In search of a great exit: Part One

Steven Covey says, “Start with the end in mind.”  At the recent Colorado Capital Conference, Peter Adams, Executive Director, Rockies Venture Club (RVC) said, “For entrepreneurial ventures, that end is typically an exit.”

For more than 27 years, RVC has advanced Economic Development in the Rocky Mountain Region by connecting investors, service providers and entrepreneurs.  Since 2012, for example, RVC companies have raised $23 million, and that amount is growing.  Many times, the beginning for a firm includes acquiring funding.  But this is not enough.  It’s never too early to envision and attract the right exit for your firm.

About Exits.  Joe Zell, General Partner at Grotech, studied 2,346 recent company exits and shared these findings at the Colorado Capital Conference (#2013CCC), “97 percent of the firms were exit by acquisition.  Only 3 percent were IPOs.  And 76 percent of the technology companies acquired in 2012 had NO institutional investment.  Of those technology acquisitions, 53 percent of the valuations were under $50 million. Only 2.4 percent were valued over $1 billion.  If the firm raised Venture Capital investment, the median amount raised was $16.6 million, the average exit was $73.5 million, offering a 5x return.” 

Here are Three Practical Pointers from recent Colorado entrepreneurial stars that may help you attract good exits:

  1. Build the Right TEAM.  U.S. Rep. Jared Polis shared his two-time successful entrepreneurial exit success story, first with for $780 million and then ProFlowers for $480 million, as the Keynoter at the Opening Gala for #2013CCC.  “The team is more important than the idea. There are many good ideas.  You need the right team to successfully execute on an idea.  A good team includes people with complementary skill sets, who have the right attitude, a bold vision, the ability to think logically and to execute, and a good sense of the market.  This team knows the value proposition or how to offer a new efficiency in the marketplace.  This is why education is important – I met many co-workers as co-students.”
  1. PROMOTE, at the right time.  Good April, a TechStars Boulder company, was acquired by Intuit in August 2013 after 8 months full-time.  Benny Joseph and Mitch Fox, co-founders, shared at the opening of Day 2 of #2013CCC, “We made sure our biggest competitors knew about us.  We were careful on when to tell them.  We did not announce until we had built the minimum viable product.  Then we put ourselves in the place to be noticed. We got the phone call – are you open to being acquired?  We had a serious bargaining chip – we had an alternative investment option from other places. It was the fastest acquisition, five to six weeks, most had seen.”
  1. Build a great BRAND (and COMPANY).   Kevin Reddy, Chairman and CEO of Noodles & Co., also found that lightning can strike twice – first with Chipotle and then with Noodles.  “The IPO is not the goal.  The focus in on building a great brand.  I saw great potential with Noodles in the fast casual space.  We had good food, but our strategies needed a little work in delivering the right dining experience.   Our IPO was a success, but that was one event.  Now we strive to build the brand and create financial strength.  There is a difference between wealth and net worth, most of it is not the money. Our brand stays innovative by dining at a lot of restaurants to do an environment scan, by following consumer trends, and by taking an idea and commercializing it with the right food, service, and guest interaction.”

Colorado has had and will continue to have good exits – we need to learn from the people making them happen.  Consider Janet Eden Harris, who as CEO of Umbria, a pioneer in deriving market intelligence from the online community, led the firm in its exponential growth resulting in its acquisition by J.D. Power in 2008. Her story, and those of other ventures with successful exits, gives even more hope.

As Peter Adams said, “Promote exits.”  Let others know that good things are happening.  

Stay tuned for Part Two for even more wisdom.

Categories: Company Perspectives