Before you sell your company, even the odds. While a successful entrepreneur may exit a handful of companies in their lifetime, large buyers close deals all the time. Without decades of experience in mergers and acquisitions, founders don’t have the tools they need to get the best results for themselves, their teams or the new parent company.
Mark Achler and Mert Iseri’s new book, Exit Right, delivers the hard-earned lessons that lead to successful exits. From negotiation to evaluation, to breaking down a term sheet, managing legal cost and handling emotional turbulence, this unparalleled guide covers every critical aspect of a technology startup sale.
The book aims to teach where deals get into trouble, how to create alignment between negotiating parties and what terms you should care about most but above all, you’ll learn how to win in both the short and long term, maximizing your price while positioning your company for a legacy you can be proud of.
Hey Listeners, my name is Drew Applebaum and I’m excited to be here today with Mark Achler and Mert Iseri, authors of Exit Right: How to Sell Your Startup, Maximize Your Return and Build Your Legacy. Mark, Mert, thank you for joining, welcome to The Author Hour Podcast.
Mert Iseri: Great to be here.
Mark Achler: Yeah, Drew, thanks so much. We’re really excited to talk with you.
Drew Appelbaum: Kick this off for us, can you respectively just give us a brief rundown of your professional backgrounds?
Mark Achler: Sure, this is Mark and I am a serial entrepreneur. I’m a technology guy who’s built four tech companies, worked at Apple in the very early days and have been a venture capitalist and also head of innovation at Red Box — or as my wife likes to say, I think I’ve had a fun and eclectic career and my wife thinks I can’t hold a job.
Mert Iseri: My name is Mert Iseri. Prior to writing Exit Right, I was a founder and CEO of a company called Swipe Sense, a healthcare technology company. We raised $24 million dollars, went through the ups and downs of a startup journey. Our mission was always to save lives in hospitals, although, we took a convoluted way to get there.
In the end, we had what most founders dream of having, which was a successful sale to SE Johnson. After the acquisition, we embarked on this project of Exit Right. I actually recently joined MATH Venture Partners as an entrepreneur in residence. You could say that I joined the dark side from being a founder to being an investor and I’m absolutely loving the journey so far.
Mark Achler: Yeah, I forgot to mention, I’m currently a partner to a venture capital fund called MATH Venture partners, where Mert is one of our latest colleagues. Thanks, Mert.
How To Prepare For A Successful Exit
Drew Appelbaum: We know the origin story now of the friendship between you guys but why was now the time to share these stories and to write this book? What was out there and was it something inspiring and did you have an “aha moment”, you feel like you just wanted to spread the word of your collective knowledge?
Mert Iseri: Well, I want to sing Mark’s praise a little bit here. Mark and I have known each other for many years. He’s been an incredibly generous mentor over not a handful of years but over a decade. He’s someone that I’ve looked up for a long time and very much sort of tried to embody his way of mentorship. I pitched Mark AchlerTH Venture Partners three times and they always turn me down and I kept sort of going up for advice.
The impetus for the book was actually me, sort of sitting down over coffee with Mark and commiserating a little bit about how difficult the transaction for Swipe Sense was. It was a happy ending, I was grateful for everything that sort of led up to the final sale but it was difficult. I just felt like I hadn’t — no one sat me down and sort of showed me the ropes on, “Mert, here’s how you sell a company.”
As a result of that, I felt like things could have gone a little differently, things could have gone a lot better. We sort of in one cold march evening, Mark and I, sat down over coffee and I guess I’ll turn it over to Mark to share the rest of the story here.
Mark Achler: Well, thanks Mert for the kind words and friendship but what’s really interesting is, exits are one of those topics that there’s not a lot of information out there. If people have a successful exit, it’s either confidential or they don’t want to brag. Or if it wasn’t a successful exit, they don’t want to bring attention to it, and entrepreneurs are really left to their own devices. So there’s lots of information out there about how to start a business and how to raise money and how to build a sales team and the messy middle and marketing and HR and culture.
It turns out that there’s very little information out there on how the best practices of selling a business. We have a spirit of giving back of giving first and we really wanted to help the entrepreneurs sort of even the odds and level the playing field and we felt it was really important to collect off of these great stories and wisdom to help entrepreneurs.
Drew Appelbaum: When you decided to start the book, I’m sure you had an idea of what you’re going to write about. You clearly have worked with a lot of businesses, you both had scales yourselves and exits yourselves. Did you come to any major breakthroughs or learnings along your writing journey, maybe just by digging in a little deeper or by focusing on the subject as a whole?
Mark Achler: Drew, what a great question. I have to tell you with all humility when I started the book, I’ve been a CEO four times, I’ve been a venture investor for decades. I’ve sat on a lot of boards and I thought, “Well, this will be a fun journey, how much am I going to learn?” I have to tell you, it was humbling. It was so much fun to talk with all of these CEOs and bankers and attorneys and corp dev leaders and to hear all the stories we learned.
I learned so much from that journey and that experience and out of that, we came up with a framework, which we call FAIR, which stands for fit, alignment, integration and rationale and a way of thinking of how to structure business and what’s really important. Mert, what do you think?
Mert Iseri: I’ll build on what you shared, Mark. I mean, first of all, we want to sort of to lay down the groundwork here on encouraging entrepreneurs [to] think of their exit, not as sort of like a happenstance. You’re sitting in your office, corner office one day and somewhat, you get a phone call from this mystery Fortune 50 CEO who says, “I want to buy your company.” I mean, that’s just not how the reality works.
An exit, if done right, is a thoughtful, carefully planned and well-executed strategic outcome of years of work. This is sort of goes against the grain of what the conventional wisdom is around, what startup exits are like. The way you imagine a startup sale is very much like winning the lottery and yet, that’s not how it happens.
Actually, it’s more likely to have founders raising capital for their startup which again, if you are a founder, you definitely know it’s not like winning the lottery. It’s very much like the beginning of a new journey that’s a result of hopefully, a long-cultivated relationship where both sides can mutually hold themselves accountable for.
We’re trying to answer some fundamental questions like one, when should you sell your company, who should you sell it to? Why should you sell your company? These are difficult questions that it’s not just on your shoulders as a CEO. We believe that this is one of the fundamental questions that a startup board should be striving to answer.
To that end, we actually came up with this annual exercise where we call it an Exit Talk. Founders should make a diligent effort to put on the agenda once a year, the alignment of the board around the exit of the startup. Answering some key questions like, “Okay, what’s our threshold? When are we ready to sell? Are you willing to fund the next phase of growth if you’re not willing to sell?”
“If not, why not? What’s your timeline for your funds? What’s your timeline founder in terms of how long you’re willing to do this?” Right now, if you bring up an exit to your board unprompted, you immediately get labeled as, “Well, you’re just tired, you want to move on and you’re bored. We’ll have questions about your commitment as a CEO.” Our approach here is this should be a planned thoughtful activity that we’ll bring it up once a year and sure, there’s alignment along the table.
There’s many more but there were a lot of these, “That’s not how we do things usually at startups” kind of eye-opening moments as we put the book together and very much is sort of a product of the brilliant folks that we met along the way.
Mark, I’d love to hear your reflections on this as well but we just met some incredibly generous, amazingly thoughtful people, who generously share their expertise with us. Would love to hear your reflections on that for a bit.
Mark Achler: Yeah. Boy, you know, talking about humbling. We’re so grateful to all the different people we interviewed and one was smarter and wiser than the next. I said earlier that a lot of people don’t talk about exits but there’s so much wisdom and all we had to do is ask.
When we ask the question, and we framed it for the purpose of giving back and helping educate the next generation of entrepreneurs, we ask the question, “What do you know now that you wish you knew before you sold your company?” and out poured story after story.
It was just really — it was just a joy to be working with all the different entrepreneurs and people that we spoke with. One of the things that came out of it was also the philosophy of, it’s not the end of the road.
A lot of people think that exits are like winning the lottery, it’s the end of the road. We’re big believers in the long game and that the minute you take somebody’s money at the start of the entrepreneurial journey, you’re also taking their agenda.
Understanding how do you build alignment with your partners, with your team, the decisions you make during an exit are going to come back to you over time, because once you sell the company, how did you invest or think about you? Did you treat your investors fairly, how did your employees think about you?
Was it a successful exit? Are the people that bought your company, are they going to want to do business with you again, and what happens when you start your next business? Managing relationships and thinking in the long term were also part of the learnings of this book.
Drew Appelbaum: Now, is selling your business just like selling a product, selling a house? Maybe show some good finances, you clean up a bit or is it way more nuanced than that, and why so?
Mert Iseri: I think of it as very much, sort of kicking off a new partnership. It very much consolidates, obviously the ownership structure of the company. You were once owned by sort of a combination of employees, the founders, the investors and that somewhat gets simplified to what’s sort of one entity owning the whole thing and sort of having a huge say on those strategic directions. Just like what a successful partnership looks like, it very much when it works, it looks like two forces getting together, one plus one equaling a hundred.
There is a strategic objective at the end of the day that both sides are striving to accomplish and just joining forces makes that strategic objective more likely to achieve. Think of it as like, Ocean’s 11 joining forces. We’re building the squad to make something amazing happen. It feels more like everybody obviously has responsibilities. There’s a giant difference in power structure, the buying company has a lot more sway than the company that is selling.
When it works, it very much feels like two teams getting together versus one side telling the other what to do. Mark, what are your thoughts?
Mark Achler: I have an investment thesis around trust and I think that trust is in short supply in this world in general but when you’re selling a business, you’re selling — it’s not like selling your house. A house is a relatively known quantity. Of course, you have to get a house inspection but you pretty much know what you’re getting.
When you’re selling a business, there’s so much underneath the hood that is hard for an acquirer to understand what’s really there and trust is such a critical component. You’re really selling yourself, who you are, the belief in the acquirer that you and your executive team, what you’ve built, what you commit to going forward.
As Mert said, it’s not about you. It’s about your impact on the acquiring company and how, if you slotted the strategic value of your technology, your products, your customer base, unplugging your employees and their domain expertise and plugging that into the larger company, how do you help the larger company to achieve their greater strategic goals?
It’s this dance, really understanding your potential impact on the larger company and having that larger company trust in you and your vision and your ability to execute and deliver.
Mert Iseri: This is such an important point, I want to pin on this and share an example around this. If you pull aside a startup CEO who hasn’t sold a company before — very much the kinds of entrepreneurs that we hope to get a copy of this book — and you ask them, “Well, how much do you think your company’s worth if someone were to buy it today?”
The answer is something along the lines of, “Well, here’s our core performance metric.” Say it’s revenue for a lack of better description, could be users, it could be a number of accounts or engagement, whatever the company’s trying to maximize. They say, “Well, we have a million in sales and companies in our market typically get priced 8 to 10 times their revenue, maybe it’s less, maybe it’s more. Our company is worth roughly X.”
This is a way of describing the value of your company but you’re basically leaving money on the table. What we encourage — and this was one of the sort of the big “aha moments” of why selling a company is very much an exercise in empathy and understanding of the entity in front of you.
Who cares about your revenues? It’s about the impact that you can do to the acquiring of a company’s revenues that really is valued. There’s no better example than this than the Instagram acquisition of Facebook. People laughed around the world when Mark Zuckerberg paid nearly a billion dollars for this company with 14 employees, barely had revenues, not that many users considering how big Facebook was at the time.
Look, it was a billion-dollar exit. People made a tremendous return on that investment but what most people don’t talk about is, in 2019, Instagram delivered $20 billion dollars in profit. It was like one-fifth of Facebook’s entire top line. I mean, they stole it for a billion. That was a no-brainer to pay for that.
They very much bought it not for what Instagram was able to do then, they bought it for what they could do together in terms of how much Facebook and Instagram together could drive value together. This very much is sort of like a micro example of what we’re trying to share with this book. We encourage founders to think about, not just what they can do but what they can do together with the acquiring company.
That’s one of the keys to drive the highest price, the biggest value, the best partner for your business.
Navigating The Process
Drew Appelbaum: Now, is this something that you should go on and take on, on your own as an owner or a CEO with your own team or is this something where you want to build that outside pipeline of professionals to really get maximum value for your sale? If you do go that road, is it worth the investment?
Mert Iseri: For example, to work with the banker?
Drew Appelbaum: Yeah, we work with the whole outside team.
Mark Achler: Yeah, you know what? The answer is, it depends. It depends on the size of the company, the size of the transaction, it depends. There are different types of buyers, there are strategic buyers who really care about the impact that we’ve been talking about, the impact of the product or employees on the company and there are financial buyers who are really — maybe they are rolling up a private equity firm that’s rolling up, there’s companies in a particular industry and they are looking for scale.
It really depends on how large the transaction is and what the type of buyer is. Typically in the technology world, if you think about a strategic buyer and who are the most likely strategic buyers for any particular company, chances are the CEO already knows who are the top five prospects. Chances are, they already have some kind of relationship with the potential top five acquirers.
Good CEOs start the selling process before they really ready because what you — the beginning of the process is building trust and relationships, so a good CEO starts laying the foundations of building relationships with potential acquirers years before they’re really ready to make that acquisition. To answer your question, that’s a long-winded answer, it kind of depends. You know, if you look at what a banker can do, they can identify potential targets.
They can help you tell your story better, they can organize the process of putting together a strong data room. For example, if you don’t know how to do that and they can help you negotiate and so, it depends on the transaction the type of influence that a banker can have. Mert, what do you think about that?
Mert Iseri: I’ll take the other side of your professional team, which is your law team that’s working with you.
Mark Achler: Yes.
Drew Appelbaum: Right.
Mert Iseri: While a banker could make an argument for whether it makes sense for you to have one, if you’re running a process, sure. If you’re really just working with one potential buyer and that this is who you’re going to be working with and perhaps audio paying a sort of unnecessary text on the expertise but very much like Mark said, it depends. In terms of working with a lawyer who is a specialist, it doesn’t depend.
As long as you can afford it, you get one and this is not the time to work with your cousin or work with your general business attorney that you work for, for many, many years. You need, and we cannot stress this enough, you need to hire the best specialists that money can afford and the reason is very, very simple. When you receive your term sheet let alone the closing documents, you’re not going to understand what it says.
It feels like you know, when you first get it, it was like, “Okay, somebody is putting a price tag on my company, how exciting is that? Like somebody is willing to pay a hundred million dollars for my business.” It feels like a super exciting thing and then you realize, this is an eight-page document and the price is the first paragraph. What the hell is the rest? Well, then aside from price — I mean first of all, the price isn’t just a number.
There is a number of things that go into calculating the price. Outside of that is the certainty of close. Well, what are the conditions that we have to meet in order for this deal to close and then the term sheet very much outlines what happens after the transaction. Well, are we going to keep the team? What’s going to be our process for budgeting this? I mean, the more details you have in the term sheet, the better it is because you can go into the closing docs process with more certainty.
There is no way that you’ll be able to navigate those others without someone who’s done it by your side and by the way, they’re there as an outsource expertise. They can tell you what things are but you are not going to be able to outsource the judgment. You very much need to make the case yourself and this is sort of another one of our objectives with Exit Right, we want to demystify the process so you know what to ask your lawyer and sort of allow them to guide you along the way.
Outside of that, the banker, the lawyer, I would say maybe the two internal stakeholders that really need to be involved with again, with caveat of their involvement sort of changing along the way is very much your board. Your board needs to be super lock step, high transparency, they need to know what you’re doing. They need to know the decisions that you’re making and there cannot be a moment where you separate from your board.
You very much, you are representing shareholders of your investors and so your board is a key stakeholder in here and then with selective judgment, your leadership team. This is one of those cases where you can’t afford the whole team to get distracted by this. Of course, you should be transparent as things are getting more and more clearer but early on, outside of perhaps some key stakeholders that are specialists in the product and there might be sort of a technical due diligence, and maybe you’re pulling a handful of your engineers into that meeting.
Maybe your finance leader is going to be involved in here so there is a selective, another “it depends” answer in terms of who you get involved in here but it is definitely a subset of your leadership and your team. Those are sort of the key folks that you need to sort of being lock step alignment with as you get closer and closer to an exit. Now, obviously, we can have a whole section where we talk about how you keep your sanity throughout all of this and how transparent are you with your loved ones, with your family, with your partner but we’ll save that for another question.
Keeping The Long-Term View In Mind
Drew Appelbaum: I was just about to ask that. This seems like a lot, so if you could just give a few tips. How do you stay cool, how do you stay calm as a CEO/Owner during this whole process?
Mert Iseri: You find yourself a Mark and then after exit, you should write a book together with him. Well, Mark, what do you think? How do you keep your sanity throughout this?
Mark Achler: Well, it’s so hard because if it’s a good exit, you know, you’ve been working for a decade-plus and getting and building your business. It’s your baby, it’s your lifeblood. You’ve put your heart and soul and everything into it and now, it’s time. There’s so much riding on it. You know, it’s not only you, it’s your investors, it’s your employees, it’s your customers. So much is riding at it, so this is fraught with emotion and there’s ups and downs.
Mert’s journey, there were really high highs and really low lows. All transactions are like that, if it’s a good transaction, there is moments in time where it looks like it’s going to fall apart and you have to keep your calm. You have to persevere, you have to know that you’re — if it’s meant to be, you just have to power through it and it’s really important to surround yourself with people you trust, a small cadre of advisers.
It could be a board member, it could be a significant other, a partner. It could be an outsider like me for Mert but it’s really important to keep calm and you know, Mert talked a little bit about the board and alignment. Let me give you an example of how it’s really easy to get out of alignment with your board. There’s multiple components to a term sheet, to a transaction. One that is the price to shareholders but there is another piece of a transaction, which would be future compensation for the CEO and executive team.
Now, the acquirer and the CEO that is being acquired would like to see more money in the future, and the acquirer would like to see that CEO be incented to stay and incented to perform, whereas the VCs were exiting, we want our money now and we want as much money as possible at the time of this transaction. There is actually a really interesting dynamic between how much did you give the shareholders and how much do you hold and reserve for future performance.
That’s an example of how easy it is for CEOs and boards to get out of alignment and that’s why trust is so important, transparency is so important. They can share that there’s ongoing and constant communication is really, really important.
Mert Iseri: I want to reiterate something here, it’s really hard. I mean, it’s just really effing hard. I mean, first, you’re sort of rocking between these emotional rollercoasters from one end to another. On one hand, congratulations. It’s amazing, it feels incredibly flattering somebody is willing to pay millions, if not billions, for this thing that you cared so much about for so long, so many dark days and it just feels like you’re now becoming part of the initiated.
Everybody has a different view of entrepreneurship. I very much sort of belong to the school of this is a long non-zero-sum game that you can continue to play, get infinitely better at and you know, there are definitely sort of a feeling of I made it. I am now on the other side, I have somebody interested in buying my company. How rare it is to get to a place that not only success but this incredible validation of this dream that we’re pursuing so long and that’s on the positive side.
But, there’s an incredibly dark depressing counterweight to that, which is, “What if we mess this up? What if the thing that I’ve been dreaming about falls apart?” and because this is such a big distraction, maybe it lends to unraveling the company, maybe we get sidetracked and we miss our targets and we miss our targets and now we’re in a mess of things that our eyes are off the prize or we don’t think about the company long term anymore or what happens on the other side.
What if the acquiring company doesn’t treat us that we hope to be treated? I mean there is so many of these questions, ambiguity and as a result of that, it’s maddening. I mean, it is the kind of thing that keeps you up at night and you constantly go back and forth between these two emotions as you, you know, as you sell your company. I mean by the way, people think of selling your company as sort of a quick process.
Buckle your seatbelts, if your fundraising takes three to six months, this is at least going to take that much. There is so much due diligence, so many things were — there is a moment where you signed the deal and then you have to wait a couple of weeks in order for the deal to go through and anything can happen. I will tell you, for Swipe Sense, we signed the deal on Valentine’s Day, it was a Friday.
I remember feeling like amazing, what an incredible feeling and then somebody said, “Oh yeah, this doesn’t close until March 6th” and by the way, that was March of 2020, so COVID. I am thinking the whole time, “Oh my god, this can’t be happening to me. Like this is, we worked so hard for this. I mean, we finally got to the other side and now there’s a pandemic on the doorstep, Jesus!”
There is so many of these moments where it feels within grasp and yet so far away, yet so slippery and it just really takes a lot to emotionally withstand all of these, so I really can’t emphasize what Mark has said, you have to have a brain trust of folks that really have your back, not just your shareholders, not just your cofounder but really people who want the best for you no matter what. That is a very, very valuable safe haven as you go through the really rocky road of selling your company.
Mark Achler: I would also add, going back to the long term and relationships matter, sometimes it’s easy to get greedy or it’s easy to cut corners. My question is, after a transaction is done, how will people think about you? How will your investors think about you? Will they want to give you money for your next venture? How will your employees think about you? When you start your next company, will they want to join you?
How will the acquiring company think about you or was this a successful transaction? Will they want to do business with you again? Sometimes in the heat of the moment of a difficult transaction, it’s easy to lose track of how important it is to always do the right thing, to think larger than yourself, to hold your head up high with integrity that it just really matters.
Mert Iseri: I learned this from Mark and one of Mark’s partners, Troy, is you want to make sure that your actions pass the Wall Street Journal test, which is if this were on the first page above the fold of the Wall Street Journal tomorrow and your grandmother is reading the paper, would they be proud of you or would they be, you know, kind of ashamed of you? This sort of invisible layer of check-in, I like to think of it as sort of like constantly thinking about the long term here, is your reputation is the real thing that you pocket at the end of a transaction.
The money, the success, the credit, that’s a byproduct. You put that in your pocket, that’s fantastic. It set you up for hopefully many, many greater mountains to climb afterward but you have to remember that the real winners in this game that we play called entrepreneurship, are folks that, with a stellar reputation, that build multiple companies over the years, that is not just a coincidence.
You don’t get to do this over and over again if you’re one of the bad folks — and by the way, I use bad folks sort of generously in here. I am talking about folks who are, “I win, you lose” folks, folks who are trying to get something short-term, they’ll really care about how they are perceived or how they are thought about. We encourage our readers not to be those folks and we encourage our readers to sort of always think of the long term.
Imagine that you’re describing the transaction to the version of you that’s, you know, 20 years wiser, 20 years down the road. You want that person to remember this with fondness and sort of look back and be proud of the decisions that you’ve made. That somewhat alleviates the tension around this because ultimately, a founder — I mean, if you are good, you get four, five of these. I mean, the greatest ones get four or five exits in their careers…
Most founders get one to two, so it really matters to get it right and be thoughtful about the decisions that you are making with that long-term view in mind.
Mark Achler: I would add, we wrote this book in the spirit of giving back. We wrote this book because we felt that this was information that was really hard to get and that most entrepreneurs needed it and we wanted to do something to give back to the community and that spirit of giving back. We also encourage the entrepreneurs, if they do have a successful exit one day, they’re now the superheroes.
They are now the heroes to the next generation of entrepreneurs and it’s really, really important to give back, to help, to be mentors, to pay it forward.
Drew Appelbaum: Well Mark, Mert, you know, we just touched on the surface of the book here and you all have so much collective experience as well, so I just want to say that just writing this book to help folks get the most out of exiting their company is no small feat, so congratulations on having your book published.
Mert Iseri: Thank you.
Mark Achler: Yeah, thanks and you know, we couldn’t have done it without Scribe and it’s been a joy. This has really been a fun project to work on.
Mert Iseri: Our partners at UBS, we’re super grateful for their part in all of this as well. You know, Scribe was an incredible partner for us to have throughout this process in terms of showing us the ropes on how to put a book together but then having UBS as a global powerhouse to spread the word of what we’re trying to share with the world of entrepreneurship, that’s just been the icing on the cake.
We’re super grateful for our partners at UBS and we hope that this book helps founders make billions and billions of dollars more with their exits and find the perfect home for their startups.
Drew Appelbaum: Well again, Mark and Mert, this has been a pleasure and I’m excited for people to check out the book. Everyone, the book is called, Exit Right, and you could find it on Amazon. Gentlemen, besides checking out the book, where else can people connect with you?
Mark Achler: Well, we both work at Mark AchlerTH Venture Partners, so mathventurepartners.com. Please feel free to connect with me on LinkedIn. This is Mark, Mark Achler at LinkedIn.
Mert Iseri: For me, the best place to get a hold of me is also LinkedIn, although I am active on Twitter and I try to share some of my writings on my Medium account. Over the course of the coming weeks, you’ll see parts of the book released on Medium as well, so be sure to follow me, follow us, and our journey over there.
Mark Achler: Yeah and we’d love to connect with our readers, so please feel free to reach out and say hi.
Drew Appelbaum: Thank you guys so much for giving me some time today and I just want to say best of luck with your new book.
Mert Iseri: Thank you, Drew.
Mark Achler: Yeah, thanks, Drew.
Perspective: Chris Boman