Nearly every founder or executive considers selling their company at one point or another. Before embarking on the complex process, it is crucial for the company leaders – especially within the ever-evolving tech community – to ensure their strategy encompasses all aspects of a sale, from understanding the environment to being accurate with pricing expectations.
In advance of the annual FOLEYTech Summit held on October 1, we are releasing five tips for a successful exit. See below for tip number three and check back here for more tips leading up to FOLEYTech.
3. Understand the Impact of the Current Funding Environment
There are many different types of investors pursuing startup companies: accelerators, crowdsourcing, angels, traditional venture capital and private equity funds. This tsunami of capital has fueled not only a large crop of startups, but it has also led to more exits. Founders face new pressures, as disparate classes of investors have varying goals and requirements.
Traditional growth capital investors often have a longer horizon when weighing the risk and reward of exiting now versus holding out for a chance at a much larger deal or even, in the rare case, an IPO. Growth capitalists answer to their limited partners, many of whom are institutional investors such as college endowment funds, and expect their capital to be locked up for long amounts of time.
Smaller investors, from angels to funds comprised of lower net-worth individuals, often have more constrained timelines. They may prefer to sell early and eliminate risk. The demand for liquidity from these new kinds of tech investors can accelerate exit paths and create dynamic sets of influences on founders.
Even companies that weren’t venture backed may face pressures to sell from family members who had no part in creating or building the company. In many cases, company founders from the baby-boom generation, approaching retirement, don’t see their own zeal for the business reflected in their younger scions. When there is nobody in the family to carry on, it can be an attractive time to sell.
For more information, visit Foley.com/intelligence
This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney.
This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary.
The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites.
In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.