Here’s What Happens When You Decide to Sell Your Startup

Spreadsheets and hockey-stick charts probably aren’t enough to open checkbooks

Photo: Westend61/Getty Images

Are you considering selling your company as a potential exit? Now? A year from now? Five years from now?

In over 20 years of working in the startup world, with over a dozen acquisitions under my belt as an entrepreneur, advisor, and investor, I can assure you that an acquisition is always a massive and complex transaction that you’re never 100% prepared for. In fact, the one regret I hear over and over again from my peers is that they got less than what they should have when they signed the deal.

Whether you’re a founder or you just have some equity, there’s a bunch of stuff you need to know before you decide to sell your startup, stuff that you won’t actually learn until you’ve been through it.

I sat down with a friend last week who is in a position to seriously consider selling her company. It’s her first startup, so we went over a high-level outline of the process.

How to know when it’s time to sell

There are basically four reasons to sell your company:

1. Things are going poorly. This obviously isn’t good and, unless you’re in a position where you have to sell, I would recommend against it. Instead, I’d do everything in your power to stabilize and reconsider later.
2. Things are going extremely well. On the other side, this is the best position to be in, but it’s also the time when the founders are least interested in selling. The deal usually has to be outstanding.
3. An external factor. Something has happened outside of the company that has made selling an attractive option. For example, I wound up running two companies at the same time, and decided to get out of the small one to focus on the big one.
4. You’ve taken it as far as you can. This is most often the primary reason why founders choose to sell their companies. They see a lot of opportunity down the road, and decide that a specific acquirer can take much better advantage of that opportunity.

Usually, the decision to sell is based on a combination of these reasons.