What’s the best way to sell your company?

Justin Kan (Partner at Y Combinator)
The Founder’s Guide To Selling Your Company

Negotiating an acquisition is the most distracting thing you can do in a startup: going through M&A is an order of magnitude more distracting than raising money. All of your ability to run the day-to-day operations of your company will grind to a halt. You should only enter an acquisition process if 1) you are certain you want to sell the company and 2) you are likely to get a price you will accept. Don’t talk to potential acquirers “just to see … (read more)

What’s the best way to sell your company?

Justin Kan (Partner at Y Combinator)
The Founder’s Guide To Selling Your Company

Entering the acquisition process is one of the most dangerous things an early stage startup can do, because the process is distracting, demoralizing, and usually involves giving your competition most of your proprietary business data. Founders who have been through the process have said it is ten times as distracting as fundraising. It often cripples your ability to oversee the business operations. Do not enter into an acquisition process lightly… (read more)

What’s the best way to sell your company?

Justin Kan (Partner at Y Combinator)
The Founder’s Guide To Selling Your Company

Similar to raising money, the best time to sell your startup is when you don’t need to or want to. Paradoxically, you are probably thinking about selling your startup as you are experiencing a lack of traction, tough competition, or difficult time fundraising. However, this is a bad time to sell your startup: you will have few bidders and be more likely to acquiesce to the demands of anyone who does show up.

What’s the best way to negotiate the sale of your company?

Justin Kan (Partner at Y Combinator)
The Founder’s Guide To Selling Your Company

A potential acquirer’s first offer is rarely its best offer. Don’t be afraid to say “no” – the potential acquirer isn’t going anywhere. There are many negotiation strategies, but in order to extract the most value you need to (1) be willing to walk away and (2) initiate a competitive bidding process.

What’s the best way to negotiate the sale of your company?

Justin Kan (Partner at Y Combinator)
The Founder’s Guide To Selling Your Company

Sometimes, a company you are doing a critical business development partnership with will insist on a “cool down period” in an agreement. This is a period of time during which you have to wait once you’ve received an acquisition offer before you can sign (for your partner to theoretically prepare a better counter offer). Cool down clauses can actually work in your favor as a way to acquire additional offers once you’ve received a first term sheet.

What’s the best way to negotiate the sale of your company?

Justin Kan (Partner at Y Combinator)
The Founder’s Guide To Selling Your Company

You can tell if an offer is bullshit because it will not be accompanied by an expiration date and/or a promise of a term sheet delivery within a very short period of time (24-48 hours). When a sufficiently high-up decision maker decides he/she wants to buy your startup, he/she will attempt to meet with you constantly and put time pressure on you, so as to prevent you from shopping the deal and getting a better offer.

What’s the best way to negotiate the sale of your company?

Justin Kan (Partner at Y Combinator)
The Founder’s Guide To Selling Your Company

Investment bankers are expensive (1 to 2% of the total deal value). However, the good ones can help you get a thorough understanding of the competitive landscape, who the individual decision makers are at every potential acquirer, and what buttons to push to maximize your deal value. Having a professional negotiator on your side is often extremely valuable, if you can get someone good.

What’s the best way to negotiate the sale of your company?

Justin Kan (Partner at Y Combinator)
The Founder’s Guide To Selling Your Company

As the startup, you have all the leverage before you sign a term sheet. Once you sign, you have almost no leverage at all. Feel free to push back on exploding offer deadlines and other pressure to sign immediately. After you sign, you can expect any points that weren’t previously negotiated will end up with language in favor of the acquirer.