The document provides guidance on planning for an acquisition or "terminal plan" for a startup company. It discusses deciding when to pursue an acquisition, mapping potential acquirers, adjusting the company roadmap, executing the sale process by building the acquirer's internal case and negotiating price, and closing the deal through due diligence and definitive agreements. The overall message is that entrepreneurs should proactively plan an acquisition as one potential exit and optimize the company, narrative, and deal process to maximize value for the startup.

1. The Terminal Plan
How to end your startup on your terms

2. Most common question
How do I sell my company?

3. The best startups don’t sell.
Apple. Google. Amazon. Facebook. Microsoft.
LinkedIn.
00: Endings
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4. The the worst startups don’t sell.
They die.
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5. Most startups won’t IPO. Most startups aren’t suicidal.
Most entrepreneurs must plan for an ending that isn’t
death.
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6. black swan inbound offers
some happy endings are unplanned. we’re not going to
talk about those today.
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7. Humans don’t like to contemplate endings
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8. Entrepreneurs are (super)humans
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9. Planning your sale
1. Rally stakeholders
2. Map acquirers
3. Adjust roadmap
02: Plan
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10. For most entrepreneurs, selling is a
process
1. Decide
2. Plan
3. Execute
4. Close
00: Endings
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11. Decide to sell:
1. Things are not going according to plan
2. You’ve run out of alternate plans
3. Both 1. and 2. are well-kept secrets
4. You have time
01: Decide
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12. When to start the selling process
1. Things are not going according to plan
i.Lack of product-market fit
ii.Team conflict
iii.No longer believe in vision
iv.No fundraising traction
v. External threat that is probably lethal
2. You’ve run out of alternate plans
3. Both 1. and 2. are well-kept secrets
4. You have time
01: Decide
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13. When to start the selling process
1. Things are not going according to plan
i.Lack of product-market fit
ii.Team conflict
iii.No longer believe in vision
iv.No fundraising traction
v. External threat that is probably lethal
2. You’ve run out of alternate plans
vi. No more restarts
vii. No more pivots
3. Both 1. and 2. are well-kept secrets
4. You have time
01: Decide
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14. When to start the selling process
1. Things are not going according to plan
i.Lack of product-market fit
ii.Team conflict
iii.No longer believe in vision
iv.No fundraising traction
v.External threat that is probably lethal
2. You’ve run out of alternate plans
vi. No more restarts
vii. No more pivots
3. Both 1. and 2. are well-kept secrets
viii. Outside world thinks your startup is doing *at least* well, preferably “crushing it”
4. You have time
01: Decide
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15. When to start the selling process
1. Things are not going according to plan
i.Lack of product-market fit
ii.Team conflict
iii.No longer believe in vision
iv.No fundraising traction
v. External threat that is probably lethal
2. You’ve run out of alternate plans
vi. No more restarts
vii. No more pivots
3. Both 1. and 2. are well-kept secrets
viii. Outside world thinks your startup is doing *at least* well, preferably “crushing it”
4. You have time
ix. At least 6 months of financial and team runway
01: Decide
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16. The Plan
Conventional narrative is that companies
aren’t sold, they are bought.
The notion of not having a plan for what
could be the most transformative event in
your team’s life is simply insane
02: Plan
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17. Planning your sale
1. Rally stakeholders
2. Map acquirers
3. Adjust roadmap
02: Plan
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18. 1. Rally stakeholders
I. Team
•General rule: Until term sheet stage, just co-founders
•Co-founders must be aligned
•Align on “stretch goal” and “minimum viable exit”
II. Investors
•General rule: Only discuss with those who can/will help
•Watch outs: (a) participating preferred, (b) double trigger acceleration
02: Plan
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19. 2. Map Acquirers
I. Determine acquisition type
II. Map inbound interest & existing relationships
III. Identify 3-5 cold prospects
02: Plan
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20. 2. Map Acquirers
I. Determine acquisition type
•Strategic
•Talent
•Technology
•Asset Sale (essentially death)
II. Map inbound interest & existing relationships
III. Identify 3-5 cold prospects
02: Plan
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21. 2. Map Acquirers
I. Determine acquisition type
•Strategic
•Talent
•Technology
•Asset Sale (essentially death)
II. Map inbound interest & existing relationships
•Partnerships
•Customers
•Friends
•Portfolio companies of your investors
•People who’ve checked out your LinkedIn profile repeatedly
III. Identify 3-5 cold prospects
02: Plan
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22. 2. Map Acquirers
I. Determine acquisition type
•Strategic
•Talent
•Technology
•Asset Sale (essentially death)
II. Map inbound interest & existing relationships
•Partnerships
•Customers
•Friends
•Portfolio companies of your investors
•People who’ve checked out your LinkedIn profile repeatedly
III. Identify 3-5 cold prospects
•Competitors
•Players in adjacent/complimentary spaces
•Must be in high-growth mode
•Partnership NOT sale
02: Plan
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23. 2. Map Acquirers: Acquisitions happen when the
acquirer believes they need you in order to deliver on
their plan
02: Plan
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24. 3. Adjust Roadmap
I. Remove impediments to exit
II. Increase strategic value of company
III. Manufacture the optimal narrative
02: Plan
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25. 3. Adjust Roadmap
I. Remove impediments to exit
•Extract company from any business development deals that will be viewed as liabilities
•Kill crazy bet-the-company skunkworks project that will take 2 years to build
•Settle any pending legal action
•Align incentives so nobody internally will be motivated to kill a deal
II. Increase strategic value of company
III. Optimize optics
02: Plan
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26. 3. Adjust Roadmap
I. Remove impediments to exit
•Extract company from any business development deals that will be viewed as
liabilities
•Kill crazy bet-the-company skunkworks project that will take 2 years to build
•Settle any pending legal action
•Align incentives so nobody internally will be motivated to kill a deal
II. Increase strategic value of company
•General frame = Low dev complexity, high strategic upside to prospective acquirers
•Adjust product roadmap to help enable exit
•Close low-hanging-fruit deals
•Titles
III. Optimize optics
02: Plan
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27. 3. Adjust Roadmap
I. Remove impediments to exit
•Extract company from any business development deals that will be viewed as
liabilities
•Kill crazy bet-the-company skunkworks project that will take 2 years to build
•Settle any pending legal action
•Align incentives so nobody internally will be motivated to kill a deal
II. Increase strategic value of company
•General frame = Low dev complexity, high strategic upside to prospective acquirers
•Adjust product roadmap to help enable exit
•Close low-hanging-fruit deals
•Titles
III. Optimize optics
•Perception IS reality
•Steady drumbeat of PR - If you didn’t care about it before, now is time to start caring
•Manufacture compelling narrative & scream it as loud as possible
02: Plan
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28. Optics: Narrative
You must compell third parties to tell a story
that is technically accurate but otherwise
detached from reality
02: Plan
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29. Optics: Case Study
02: Plan
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30. Optics: Case Study
02: Plan
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31. Optics: Case Study
02: Plan
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32. Optics: Case Study
02: Plan
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33. Optics: Case Study
02: Plan
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34. Optics: Case Study
02: Plan
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35. Optics: Case Study
02: Plan
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36. Optics: Crafting a rocket ship narrative is very hard
But it’s not rocket science
02: Plan
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37. Execute
1. Initiate
2. Build acquirer’s internal case
3. Price discussion
4. Negotiations
5. Term Sheet
03: Execute
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38. 1. Initiating Discussions
I. Code
•Roleplay from potential acquirer’s vantage point pre-meeting
•Partnership vs. acquisition
•Pick up and adapt to their verbal and non-verbal queues
•You want them to be the first to say the word “acquisition”, not you
II. Third parties
•Customers, investors, or contacts make the introduction
•CEO must be the negotiator/decider in acquirer’s eyes
•Close behind the scenes advisor who has been through it before is great
III. Implicit selling
•Effective sales doesn’t feel like selling
•It’s dating, not sex
V. Optics
•Meeting locations
•Personal aesthetics
•LinkedIn profiles, GitHub, personal and company blogs must all be on message
03: Execute
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39. 2. Internal case
•Powerpoints & Spreadsheets
•Planning sessions
•Management meetings
•Objective: Build case for them, have
them think they did it themselves
03: Execute
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40. 2. Internal case: Prelim due diligence
•NDA
•Do disclose certain potential unpleasant surprises
•Don’t disclose anything else you’re not asked
03: Execute
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41. 3. Price
• A figment of your imagination
• A function of your sales skills
03: Execute
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42. 3. Price: Don’t negotiate against yourself
•Acquirer’s capacity to pay
•Optimal opening price
•Your minimum viable exit price
03: Execute
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43. 3. Price: Is not as it seems
•Cash vs. Stock
•early stage private company stock should typically be valued at zero
•Earn outs
•Indentured servitude
•Contingencies
•Assign informed probabilities to every contingency
•Avoid revenue or results based milestones
•Holdbacks
•Up to 20%, 2 years is typical
03: Execute
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44. 3. Price: Multiple interested parties
Only way to optimize price is to have options
•You must parallel path acquisition discussions with multiple parties
•DO lean forward on communicating level of interest from other interest parties
•DO NOT name the other interested parties
•DO NOT fabricate other interested parties
03: Execute
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45. 3. Price: Generally, the right personal psychology is to
focus on what will be life changing for founding team
vs delusions of grandeur
03: Execute
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46. 4. Negotiations: Companies don’t buy
companies. People buy companies run
by people.
03: Execute
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47. 4. Negotiations: People at acquirers have
warped incentives. Leverage them
•Understanding the psychology is critical
•Almost all decisions at a big company are motivated by internal politics
•Managers want to look good to their boss
•New CEO wants to shake things up in role and make a mark
•Privately held companies may want your investors on their cap table
•Managers want to build their personal networks
•Probable that their actual motivations for
acquiring you are hidden... and warped.
03: Execute
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48. 4. Negotiations: Hail Mary Passes
•Have at least a few of these up your sleeve
.
03: Execute
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49. 4. Negotiations: Do not reveal your psychology
03: Execute
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50. 4. Negotiations: Avoid agency problems
•Bankers
•Bankers are ultimately incentivized to build their long term deal pipeline,
understand what this means for you
•Only acceptable use case is (I) multiple term sheets, and (2) strategic or technology
acquisition
•Lawyers
•Some law firms are notorious for dragging deals out to maximize billable hours
•Have your lawyers call out their lawyers at the first sign this is happening
•Time is the enemy
•Internal agency problems
•There are stakeholders within acquirer who could be against a deal happening
•Watch out for board members
•Figure out who they are, and preemptively turn them into deal champions
03: Execute
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51. 5. Term Sheet
03: Execute
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52. The Close
1. Due diligence
2. Forward Motion
3. Definitive Agreement
04: Close
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53. 1. Due Diligence
I.Don’t disclose anything you’re not asked
•The psychology on acquirer side quickly shifts to “we’re scared we are going to screw up”
•You’ll be shocked by what they freak out about
•You’ll be shocked by what they don’t ask
•Roll with it
II.Lean on your lawyers
•Now is the time to really engage them
•Make sure they are great
III. Stay organized
•Google docs checklist
•Shared Dropbox folder
•Advanced prep
04: Close
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54. 2. Forward motion
I.You and your team must keep moving
your company forward
•Make sure only a few of you are distracted by the acquisition process
•Easier said than done
•Now is not the time to drop any balls
II.Create a sense of urgency
•Continuously remind acquirer why it’s important for them to close by X milestone
•“Rabbits out of hats” - Deploy new features and announce new news that will be a pleasant
surprise to the acquirer
•Disclose any and all overtures from new interested parties
III.Temporarily embrace your inner sociopath
•If they stop liking you as a person, the deal dies
•Restrict their contact with anyone on your team who can’t put on a happy face
04: Close
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55. 3. Definitive Agreement
i. Reps & Warranties
ii. Indemnification
iii. Employment Agreements
•If singing up for indentured servitude, ensure you and the team cannot be
terminated without cause, and that “cause” is tightly defined
04: Close
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56. 3. Definitive Agreement
04: Close
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57. The worst is over for you.
But it’s just begun for the acquirer :-)
04: Close
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58. Want more?
@justglew
geofflewis.org
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59. Questions
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