Startup Acquisition Stories Podcast with Wil Schroter, Founder of Startups.com
Feb 27, 2024
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Venture-backed startups often fail, but M&A can salvage them. Wil Schroter shares his experience of buying failing startups and making 50 times ROI. Topics include knowing when to sell, restructuring a startup for desirability, and the challenges of acquiring distressed companies.
Founders can renegotiate valuation with investors for mutual benefit.
Choosing to exit a failing startup requires open communication with investors.
Timely actions and transparent decisions are crucial when funds are running out.
Deep dives
Renegotiating Valuation and Ownership with Investors
In the podcast episode, the discussion revolved around the option for founders to renegotiate their valuation and ownership with investors when their venture-backed startup is not meeting expectations. The example of a stock sale versus an asset sale was highlighted, emphasizing the tax benefits for the founder in a stock sale. By initiating candid conversations with investors about the current state of the business and aligning on new terms, founders like Dan Martell from Clarity.fm demonstrated proactive strategies to secure a mutually beneficial outcome.
Considerations Before Quitting a Startup
The conversation delved into the important realization that founders can choose to walk away from their startups if the circumstances warrant it. The podcast stressed the significance of honest discussions with investors before making that decision, recognizing the responsibility to communicate openly about the challenges faced. Encouraging founders to prioritize personal well-being and relationships, the episode highlighted the need for candid conversations to navigate the complex emotions and obligations of exiting a startup.
Navigating End of Runway Scenarios and Importance of Timely Actions
The podcast addressed the critical phase where a startup is running out of funds, emphasizing the need for timely actions to manage the impending closure or acquisition of the business. Founders were advised to recognize the signs of financial strain and impending shutdown and to consider the impact on employees and investor relationships. By acknowledging the urgency of the situation and making informed decisions promptly, founders can navigate the challenging end-of-runway scenarios with transparency and responsibility.
Strategic Options for Struggling Startups
When a founder faces limited runway, strategic options emerge. One approach involves renegotiating deals with empathetic investors, ensuring a win-win structure. Another option is for startups with significant capital to consider selling the business, offering an exit strategy. By exploring profitability and restructuring, founders can attract buyer interest and potentially secure a sustainable future for the business.
Unconventional Success Stories in Acquisitions
Failed startups can hold hidden value for buyers. Instances where seemingly unsuccessful ventures were acquired have yielded significant returns. Buyers often structure deals with both cash payments over time and equity components, emphasizing shared success. Such acquisitions showcase the potential for salvaging valuable assets from startups that did not align with the market or timing, offering a second chance for growth and success.
It’s a well-known fact, yet many venture-backed founders choose to burn out and ride their dying startups into the ground. Few realize they have options like M&A that could salvage their business for both themselves and their investors.
Wil Schroter, founder of Startups.com knows all about failing startups. He founded nine different startups over 30 years despite one of his first businesses crashing due to lack of capital.
When his business failed, Wil was perplexed. A business valued in the millions with happy customers and even profits was still able to fall apart to nothing. It defied logic and he felt the business surely should still be valuable to someone.
It caused Wil to spend years talking to people in San Francisco trying to understand exactly how to sell and buy dying VC-backed startups.
After meetings with over 100 failing VC-backed businesses, Wil created his company Startups.com by buying the assets of six burnt-out VC startups. Since then, he’s made an estimated 50 times ROI from his buys.
Tune in to an extra-special episode of Startup Acquisition Stories with Wil and Andrew as they discuss a topics rarely heard about outside of corporate boardrooms like:
► How to know it’s time to throw in the towel on your VC-backed startup
► How to break the news that you want to leave your startup to your board
► Which types of buyers will want to buy your startup
► How to restructure your startup so that it is as desirable as possible to potential buyers.
Wil’s isn’t just getting started – he’s been doing what he does for decades. Follow his journey at: Startups.com
https://www.linkedin.com/in/wilschroter/
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Thinking about selling your own startup? The number one question is always 'how much can I sell for' and we've got the answers in our biannual valuation multiples reports here → https://blog.acquire.com/tag/acquire-coms-acquisition-multiples-report/
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About Acquire.com:
Acquire.com is the largest and most active acquisition marketplace for buying and selling online businesses. Acquire.com is the highest-rated platform for both ease and quickness to match buyers and sellers.
We cater to all types of online, revenue-generating businesses while producing the highest success rates for SaaS and eCommerce/DTC businesses in the M&A industry. Join over 350,000 entrepreneurs making life-changing connections and deals everyday.
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