Selling a startup — exit paths and what buyers actually pay for

Acquihire — buyer wants the team, doesn't really want the product. Typical at $1-10M acquisition. Equity rolls into vested stock at buyer. Useful when the product has stalled but the team is strong. Result for founders: usually a 3-4 year buyer-stint, modest payout.

Strategic acquisition — buyer wants the product or customer base because it fits a strategic gap. Pricing reflects strategic value (not just multiples). Typical at $20M-$2B. Best path for most founders if available; depends on having a clearly strategic asset.

PE / financial acquisition — buyer wants steady cash flow at an EBITDA multiple. Typical for bootstrapped businesses with strong profit margins, ARR >$5M, low growth but very stable. Most founders dismiss this; for B2B SaaS at $5-30M ARR with healthy economics, it's often the cleanest path.

Secondary — partial sale of founder/early-employee equity to investors during a primary round. Not an exit; a partial liquidity event. Useful at $20M+ ARR for de-risking founder personally without giving up the business.

The mistake: defaulting to "strategic acquisition by Google" as the goal. ~95% of acquisitions are not Google buying. Plan for what's actually likely.

Not the pitch deck. Not the technology. The real drivers, in order:

1. Quality of revenue — ARR with strong NRR (>110%) beats ARR with weak NRR. Recurring beats one-off. Diversified beats concentrated (no customer >20% of revenue).
2. Defensibility — network effects, switching costs, regulatory moats, brand. "We have AI" is not defensibility.
3. Team retention — buyer asks: "will the top 5 people stay?" Without yes, the acquisition is just an asset purchase.
4. Clean books + clean cap table — messy financials, undocumented option grants, side letters, IP gaps in contractor agreements — each one knocks 10-30% off valuation in DD.
5. Strategic fit — does owning this fill a specific gap the buyer has named publicly? Strategic fit is often worth 2-5× the multiple of pure financial fit.

What buyers don't pay extra for: the founder's hustle, the team's love for the product, future roadmap. Be realistic about what you're selling.

Preparation that compounds over 18 months:

Month 1-6:

• Clean up books, cap table, contracts, IP assignments
• Document every key process (the SOPs you've been avoiding)
• Build a senior team that doesn't depend on the founder day-to-day

Month 7-12:

• Sharpen the strategic story — who would naturally buy this, why
• Develop relationships with 5-10 potential acquirers (informational, not sales)
• Strengthen retention metrics (NRR is the single biggest valuation lever)
• Hire a fractional CFO if you don't have one

Month 13-18:

• Engage an M&A advisor or banker (under $50M deal: boutique; above: brand-name)
• Tighten the 12-month forward plan — buyers value predictability
• Have the data room ready before any LOI

Founders who run a process in <3 months without preparation typically capture 30-50% less value than those who prepare for 12-18 months. The preparation is the leverage.