Set Expectations, Build Credibility, and Maintain Trust With Your Board With an Annual Exit Talk

The following is adapted from Exit Right by Mark Achler and Mert Iseri.

The foundation of all trust, whether it’s in your personal or professional life, is open communication. We all know this instinctively, but we tend to forget it when we get busy — and when you’re beginning the process of selling your startup, you’re busy.

Too often, we prioritize other issues around exiting a business (while continuing to run it at the same time) and forget to stay in regular communication with the important stakeholders in our organization. But you need to talk about selling your company with your stakeholders, often and consistently.

Getting acquired is not a bad thing, after all — a successful exit is the desired outcome for most startups. What hurts is when the acquisition is a surprise — a distraction from the shared commitment everyone is there for.

Communication is a Balancing Act

Start a conversation about selling too early, and the shareholders will doubt the long-term commitment of the leadership. Too resistant to a sale, and the shareholders will grow frustrated with their expectations for a positive return. This is a tough balancing act, but it should not prevent you from discussing an exit at all.

Unfortunately, the conventional wisdom is for founders to virtually never discuss exits with shareholders. It is frowned upon to talk about the sale — investors expect the founders to constantly be focused on building an even bigger company until they are ready to cash out.

The challenge is that if the founders are bringing up the sale conversation, it looks like they are interested in selling the company before the maximum value can be achieved. In other words, the board will question the long-term commitment of the CEO if the conversation comes up prematurely.

Make The “Exit Talk” Part of Your Annual Agenda

Founders need to establish the expectation with their boards that once a year, the group will add an agenda item to the meeting related to the sale. It is simply a temperature check on long-term strategy, potential strategic buyers, and time horizons. This will allow you to build rapport, continue the process of alignment, and establish the trust you need to have a successful deal.

The exit is one of the most important moments in the life of a startup for the founders and investors alike. A conversation filled with anxiety, doubt, and mistrust serves no one. Carving out intentional space to have these conversations in an open and honest fashion on a periodic basis will improve outcomes for all parties.

The secret to board (and shareholder) buy-in is consistent communication on expectations and strategy to achieve objectives. This is where the CEO can withdraw from the trust bank that they have been putting the savings in over the years with their consistent communication.

Get Alignment Around Key Questions

The goal of these conversations is not to kick off a sale, but to ensure there is alignment around key questions:

• What is our threshold walk-away price?
• What is the fund timeline to return proceeds for limited partners?
• What objectives need to be accomplished for existing investors to further capitalize the company?
• Who are the key buyers, old and new? With whom should the CEO be building relationships in those companies?
• What is the key performance metric those buyers care about? What is the strategy to optimize that further?

We call this the Exit Talk: a key ingredient for a successful exit and effective governance. It is also an opportunity for a CEO to educate their shareholders and board on what matters. These are the moments to build shareholder confidence, define what the possible exit can look like, and execute on that premise.

Ongoing Transparency

When new investors join the board, get them familiar with the “Exit Talk” concept. Let them know that once a year you’ll be bringing up this crucial question: are we ready to sell our company? In most cases, the answer will be a simple no — but formally carving out that space will take out the anxiety that a founder will feel when they bring up this question.

In addition to the board, regular check-ins (about once a year is the right cadence) with the core leadership team to update them on the current thinking surrounding an exit are similarly beneficial. Take the temperature of your team and fill them in on where your head is.

Is everybody still in the game? Are there things we should be worried about? Is this the right time to sell? Use correct judgment and limit the discussion to your top leadership, but be honest and transparent with the folks who will take the company to its ultimate destination. If the ultimate goal is to go public, you need to have extreme dedication from your key leadership to stick it out long-term, not just from the founders.

For more advice on how to align all your stakeholders around an exit, you can find Exit Right on Amazon.

An early employee of Apple and Head of Innovation at Redbox, Mark Achler has been creating and investing in tech startups since 1986. Today, he is a founding partner of MATH Venture Partners, a technology venture capital fund, and an adjunct professor at the Northwestern Kellogg School of Management.

Mert Iseri cofounded SwipeSense, a healthtech company acquired by SC Johnson in 2020. He also co-founded Design for America — using design thinking for social impact — which became a part of the IBM Watson Foundation in 2021. Together, they wrote Exit Right to be the definitive guide on exits, maximizing the outcome for you and your company.