets, and (2) strategic or technology acquisition •Lawyers •Some law firms are notorious for dragging deals out to maximize billable hours •Have your lawyers call out their lawyers at the first sign this is happening •Time is the enemy •Internal agency problems •There are stakeholders within acquirer who could be against a deal happening •Watch out for board members •Figure out who they are, and preemptively turn them into deal champions03: Execute 50
  51. 5. Term Sheet03: Execute 51
  52. The Close 1. Due diligence 2. Forward Motion 3. Definitive Agreement04: Close 52
  53. 1. Due Diligence I.Don’t disclose anything you’re not asked •The psychology on acquirer side quickly shifts to “we’re scared we are going to screw up” •You’ll be shocked by what they freak out about •You’ll be shocked by what they don’t ask •Roll with it II.Lean on your lawyers •Now is the time to really engage them •Make sure they are great III. Stay organized •Google docs checklist •Shared Dropbox folder •Advanced prep04: Close 53
  54. 2. Forward motion I.You and your team must keep moving your company forward •Make sure only a few of you are distracted by the acquisition process •Easier said than done •Now is not the time to drop any balls II.Create a sense of urgency •Continuously remind acquirer why it’s important for them to close by X milestone •“Rabbits out of hats” - Deploy new features and announce new news that will be a pleasant surprise to the acquirer •Disclose any and all overtures from new interested parties III.Temporarily embrace your inner sociopath •If they stop liking you as a person, the deal dies •Restrict their contact with anyone on your team who can’t put on a happy face04: Close 54
  55. 3. Definitive Agreement i. Reps & Warranties ii. Indemnification iii. Employment Agreements •If singing up for indentured servitude, ensure you and the team cannot be terminated without cause, and that “cause” is tightly defined04: Close 55
  56. 3. Definitive Agreement04: Close 56
  57. The worst is over for you.But it’s just begun for the acquirer :-)04: Close 57
  58. Want more?@justglewgeofflewis.org 58
  59. Questions 59

×