From day one of launching a startup some founders already have one eye on the exit. They know that when the time is right they will cash in. But when is the right time? The obvious answer is when the company reaches what the founder deems to be peak value.
But according to Tim Armoo, founder of Fanbytes, “that is the dumbest thing you could ever do”.
Fanbytes is a digital influencer marketing startup that was acquired by Brainlabs in May 2022 for an undisclosed fee, reported to be in the tens of millions.
Speaking at London’s Black Tech Festival – a multi-day event celebrating and promoting greater diversity in the tech industry – Armoo said that the idea of selling a startup when it has grown to its highest level “infuriates” him.
“The mistake a lot of entrepreneurs make is they try and sell at the peak. And they’re trying to like juice every possible return out of it. And I think that’s the dumbest thing you could ever do,” Armoo said.
Armoo made the point that often when a company is seeking to acquire a startup, it is because the acquirer thinks it can grow faster by buying someone else’s customers, intellectual property and staff.
“We aimed to sell not at the peak but going up to the peak,” said Armoo. “What that meant was, we could then tell a very good story, a real story, about how this was going to grow further in the hands of the acquirer.”
Armoo said that the promise of further growth was more meaningful than startups already at the peak of their growth.
Armoo isn’t alone. Geri Cupi, founder and CEO of Twig, told UKTN his own views on when a startup should think about selling:
“I think that for any founder in whatever market sector, the main goal now should be not just to sell the business at growth phase, but to build something impactful for the world and shareholders,” Cupi said.
“If you build a business that has some sort of positive impact right from the beginning, the right valuation will follow.”
Earlier at Black Tech Fest, senior members of Google’s European team explained why slowing down the recruitment process is necessary to promote diversity.