How to Prime Your Startup For Acquisition or IPO

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If your startup is looking to be acquired or go public, here are some key ways to prepare:

How to prepare your startup for an acquisition or IPO

Build strong systems and operations

Invest early in scalable infrastructure, policies, and reporting so that acquirers and public markets will find your company attractive.

Standardize processes to ensure that your company is operating consistently and efficiently. Implement rigorous financial planning and performance tracking so that you can monitor your progress. Strengthen compliance, security, and risk management so that you can focus on the most important aspects of your business.

Drive Profitable, Demonstrable Growth

Solid revenue growth, impressive customer metrics and profitability make your startup an attractive acquisition target or candidate for an initial public offering.

Be sure to focus on initiatives that will bring in the most money. Try to make your business grow by expanding into new areas that are already doing well.

Cultivate External Brand Awareness

The more people know about your brand, the more valuable it becomes. PR, media coverage and other types of third-party endorsements help build credibility.

Make sure that executives are recognized as industry experts and spokespeople.

Attract Talent for the Future

Acquiring startups with talented team members signals a company’s potential to grow.

Attract rising stars, top talent and big company experience by offering compelling career paths, leadership programs and incentives.

Minimize Dependence on Founders

Build a strong bench of leadership, so that if one person leaves or gets hit by a bus, there are others who can step in. Decentralize critical knowledge so that it’s not dependent on one person.

Make sure that no one person holds all the keys to success. Cross-train your employees, and document procedures so that everyone has access to the same information.

Clean Up Any Red Flags in Advance

Make sure you are aware of potential risks to your company, like lawsuits, compliance issues and toxic contracts.

When you are under consideration for acquisition, the acquirer will examine your business closely. It’s better to correct any problems before the acquisition takes place than explain them later.

Broaden Your Technology Moat

Strengthening your company’s technology and intellectual property assets can help you attract interest from potential buyers or investors.

Focus on internal innovation to help you stay ahead of the competition. Use technology to make it more difficult for others to access your platform, thus allowing you to charge more.

Model Various Exit Scenarios

Analyze the potential impact of hypothetical deal terms, valuations, regulatory hurdles and competitor moves on your company’s future.

Put yourself in the place of shareholders and employees. How would they be affected by liquidity events?

If you want to exit your startup successfully, you need to start planning for it years in advance. Build scalable systems, grow revenue and market share, attract talent, minimize red flags, and model contingencies well in advance of any acquisition or IPO opportunities that may arise. With maturity and discipline, your startup will be ready when opportunities do come up. - Article author