What startup founders don’t know about exit strategies
Sam Lee Chengyi
Fractional CFO who specializes in SME M&A and Series A Fundraising | M&A Advisory | Seed and Series A Fundraising | Exit Planning | Growth Strategy | Performance Dashboarding
This article is first published on E27 by Charles Phan, ACCA from Paloe | CFO Advisory
In the weeks leading up to the current funding winter, the startup ecosystem was troubled by many issues, such as layoffs, lengthier funding rounds and risk aversion among investors.
Thus far, criticism has largely focussed on startup founders and their unsustainable business models, prioritising rapid growth over profitability, and incurring high cash burn.
While there is merit in that argument, we all agree that the current climate for venture-backed fundraising seems muted. Many VC firms around the region are adopting a wait-and-see mentality as exit via the public markets becomes less viable.
The result??Startups are facing challenges in getting fresh funding; many?are close to the end of the runway. This means that we can expect a pick up of mergers and acquisitions (M&A) activities as startup founders will look to exit when there is a lack of cash flow.
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Who do you go to in such a scenario?
Usually, people will opt for investment banks, but have you ever wondered why? These organisations are usually hired as financial advisors to large corporates or institutions to execute M&A.
After all, they bring a set of highly specialised skill sets ranging from deal negotiation to investor relations to corporate finance expertise to get the deal done. Therefore, they are valuable advisors as M&A transactions are major events in any corporation and issues close to the startup founder’s mind.
On the other hand, we recommend CFO consultants as they position themselves as in-house corporate development functions within an organisation. These consultants either provide functional support to the CFO or act as the interim CFO to the organisation if there is a lack of one. In the context of an M&A transaction, they share the same objective, have similar expertise, and are equally vested in the firm’s success.
With similar profiles, the next question would be: what should a CEO think about before engaging with these advisors?
CFO Partner who specializes in preparing Start-Up Founders for Fundraising
1 年great
M&A specialist for SME deals between SGD5m and SGD30m | Exit Planning | M&A Advisory | Valuation | Due Diligence Prep | Commercial Term Negotiation | Global Broker Network
1 年Insightful read for startups to understand more on exit strategies