Selling Your Startup (CREMADES): Book Review

I was eager to review @Alejandro Cremades’ new book, Selling Your Startup . It did not disappoint. It stands out as a gem in this genre.?

My career path is similar to that of Cremades. We are both venture-capital-backed serial entrepreneurs and angel investors. We have both advised hundreds of startups. We were both VC’s and ended up becoming M&A professionals.?

Few authors of books on selling a company have all of these credentials. Most books, blogs, and courses on selling a company are written by brokers or bankers who have never started and built a business from scratch, then sold it successfully (no less multiple businesses as has Cremades and myself). We know of which we speak because we have lived on all sides of it.?

It is with this bias, plus having written a do-it-yourself book and course on the subject myself, that I critically reviewed ‘Selling Your Startup’.?

Let’s Dive In

First, every entrepreneur who aspires to have a multi-million dollar (or billion dollar) exit is going to love the foreword by @bhavin Turakhia . His story is compelling, and he makes a good case for the value of the book. You also get the sense that he and Cremades are authentic – the real deal, because they give conflicting advice. That’s the real world.

?Like every good author supporting his premise, Cremades says in the book that every entrepreneur should start and build a company with the exit in mind. Every VC will tell you the same thing. As an M&A professional, I also say that to all the startups I work with, even though I never did so with my own startups. In the foreword, Turakhia says he never started a company with the idea of selling it; of hitting it big and cashing out with billions. That’s the mark of an authentic entrepreneur.?

Just build a great company. The exit will take care of itself (with a little help from the pros when the time is right).?

The Content

The book is 259 pages, including a helpful glossary for readers unfamiliar with the arcane terms bantered about in the world of mergers and acquisitions. Technically speaking, the book covers the process and all the fundamentals of selling a business: planning, prospectus, targets, due diligence, negotiation, closing, transition, etc. What’s most valuable about the way Cremades lays out the fundamentals are the personal anecdotes that make the material more approachable. He presents good examples in conversational, easy to comprehend language.?

The book also touches on several topics not normally covered in other books on the subject. I particularly liked the sections on the (real) role of a good investment banker and strategic versus financial acquisitions. I also liked the section on ways to kill a deal. Only about 30% of startups that initiate an active selling effort will be successful, so these topics should be fully understood by startups that undertake the effort.?

The Most Valuable Pages

In my opinion, the pages devoted to how to value (price) the company and how to think like the buyer are the best part of the book. In my experience, most sellers are unrealistic about their company’s value and most are downright clueless about how to get into the heads of the buyers. It’s often a game of psychology as much as facts and figures, especially when there are multiple bidders at the table. Buyer needs and motivation are always more important than seller needs and motivation, but this is hard for many entrepreneurs to grasp when they are conditioned to thinking it is all about them.?

What Could be Better?

The book covers planning and preparation in a fair amount of detail, but I would like to have seen more on the strategies and actions the company can take to boost its valuation before going to market. There are some ‘tricks of the trade’ to fetch 30% or more than other companies with similar attributes that buyers may be targeting for acquisition. The more time a company has to prepare for exit, the higher the valuation they are likely to get. Using this time in a methodical way can boost valuation significantly. To be fair, this subject deserves a book in it's own right.

In the pages about communicating with buyers, I would like to have seen some tips on how to quickly qualify buyers. Many buyer inquiries are a waste of time. They are tire kickers, or worse, fishing for competitive intelligence. They can waste a lot of your time if you don’t know how to qualify them. Your broker or banker can help is this process, but you should be able to identify the signals of those that might get through your banker’s filter.?

Speaking of the role of bankers, it’s also good to know what they are NOT good at, and situations where you may not need one at all to sell your company. The book does not address those scenarios.?

In the pages about due diligence, I would like to have seen some tips on how to keep other interested buyers warm once you have signed an LOI. The deal often falls apart in due diligence and its always good to have a backup buyer at the ready, rather than have to start the process all over again.?

Also, in the due diligence phase, getting tips on how to remove buyer contingencies and accelerating the time to get a purchase agreement, would have been helpful. Time always favors the buyer, not the seller, as Cremades rightly points out. So, selling strategies and actions that accelerate due diligence and closing are an important part of the process.?

To be clear, these are not major flaws or omissions in the book. These are my personal little nits as one who has gone through this process as a buyer, seller, and broker. To be fair, no book can cover all of the nuances of selling a company. 'Selling Your Startup' does a very good job of covering the most important parts of the process. It's thorough and well written.

In Summary

A solid read. Worth your time. One of the best books ever written on the subject. Highly recommended.?