You need to be thinking about the exit from the very beginning. Start with the exit in mind. That doesn’t mean it is a main topic in staff meetings, or something you discuss with partners. It certainly doesn’t mean you put a “for sale” sign on your company. You aren’t publicly for sale. For the emerging company, aggressively shopping the company too early can be fatal.
When I say “start with the exit in mind”, I mean that you work on building a great company (duh), because that solves a lot of problems – and it also means that you think very carefully of how you can become relevant to the logical acquirers in your market. Whether you sell before generating revenue, or after crossing the hundred-million-dollar mark, relationships with buyers reduce friction and increase valuations.
When I get involved as an angel investor or board member, I ask the CEO to figure out the most likely acquirers, and to develop a strategy for getting to know them. Emerging companies need the support of larger partners. They need to operate under the halo of big names. This isn’t just about M&A, it is also important for growth. If you help a partner win a customer, they will come back around and help you. If your dev team works well with their dev team, seeds of future collaboration will be planted.
You figure out how these two companies can win together. You figure out how to add value and grow revenue. When you’re a startup, no one believes you are going to be around in two years, so if you can sell alongside Microsoft or another big name, frankly, you’re just going to win more. You go to Linkedin, you go through your rolodex, figure out who you are going to talk to, what is the business proposition, and then you find a way to broach the topic clearly and simply, as in “”hey, we have got an idea of how we might do some work together, let’s talk about it”. And if you’re lazy, and you don’t make a very effective approach or you have gone to the wrong person, you will be gently redirected to the “partners” section of the web site, where initiatives go to die. But if you are compelling and energized, and you bring clear value, then you will get the meeting with the giant, to discuss how you can clamber up on their shoulders.
Of course there are also best practices for corporate hygiene and preparedness for M&A, but that is a topic for another day.