Given that big exits and valuations appear to be one of the factors that are really inspiring all the media attention around the startup ecosystem and billions in venture capital investments, it’s a part of starting a company that every entrepreneur needs to understand. Still, there seems to be a lot of persuasive myths and misconceptions about this eventual milestone among entrepreneurs so here is what every entrepreneur should know about acquisitions…
1. We’ll Have An IPO In A Few Years
According to TechCrunch, one of the top misconceptions about startups by founders is that they assume they’ll start a company today, and in a few years they’ll just organically wind up going public and get listed on a major stock exchange.
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This doesn’t mean you shouldn’t pursue an initial public offering. At least several top CEOs I’ve interviewed on the DealMakers Podcast were actually in the midst of, or days away from going public when they got acquired. It is still potentially a great outcome. For some startups, it will be the best choice of exit.
Just recognize that it may be less likely than you think, and that should spur founders to be thinking about what the mergers and acquisitions path looks like and means for everything else they are doing, including fundraising.
2. An Exit Will Probably Come Much Later
While on the one hand, some startups seem to be raising more rounds, the majority of exits may come far sooner than entrepreneurs think something certainly key when it comes down to what every entrepreneur should know about acquisitions.
Series D fundraising rounds seem to be much more popular these days. Even Series E rounds. They seem to be coming faster and closer together too.
However, data from CB Insights shows that most startup exits actually come right after Seed and Angel funding rounds. 44% happen between the Seed round and before the Series B. Almost 60% of exits from before a Series C is raised.
I know many founders who have received acquisition offers far before they thought they would be ready. That makes it extremely important to know how to react and to talk to your M&A advisor about it in advance.
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