Imagine a regular day in your corporate / banking / consulting job...
You’re in the office, late in the evening, all by yourself, wondering if it's really worth it. Yes, you’re looking for fulfillment and purpose - but in the end, life isn’t free, and having a little seven-figure payday really would make things easier. You can stay in your job for another decade to get there, but you’re ready for a change, you’re ready to take a risk. What do you do?
Your first thought might be to start the next-cutting edge tech start-up.?Find a solution to an unsolved problem, raise money from a VC fund, and have your big payday a few years down the line. Yes, that can work - but as most people know, only a few start-ups make it, and even if you get to an exit, liquidation preferences might significantly cut into your payday.
Or you could bootstrap a business.?If you go for an innovative business, the risks around start-up product-market fit remain. If you start a ‘boring’ business, it might take a while to take off. And even when all goes well, it might take a decade or longer to reach a VC-sized exit.
But what if there was another way - a more reliable way - to get your seven-figure payday????
Let’s talk about a path you might’ve not thought about yet:?Entrepreneurship through Acquisition (ETA).?We’ll get into all of the details what ETA is, how it works, and what you need to bring for it to be a desirable path for you - but for now, let’s focus on our key motivation, getting that “seven-figure payday”:
In 66 ETA transactions, over 70% of ETA entrepreneurs held equity worth more than $1M (!) at the point of exit.?Excluding exits over $10M, the average equity value stood at $3.3M, rising as high as $7.6M when including exits above $10M. Also worth highlighting is the hit rate: Almost half (66% acquisitions * 73% with a gain) make money on their deal, anecdotally much higher than with start-ups, at least from my experience.
So to quantify these results:?Assuming you manage to close a so-called “search fund”, your average personal exit proceeds were between $1.6M and $3.7M.
Of course, things are much, much more difficult in practice, and that payday is not guaranteed.?While still a less-taken path in Europe, ETA has picked up significantly in popularity since I first came in contact with it in 2022, with both former colleagues and my clients considering (or taking) that path. And the opportunity might only become bigger in the next few years.
Want to learn more? More about the topic of ETA, this week, here on LinkedIn (and already in the inbox of my subscribers).
#privateequity #searchfunds #eta
