The Surprising Secret To A Big Exit
We get to see a lot of
company founders who are contemplating an exit. Some of our customers get lucky
early in life, but in the vast majority of examples where a founder is getting a
seven- or eight-figure offer, it is not their first rodeo. In fact, most owners
have had multiple failures and modest successes before their first big exit.
One of the most compelling
reasons to consider selling your business is to give yourself a clean canvass for
designing your next business. You can take all of the lessons you’ve learned
building your current company and apply them to a new idea.
What would you do with a clean
slate?
Michelle Romanow partnered with two friends from
her engineering class and together they founded Evandale Caviar in their early
20s. The trio’s idea was to sell caviar to high-end restaurants around the
world.
The partners built a fishery and had just
started to get the business off the ground by the summer of 2008 when the
luxury restaurant industry started to wobble. By fall of that year, high-end
restaurants around the world were suffering, and by the end of 2008, the
industry was on its knees.
Evandale Caviar failed.
The partners licked their wounds and came
together to start a new business, a deal-of-the-day website called Buytopia.
They had learned from their Evandale experience and were building a good little
business—call it a single, to use a baseball analogy—when the partners started
to tinker with a third idea.
From nothing to $25 million in 12
months
Romanow saw big companies wasting millions of
dollars printing paper coupons and reasoned that there must be a more efficient
way to distribute them. They dreamt up a mobile app that would notify the shoppers
in a grocery store of special offers and let them snap a picture of their
grocery receipt and receive money back on the products being promoted.
The SnapSaves business model was to charge the company advertising its
offers through the app.
Romanow and her partners poured more than
$100,000 a month of Buytopia cash into SnapSaves, and within six months they
had a product they could take to market. They launched SnapSaves in August 2013
and the company was a quick hit with consumers and advertisers. Within a year,
the founders were entertaining venture capital investment offers with an
implied valuation of around $25 million for their young company.
That’s when Groupon called and said they wanted
to buy SnapSaves outright. The partners haggled with Groupon and got them to
double their offer in the process. Less than a year after launching SnapSaves,
they agreed to be acquired by Groupon.
Third time’s a charm
A casual observer of the SnapSaves story would
likely chalk it up to luck: a couple of friends leave school, start a business
and become an overnight success. That’s a convenient story, but it’s not true.
SnapSaves would never have
happened without the lessons the partners learned from Evandale. And therein
lies the secret to many successful entrepreneurs: they got their first few
businesses out of the way early in their working lives to make the time, room
and capital for a true success.
*** Richard Kranitz (Wisconsin) is an experienced attorney and business consultant in the areas of corporate, securities and tax planning for corporations, partnerships, joint ventures, limited liability companies, multi-unit enterprises, and a variety of different non-profit entities. In addition, he has counseled their owners and executives in compensation planning, estate plans, and asset protection. Attorney profile at: https://solomonlawguild.com/richard-a-kranitz-esq
