Thinking About Exit When You Start Your Business: Entrepreneurs Envisioning Successful Outcomes for Themselves and their Investors
Join a webinar led by Church Lewis and Claire Gruppo, partners at Gruppo, Levey & Co., the investment bank sponsor of New York Angels.
Each with more than 20 years of experience in growth company finance and merger and acquisition transactions, Church and Claire will be sharing their perspective on the range of outcomes possible for a startup venture with seed/angel funding and their probability of occurrence. Among these possible outcomes, they note that a completed sale of a company is the one most within the control of the entrepreneur and the management team because it can be achieved early in the life of a company meeting its objectives and can happen before additional funding is required.
The number of companies that receive first-time VC funding each year is a very small fraction of those that receive seed/angel funding. Of those that are VC funded, only 2% become public (IPO).
Similarly, the potential of becoming a billion dollar company, which may be one of the exciting characteristics of the business idea behind a startup, is not the same as the actuality of becoming a billion dollar company. Tumblr’s sale to Yahoo is the only example of an angel or VC backed company in NY reaching (or going public at) this value in 2013.
If the startup entrepreneur cannot plan for an IPO or for a billion dollar valuation, then what are the financial goals that the startup entrepreneur can have in view and around which a tactical plan can be built? On a personal level, what is the minimum financial outcome with which a startup entrepreneur would be satisfied for as many as five and potentially more years of dedicated, unrelenting effort?
Anticipating and planning for an early sale is often the best path to successful exit for entrepreneurs and their backers, even though the sale price at this point may be as low as $10 million and is unlikely to exceed $30 million.
Target Audience: Startup entrepreneurs who have received seed/angel funding, their seed/angel investors, and other entrepreneurs who want to start companies.
Desired learning: Participants will come away understanding that IPOs and other high value exit events happen very rarely. Further funding beyond the seed/angel round from venture capitalists may be hard to obtain, will be dilutive and elevate the value required to deliver good financial returns to the entrepreneur and investors. Therefore a startup should target becoming an attractive sale candidate with its seed/angel funding, achieving the following characteristics-
· Revenue of approximately $5 million or more
· Annual revenue growth of 30% or more
· Attractive gross profit and contribution margins
· Continuing differentiated position in its chosen market
When this threshold is reached, the entrepreneur should speak with an investment bank for an assessment of the company’s sale potential.
Speakers: Church Lewis began his growth company investment banking career at Alex. Brown in the 1980’s and ran the internet and digital media investment banking business for eight years at Needham & Co. before joining Gruppo, Levey as a Partner in 2012. Claire Gruppo founded Gruppo, Levey in 1992, following a successful career in business development for American Express, to provide M&A advice to direct marketing, media, and data analytics companies. Today, the firm predominantly advises technology enabled service companies in M&A and later stage financing transactions. www.glconline.com (http://www.glconline.com/)