How to think about exits from the early days of your startup? Serial entrepreneur and author Shirish Nadkarni shares his insights
Shirish Nadkarni has already founded and successfully exited three startups. Following that, he has been the advisor to several other early-stage companies like Ally, Bloomz, and Enlyft.
He was also one of the crucial masterminds who made Hotmail’s acquisition by Microsoft happen and is currently the Co-chair of the Z5 Funding Initiative of TiE Seattle.
When it comes to startup exits, Shirish has definitely mastered the game. And his advice on how to do it effectively is simple.
As an early-stage entrepreneur, you need to keep track of your potential acquirers and build solid relationships with them. The exit will happen seamlessly then as the acquirers will already be familiar with your business.
Thinking about exits as a new founder
Shirish believes that all founders should have an exit in mind right from the early days of starting up. But this does not mean that entrepreneurs should not be missionary in their approach and build a business for the long run.
Shirish advises, “Build a list of the major players within your industry early on. And try your best to explore partnership opportunities with these giants. When the time of acquisition will ultimately come, the big players will look at you first because they are already comfortable selling your product and the managers understand your company inside out.”
He says that having meaningful relationships with business leaders of top companies tends to keep founders ahead when it comes to exits. Because it is the business leaders who ultimately make acquisition decisions, not the investment banks.
How to build that solid relationship?
Naturally, as an early-stage entrepreneur, you cannot approach a C-suite of a Forbes 500 company and just introduce yourself. To overcome this challenge of forging relationships with the top brass, Shirish says that you need to start by establishing yourself in the big company’s marketplace.
“Once you are inside, the company will keep track of your sales and revenue growth and if you can display impressive parameters, the important people will start taking notice.”
Another way to develop relationships, according to Shirish, is to approach the big guns using your common customers. He says, “Your common customers will look for deeper integration between the big company’s products and yours. This is your opportunity to get in touch with their product managers who tend to make acquisition decisions. Show your potential and be in their good books.”
Leveraging your board for building relationships
Shirish also emphasised how your board members and investors can pave the way to building valuable relationships and finally, that coveted exit. For this, you will need to take care of your board as an early entrepreneur.
“First up, get those people on your board who have deep entrepreneurial or operational experience. They can really help you in making strategic decisions. Next, explain your strategy of acquiring customers and budget in the very first meeting. This will help to build trust.”, says Shirish. He also advises to always keep the board in the loop on operational grounds and don’t share surprising information during the board meetings.
The fear of collaborating with competitors
If collaboration is indeed the best strategy to carve a path of exit, how do entrepreneurs overcome the anxiety of giving too much of the idea away to competitors? Shirish suggests you partner with industry incumbents. And they are generally slow in moving forward. Plus, the chances are high that they already know about you if you are operating in the same domain.
“Have conversations with your competitors. Establish a dialogue. You might end up with insights that will propel you forward, no matter the ultimate result.”, adds Shirish.
To know more listen to the podcast here
02:00 - Acquisition of Hotmail by Microsoft - Build vs buy
06:15 - How to think about exits as a founder
10:15 - Startup’s fundraising journey: Storytelling vs metrics
20:10 - The actual purpose of board meetings
23:30 - Relocating from India to the US as a founder
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