For all startups selling their company, entrepreneur Justin Kan has written a fantastic guide on how to negotiate an acquisition.
Kan founded and sold both Socialcam and Twitch (the latter sold to Amazon for $970m), and his piece is a summary of what he has learned about selling startups in the past 10 years of being an entrepreneur.
The guide covers the entire process, from when to sell, valuation, getting offers through to signing a term sheet and closing.
He says that paradoxically, the best time to sell a startup is actually when you don’t want to, or need to.
A startup which is stalling will be a much tougher proposition to sell, and get a good deal from.
As he says: “the best way to “build to flip” is actually the same as building a successful company.”
Kan also gives six great reasons why someone might buy your startup, which includes “a competitor to an acquirer is out-executing it in a business and you can help the acquirer become better.”
He also warns against bullshit offers, which are “dangerous because they can lull you into a false sense that you are being successful. Like TechCrunch articles, bullshit offers are a vanity metric, not an actual measure of success.”
The fantastic guide, which Paul Graham said “every startup founder should read”, is available on Kan’s blog here.