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Startup failure statistics vary widely, but even the rosiest numbers show more than 50 percent failing within five years. Startup founders often have obligations to many stakeholders, including family, employees, investors, and perhaps customers. So when they are forced to face the reality of their business’s failure, they have a responsibility to these groups to do everything in their power to optimize the process of exiting. This starts with understanding the various paths available to you before you have $0 cash in the bank. By that point, many potential exit opportunities will be off the table.
It all starts with communication. It is critically important to communicate regularly and consistently with your stakeholders from the day you launch the company. Communicating honestly and transparently about the good, the bad and the ugly will (a) encourage an environment of collaboration, wherein your stakeholders will work with you to overcome challenges, and (b) help you to avoid surprising your stakeholders if you have to shutter the company.
When you and your cofounders make the decision to exit, I suggest you enlist the help of your investors and advisors. Here are some potential avenues to consider:
1. Compile a list of all of your competitors and prioritize them in order of which ones are most likely to have an interest in buying the company. Then start contacting them. Of course, it’s always better when a potential acquirer contacts you, but you have to face reality. It’s all about optimizing the exit, so speak to as many potential acquirers as possible. Depending on the state of your company, such an acquisition may be considered an acquihire, but that’s okay. Even if you end up with very little or no cash up front, an acquihire can provide important benefits including (a) a payout over time, (b) jobs for you and your cofounders, and (c) jobs for your employees.
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