Hot Seat

Chapter 41. Why to Sell

On January 7, 2000, Jeremy Jaehic sold Visio Corporation, a $1.5B publicly traded company, to Microsoft.

Visio was at its peak and still growing wildly. There was no end in sight. I asked him why he did it.

“Honestly? Because I was bored and wanted to do another startup.”

Every startup transaction is wildly different: the stage, the acquirer, the cap table, the personalities, the negotiations. But there are a few constants in startup M&A. As you consider the opportunity to sell and decide whether to take the leap, think through all of these—the common threads I’ve found in almost every decision to sell.

Is It a Great Deal?

One could argue that the CEO’s job is simply this: “Create a valuable company, then get a good price for it.”

So what’s a good price?

The entire life cycle of a company is a process of trying to seize some grand opportunity. As time goes on, the company will move toward (or away from) that opportunity in fits and starts. As the risk of failure goes down, the value of the company—the amount an acquirer will pay—goes up.

At the beginning, a company has very little value and a tremendous risk of failure. If it does well, the risk of failure drops, increasing the company’s value to an acquirer.

But the growth is never a straight line. As the company goes through various stages of its life, new risks appear.

For example, a startup company with an idea but without a proven team, funding, or product is very risky and not very valuable. That ...