How do you maximize your exit deal value?

1 Understand your exit options

When exiting your startup, there are several options to consider, depending on your goals, the market conditions, and the interest of potential buyers or investors. These include an acquisition, where another company buys your startup for cash, stock, or a combination of both; a merger, where your startup combines with another company to form a new entity; an initial public offering (IPO), where your startup goes public and sells its shares on a stock exchange; and a secondary sale, where existing shareholders sell their shares to new investors. Acquisitions can be strategic to gain access to technology, customers, or talent; mergers can increase market share or expand product portfolios; IPOs can raise capital or increase brand awareness; and secondary sales can provide liquidity or reduce risk.

3 Prepare your exit materials

Once you have determined your exit option and readiness, you need to prepare materials that will demonstrate your startup's story, successes, and potential to potential buyers or investors. This includes a pitch deck, which is a presentation summarizing the problem, solution, market, traction, business model, team, and ask. An executive summary is also necessary; it is a single page document that highlights the key points, value proposition, and exit opportunity. Additionally, a financial model should be created - a spreadsheet projecting revenue, expenses, cash flow, and valuation based on assumptions and scenarios. Finally, a data room should be established; it is an online platform storing and sharing confidential and sensitive information such as contracts, patents, customer lists, and financial statements.

4 Find your exit partners

Executing an exit strategy requires finding the right partners to help you navigate the process and maximize your deal value. An exit advisor, such as a banker, broker, lawyer, or accountant, can provide advice on your exit option, valuation, timing, and negotiation. Additionally, a lead buyer or investor will make the first offer, set the terms, and lead due diligence and closing of the deal. They can be a strategic or financial buyer, or a venture capitalist or angel investor. Lastly, co-buyers or co-investors may join the lead buyer or investor in the deal as partners, syndicates, or consortiums. These can be other companies, funds, or individuals depending on the deal structure and size.

5 Negotiate your exit terms

After you have identified your exit partners, it is important to negotiate the terms that will determine your deal value and post-exit relationship. These terms include the price, payment, earnout, escrow, equity, and role. The price is the amount of money that the buyer or investor will pay for your startup, either upfront or over time. The payment is the form of payment that the buyer or investor will use to pay for your startup, either in cash, stock, or a combination of both. An earnout is a contingent payment that the buyer or investor will pay to you based on your startup's future performance. An escrow is a portion of the payment that the buyer or investor will hold in a third-party account until certain conditions are met. Equity is the percentage of ownership that you will retain or receive in the new entity, either as shares, options, or warrants. Lastly, a role is the position and responsibilities that you will have in the new entity, either as a founder, employee, advisor, or board member.