Reflections On a Successful Exit

A Post-Post-Mortem of the GreenButton Story

Earlier this year I met Suse Reynolds and Marcel Van Den Assum from The Angel Association of New Zealand and both asked if I’d spend some time capturing the lessons learned from the GreenButton journey from idea through to exit, an event which was relatively fresh on the startup horizon in New Zealand.

Download the in-depth case-study: “Anatomy of a Successful Exit: The Green Button Story”

Brief Background

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Scott Houston, Founder & CEO, GreenButton

Investment Into Making the Entrepreneur Successful

Up to this point, Scott was a solo-founder and had driven the idea alone to realize the vision, build the early product, and get it in front of investors. There’s lots of negative rhetoric about solo-founders and how all good startups start with a co-founding team, but it’s easy to forget that in any startup, the idea and vision is usually driven by one person and investors usually back that visionary individual, trusting them to pull a team together around them.

“The early board acted as a ‘Startup SWAT’ team”

Looking back over the research interviews, the most striking thing about Marcel and the early board is how they operated as a ‘Startup SWAT’ team, pulling in trusted allies, prior co-workers, and team members around them to fill out the missing governance and operational roles to help Scott make this venture a success. From COO Chris Teeling, CFO Darryl Lundy, and CTO Dave Fellows, suddenly Scott had a strong experienced management team around him that knew how to execute, and much of this value came from the connections and network that early investors brought.

“Pitch above your capability, but execute within it”

A particular point from that early journey that resonates with me is the ability to “pitch above your capability, but execute within it”. This takes strength of character of the CEO and early investors in an industry where venture capitalists are all too eager to replace the founder or CEO with a more operational one to maximise their chances of creating the next billion dollar company for selfish gain.

Personal Impact Acceleration

The key difference around how Marcel operated versus how some other investors operate is what I would call the impact his ‘personal acceleration’ had on GreenButton. He gave not only money to GreenButton, he also gave his expertise and time — making the transition over time from Investor Director, to Chair, to Executive Chair. He did what it took to take the company where it needed to go and helped Scott turn this into a success, even if his work transcended pure governance and became semi-operational at times.

“The most important thing an angel investor can give is themselves”

Of course the reality for many New Zealand angel investors is that they are still working full-time and unable to commit to this strategy, but how can you find a way to be involved more in your investments? After hearing the GreenButton journey, I now subscribe to David Akers new view of an angel investor as no longer just adding smart-money, but adding hard-working money (i.e. money and days per week of effort).

The Benefits Of An Early Exit Focus

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GreenButton’s homepage: post-acquisition

“The exit is rarely about money, it’s about how to achieve the same vision through a larger channel and reach the market more efficiently”

The sense of ownership and pride many entrepreneurs have about not ‘selling out’ early because it sometimes compromises their vision is another point I hear often. For the most part, the exit and choice of acquirer is rarely about money (assuming it’s in the right ballpark); it’s usually about alignment of vision and helping a company achieve that same vision through a larger channel or ability to reach the market more efficiently. For the entrepreneur driven purely by vision alone, an early exit strategy is the perfect way to achieve that vision (and put some cash in your back pocket too) so shouldn’t be seen as a defeat in not having personally built that last mile.

The Myth of US Venture Capital for NZ Companies?

As GreenButton grew, they realized that they’d need to get out of NZ and start selling overseas, and like many, assumed they go to the US and raise venture capital. But after 30–40 trips down the infamous Sand Hill road in the US, they just couldn’t get any traction with VCs. In fact, the number of Kiwi companies that have successfully raised US VC is smaller than many entrepreneurs would believe, Mark Thomas (mentioned earlier) being one of the few to successfully do it.

“Foreign venture capital shouldn’t be the default growth route for Kiwi companies”

This has really changed my opinion to foreign venture capital not being the default growth route for Kiwi companies and has been a key lesson learned reading the success of GreenButton’s partnership journey. Whilst Kiwi entrepreneurs are often blinded by US funding announcements in the popular technology press, many don’t understand the value of building strategic international partnerships not just for customers or access to new channels, but as an ultimate source of liquidity for the business.

The Value of Strategic International Partnerships

Reading the acquirer, Microsoft’s, account from their early days to exit, it’s clear that the early trusted relationship and GreenButton being their technology champion was a significant reason for GreenButton’s success. Microsoft was early in building their Azure platform and needed a good application championing it on their behalf and this was the role GreenButton played for them.

“Knowing your strategic partner’s roadmap and innovating one step ahead of them is a surefire way to get their interest”

Their partnership really was a win-win: GreenButton gained a solid enterprise partner and credible routes into international markets, and Microsoft gained thought-leadership and clear case studies for their nascent platform. But as Dianne O’Brien, Senior Director of Cloud and Enterprise Business Development at Microsoft said, this would be wholly different if GreenButton approached them today — knowing the maturity of partners platforms, their lifecycle in the market, and which routes to market they need are key when approaching larger enterprises like Microsoft.

Competitive Tension Is Critical

When it came time to think about both venture capital and potential acquirers for GreenButton, the reminder of how important competitive tension is in any sort of deal-making becomes even more evident when a potential exit is on the line.

“In any sort of dealmaking, there’s always factors outside of your control”

Unfortunately the reminder in the final acquisition deal not having much competitive tension is that there are always factors outside your control. Whilst GreenButton were having all of the right conversations with others when the final Microsoft deal came to fruition, internal sponsors being away on holiday and/or bad timing for other potential partners is just something you can’t plan around (other than continuing business as usual). This is shown no more clearly than in the final deal itself, in which the acquisition discussion had to be put on hold whilst Microsoft had to find a new CEO after Steve Ballmer stepped down — a nerve wracking 3 month period for the team with an acquisition offer on the hook, and all acquisition discussions put on hold by the acquirer!

Having The Right Acquisition Team Is Worth Millions

Hearing GreenButton’s journey and the sheer level of commitment it took to get the deal over the line from those involved at the board and senior management level reminds us how much extra effort above normal business-as-usual these people provide.

“identify, and be open to rewarding those people with capability to drive the exit, ahead of time”

The lesson to learn here is that having the right people and capability required to drive the exit is literally worth millions so identifying these people ahead of time and being open to rewarding them for you seeing any liquidity on that investment is a key sentiment all investors should have going into early deals (Marcel estimates setting aside 250K-500K for those who need extra recognition at exit for deals of a similar size).

The Impact of Exits On The Startup Ecosystem

I’ve always been an ecosystem guy, and am passionate about building a sustainable startup community here in New Zealand. My last and most important takeaway, therefore, is just how important exits like GreenButton’s have on the startup ecosystem as a whole.

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The GreenButton Journey: From Startup to Exit

Further Insights

This short write up doesn’t do justice to the teams’ full journey, which in reality is one of relentless determination by the founder and board, and strength of will in the face of adversity. Particularly resonant is founder Scott’s emotional journey of financially ‘going all-in’, being away from friends and family for long periods at a time, and an intense long-run of hard work driving hard towards that exit.

Acknowledgements

A final word of thanks is given to those who chose to give back and share their learnings, with special thanks to Scott Houston, Marcel Van Den Assum, Darryl Lundy, Dave Fellows, Mark Canepa, David Akers, Dianne O’Brien, Bill Murphy, Chris Twiss, Bruno Bordignon, Ben Anderson, and John Cromwell; as well as Suse Reynolds, The Angel Association of New Zealand, and New Zealand Trade and Enterprise for making this work possible.

About the Author

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Download the in-depth case-study: “Anatomy of a Successful Exit: The Green Button Story”

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Experienced startup CTO/CPO based in New Zealand; Built startup community & accelerator space in NZ; Passionate about helping Kiwi founders go global from NZ.

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