Selling your company can be the fulfilling end to a long journey, a brief rest before taking the next step, or a deal you’ll regret the rest of your life. Mad Mimi co-founders Gary and Dean Levitt provide some insights to help you come out on top.
Today when tech startups with paper valuations worth billions are almost commonplace, so is the idea that the startup road always ends in an exit strategy — the moment when the entrepreneur sells his company, or takes it public, and walks away into the sunset a very, very wealthy person. It’s Silicon Valley’s version of a storybook ending, and every young tech engineer from Bangalore to Palo Alto hopes it will happen to them next.
However, there are a lot of important steps prior to realizing this dream, and brothers Gary and Dean Levitt, the co-founders of Mad Mimi have some excellent advice for entrepreneurs thinking it might be time to sell their companies. Recently, they sold Mad Mimi to GoDaddy.com not as an exit strategy, but as a means of further developing the email marketing product they created, and reaching a broad new audience. Their insights into the process of selling goes well beyond the standard to-do list, and gets to the heart of what makes a company valuable in the first place.
1. Focus on Your Product, Not the Sale
Gary Levitt, Mad Mimi’s CEO, compares the sale to the complexity of human relationships.”You can’t meet a person with the objective of marrying them, ” said Levitt. “That’s just not healthy or wholesome. Imagine meeting someone, then going through a checklist, and if they meet your criteria, you marry them. It’s absurd. ” Levitt regards marriage as a natural manifestation of personal growth and the development of character, and he maintains that this applies to companies too. “If you focus on the product and make people love the product, you’ll naturally be able to sell the company if you want to,” he said.
If you focus on the product and make people love the product, you’ll naturally be able to sell the company if you want to. — Gary Levitt
2. Keep the Promises You’ve Made to Your Customers
If you pursue the sale above all, you may be making decisions that encourage someone to buy your company at an inflated price rather than providing value to your customer base. Levitt goes so far as to call this approach “tricking the buyer .” On the other hand, if the promises you’ve made to your customers are fulfilled, then the sale will be “the icing on the cake.”
3. Educate Yourself on the Process
Dean Levitt, the Chief Cultural Officer of Mad Mimi (the de-facto COO), suggests that potential sellers read as many books on sales and venture capital as possible. Consume information, and as you do, you begin to realize that you can say no. “For most entrepreneurs, the scariest thing is to say “no” to an offer,” says Dean, adding that “often times some really lovely companies sell their soul, which is something that Mad Mimi really never had to do. Gary and I said no to quite a number of deals before exploring the GoDaddy overture because they never felt right. Being educated gives you a lot of confidence to make the right decision.”
4. Get Advice from People You Trust
Once you’ve been educated and you feel confident in the information that you’ve got, you’ll able to say that’s the right advice, or the wrong advice. “The key thing is making sure that you’ve got people you can float your thoughts by,” said Dean Levitt. ” If you’re not confident going into the process, or you’re not convinced that the deal is right, it’s going to suck up a lot of time and a lot of money to get through it.” So, make sure that you read a lot and are on top of the whole process.
A genuine alignment of values supercedes any amount of money you can put on the table. — Dean Levitt
5. Look for an alignment of values
According to the Levitt brothers, many entrepreneurs that have sold their companies or have taken large infusions of capital are not happy with the results. Their advice is to make sure there’s an alignment of values at the beginning of the process. When they sold Mad Mimi to GoDaddy, they found that alignment. “GoDaddy also has a commitment to small businesses, and sincerely appreciates how we interact with our customers. And in a lot of instances, that isn’t so,” says Dean Levitt, adding that ” a genuine alignment of values supercedes any amount of money you can put on the table.”
6. Prepare for the Due Diligence Process NOW.
You might be a couple of years away from wanting to sell you company, but you should be getting ready for the rigors of the due diligence process ahead of time. Make sure that your financials, your customer data, and your sales data are in good shape. In summing up, Dean Levitt said, “Make sure that you are so aware of the intricacies of your own business that you can easily collect the information and present it in a clear and honest way.”
He concludes by summing up the experience of the two Levitt brothers in one brief statement: “Your customers should always come first. Don’t worry about the sale before it’s really time, but once you really feel that it’s time and you’re getting interest, make sure that your data is on hand.”