Mastering Your SaaS Exit: Key Tips
11 Oct 2024
Exiting a SaaS business is one of the most critical milestones for any founder, requiring a blend of strategic foresight, operational readiness, and emotional resilience. At the ARRtist Summit 2024 – Europe’s leading conference for B2B SaaS – Carlsquare Managing Partner Mark Miller led a panel discussion.
Three highly successful B2B SaaS entrepreneurs, all of whom who recently sold companies, joined Mark to share exit stories and insights: Nader El Ali, CEO of DemoUp Cliplister, Emil Beck, Co-Founder and Managing Director of Remazing, and Manuel Hinz, Co-Founder and CEO of CrossEngage, formerly CEO of Toroleo and CFO of DailyDeal.
These key takeaways provide founders with essential guidance on navigating the complex and often challenging exit process:
Timing is crucial
- Two different exit points: the hype point, when the category is hot and strategic buyers are thinking they need to get one of these companies, and then the profitability point
- In between there is often a bit of a Death Rally, because once the hype is over there’s a tough time where you first need to build a real profitable company before you will be able to sell again
- But don’t forget gut feeling: one of the companies saw that their competitors were either private equity-backed or being bought up by strategies, and without relying on scenario planning sensed it was time to sell
Preparation Pays Off
- If you have multiple founders, consider delegating one to focus solely on the exit process, with no operational topics in that six- to nine-month period
- Talk to as many entrepreneurs who have been through the same journey as you can
- Also talk to M&A advisors early – it’s like an MBA for free, because they can help you start thinking what the KPIs are, and so pick the right moment to start the exit process
- IP rights can often be a sticking point, so make sure you have proper IP rights clauses in your contracts; having a good data room is also crucial
Overcoming Challenges
- Expect an emotional rollercoaster for which a good support system is vital: you think someone will be a great buyer and then suddenly they drop out and you need to find the next guy you can fall in love with
- Market dynamics over which you have no control (e.g. a major customer going bankrupt) can also influence the process
- Expect an especially heavy workload with some long nights
Choosing the Right Buyer
- The buyer must see the vision and be passionate about fulfilling it; if there is no common ground on the same vision, then probably it’s not the right fit
- Take time and drink wine (literally or figuratively) with each of the candidates because you need to build trust with them and see if you can see the next three years together with them
- Different stakeholders (founders vs external shareholders) can have different interests and correspondingly different preferred buyers, expect to have to balance these (e.g. founders more willing to take 5% price cut for buyer more aligned with the vision)
Selling to Private Equity
- Boosts professionalization
- Enables you to accelerate growth by acquiring other companies
- Provides a valuable experienced sparring partner
- Act quicker than strategic buyers
What comes next?
- As a founder, it can be like going into the left lane on the German Autobahn and really going full throttle because now you have less personal risk
- A honeymoon phase, after which sometimes numbers will not always be as expected, but then you will see the character of your chosen buyer; the panelists were favorably impressed by how professional the reaction was in such circumstances