ISSUE: Should my goal be to sell my startup or to get to Initial Public Offering?
Now that’s a mighty important question for CEOs and their team!
Let's address that issue by taking a quick look at an event that today I spotted in Crunchbase Daily – about the sale of a startup to an respected giant:
September 29, 2017: Ikea buys TaskRabbit
Ikea is buying TaskRabbit, the online platform for connecting consumers and workers to do household chores involving things like moving, home improvements and furniture assembly. Terms weren’t disclosed. TaskRabbit, which currently operates in the U.S. and U.K., will continue to operate as an independent company.
Sounds like a great success, right? You would be pretty pleased if your startup did that well. I’d agree in principle, even though we don’t know the financial terms or circumstances for either seller or buyer. To me it sounds like a deal that makes strategic and business sense: Giant gets jump-start solution for delivery and assembly of those (confounding) Ikea furniture items. Startup gets a “liquidity event” (investors and employees get $ cash) as well as a place to focus and continue growing their business.
So that’s why I say “Not bad.” To be more enthusiastic, I need to know more, but that’s not the point. What is important for you to ponder is this:
QUESTION: Is it better to plan for your startup to be sold or go to IPO?
MY ANSWER: It's better to PLAN on achieving IPO than on selling the business.
WHY: Never show up trying out for the Olympic Team by telling the coach “I am here to try out for the bronze medal.” Coach wants people eager to try for the gold.
Everyone of talent (investors, employees) want to join an ambitious startup, one whose leaders have a plan that has a good chance of being IPO qualified (at least $50 million of annual sales and profitable).
This makes sense if you think about it for a moment: If you eventually cannot achieve IPO status, then at least your fallback can be to sell the company with a respected valuation. But if you aim for less, you will have less to sell, much less value.
Bottom Line: Go for the gold –- and if that turns out to not be realistic, then you can happily settle for sale of your business. That’s how serial entrepreneurs think, so should you.
FOR MORE take a look at my new course for startup founders: Start1 Cookbook – Know-How For Entrepreneurs In A Hurry.
I wish you The Best on your Adventure!