How do you think of exiting as an experienced founder

When we talk about tech entrepreneurship, we are naturally drawn to the exciting and exciting world of venture-backed startups.

And yet boot – Where a business is funded through its operations – is often a better business strategy. It gives founders more control over their own destiny, and a greater reward for their efforts when they finally decide to move out. However, these companies are often created out of the public eye, so it is rare for other founders to learn from their successes.

That’s why I thought it would be helpful to share insights from the work I’ve done with seasoned founders and teams working towards the exit.

So how should these founders think about and prepare for the exit process? How should they tell their story to potential buyers and sell the exit to employees?

Big thanks to Janosch Kühn, co-founder of Berlin-based Kolibri Games, who shared his exit story as part of this piece.

Reason: Why exit? why now?

Bootstrapping requires an enormous amount of heavy lifting for entrepreneurs to grow and sustain their business to the point where exit becomes viable.

Unlike venture capital-backed entrepreneurs, who typically operate in a predetermined seven- to ten-year time horizon, the end of the startup journey isn’t always with clear signs.

Through my coaching work, I’ve identified five key drivers of why seasoned founders might consider exit:

  • Growth Partner Wanted. There are significant growth opportunities that they cannot address without more resources or investment.
  • Take advantage of the interest received. People are knocking on doors to buy the company.
  • Relationship breakdown. The co-founders no longer saw eye to eye on the company’s future, and these differences proved irreconcilable.
  • Know its limits. They took the business as far as possible, and realized they didn’t have the right skill set to take it to the next level.
  • it is time. Whether it’s because of burnout, feeling down, wanting to spend more time with their family, or pursuing other opportunities, they know it’s time to move on.

But regardless of the motive, things ultimately boil down to one question: Does getting out make sense now?

Furthermore, the founders will be tasked with telling an exit story to their teams, clients, partners, and potential buyers or investors. If they can’t convince themselves that it’s the right decision, they’ll have a hard time getting those fans to their side.

Path: What are the exit routes?

Once the founder has committed to the exit, the next step is to evaluate different options.

After a five-year journey, Kuhn and his partners, Daniel Stammler and Oliver Loeffler, left Kolibri Games in 2020, having sold the studio to gaming giant Ubisoft for upwards of $100 million.

When considering exit strategies, he explains, “It’s always a trade-off between financial investors and strategic partners, so it’s important to be clear about your end goal. We needed strategic support, first and foremost, and Ubisoft was the perfect partner in that sense.”

Most bootleg exits take the form of a commercial sale/acquisition, either via a strategic acquirer – as was the case with Kolibri Games – or a private investor, such as a private equity fund. linked companies Can The list is public, but – as with any project – the probability is slim. As Cohn points out, in most cases, an exit will involve striking the right balance of strategic and financial support.

The time frame for completing this transaction will vary greatly depending on the appetite of the acquirers. We often hear the standard estimate that project rounds take about six months; For the founders I’ve worked with, the exit process took roughly 12-18 months. A longer time frame is not necessarily a bad thing. It gives the founder a chance to strategically manage the exit and prepare everyone for the disruption that is likely to follow.

The Agreement: How can we create a founding coalition and a joint commitment to get out?

All entrepreneurs have different reasons for considering an exit, and in the case of a joint venture business, those reasons will not always align.

In my experience, the best way to achieve alignment is for founders to walk through various exit scenarios and explore all possibilities. For example, is a selling strategy, or could an outside investment represent an alternative way forward? Is it possible for the remaining partners to purchase one founder? The founders must team up before making any further decisions.

One company I worked with had three founders: two with the company longer than the other and with more personal investments at stake. They were ready to take some of their chips from the table and spend more time with their young family. The other founder joined the group a little later and was at a different point in her life. She definitely wanted to stay and see where the success story could go.

Kühn of Kolibri Games explains: “Although we were pushed by our friends and family, we never disagreed with the co-founders about the time frame for the exit. Our goal has always been to get to a level where the exit would be beneficial for us and would make strategic sense for the company. With this alignment, we were able to All of us are able to work together on the trip.”

Story: How do we shape the narrative around the director?

A big part of getting ready for an exit is getting the story right. Founders need to be able to talk about why it’s time to sell, and shape that story to teams and potential buyers. If you’re crossing a river, you need to be able to show people what the bank looks like on the other side and convince them it’s worth the effort to get there.

Remember that moving out can lead to job losses or role replacements, therefore internal communications No less important than external factors. It creates significant uncertainty, and founders shouldn’t tiptoe around that reality — but they shouldn’t go too far, too early, in their communications. In the case of one company I worked with, they built their internal communications strategy around listening to the team’s concerns, just to make sure everyone felt heard.

Of course, sometimes the most convincing person is the founder himself. They are emotionally invested in their business, and while they know it’s a good time to get out, letting go is no easy feat.

I always ask the founders, if they see the company as an outsider in five or ten years, what do they want to see? Some respond in terms of revenue or profits. Others talk about preserving company culture at scale, improving product quality by leveraging the buyer’s research and development capabilities, or enhancing customer satisfaction by giving them access to a broader ecosystem.

Once the vision is clear, founders can define what a successful transition looks like—in terms of customers, employees, products, and financials—and begin crafting the story around the exit.

The dilemma: improving profitability or growth?

A compelling exit narrative needs to be supported by facts about the company’s performance. This is an ideal time for founders to focus on improving the business, but it is important that they stay true to their playbook as they put their exit strategy into action.

A Bootstra business has been optimized for profitability from the start, and while it can be tempting to focus on a strategy for inclusive growth in an effort to maximize interest in the company, this approach can backfire if it goes against your expectations. Organizational culture and DNA. .

“Having been turned down by investors so many times,” Cohn says, “we operated with a profitability mindset throughout our journey. We were very hesitant about spending money—even on things like marketing—until we were confident about the kind of return we could expect. So, as we ramped up our marketing efforts as we sought an exit , we continued to improve toward profitability, for example, asking for return on investment [return on investment] Within three months for any marketing investments.

Uncertainty: Who am I once I no longer run my company?

After closing the deal with Ubisoft, Kuhn and his co-founders committed to staying for 18 months to help the organization adjust to its new environment. “We were still involved with the company, and invested a lot of time in developing new games to take it to the next level,” he says. “It was good to continue to contribute our ideas and keep up with the great developments in the company.”

What Cohn describes is not easy. For many founders, it can be difficult to adjust to a world where they are no longer at the helm. Some keep calling shots from the sidelines, confusing their old teams. Others feel trapped and powerless, and regret their commitment to stay.

The lesson here is twofold. First, founders should think carefully about the length of their post-exit period. Remember, most acquirers want to retain the knowledge and insights of the founders for several years, whether in an executive or non-executive capacity. Disappearing too quickly could leave the new leadership team exposed. However, a long term in an executive position can become a prison sentence, preventing the founder from continuing with his life.

Secondly, the founders need to decide what life will be like after the exit. Many seasoned entrepreneurs can’t differentiate themselves from their business and really have no idea what they’re going to do with themselves after they get out.

Thinking of a way out? Find an experienced founder

A lot of this recent work with seasoned founders has reminded me of “working from first principles”: out of the spotlight, they don’t take anything for granted and don’t pretend to know anything. Founders with or without venture capital support should reach out to experienced peers to understand their perspective on the exits.

Julius Bachmann He is an executive coach based in Berlin who focuses on working with entrepreneurs. He is also a co-founder of JRNY.

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