Below is an excerpt from “Exit Right: How to Sell your Startup, Maximize your Return and Build your Legacy” This is a part from the Epilogue, Mark’s wisdom for all founders who recently had an exit.
Don’t make serious financial commitments for at least six months after the close
Brad Feld wrote eloquently in his book Startup Life his advice on what to do when you find yourself staring at your checking account and there is more money in there than you ever imagined.His simple guidance is to not do anything for at least six months. “People will come out of the woodwork to help you — financial advisors, friends, family, and other successful entrepreneurs who have already been through a big exit of their own. The advice will come fast and furiously, and you will feel the pressure to figure out where to put the money, how to invest it, and whom to hire to help you. Don’t succumb to this pressure.”
According to Brad, there is no way to filter out who has your best intentions at heart. Some will be there to genuinely help; some will be there for themselves. We agree, financial advisors can simply see a new client with little experience, or family members might view you as deep pockets that can help bail them out of their financial challenges.
Simply put, by taking a deliberate break from making a decision, you can collect data dispassionately, seeing what the landscape entails, and letting the emotions settle before you start making commitments.
Be honest with yourself about your track record.
Your track record will depend upon the point of view of who is looking at it. Remember, you have multiple stakeholders.
• Your investors will look at how much they received at the time of closing and how you looked after their interests during the process. Be honest with yourself (assuming you would want to work with them again); how willing will they be to back you in your next company?
• Your employees will see how generous you were at the time of closing; did you go to bat to protect their jobs during the transition and fight for their rights inside the new company? Will they come work for you again? What is the future value of working together with a team that you trust?
• The corp dev leader and the person who championed the deal to acquire you, how will they look at this deal with the perspective of time? Did they stake their reputation on doing your deal? Was it a feather in their cap, or something to be ashamed of? Do you think they will want to do business with you again in the future?
There’s the story you tell everyone, and then there’s the real story of how others feel about you. Do everything in your power to ensure that those stories are one and the same
Improve the M&A process of your acquiring company
No transaction is perfect. There are always ways to improve the process. This is actually how this book got started. Mert went through a transaction with several learning moments. Mark coached him to write them down, in the spirit of sharing these learnings with his new company. So that (at the appropriate time) when they make their next transaction, it can go smoother for everyone.
We like to map out every process both functionally and — even more importantly — through the lens of an emotional roadmap. You’ve heard of a product roadmap? Do the exact same thing but map out the emotions. How does the recipient on the other end feel in each step of the process/journey? It’s an incredibly useful exercise to go through. How do you want people to “feel” as they go through an M&A experience with your company?
Remember to be humble. Not everyone is open to feedback. In the spirit of trying to improve their process, because you have fresh eyes (and sometimes raw feelings), you can provide valuable insights in the spirit of making it better for the next transaction.
When you leave, leave well.
Look, we understand, most entrepreneurs aren’t built to be in larger companies. Going from being your own boss to chafing against a rigid bureaucracy takes some getting used to. We urge you to be patient. Larger companies have much they can teach you — so hang in there for as long as you can and — importantly — as long as you are contractually committed to do so. Hang in there for your employees and customers who are depending upon you.
But sometimes you just have to go. And when you leave…leave well. Be open. Be transparent. Give plenty of notice. For goodness’s sake, whatever you do, try your hardest never to burn bridges. Maintain the integrity of those relationships you care about, and ensure your reputation is solid and that you can hold your head high.
Relationships matter; turns way more than you think
Who knows what your future will hold? With a successful track record, some money in the bank, and some real operating knowledge and wisdom, where will that take you? Whatever path(s) you end up pursuing, you can bet that some of the people that you have interacted with in this company will intersect with you again down the road.
As VCs, we love to see exec teams who worked together previously, had a successful exit, and through that pressure cooker, bonded to the extent that they want to continue on together, as a team. Really says a lot about the quality of trust between them and the mutual confidence in each other’s abilities.
Investors love to invest in people they already know and trust. Corp dev leaders like to invest in people they trust. Strategic channel partners like to partner with companies led by people they trust. See a pattern here…
Relationships really matter. It is one of your principal assets. Manage this asset like anything else that is precious to you. You will be shocked how often you will run into people today somewhere in your future.
Pay it forward and be generous of time and spirit
You just had an exit. Hopefully, a life-changing event for you and your family. You took huge risks. Worked your ass off. Your actions put you in the position to finally cash out. The truth is, as we talked to dozens of CEOs — and as we have experienced ourselves — there is also an element of luck and timing involved. Karma just smiled down upon you. Now is the time to smile back.
Our collective job is to pay it forward. To make this world better off than we found it. Be a mentor to a struggling entrepreneur. You will have so much wisdom, insight, and real- world experience to share. Open up your network to help others. To the extent you can, invest back into deserving entrepreneurs. You are now part of the flywheel of success that begets success.
Stay humble and grounded
After having sold your company, you are flooded with many intense and competing emotions, and if it was a successful exit, then you are probably feeling pretty good about yourself. You want to climb the highest hill and shout out to the world at the top of your lungs, “Fuck you, world, I did it!” You should absolutely do that…in the shower, to yourself. Go ahead and indulge yourself and let it rip. It will feel great.
Out there in the real world, you will be asked often to tell your story. It will be so tempting to start off with the words, “Well, I…” Stop yourself. Practice the following… “It was a team effort. So many people to thank who made this possible…”
Additionally, we urge you to think carefully about courting or encouraging publicity. It’s no one’s business how much money you made, and there can be unintended consequences from broadcasting that information widely. When Mark sold Kinesoft to SoftBank in 1995, his neighbor was a journalist for the Chicago Tribune and asked to interview him about it. Next thing you know, the article is the front page of the business section, and his wife and family were caught off guard by the family’s business that was now being talked about among relatives and classmates in their Chicago suburban community. This was an unintended consequence that, in retrospect, he wished he had avoided.
Remember that credit travels down in an organization, while responsibility travels up. Resist the temptation to talk about yourself and what you accomplished. Talk about all the people who came together to make this possible and a success. In the event of failure, take ownership and move on.
Your success is a given. Your role is understood and assumed. You will actually build a much better reputation by being humble. This might come as a slight shock to you, but you are now a superhero to the next generation of entrepreneurs who will want to be and act just like you. Show them your better self. We know you can do it and can’t wait to hear the story of the right exit for you and the FAIR deal you made.
Get your copy of Exit Right today.
