The Exit Strategy is the Path to Freedom

The key for freedom from the prison entrepreneurs may fall into on our quest for freedom

The belief in the freedom to build our own future. The pursuit of autonomy, not having to answer to a boss, nor wear a badge from a company that isn't your own. The feeling of empowerment, of being able to do anything.

If your entrepreneurial journey started like mine, it was filled with one or more of these feelings. With the energy that gives us the ability to turn nothing into everything, to transform an idea into a business. They are the fuel of a great power that has been given to us entrepreneurs, whether by genetics, by our life story, or any other explanation that science has yet to find.

"With great power comes great responsibility"

Uncle Ben

When freedom turns into prison

It happened to me, and if it hasn't happened to you yet, it still could. Responsibility can transform our vessel for seeking freedom into a prison. Years ahead on the journey, we find ourselves surrounded by employees, often with families that depend on the company we created. Investors to whom we promised that our business would succeed. Customers who believed that we would be here to honor the commitments we made to them.

And what if the future is no longer as it used to be? Even worse, what if the present no longer offers the same energy of being able to do anything? If these commitments and obligations take away our autonomy? This is when many of us start looking for a way out. We don't want, don't see ourselves authorized, nor believe we need to shut down the company, fire everyone, and disappoint those who bet on us. It's at this time that most start thinking about selling the company.

Maybe it's too late. Maybe not, but this is the time when the company can only be sold, not bought. What's the antidote for this? Is there an exit strategy? Yes, and we know it intimately.

The Go-To-Market of the MVP

As entrepreneurs, we are experts in identifying a demand and delivering a product (or service) that meets it, taking it to the market. To represent this quest, we use various frameworks and jargon. We seek the market fit, identify the ICP (Ideal Customer Profile) and the buying persona, think about the Go-To-Market strategy, and plan the User Experience of this customer extensively. What about our Most Valuable Product, our company? Can we not apply the same way of thinking?

Revisiting my experience as a director of Mergers & Acquisitions and a founder of an acquired startup, I created the framework I call the "Most Valuable Product Journey." It is the antidote to the "prisoner's dilemma" of the founder who embarked in search of freedom.

Timing is important. A merger or acquisition process is seldom completed in less than 6 months. And the journey we'll discuss should be considered even longer. For the entrepreneurs I mentor on the topic, I set the expectation of at least 10 months.

"You cannot plant the tree when you need the shade"

Clayton M. Christensen

The Framework

Let's go to the framework. It is a 5-phase process. Each of them has a very high equivalence with the frameworks we use for our company's products (like market-fit). I use some of them, establishing this correlation can help apply them.

Let's briefly understand each of the stages. In the next articles, we will delve into each of them.

1- Thesis (Market Fit)

What is the fit of your company in the market of companies that may wish to acquire it or merge with it?

What is a thesis? It is the theory behind the business logic of this union. For example, a foreign company wanting to enter Brazil might want to acquire a local company to avoid starting the operation from scratch. This is a thesis of geographical expansion. This is what happened with Zeropaper, a company I invested in through TOTVS. When Intuit decided to enter Brazil, it made a lot of sense to acquire a local player with a user base and an established operation: Zeropaper.

The MVP Journey framework includes 12 "thesis cards" like this one that you will learn about in our upcoming articles. The idea is to "understand the acquirer's mind" by looking at the acquisition opportunity through the lens of theses that may make sense for them.

2- Companies (ICP - Ideal Customer Profile)

For each thesis, identify the companies for whom this "market fit" makes sense. This can be a more complex mapping, but it is the starting point for building concrete opportunities.

By understanding the list of companies, it's also possible to identify synergy opportunities that this union could generate. An example of synergy is the cross-selling of products and channels. That is, can the acquiring company have complementary channels to sell its products? This is a synergy that can generate additional value. And if the reverse is true, even better.

There can also be dis-synergies. It's important to be aware of them, but this is a topic we won't have time to delve into today.

The companies that have a thesis fit and also have synergies (or few dis-synergies) can be ideal: your ICP, or rather, IAP (Ideal Acquirer Profile).

3- People (Buying Persona)

The truth is, it's not a company that will buy yours. It's a person within a company. Or a group of people. Decisions are made by people, ideas are in people's heads. If you can influence the desire to buy your company, we're talking about influencing people.

Which people? Ah, the head of M&A, obviously. Not true. In the case of my startup, Onyo, the acquisition process was born out of a partnership, and the team responsible for the partnership, with whom we developed a great relationship, was the one who internally bought and sold the idea of the acquisition.

As a director of M&A, I also bought acquisition ideas that were brought by business areas. Others were more strategic theses we discussed at a higher level, even with the board. There maybe different personas that could start an M&A process inside a company. This mapping is necessary to find the fertile ground to plant this idea.

4- Relationships (Go To Market)

Once we understand that it's people who will be influenced, it's natural to grasp that the go-to-market for your "MVP" is actually about building relationships. They can take various forms and use numerous behavioral science tools. Within this spectrum of possibilities, the most basic is "see and be seen," which appeals to our availability bias. The company that is seen will be remembered and that can be the start of a process. This can be as simple as being at the same events as the mapped-out people.

But it can go much further. As an M&A executive, I even developed friendships with founders that I maintain to this day. The deepest and most lasting, interestingly, were with founders of companies we didn't acquire, but for which there was no lack of desire.

5- The Deal (Customer Journey)

There's a lot you need to know about the deal. Even about everything that comes afterward. But the important part here is how to conduct this moment, much like how you think about your user experience. The preparation here will make all the difference because this topic touches our emotions in a way that product UX does not. What will you do when a competitor you mapped shows interest in a merger?

A quick spoiler, accepting immediately and waiting for a Term Sheet is not the best option for those who started the journey in search of freedom. More details in the next episodes!

Is it already time to start selling my company?

This is the question that might come to mind. Or a variant of it might be: "I'm not thinking about selling the company, we are in this for the long game."

Well, unless you want to leave the company to your children, which I think your investors might not like very much, it's good to assume that you will have an exit one day. The sooner you understand and start preparing for it, the better it will be. Among other reasons, because you will have had time to sow various opportunities to be able to choose the best one.

I, too, was once a founder with this speech ready at the tip of my tongue. And it wasn't just talk. The ambition was huge. However, having a foot in reality and knowing to be attentive and open to M&A opportunities was what led us to successfully close a cycle. Discover how to turn the dream of freedom into a sustainable reality. Subscribe and join the journey.