Planning for an ExitSome Lessons for VCs &     EntrepreneursMark SusterRincon Venture Partners LP & CEO Summit,November 20...
Understanding the Market   for Venture Exits
Most Entrepreneurs Have Unrealistic    Expectations of Exit Values                      IIcan always get                  ...
Or As Pandodaily Put It
Of course it’s much harder    than that – but youwouldn’t know it from the           press
Most VCs Don’t Have a Strong Sense of Exit Values Either. It’s Not Only HRs
The Fallacy of Bimodal Returns. Great                Funds Often Built in the MiddleSource: USV returndata per AVC.com
The Reality Is - There Aren’t Many VC                      Exits > $100 millionSource: Capital IQ      And Many of These R...
And There Aren’t Many VC Tech IPOs                               EitherSource: Capital IQ
The Median VC Exit Value for 2010 Was                       $70 million                                       Guess What? ...
What Does This Mean forEntrepreneurs and VCs?
I Recommend Entrepreneurs Start Lean,                         Only Go Fat If Product/Market Fit                           ...
When The Hors D’oeuvres Tray is Passed             Take Two
And Put One in Your Pocket
Just Don’t Take the Whole Tray!
As a VC We Try to Lean in Early on         Winners & Avoid “The Mark Up Game”ownership %                                  ...
“Fat is good when you’re on to something                 really special, but …          Sometimes NOT Having a Big VC Abov...
Selling Your Company
Companies Are Bought, Not Sold                    PR Matters. I know. It shouldn’t.                     It does.         ...
Need to Know What Type of Acquisition               You Would BeValue to Acquirer                                         ...
Organizational Purchases                      Champion                                     Beat You                       ...
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Startup Exits: A Primer

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A primer to think about exits at tech startups from a presentation I gave November 2012 at Rincon Venture Summit

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Startup Exits: A Primer

  1. 1. Planning for an ExitSome Lessons for VCs & EntrepreneursMark SusterRincon Venture Partners LP & CEO Summit,November 2012@msuster
  2. 2. Understanding the Market for Venture Exits
  3. 3. Most Entrepreneurs Have Unrealistic Expectations of Exit Values IIcan always get can always get acqui-hired for acqui-hired for 15 million bucks 15 million bucks
  4. 4. Or As Pandodaily Put It
  5. 5. Of course it’s much harder than that – but youwouldn’t know it from the press
  6. 6. Most VCs Don’t Have a Strong Sense of Exit Values Either. It’s Not Only HRs
  7. 7. The Fallacy of Bimodal Returns. Great Funds Often Built in the MiddleSource: USV returndata per AVC.com
  8. 8. The Reality Is - There Aren’t Many VC Exits > $100 millionSource: Capital IQ And Many of These Raised Huge Sums of Money so Returns Aren’t Clear
  9. 9. And There Aren’t Many VC Tech IPOs EitherSource: Capital IQ
  10. 10. The Median VC Exit Value for 2010 Was $70 million Guess What? Entry Price MattersSource: Flag Capital via Bryce.VC
  11. 11. What Does This Mean forEntrepreneurs and VCs?
  12. 12. I Recommend Entrepreneurs Start Lean, Only Go Fat If Product/Market Fit FatProgress / Capital Keep Options Open Inflection Point Time
  13. 13. When The Hors D’oeuvres Tray is Passed Take Two
  14. 14. And Put One in Your Pocket
  15. 15. Just Don’t Take the Whole Tray!
  16. 16. As a VC We Try to Lean in Early on Winners & Avoid “The Mark Up Game”ownership % 3 Get 2 30% Ownership in Solid Performers 1 Lean Early on 20-25% 20% Big Winners Small Initial Check 10% $0.5 $2m $4m $8m Total investment ($m)
  17. 17. “Fat is good when you’re on to something really special, but … Sometimes NOT Having a Big VC Above you in the Cap Table is a Great Thing for both VC & Entrepreneur” It Keeps a lot More Options OpenSource: Mark Suster. Having been burned before by misaligned incentives on exits
  18. 18. Selling Your Company
  19. 19. Companies Are Bought, Not Sold  PR Matters. I know. It shouldn’t. It does.  Get Biz Dev or Sales Deal People buy people they know.  Start Early. Need to Take Early Meetings (just like raising VC)  Leverage VCs. Corp Dev use as a quality filter  Use Banks Wisely. Some deals fees nothing compared to price increase, closure %. But bank must have skin in the game.
  20. 20. Need to Know What Type of Acquisition You Would BeValue to Acquirer Defensive Move  Can’t Afford to Strategic Have A Threat Competitor Own  Avoid or Delay Revenue Disruption Driver Product Gap Talent Hire  $1m / Dev  Location Matters Purchase Price
  21. 21. Organizational Purchases Champion Beat You You UpSell Your Product Business Buyer IT Dep’t Legal / FinanceSell Your Company Sales Product Corp Dev In some companies Corp Dev leads strategy / investments. In others they are the deal execution teams. Know your buyer.
  22. 22. </end>
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