How can founders exit their companies?

Intro

As any company owner will tell you, its not just money that is being invested in a business -? it’s also about time, money and energy… So it's natural to want to explore the best possible options for exiting such an investment - options that will make all the struggles worthwhile.?

All business founders naturally develop a parent-child relationship with their company. As any responsible parent, you want to see you baby grow, so you know when its time to let go and seek the next steps on this path towards growth. Perhaps the best way to do this is to send your child to a top-tier university, where they would grow their knowledge and network.?

From a company perspective - private equity funds play a similar role. PE firms offer huge base of knowledge and experience, paired with deep pockets which will finance the growth of a company. This is why one increasingly popular exit option, especially among SaaS founders is selling shares to a private equity fund.

What is a private equity fund??

Private equity funds are investment vehicles that pool money from high net worth individuals and institutional investors to invest in private companies. They typically have a longer investment horizon than traditional venture capital firms and can provide significant amounts of capital to fuel growth and expansion.

Why sell?

Selling your shares to a private equity fund can be a great option for SaaS company owners for a few reasons:

1. Access to capital: Private equity funds have deep pockets and can provide the capital you need to take your company to the next level. Capital allows already profitable companies to scale up to the next level. PEs have a strong interest to invest in such companies and the benefits are shared across the board - from employees to owners.?
2. Industry expertise: Many private equity firms have extensive experience in your industry and can offer valuable insights and guidance to help you grow your business. In the case of Everfield just our core team have a whopping collective experience of more than ? decade. As with most PEs the underlaying value here is that if we want to you, then we saw something in your business. Deep industry knowledge, paired with access to capital can unlock that unrealised potential.?
3. Stability: This one might be the most important for founders who have long-term vision. Private equity funds typically have a longer investment horizon than traditional venture capital firms, which can provide more stability and certainty for your company. This means no aggressive new strategies, tactics or restructuring. As a business owner you have an obligation to your employees and rather than get rid of them, most PE fund will be more interested in keeping your team onboard.?
4. Flexibility: Private equity funds have a variety of exit options, including strategic acquisitions, IPOs, and secondary market sales, giving you more flexibility for the future. At Everfield we typically offer 100% buyouts, but we also have an earn out structure, which allows founders (who want to stay in the company) to do exactly that and reap the benefits from the new capital that is poured into the firm, while enjoying the freedom of financial independence.?

Here is an example of a successful acquisition:?

A successful SaaS company that was acquired is Trello. Trello is a popular project management tool that uses a visual board and cards system to help teams collaborate and manage projects. The company was founded in 2011 and quickly gained a following, with more than 19 million users worldwide by 2018.

In 2017, Trello was acquired by Atlassian, a leading provider of collaboration software, for $425 million. Atlassian was attracted to Trello's user-friendly interface, strong user base, and potential for continued growth. Atlassian also saw Trello as a natural fit for its suite of collaboration tools, which includes products like Jira and Confluence.

The acquisition has been a success for both Trello and Atlassian. Trello has continued to grow under Atlassian's ownership, with more than 50 million registered users as of 2021. Atlassian has also leveraged Trello's capabilities to enhance its suite of collaboration tools, creating a more seamless and integrated experience for users.

Overall, the Trello acquisition is a great example of how a successful SaaS company can benefit from being acquired by a larger company. It can provide the resources, expertise, and support needed to accelerate growth and take the company to the next level.

What are the underlaying factors that need to be aligned before a company is ready to be sold??

If you're considering selling your shares to a private equity fund, there are a few things you can do to prepare:

1. Build a strong team: Private equity funds often look for companies with a strong management team in place. Make sure you have a team that can continue to drive growth and expansion even after you've exited (if you don’t want to stay of course).
2. Focus on profitability: Private equity funds typically look for companies that are profitable or have a clear path to profitability. Focus on building a sustainable business model that generates positive cash flow and has clear, forecastable recurring revenues.
3. Prepare your financials: Private equity funds will want to see detailed financial statements and projections, so make sure your financials are up-to-date and accurate. There is nothing more discouraging for any investor than a financial accounting mess.
4. Hire an experienced advisor: Selling your shares to a private equity fund can be complex and time-consuming. Consider hiring an experienced advisor to help guide you through the process if the fund is not already offering similar support.?

In conclusion, selling your shares to a private equity fund can be a smart move for SaaS company owners looking to exit their investment. Private equity funds provide access to capital, industry expertise, stability, and flexibility for the future. Just be sure to prepare your business for sale and seek out experienced advisors to help you navigate the process.?

Reach out to me on LinkedIn, if you are interested in selling your company.?

Thank you for reading and until next time!?