M&A or IPO? How do startups seize the right time to exit?|Dahe Talk (中文在後)

Every entrepreneur faces the issue of “exit" sooner or later when running a business. Even if you are willing to dedicate your whole life to the company you founded, you will retire one day and encounter company handover, equity transfer or trade sale and so on.

As an investor, I often ask entrepreneurs about their thoughts on “exit" in the future. This not only allows me to know when this potential deal might come to fruition, but also helps me understand whether the founder’s insight of the market is thorough enough.

Generally, most entrepreneurs exit by initial public offering (IPO), mergers and acquisitions (M&A), or selling secondary stocks to cash out.

I have met many entrepreneurs who aim to go public but ignore that the market size is not big enough, and the chances of meeting the listing requirements are very slim. I have also seen many entrepreneurs who only focus on the growth of the company, thinking that buyers will come when the company is successful, but often miss the ideal time to exit ultimately.


M&A happens not just by chance, but by choice.

As Bo Burlingham, the author of “Finish Big: How Great Entrepreneurs Exit Their Companies on Top" suggests, entrepreneurs should keep following three points in mind to ensure that they are on the right track.

  1. Who would be the potential buyer? What aspects do they value?
  2. What factors may make them pay more? What factors may make them pay less?
  3. What weaknesses would they see in your business? What weaknesses can you work on to eliminate?

Apart from evaluating potential buyers, the moment of exit is also essential. If you analyze historical data, you will find that there is a strike zone in the M&A market. If you miss the strike zone, the possibility of being acquired in the future will be relatively low.

According to Tech in Asia, the median range of M&A deals in the Southeast Asian market from 2018 to 2022 is between US$18M to US$69M. On the other hand, KPMG reports that the median Pre-IPO valuation range in Asia from 2018 to 2022 is US$394M to US$672M.

In other words, when a startup reaches a valuation of around $20 million, it starts to step into the strike zone of M&A. If you don’t sell the company then, it will get harder and harder to find a buyer later as your valuation gets higher and higher. Eventually, the only option left may be to pursue an IPO, which can be a lengthy and challenging process.

How long does it take typically for a startup to go public? According to PitchBook’s research on European and American startups, the median time between receiving an initial venture capital investment and to be acquired was 4.9 years, and VC-backed companies went public approximately 8.3 years after securing their first VC investment.

Moreover, these statistics suffer from survivorship bias. In fact, only a small set of companies succeed in going public. Many startups have failed to exit after missing the strike zone, leaving them unable to go public or be acquired.


Build to sell or build to IPO?

While it varies by industry, the thing I want to emphasize is that the exit strategy should be prepared in advance. Even though your company is still in the early stage and may be struggling to survive, I still recommend that founders should sometimes consider how to exit in the future.

Going public through an IPO is of course a great exit option, but it takes longer to be IPO ready and has many regulatory requirements to meet. On the other hand, M&A may be a quicker, simpler exit way, but founders must identify potential buyers and understand what they value, such as user base, datasets, unique technology, talent, or some combination of these factors.

Meanwhile, it is also essential to pay attention to the financial condition of potential buyers, how much money they have, and how much they are willing to spend on acquiring your company? One more reminder, founders should not solely focus on growth while ignoring the potential exit opportunities around you.

M&A or IPO? 新創如何抓住出場時機?



一般來說,創業者的出場方式不外乎就是透過上市(Initial Public Offering;IPO)、併購(Mergers and Acquisition;M&A) 或出售老股,來讓手中的股權變現。




如同《大退場:創業家如何急流勇退》作者 Bo Burlingham所建議的,創業者應該持續思考以下三點,以確保公司走在正確的道路上。

1. 誰會是公司的潛在買家?他們重視哪些特質?

2. 哪些因素可能讓他們出更高的價格?哪些可能讓他們出較低的價格?

3. 他們認為你的事業有哪些弱點?你可以努力解決哪些弱點?

除了評估潛在買家外,出場的「時機」也格外重要。若以歷史數據來看的話,你會發現M&A市場其實有一個交易熱區(strike zone),要是錯過了這個區間,未來被收購的可能性就會相對較低。

根據Tech in Asia的數據,2018年至2022年東南亞市場的M&A交易的中位數區間約在1,800萬美元到6,900萬美元之間。另一方面,KPMG報告顯示,2018年至2022年亞洲公司的上市前估值中位數區間約介於3.94億美元至6.72億美元。





Build to sell 還是 build to IPO?






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