In mid-November, TIMIA Capital hosted Season 2, Episode 3 of #BestInSaaS Breakfast in Toronto, Kitchener and Vancouver. CEOs of SaaS startups were invited to participate in the panel discussions and hear from expert guest speakers on topics about scaling up your startup. The Vancouver event was held at TIMIA headquarters and focused on Unconventional Exits and Founders’ Issues.
We highly recommend watching the full panel discussion here. Strapped for time? We’ve also conveniently summarized the key takeaways below:
Unconventional Exits
We had the pleasure of having Brent Holiday, Founder & CEO of Garibaldi Capital Advisors, moderate the panel discussion about unique exits with Andrew Chau, Co-founder of SkipTheDishes; Jayesh Parmar, CEO and Founder of Picatic (recently acquired by Eventbrite); and Bart Copeland, CEO and President of ActiveState Software.
All three panel speakers agreed that every exit is different. Timing is everything, and it is crucial to look at every offer carefully. Every company and its board, investors, and employees are unique to each exiting process. Doing your due diligence with investors can be extremely time-consuming—with tedious, back-and-forth legal paperwork—so it’s critical to align yourself with trusted lawyers. All documents and contracts contain legal jargon that can have huge implications for the future of the companies involved.
Our panelists also faced the challenge of running business-as-usual while focusing on all the logistics of a deal closing. Each mentioned the importance of protecting the company by minimizing the involvement of too many internal members throughout the process. Managing expectations is critical because, if the deal falls through, it can be detrimental to employee morale (especially if it becomes public knowledge that the exit is unsuccessful).
While coming to the decision whether to exit or not, our panelists stressed the importance of keeping the happiness of their key stakeholders (customers, employees, and families) in mind. Aligning the business plans with the original startup goals can help keep stakeholders’ expectations top-of-mind.
When a company is deciding between a financial buyer versus a strategic buyer, the experts advised that it’s important to be clear on expectations when making a decision. To ultimately grow your business on a national or global scale, it is important to weigh the financing you require or the resources and experience you’ll gain from a strategic buyer.
Founders and Co-Founders Therapy Sessions
Keith Spencer is the Co-Leader of Fasken Law’s Start-Up & Emerging Company Services group, providing expert advice to startup and mature private technology companies.
Setting early expectations cannot be overstated. Not having the initial conversation about how much time commitment each founder is giving to the company (full or part-time) as the company grows is a major oversight. Discussing each founder’s roles, and how they will evolve and complement their skills over time, is another early conversation many founders overlook.
One of the most important first steps a startup should make is to bring on a third party independent consultant or a group of trusted advisors to help form the future Board of Directors. It is crucial that the third party advisor has relevant experience and knowledge and can offer unbiased advice. Be selective in your choice: the advisor should have strong communication skills, acting as a conduit between the founders and CEOs. This helps prevent tension and toxicity arising between the founders and CEOs.
Having a Board of Directors in place early on is also very significant for helping investors come to the decision to support your company. The Board acts as an advisory council, holding the CEO and company accountable for their actions and decisions.
The size of the founding team is also important. The ideal number for startups is two to four people that exhibit the following three skill sets:
- The Charismatic Leader – This leader is outward-looking, outspoken, and can successfully communicate the company’s vision and value proposition, convincing investors and employees to buy-in.
- The Technical Leader – This leader is the inventor and visionary behind the company’s technical capability.
- The Operational Leader – This leader is the controller that has strong organizational skills, keeping all paperwork and financial details in order.
The division of money is always a difficult but necessary conversation for founders to have. Keith advises having these conversations with your third party advisor very early on. He said Reverse Vesting is currently the best and most common practice for startup founders. Founders receive stock up front, which the company buys back at the nominal price in the event that a founder leaves the company, for example.
If you’re interested in getting more insights from our expert speakers, sign up for our monthly newsletter or follow us on social, and join us in person at the next #BestInSaaS Breakfast – or watch the discussion live!