In this video interview, we speak with Richard Goold from EY about exit strategy. We explore the different types of exit, at what point founders should plan for this outcome, when the best time is to exit and how to choose the right buyer for your tech company.
Emily Spaven: First of all can you tell us what the different types of exit are?
Richard Goold: So most people think of an exit as a private sale to a strategic buyer, but there are IPOs and we’re beginning to see some IPOs coming back into the market again, but also increasingly we’re seeing partial exits, because growth-stage investors come in and can buy part of an entrepreneur’s stake.
Should exit be the ultimate goal for all tech founders?
Well it’s certainly true that some entrepreneurs build their companies to sell them, but not all of them.
I think many entrepreneurs just want to build a company that’s going to change the world and do something really exciting. In fact, most of the biggest exits are in that second category.
And at what point should founders plan for an exit?
So I think, in many ways, planning starts from day one. You need to have your house in good order and you need to have the systems and governance in place so that if an acquisition were to happen, a buyer wouldn’t find problems.
Really, relationships are fundamental, because many companies get sold to a company they have had a relationship with for a very long time. So building strategic relationships early is key for every entrepreneur.
So once a founder feels their firm is at the stage to exit, how do they then decide on the best buyer?
Some of it is just around money, but a lot of it is around culture as well. Your investors and your advisers are going to have a view, but ultimately, an entrepreneur typically wants to have their company – their baby – be successful in someone else’s hands. So finding some form of meeting of minds around the cultures is really important.
How can a company know when it’s the right time to exit?
I think there’s a lot of touch and feel around that and, again, some of that will go to what your investors think, but taking a lot of advice – taking advice from your advisory board or the broader professional services community is important.
I think much of it is driven around what they buyers want, though, and the buyer’s timing. And to get the best value, what you really want to do is get your startup just at the front of an innovation cycle. Because, typically, in a new area, the best values are always going to be paid for early acquisitions in any new technology area.