From Start-up to Sale: Insights on Building, Selling, and Life After the Exit

Selling a company is often imagined as a grand event, but the reality is far more complex and emotional. At Innovation Factory’s recent 'Fireside Panel: Start-up Acquisitions – Lessons from the Frontlines,' seasoned founders discussed their acquisition journeys, sharing the nuanced experiences before, during, and after the sale. The panel featured Stephanie McLarty (REfficient), Julie Ellis (Mabel’s Labels), Fabian Raso (Hangry), and Kelly Dore and Matt Holland (Acuity Insights), and was hosted by Gowling WLG, a law firm dedicated to helping businesses thrive.

Key Lessons Learned by Founders

1. Value Creation:
   McLarty, when founding REfficient, initially didn’t envision selling her company. However, after a near-bankruptcy experience, an advisor prompted her to recognize the value she created. This shift in perspective paved the way for a successful sale to Quantum Lifecycle Partners in 2022. Conversely, Raso always intended to be acquired. His partnership with a future acquirer taught him to be proactive in the acquisition conversation, especially as leadership changes can significantly affect negotiations.

2. Cultural Fit:
   Ellis emphasized that selling included her company's ethos and community, not just its brand. When approached by CCL Industries, finding a buyer who respected their culture became vital. This sentiment was echoed by Dore and Holland, who emphasized the need for acquirers to demonstrate respect for the acquired team, underscoring the importance of culture during integrations.

3. Anticipating Surprises:
   Raso found that the acquisition process took longer than expected—13 months to close—an exhausting challenge alongside running his business. In contrast, McLarty’s process was much quicker at four months, yet still arduous with intense due diligence. Ellis stressed preparation, noting that their robust practices kept everything on track for a seamless, five-month close.

4. Emotional Transition:
   The emotional fallout of selling took many panelists by surprise. McLarty described a moment months post-sale when a simple question triggered tears, revealing unprocessed grief over losing her entrepreneurial identity. Ellis also faced challenges in adjusting to life after Mabel’s Labels, learning that transitioning involved adding new dimensions to herself before fully subtracting her past identity. Raso expressed feelings of confusion during his adjustment, illustrating the unexpected hardships faced after selling a business.

Post-Acquisition Life:
Despite initial challenges, the panelists managed to find new rhythms. McLarty continues at Quantum in a role that allows for flexibility and creativity, leading sustainability efforts. Dore and Holland focus on scaling Acuity Insights, exemplifying that growth comes with renewed challenges and opportunities.

Advice for Founders:
The conversation yielded critical advice for aspiring founders:

• Networking: McLarty stressed the value of building relationships before you need them, as connections often precede acquisitions.

• Quality Advisors: Ellis remarked that if founders consider their advisors inadequate, it's time for better ones, emphasizing her own team’s support during the sale.

• Health and Profitability: Raso advised running a profitable business to enhance acquisition value—seeking buyers when you don’t need to sell tends to yield the best outcomes.

• Vision for the Future: Holland underlined that acquirers are interested not just in current achievements but the visionary future of the business.

In conclusion, every acquisition journey is unique, filled with challenges that can surface unexpectedly. However, with solid preparation, a thriving business model, and support from knowledgeable advisors, selling a company can lead to new chapters filled with exciting opportunities. If founders are thoughtfully strategic about their exit, the experience can enrich their next ventures or roles.