6/19/24, 6:02 AM How to Sell Your Early-Stage Startup | by Chloe Yoo | Jun, 2024 | Medium

How to Sell Your Early-Stage

Startup
Chloe Yoo · Follow
4 min read · 6 days ago

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 place when it comes to theHowtopic
6/19/24, 6:02 AM of Early-Stage
to Sell Your M&A. Startup | by Chloe Yoo | Jun, 2024 | Medium

You need to spend to grow, but prove growth to raise. Maybe you operate in a
fragmented market that’s ripe for consolidation, or are in a highly regulated
industry with many large incumbents (e.g. healthcare, fintech) making
enterprise deal cycles long, laborious, and costly.

After leading the sale of HumanFirst, a Series A life sciences tech platform,
to the global clinical research organization ICON plc., I wanted to shed light
on three tips to successfully sell your company.

1. Explore partnerships early and often

Seeking partnership opportunities with large players in your space is a vital
way to plant early seeds about the strategic rationale of working together.
There’s a reason why “partnerships” is an ambiguous function. Let that work
in your favor. When we first started exploring an acquisition, we met with at
least a half-dozen companies in the life sciences space, including several
who consistently hover in and around the Fortune 500 realm.

By coming to the table with potential partners, you gain insight on where
your offering fits amongst their priorities and larger roadmap, embark on a
live test run of your teams working together, get an early sense of integration
requirements, and naturally identify an internal champion to advocate for
you. (Also, the more partnership conversations you have, the more intel
you’ll get on how to best tell your story).

Even if you’ve demonstrated through partnership conversations that there’s

“a there-there,” it’s worth acknowledging the crucial factor of timing. If what

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 of your time (or theirs) to How
6/19/24, 6:02 AM pursue further.
to Sell Your Early-Stage Timing is vital
Startup | by Chloe Yoo | Jun,in a | world
2024 Medium where

good companies are bought, not sold. In fact, buyers are often actually
looking for reasons to *not* buy a company because acquisitions can be so
expensive, complex and time-consuming.

If you’re an early-stage venture trying to make strategic decision on if and

when to embark on your next financing round, you don’t really have the
option of waiting two or three more quarters to align with the roadmap of
someone who isn’t focusing on your niche area. Prioritize potential buyers who
are. That doesn’t mean you should completely exclude those who aren’t there
yet, but acknowledge that the process will be slower and may not align come
time for reviewing IOIs.

2. You can work with a bank without hiring a bank…

If your start-up is early-stage, hiring an investment bank may be
prohibitively expensive. They typically work off of a Retainer + Success Fee
model that may not be aligned with your optimal outcome and their
incentives may not be strong enough to treat your company as a top priority.
While incentives to hire may be sub-optimal, the incentives for them to stay
close and help where they can are strong. It never hurts to reach out for what
is inevitably a mutually beneficial conversation.

Specifically, let investment banks prime the market for you. For smaller
companies, reach out to boutique investment banks who do high-deal
volume in your space. More often than not, bankers will be happy to make
introductions for you as this helps them serve their clients as well. You’ll also
likely gain some valuable intel on your buyer universe, reference exit
multiples, and what market segments you’d fall into in the broader markets
eyes

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 3. …But hire strong M&A lawyers, and bring them into the
6/19/24,conversation
6:02 AM early How to Sell Your Early-Stage Startup | by Chloe Yoo | Jun, 2024 | Medium
While you may not need to hire an investment bank, you absolutely need a
strong legal team with significant M&A experience. When it comes time for
negotiation, your lawyers are the ones who will work tirelessly to make sure
you’re getting the best terms per market standards.

Evaluate the junior team — they’re your day-to-day foot soldiers for getting
things done to keep the deal moving. This means managing the lengthy list
of documents that need to be completed to close, maintaining the source of
truth on your waterfall, and ensuring you are set up to communicate with
your shareholders. Most importantly, your junior legal team are the ones
that will quickly translate legalese into digestible language. For big-picture
Open in app Sign up Sign in
people like me, this skill is invaluable, particularly when you’re on the hook
Searchof disclosure schedules.
for answering 60+ pages Write

Even before you’re actively selling, there are a few key legal elements to
bring to your team, including incorporating management carve-outs into
your bylaws, getting an in-depth understanding of historical financings,
reviewing customer and vendor contracts for key assignment clauses, and
ensuring your IP protection is tight. I’ll touch upon those more next time
when I talk about how to prep for diligence.

Evaluating exit strategy and process for your startup? Would love to connect!

Mergers And Acquisitions Partnerships Startup

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6/19/24, 6:02 AM How to Sell Your Early-Stage Startup | by Chloe Yoo | Jun, 2024 | Medium

Written by Chloe Yoo Follow

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Strategic finance & operations leader

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