Important Things to Remember If You Want to Sell Your Startup

We discuss some key things a startup should keep in mind at the time of a Merger or Sellout to a Company. The information is of great help for all fund seekers, entrepreneurs, startups and related fields of interest.

Integrating a startup into a big company can present some key challenges which we are going to discuss today.

Have realistic expectations from the Buyer CompanyBig companies typically have bigger budgets to spend on product development and marketing, a bigger base of customer relationships to tap into and a well-known brand name to assist with trust and credibility of your sales efforts.But, unless specific support is well-documented upfront in the merger or sale agreement, often times, big companies will not

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bring the dramatic upside the startups are expecting. There are many reasons for this, mostly stemming from a big companyís focus on other more important areas of their business.So, as a seller, make sure you get everything you are hoping for well detailed in writing.

People executing the deal should be involved in its creationTypically the people that negotiated the deal are not the same people that will implement the deal. This can mean that your future success is riding on people you have never met before, who may or may not be equally incentivized to see you succeed.Big companies are full of busy people, typically set up in various fiefdoms internally. The last thing they need is another project on their list, to help a startup they have never heard of before.So, make sure the people who will be implementing your deal are the same people involved in negotiating the deal. Ensure nothing gets lost in translation in the handoff as to the importance of the transaction to both parties.

The slow pace of big companiesBig companies just naturally take longer times to make decisions. They are typically consensus-building organizations that need buy-in from the various stakeholders involved in any project.What used to be a five minute stand-alone decision could easily become a month long process. Make sure you are ready for this material shift in culture and personality.

The norms of big companiesThink about all the budgeting processes that now need to be approved and the monthly financial reporting in consistent formats and new systems. Think about legal having to get

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involved to approve any new contracts. Think about HR getting involved in any new hiring process.

Big companies like earn-outsEarn outs are any additional money the selling shareholders may receive from the buyer, based on the future performance of your business post the sale. These payments can be tied to future revenues, EBITDA or whatever other metrics that are mutually agreed upon.The problem is many big companies structure deals with performance-based earn-outs, and these earn-outs rarely get paid out, often for reasons out of a sellerís control. So, renegotiate the deal before going ahead.

ConclusionWhen you are about to sell, be sure you are clear on what you are really signing up for as an employee of a bigger business. The most important thing is to make sure both parties are 100 percent in agreement on: (i) why the deal makes sense to both parties in the first place, and (ii) the execution plan, budget and timeline after closing, to make sure no later disappointments by either party.Donít just focus only on your own options. Understanding the other partyís interests can give you leverage. The ultimate key to selling is to stay in the game.

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