Sausage Making: Financings & Exits

David Nevas . June 19, 2015

Two days of candid conversations about raising capital, selling a company, and going public pulled back the covers for our CEOs on what it actually takes to get to the promised land -- even if the promised land is just raising that next round. There were a ton of great insights that came out of this CEO Summit sausage-making session, and a set of tactics and strategies that coalesced from many viewpoints.

The Importance of Storytelling

Our CEOs agreed - the most important thing in raising capital or selling your business is being able to effectively tell the story to stakeholders. This story is a unique one -- different from the ones you tell customers or employees, though with certain fundamentals remaining consistent.The main distinction is that you are now not only telling the story of why your business is so great, but also why it is a compelling opportunity to join forces with an acquiring company (or claim a spot in an investor’s portfolio). This theme came up earlier this year at our Fintech Roundtable. We heard from FolioDynamix and Gladstone on the importance of storytelling.

Before talking to an acquirer, you should know the following:

  • Exactly why a buyer should want to buy you
  • How much value you will be able to drive
  • Who else is like you that the buyer could acquire (and of course, why you are the better bet).

In fact, if your buyer can’t communicate the same story back to you, alarm bells should go off that this might not be a great fit. Similarly, you should have a compelling story for investors.

What specifically about their industry or functional expertise should be a strategic fit with your business? How do you play to their strengths in such a way that should cause them to be excited about your business? 

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Confidence is Key in Sell-Mode

Make it a performance. You also need to be cognizant of the fact that you are in sell mode, and every interaction with a buyer or investor in some way needs to be a ‘performance.’

Don’t wing-it. To the degree you can script interactions and rehearse with your team on the fly -- including brainstorming questions you might get – don’t get stuck making up answers on the fly. This is one instance in which winging it is most definitely not a good strategy.

Be aggressive. The plan for the business that you present should be aggressive, you’ll do yourself a disservice by being conservative, and in fact may telegraph weakness or uncertainty.

Prepping work in advance also adds credence to the fact that you are a seasoned team and “you’ve done this before,” even if you haven’t. The buyer has to feel like you’ll walk if the deal isn’t right, and that you are happy to keep operating the business (or selling to one of their competitors!).

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The Numbers Won’t Sell Themselves

True story. You need to provide the narrative and compelling vision for the business. This works best when you have built relationships with the acquirer or investor in advance.

A business development deal struck in advance of any acquisition discussions is a great way to smooth the path of the deal. Leveraging the relationships and connections you will build through a commercial deal will enable you to elevate the conversation to higher levels within your buyer, and will provide air cover as you get into the nitty gritty.

The ability to move the conversation outside of the formal communication path can be critical to the success of your deal, and taking the time up front to build those relationships and trust will give you the opportunity to leverage those relationships as the process moves up the chain of command in the buyer.  

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