As we meet with founder-controlled software businesses, one of the most common questions we get asked is, “what is life like post-close?” Founders and owners seem to think that the question is up to the investors. And while this is often true for more rigid buyers who operate with set playbooks, value guidelines, and short-term objectives, the truth is that it is you, the owner / founder of the business, who gets to decide the answer to that question.
If you don’t have an answer to this question ahead of time, potential buyers will set the goal posts. Thinking about your menu of choices before you engage with buyers will ensure you don’t find yourself in a scenario where the buyer’s post-close expectations are quite different from yours. In our experience, this always leads to a poor outcome and unhappiness even more so than price.
Having spoken to thousands and thousands of bootstrapped companies over the past decade, we see a handful of commonly desired paths for founders at a transition point (all of which Arcadea is happy to accommodate, something no other firm in the world can say).
Next Adventure
You’ve spent the last 10+ years building your business into something great. And while you will always care for the business, your team, and customers, it’s time to do something new. For some it’s another startup. For others, it’s turning to a philanthropic or other passion project. Others still want to focus on family & spend their time in retirement. Whatever that “something else” is, a clean break is in order.
Next Level
Your business is performing well. You are taking share from competitors, building products that users love, and as a result retaining nearly all of your customers. But you know that there is another level of performance – growth, profitability, customer happiness, strategic positioning – that is attainable. You want to be around for that next level, growing as a leader, capital allocator, and expert in your industry along the way. Finding a partner with operating experience, know-how, and a system for attaining that next level is important, as is finding one that respects the role of the founder over the resumes of the “professional” mercenary managers that are a “safe bet” for so many Private Equity and Growth Equity firms.
Refocusing
At heart, you are a product architect, through and through. Or maybe a sales-oriented leader that loves bringing the big fish into the boat. The last ten years as CEO have been rewarding, but it’s not where your heart is. In addition to de-risking your life financially, you want to remain working and doing something you love while someone else deals with the day-to-day headaches of managing the business.
Scout
You don’t want to remain active in the business, but you don’t want to sail off into the sunset, either. You’ve built relationships and knowledge in your industry over years and want to put that expertise to work. What you’d love is helping source, qualify, and secure additional investment opportunities, becoming a “deal maker” and getting exposure to the investing side of the equation while getting a piece of the action on the upside.
Industry Leader
You’ve built a great business and have a top-notch team running the day-to-day. You see many opportunities to leverage your market, strategic, and operating expertise across an entire portfolio of businesses in your industry. You want to acquire competitors or adjacent players and help bring them up to the same level of performance as your own business.
It goes without saying that there is no “right” outcome, only what is right for you, your family, team, and customers.