Disappointment after the sale of your #startup

Congratulations!  You've done it.  You built a successful startup and you've sold it.  Perhaps you have some ongoing obligations: transition, earn out, pay out over time, but you'll soon be financially comfortable or on your way to your next venture.  Now,  are you ready for the disappointment?

Virtually every entrepreneur I've known has ultimately been disappointed after selling their startups.  They go in to the sale optimistic for the future.  Their businesses or the associated technologies will live beyond them.  The demanding work that they and their teams have faced is coming to an end.   They'll have financial success.  They can finally get a life and spend time with their families. 

Sadly, the fact is that most entrepreneurs are disappointed in one way or another.  Here are some examples:

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• Entrepreneur #1 created a world-changing technology and sold his company to one of the fastest-growing software companies in the world.   They promised to  get the technology into the hands of millions of users.  A two-year earn out seemed like a great way to guide the technology into universal acceptance.  Unfortunately, a large industry player and competitor made a deal with the CEO to shelve the technology and Entrepreneur #1 watched helplessly for 2 years as the technology languished.
• Entrepreneur #2 sold her company to a large international Telco in a stock-only deal with one third made available each year of her 3-year employment agreement.  It certainly looked as if she could retire once the stock was registered and available for sale.   After all, this was a multi-billion dollar telecommunications company.  But during the first year, the apparently stable company nearly failed,  their stock falling over 99% before she could trade the shares.   At the end of her contract, she had sold her multimillion dollar company for a few thousand dollars.
  
• Entrepreneur #3, thinking about retirement,  sold his rapidly growing service business to a younger entrepreneur who came in with a 5-year plan to grow the company.  They agreed on a 5-year buyout.  Entrepreneur #3 would remain on the Board but would wouldn't have any operational responsibilities.  Nothing would change for the first year so that the employees and customers could become confident in the new management.  Sadly, within a month, the aggressive buyer was making changes that drove employees and clients away.  Six months later, Entrepreneur #3 got a much-diminished version of his business back and began the arduous process of rebuilding.
• Entrepreneur #4 sold her high tech product business to a multi-billion dollar public company that planned to integrate her products into their own.  Her payout and that of her employees was contingent on integration milestones.  But the larger company's product had never worked well, and the most minor changes caused it to fail.  Entrepreneur #3 fought constantly with her new management to show that it wasn't her technology that had the problems.  But the milestones were set in the contract and she and her team only received partial payment after working ridiculous hours to try to fix a poorly architected product.  She left the industry for good once her employment contract was finally over.

Of course not all startup sales are disappointments.

One entrepreneur sold his struggling business in an all stock deal for $5 per share, worth nearly $5 million to him after a 3 year earn out.  His new job as CTO of the acquiring division gave him control and he became wealthy as the stock rose to $55 per share.  He, too, left the industry, happy with what he knew was a very lucky break.  Had the acquisition delayed even a month, he would have been out of business.

Another sold her very small technology startup to a large company in an all-cash deal, turning her product over to the acquirer.  She walked away and became an Angel Investor, helping several successful startups. 

The reality is, when you sell your startup, you don't really know what's going to happen next.  The economy could change, political winds or industry competition could obviate the need for your technology, the new owners could make big management mistakes, or their companies could fail.  You need to be careful:

• Make sure the acquirer has a solid plan for taking your business forward.
• Get as much cash in the deal as you can.
• Do your due diligence - examine the acquiring company at least as well as they examine you.  Often we are blinded by big companies - it looks like they must know what they're doing to be so successful.  But too frequently parts of their businesses are unstable or poorly managed even if they look good as a whole.

And most important: Lower your expectations.  You're selling your business.  You have to be prepared to let it go.  Otherwise, I guarantee you will be disappointed.

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