Never Get Overly Attached to Your Startup

The following is adapted from Takeaways: Secret Truths from Leading a Startup.

Never get overly attached to your startup.

The best way to do this is by adopting the perspective that your startup is always for sale. Although difficult, this enables you to release your white-knuckle grip on your business and effectively prepare for any eventual outcome.

I always saw Loopd, my events wearable startup, as a quick journey from idea to product to ultimate exit.

At twenty-one years old, I was inspired by the idea of people creating friendships and sharing contact information naturally. I pursued this idea with all the ignorance and excitement of a startup rookie, but I never dreamed of making millions. Optimistic friends and family liked to prophesy the lucrative future of my hypothetical IPO, but I preferred to camp out in the reality of the 99 percent of startups that never make it there.

I was focused on the immediate present and the challenges at hand.

Lessons From Hindsight

Looking back, I wish I had spent time anticipating the potential outcome. I wish the future could have sent a missile back in time, foretelling the total acquisition of our company (technology, sales database, branding and marketing, employees, and research and development roadmap). Knowledge of the future would have drastically altered my actions back then.

With that kind of foresight, I would have strategically enlisted senior product executives at leading technology and consulting companies from the beginning. These product executives are tasked with finding new technology to complement or supplement their existing efforts. By opening the lines of communication, you can stumble into potential partnerships almost by chance. 

By failing to do this, we felt the painful sting of lost opportunity in April 2016. As Loopd was preparing for a major Series A round with venture capital firms, Silicon Valley was in the midst of the “startup winter” for investment.

Fundraising went from difficult to almost impossible. 

A Changing Startup Climate

Slow returns on existing investments and growing demands for more funding from highly celebrated startups like Uber and Airbnb caused venture capitalists and other institutional investors to become more risk-averse and less open to funding younger, smaller startups. Along with minimal investment, investors started demanding more active control, including leadership on boards and involvement in daily management and operations.

Needless to say, the climate was less than ideal for startups like Loopd to be entering the game. Like other startup CEOs, I went scrambling for alternative investors and strategic corporate partners. The work of funding took on the additional effort of gaining introductions and setting up meetings.

Although I had developed some relationships, I was hesitant to approach them for investment, especially with so much negative press about overinflated valuations. Even though I was bailing water to keep my startup boat from sinking, I did not want to appear desperate for an exit. Strategic partnerships are not charity cases; they work best when each party is useful to the other and valued because of size, customer base, technology, or prior joint ventures.

Our second-generation Loopd badge was slated to be released that fall, and I had big plans. Instead of a niche product, I started to rewrite our story in a more general way for major international players like Walmart and LinkedIn. In my dream scenario, these giants would immediately find value in our technology and help launch us into a broader arena.

My misguided dreams did not come true.

Though companies like Walmart, LinkedIn, Qualcomm, Samsung, and half a dozen other companies did agree to meet with us, the results were less than inspiring. We discussed our smart badge and cloud-based marketing analytics, but these conversations happened with lower-level business development managers. These people were gatekeepers to the real decision makers, whom we never saw. 

Making Mistakes—and Learning From Them

My attempt to broaden and generalize the appeal of Loopd beyond event marketing did major damage. Prospective investors for our upcoming Series A frowned upon this identity crisis and got skittish in the uncertainty.

We immediately halted our attempts to partner with technology companies and worked to regain our credibility as an event marketing tool. Prospective investors did their best to help us make productive connections in the event space, and we crossed our fingers in hopes that the Series A investment was still a possibility.

In the startup world, nothing is certain or by the book. You must prepare for all outcomes and have a plan for every contingency.

If I had nurtured relationships with senior product executives at technology companies when Loopd was only a concept, I could have acted on a merger, acquisition, or strategic investment at any time. Instead, I hesitated and made the rookie mistake of being too married to my idea to release control in the early stages. I failed to engage personally with product executives who knew more than I did and could have seen the larger, long-term value of Loopd for their companies from the beginning. 

The Strategic Investor Exit

As you begin to plan for your company’s potential future sale, follow these exit tips:

• In order to maximize your time and efforts, define your exit strategy before you establish your company structure.
• Create a target list of companies you want to be acquired by, and prioritize that list by location, size, and mission statement for best alignment.
• Establish strategic relationships with decision makers at target companies.
• Demonstrate your value through proof-of-concept demos. Be sure to include how your technology fills a product gap, and build internal advocates who can help you position yourself and your product.

By planning your exit strategy far ahead of time, you’ll be ready to position your company and seize the best opportunity when it comes. 

For more advice on growing a startup, you can find Takeaways on Amazon.

Brian Friedman is a millennial entrepreneur who went from a blank sheet of paper to a successful multimillion-dollar exit in less than three years. During this time, he secured over $2.5 million in angel and venture capital financing, hired more than ten employees, opened  offices in San Francisco and Taiwan, and sold global brands like Intel, Cisco, Castrol, and Box. His ideas about analytics and business practices have been quoted in TechCrunch, Yahoo!, Forbes, and other leading publications. He started the largest Wearable Technology Startup meetup in the US and now serves as VP of digital innovation on the executive team at Aventri, a leading enterprise cloud-based, event management software company.