The Wise Exit

Cashing Out Podcast | E19 | Touraj Parang

Todd Sullivan: [00:00:00] Welcome to the Cashing Out Podcast where our fellow founders share real stories and offer honest advice around selling their companies to some of the top acquirers in the world. My name is Todd Sullivan CEO of Exitwise where we help business owners create the exits they deserve.

Today I have a special guest Touraj Parang, who has not only founded and sold three venture backed startups, but he's also led eight transformational acquisitions as a corporate development buyer at GoDaddy. Touraj has been a Silicon Valley M&A attorney, a venture investor, an entrepreneurial mentor, and today is the president of Serve Robotics, which provides delivery to people in public spaces using zero emissions autonomous robots.

In our conversation Touraj and I discuss why selling a business is so difficult and how planning and preparation can greatly improve your chances of real transactional success, In fact, Touraj is such an expert on exit preparation that he wrote a [00:01:00] bestselling book about the topic called Exit Path, How To Win The Startup Endgame, in which he shares the lessons he's learned over the last 25 years from every side of the M&A table.

I love this book so much that I'm buying 25 copies to give away to our listeners who help us promote the Cashing Out Podcast. So please follow Exitwise on LinkedIn to learn more. I hope you enjoy my conversation with TourajParang.

Torres. Thank you for agreeing to chat with me today. You're one of the few M&A professionals who's built and sold companies, advised founders on mergers and acquisitions transactions, and helped buyers acquire companies really properly and integrate those companies effectively as part of a growth strategy.

Todd Sullivan: And, you know, reading your book, on how to really prepare for an exit. For me, it was fantastic. I know your insights are gonna be really well received. Um, there would be gold for our founders. Um, but also I got, I got so fired up when you agreed to do this chat [00:02:00] that I had no problem bumping Mark Cuban from this time slot.

So thank you for being here.

Touraj Parang: Apologies to Mark. Good to speak with you again, Todd. Delighted to be here and really looking forward to this chat.

Todd Sullivan: That's great. Um, like I said, you've sat really at every seat of the m and a table, right? And then you went on to write this book, which I definitely want to talk about. But maybe you could start by taking us back. you're in Silicon Valley, you're, know, a corporate attorney and then you make this jump to entrepreneurship. Maybe you could take us through that.

Touraj Parang: Absolutely And you know sitting on every side of M&A table was definitely not something I planned. It happened by accident Uh but it's fun that it did and I'm grateful all that experience the good and the bad Uh so yes Uh taking you back to when I started actually practicing in Silicon Valley Um so I was on Stanford undergrad in the nineties I studied philosophy and [00:03:00] economics and of course the natural path after that combination is law school I was unemployable otherwise so I uh went to Yale loved the study of law and had sort of a very different impression of what the practice of law entailed so I loved entrepreneurs and innovation and technology and I knew always that I wanted to be around that community And so I felt that as a lawyer I could really be helpful to entrepreneurs and uh came and practiced law corporate law representing entrepreneurs from formation all the way to their IPO and M&A events. And I quickly learned that the entrepreneurs were having a lot more fun than I did And I kind of felt that I be a lot closer to the deal to structuring the deal than documenting a deal which is important work uh which is what lawyers do And they [00:04:00] do it very well but it wasn't where my heart was So I uh networked my way into a business role which was uh an associate at a venture capital firm in Palo Alto Who was just opening office with a European fund coming to Palo Alto I happened to hit a couple of uh check boxes for them I spoke German They were German and so uh that was my first business job early two thousands In fact as soon as I joined the market Crashed hopefully correlation at causation And I uh learned a lot Uh so four years as a vc kind of got my MBA on the job and then at some point I felt um brave enough to uh actually try my hand at entrepreneurship and that's when I made the jump over being a founder and started my first startup in 2005 which was a telecommunications startup It was kinda like you may think of it as a [00:05:00] precursor to WhatsApp and Telegram in an we didn't have smartphones uh we didn't have iPhones with apps on them So these were the dumb feature phones but we wanted to connect them with your social networks And because we kind of saw these trends that people loved to talk and text on their phones People also loved to spend time on social media back then was friends during MySpace were disjointed So our our aha moment was Hey what if we bridge the two You know that startup had really great early successes and ever since I've been an entrepreneur you know uh been in the business world

Todd Sullivan: Yep. And now that was Jaxtr, right? That's the one you're. that that was it. That's an interesting story cuz you had some competitors around, you remember like, was it GrandCentral got bought by Google, there were a few others, right?

Touraj Parang: Yeah, in fact you know the site guys was that like four or five companies started in the same year [00:06:00] around the same idea which was voice over ip kind of transporting voice um and text messages over the IP network that was attached to the cellular network bypassing a little bit the toll charges you may remember Making a long distance call uh and long distance I'm not talking about international Within the US a long distance call could could uh uh empty your bank account and uh you know students couldn't call back home college students because uh heavy heavy toll charges

Todd Sullivan: Yep.

Touraj Parang: um texting was really exciting You would pay per message

Todd Sullivan: Yep.

Touraj Parang: is insane in today's world So we want we want to kind of uh address that problem make calling and texting as close to free as and so yeah GrandCentral, Jajah, jangl, Ribbit, we all started in 2005 enough uh the outcome [00:07:00] of all those other players was radically different from ours
Um and for us uh we didn't have a great outcome So we all hit the 2008 / 2009 Recession, and um which was very similar to today's investing market crashed uh all du and gloom You know Sequoia issued that PowerPoint presentation uh kind of “RIP Good Times”

Todd Sullivan: Yep.

Touraj Parang: that one Right and so um we found ourselves in a situation where we were running out of cash fast and we uh hadn't really cracked the code on Monet we were growing growing growing We were viral product raised a lot of inter money and you know grabbing market share and growth was our predominant focus So we didn't spend [00:08:00] much time on kind of trying to convert users into paid users even though they were very active users They run paid users And active users meant that we were we we had costs that were virally growing too because we still had to had infrastructure costs And you know we went from like let's say zero to 1 million users in the first month We launched a product we went to 10 million in the first year was a pretty viral thing back then These were real numbers And so we had our Pickoff investors and uh you know we had our dream list of investors actually uh backing us which but they all had big ambitions in terms of growth and market share What uh happened was that really we were caught by surprise as many startups were back then as uh they were here uh last year so we kind of had to figure out what to do Now One critical decision we had made which we came to regret [00:09:00] was that we didn't really pursue any strategic partnerships distribution partners, courting potential acquirers because we thought that we had it made right We we thought that we are growing we are gonna be a unicorn Although the term probably didn't apply were drinking our own Kool-Aid so we sort of just put the blinders on and focused on executing Didn't wanna distract ourself with bi dev or external we needed to find a way to exit which was in 2009 really hard to do we didn't have anyone around the table And we had to kind of create those relationships called we had very short runway We thought we had a year And then when we went to back to our board [00:10:00] said no no no you can't touch that venture debt So that cut our runway

Todd Sullivan: Yep.

Touraj Parang: We had like six months to figure out what to do and our investors were saying sorry we are not investing anymore um in companies that aren't on the path to profitability And we couldn't show that We tried to tweak our funnels come up with new products you know it was all hands on deck but just not enough time then we scrambled to reach out to acquirers and um were all busy licking their own wounds right

Todd Sullivan: Sure, sure.

Touraj Parang: And not in the mood to start new relationships So what happened We were kind of like we had to do a fire sale and we had Uh interested party They named the price which was pretty much close to made anything from that exit but we did transfer IP and our some of our users to a new [00:11:00] that was uh that was a hard lesson learned Right and and what made it maybe perhaps poured salt on the wound Was that all those names that we just mentioned all players that started with us

Todd Sullivan: Mm-hmm. .

Touraj Parang: amazing exits as you said

Todd Sullivan: Yep.

Touraj Parang: became Google Voice ribbits sold to uh British Telecom for uh close to a hundred million dollars and this was before they had even launched publicly

Telephonica for 200 million And I think compared to all those players we had better technology much more solid backing um had raised more money

I'm biased We had a better team So anyway uh but you know we made one critical strategic error
Todd Sullivan: it's so, [00:12:00] is really interesting, that story, to me because it very much resonates some of the things that you've said where what founders are going through right now is very similar to what happened in 2008. And just like you, we were in the middle of selling a business that I had started in August of 2008.

investment committee for the buyer pulls out on day of signing, like literally minutes before signing. The board all looks at each other and says, and Kleiner Perkins was on the board at the time and said, guys, hold all your cash. Do not buy anything. And it ended our deal on signing day. And so, um, you know, very familiar with that.

Todd Sullivan: And, and today, the attitude that is going around with venture is not kind of, um, current portfolio companies, unless they're, you know, big winners, m and a isn't getting done unless you're profitable. a lot of very similar things are happening, And, and one thing that I loved about your book is you described that situation really well and [00:13:00] you refer, to strategic partnerships and how that is an important part of M&A.

And I learned the exact same thing to the next time I went out, I was all about creating revenue through strategic partnerships. And so you're getting to know, uh, these other people that can be your requires, someday. And so having those avenues, is incredibly valuable as you're thinking through what an exit, could be.

Touraj Parang: So I you, you have an amazing career with Webs.com next, and then, yes yes So uh you know right after uh that uh learning experience I took six months to just reflect to uh to Try to understand what what just happened

Todd Sullivan: Mm-hmm.

Touraj Parang: I did come to the realization that not really courting uh those potential acquirers not creating those strategic partnerships is what did us in and so [00:14:00] I I kind of took that thesis and uh joined another startup uh called webs.com was really at this stage where Jax was but they had figured out how to get to cash flow break even They had raised a modest amount of money about 10 million or so um not astronomic valuations either that's because they were uh based out of East Coast They were in Silver Spring Maryland and they hadn't really done any strategic partnerships mostly because they were under the radar for Silicon Valley no one really had heard One of the biggest if not the biggest website creation platforms There were 30 million websites that were created on They So but but enough of them converted to paid um that got them to cash flow break even And uh they needed to break out They needed to figure out we go raise more [00:15:00] money Do we go um sell ourselves If so to whom So I joined as head of strategy and Corp Dev and um I In the first six months I kind of orchestrated on offsite uh we spent a weekend at Chesapeake Bay and kind of really brainstormed on what would success really look like for this company

Todd Sullivan: Mm-hmm.

Touraj Parang: um and who would be Our dream acquirers why would we consider them to be attractive to us and why would we be attractive to them we kind of went through that mental exercise kind the end goal and then came back and said okay what do we need to put in place to get so kind of created this two year roadmap as to what we should be how we should reposition ourselves And one of the insights that came into that meeting was that [00:16:00] among all of the cohorts of users is 30 million websites created The ones that converted the most was a very The ones that complained the Converted the best you know stayed the longest and those were the small businesses So that was our aha moment Um and we said look we need to position ourselves as a SMB platform rather than a generic website creation tool And guess what A lot of those dream acquirers they are doubling down on their SMB digital strateg So kind of like those two came together very nicely And so we spent the next two years relationships with those and telling them Hey look we are getting into the SMB space In fact these are the metrics we are seeing from our SMB cohorts What are you guys seeing So kind of build those that

Todd Sullivan: Yeah. Yep.

Touraj Parang: shared learning and then sort of approach 'em with that Hey maybe there's a way we can partner [00:17:00] together So kind of dangle those ideas Um none of them really materialized into partnership but what it did was build trust build familiarity over these two years with them that when we were about raise our next round we told them and they started uh you know becoming active and started actively uh kind of putting bids together for us you know We had to do acquisitions ourselves because to get within that short timeframe to com to have those product features that SMBs would find attractive like a CRM tool or social marketing tools we had to actually acquire Companies ourselves We did that Those were small acquisitions but extremely meaningful And then some of the uh things we did through strategic partnerships for instance we our website needed to be mobile compatible There was a great company out there called Duda we partnered with them and they basically enabled the um mobile compatibility [00:18:00] of the websites created on the platform Anyhow to make a long story had to do a lot of work Uh but it was well worth it because when when we got that those interested parties public and private kind of raised our price pretty significantly We had leverage And the best leverage of course is the fact that we didn't have to sell So we told them

Todd Sullivan: Yeah

Touraj Parang: if you want us to sell You have to make an offer we can't refuse You have to stop us in our tracks

Todd Sullivan: Yeah.

Touraj Parang: so um one party did that uh which was Vistaprint So

Todd Sullivan: Yeah.

Touraj Parang: about 120 million to Vistaprint which was Significant outcome for

Todd Sullivan: Yeah.

Touraj Parang: it was more than 10 x r revenues um forward revenues And so um Yeah, it was a it was a great deal and uh what a radically different outcome compared to what we went through with Jax Right Just because of

Todd Sullivan: Yeah.

Touraj Parang: uh both strategic [00:19:00] offsite and then the follow through

Todd Sullivan: Yeah, And what's interesting is, it's one thing to say it right, but you really walk through the steps of, for a person who may not necessarily be a natural, uh, networker, how to reach out and start creating those partnerships and. . We had a really nice exit recently with, a software company that had really gone out and not only just created customers, but really created true partners where they did what you were saying, where they learned something about their software that might be nuanced, and they started kind of putting that education out to their customers and what you saw is that just trust was starting to be developed and then they evaluated the founder a little differently and the product a little bit differently, and then all of a sudden, one of them said, you know what? This could really excel under our umbrella. . And when that happened, well then the other three, well, we don't wanna lose it.
We like that product too. And it [00:20:00] just forced, an eventual bidding war for a company that wasn't for sale, just by developing really great kind of business development strategic relationships. And we were fortunate enough to be able to advise on that and watch the purchase price go, just go up, up, up, and up. . So you, you go on and what what's exciting for me, as we talked about at the beginning, you know, both sides are all sides of the M&A table.

But now you end up as running kind of corporate development for GoDaddy buying companies, being on the other side of the table with a founder and really understanding what is it that we're looking for right then. So there might be some learnings there. there. I'm sure there are some learnings. What do founders need to do when they get in front of corporate development groups to be really attractive?
Right. To be acquired.

Touraj Parang: and and you know I I joined GoDaddy uh for a number of reasons Uh one was the mission uh which was very small business centric Uh the mission it was and [00:21:00] uh it's now modified a little bit but at the time it was to tilt the global economy towards small business It's really resonated with me You know I had been in this small business world uh especially with webs uh for quite some time and I I did app council after that Which was a marketplace for legal services for small businesses So really have a passion for small business My parents were small business owners I have owned small businesses so so love small business And then I also really liked the team at GoDaddy the culture And uh it was a pre i p O company I'd never been a public company So I felt that it was um a chance to see how uh scaled mature companies behave and how do they go about acquiring companies so it was really uh with a desire to learn uh as much as I can So I joined Godad in the corp dev team uh and and led a number of uh initiatives for various business units Um the corp dev team at GoDaddy was an interesting beast We uh [00:22:00] we Uh BizDev and Corp devs because we saw that BizDev to be a front uh kind of funnel for Corp dev A lot of companies have them as separate functions Kind of doesn't really make sense to me

Todd Sullivan: yeah.

Touraj Parang: should work hand in hand

Todd Sullivan: Mm-hmm.

Touraj Parang: so I actually worked on a number of strategic partnerships with some startups that we ended up acquiring So it it it made sense to have that continuity uh at Corp Dev uh typically what they do is they kind of help business unit owners develop a build by partner case So they have to kind of see okay is it that we want to And is the best way to accomplish this through buying someone acquiring someone Is it best to build it in-house or perhaps do a strategic partnerships There are pros and cons to each of these approaches and so that's what Corp Dev does is for some of your listeners are kind of wondering what's the role of corp dev That's what they do They're not the ultimate decision [00:23:00] makers That's a

Todd Sullivan: Yeah. Yeah

Touraj Parang: many entrepreneurs including myself when I was on the other side that we kind of assume that corp dev is like the authority They're not um they are the facilitators Uh they uh they definitely play an important role But the ultimate decision makers are in the business units uh the operating units that have to take uh the acquired entity and deliver on the promise of the acquisition Um so um Yeah.

it was really interesting to see how that's uh the role we play I I kind of uh would call myself uh a a cupid because I felt that the best role I could play was to kind of put a promising startup and our leaders in the same room let them talk kind of dim the lights a little bit and see if sparks fly right
Todd Sullivan: That's great. I, I love the point of corporate development, right? They're not really the decision makers, right. They're gonna facilitate [00:24:00] a transaction. And you know, what I encourage a lot of founders with is these strategic partnerships when the head of a particular product or a business unit, as you're, you're saying in business development, when they really latch on to something that you offer and they're integrating it and they're really understanding it.
if they're the ones that drive the interest, the acquisition interest into the corp dev group, right? You're creating really advocates for an m and a transaction. , and, and that's where I see the best ones really start at the product level. Like, wow, this is really making us more efficient. We can scale, we could really use this, uh, product in a lot of different ways.

And then Corp dev, you know, is making the call, but really driven by product or as you said, business development. So yeah, that, I think that's a, a great educational point.

Touraj Parang: uh one of the things actually uh just uh if I may piggyback on that one of
um preach uh in in the book Exit Path which is based on [00:25:00] my learnings in the past 20 plus years in Silicon Valley is that acquisitions or strategic partnerships any kind of meaningful business deal happens uh when the two parties actually like and trust each other it's

Todd Sullivan: Mm-hmm.

Touraj Parang: driven much more than numbers or contract driven you know um uh early in my career I thought Contracts made all the difference the words uh over paramount Then I realized no it's actually the numbers The business case needs to be there regardless of if the incentives are not aligned Uh that doesn't matter what the contract says right The parties are

Todd Sullivan: Yeah.

Touraj Parang: apart So then I really really drilled in on spreadsheets and numbers

Todd Sullivan: Yeah.

Touraj Parang: then I realized you know these things don't matter because even if you have the the best model and the business case still if the parties don't like each other the whole thing will fall apart And
assumptions there's a lot of faith in the future In fact Acquisitions especially are the biggest [00:26:00] uh uh strategic transactions for uh even a large public company doing a small acquisition because they're very distracting They could have a lot of reputational effect They take this very seriously There was a podcast I was listening to with the uh CEO of Walmart and he said some of the hardest decisions he had ever make were kind of acquisition decisions you And so that's why the relationships are so important because at the end of the day you have to as an acquirer you have to believe that the team the founders are gonna deliver You know they're gonna stick around And and what you saw is actually you know uh the truth uh

how much diligence they do um it doesn't overcome the personal connection I
really preach in the book

Todd Sullivan: that it, it's a great point the way you, you said it in a nuanced way, from the Buyer'ss perspective. In order for it to materialize the value that everybody's envisioning and when we, we [00:27:00] sit in the founder's shoes. We're saying those relationships really help you hit the earn out portions of, the transactions that we're creating, right?

Because these are not all cash deals. You are committing time and you're committing to, to build something very special. And when you can work really well with the people on the other side of the table, then the outcomes become more certain, right? There's obviously still risk and you want to, Create those earnouts where you have some levers in your hand, but ultimately you're now part of a team and you gotta get along really well with that team.

We're in a couple of transactions right now where we are purposefully having the founder create deeper relationships. Before we sign anything we wanna really understand is, is this the group that you're gonna be happy with, with the next two or three years, or should we look somewhere else? So, super important from the founders.

Touraj Parang: and and uh frankly you know it's very rare that one startup is so unique that it doesn't have [00:28:00] any competitors It's asset in the market that can satisfy a need for an acquirer Chances are there are multiple out there So acquirers have also their own wishlist of companies they want to acquire In each sector industry et cetera And so um for you to stand up and stand out against all the others it's where the relationships really matter too

Todd Sullivan: Ah, yep. It's perfect. Somebody had told me, you know, you might be looking at one, two, maybe a handful of potential acquirers where those. Have a stack of a thousand potential companies that they could go out and buy. Right? And so sitting at the top of that stack. It takes a lot to be able to do that.

And relationships are incredibly, uh, powerful to, to make you stand out. So I appreciate you saying that. So, your career after GoDaddy, right? You're, you've been an investor, you're advising, right? Countless founders as just as a really, as a mentor, which [00:29:00] I very much appreciate. Uh, and then you write, The book Exit Path, how to Win the Startup Exit Game.

Okay, so this is the thing I was all excited about and I, I read business books, but I am not the prolific reader that a lot of, uh, my fellow founders are. And so when I do see something that is like, this is a playbook, and I, you know, having done m and a for 23 years, selling my companies and now helping my fellow founders do it, I was able to take a lot out of this book and we look at our business a little bit differently and we are planning far ahead of any exit that we would ever see now in a very different way.
So I very much appreciate, um, just the instructional nature, uh, the real world examples, and I would encourage people, uh, to absolutely read it. Would you maybe give us the Cliff notes version? The highlights? I know we talked about strategic partnerships, which I took away as like that as gold. Uh, but there's a lot more there.

Maybe I'll leave it to you to, to pick out some gold nuggets.

Touraj Parang: [00:30:00] Sure Thank you And really I appreciate those uh those words uh uh they mean a lot especially from a experienced practitioner like yourself I I'm glad that you approve of the messaging the approach So um thank I basically wrote the book that I wish I had when I did my first startup
Todd Sullivan: Yep.

Touraj Parang: it took me about five years because I do have other jobs and family and and it took me a while Um but it was good that it took a while because I didn't rush through it I actually took the time really systematically get in the mindset of both the acquire and the seller

All stakeholders you know there are people involved when you're selling a startup There is um what I call your deal team right There is your investor key investors your board there is your key leadership team members There are potential partners that you have that need to be managed in [00:31:00] and customers as well So there there's like a holistic approach uh that I I kind of bring to this process And it all starts with understanding why it is important For a founder for a team for a leadership team at a startup to think about their exit early and not wait until they are desperate to sell or that they have an inbound offer Because once you have an inbound offer you have to kind of react to it because it could be A massive opportunity that if you don't uh capitalize on you may regret forever So um have to be ready for that And so the sooner you get started the better And kind of I take the first um you know part of the book talking about why is it so important is it that so many founders don't even uh Four hours The majority of of founders spend less [00:32:00] than four hours thinking about their exit or doing anything about it staggering statistic Actually 40% have spent no time on thinking about their exit
Now put that in contrast with the fact that for every I p o there are 30 acquisitions
acquisition is the most likely outcome successful outcome for

Todd Sullivan: Yeah.

Touraj Parang: The risk go outta business especially if you're venture backed right You either have to do an IPO which happens outta 30 times you you sell which happens the other times or you go outta business So um

Todd Sullivan: Yeah.

Touraj Parang: now when you contrast that with the fact that founders 40% have spent no time on it we we we have a big problem Um so I kind of lay out the problem the root causes why it is so critical to think about your exit And it is important for founders to understand that they have tremendous amount of agency [00:33:00] to make an exit happen and to get the best terms that they can when you are not prepared you leave a uh that otherwise would've been game changing Um so kind of talk about that Then I go into these two phases the long game which Years in advance of when you plan to sell Kind of I talked about the webs.com experience on the offsite that that's a great kickoff point Have an offsite really what you wanna do where you wanna go build this thing I call the your exit strategy canvas which is a

Todd Sullivan: Yeah.

Touraj Parang: to uh to address the critical that you need to come away answered in the offsite And I provide a lot of uh guidance in terms of The best practices of how

Todd Sullivan: Yeah.

Touraj Parang: who should be involved how do you run some of these brainstorming sessions Um drawing [00:34:00] design thinking and other kind of product management tools Uh and then kind of then go ahead and build those relationships execute on those partnerships You know build leverage uh which is when you get to the short game which is the last stage of the process it's gonna make all the difference for you Um and and kind of talk about where does leverage come from Uh that's a quick preview It's optionality but also the fact that the other party likes you If they

Todd Sullivan: Yep.

Touraj Parang: have a lot more leverage Um and so um also what are the deal dynamics What what does an m and a deal look like What are the key terms So I kind of go through all of those as well And and if and for a lot of founders perhaps they are thinking about uh selling their startup this year
Todd Sullivan: Mm-hmm.

Touraj Parang: and they would just go straight to the last chapter uh or last part of the book One of, one of the things that, um, impressed me is that [00:35:00] before this offsite right, there is a lot of work to, to make that offsite very efficient for all the stakeholders. And I think a lot of our founders maybe, you know, you've got. Five to 10 people, and I think you address that, but as well as some larger organizations, right?

Todd Sullivan: How do we, um, bring people into this process and contribute to kind of that out of the box thinking? And one of the things that I've done, and we've done this with founders, is that because we are what we believe is the largest network of, uh, independent.very industry specific investment bankers in the world.

They have such a, a really detailed insight into very specific categories. And so I went out and I started talking to investment bankers in our network to say, who do you think would be interested in us someday? Right? And that was the, the start of that preparation for our company. And we have no plans.[00:36:00]

Of exiting, but I, because of your book, I started thinking this way and the insight that I got from these investment bankers was invaluable. There were categories of buyers that I wasn't even thinking of, and I've been doing this for 25 years. Right. So we naturally, as founders will have some blinders on and opening up, uh, to not only the stakeholders within your company for those ideas, but we reached.
to the investment bankers in our network, and they were incredibly valuable. And so I would say that, that we would offer that to founders, right? Just before you're, you know, ready to sell like years before. Get that kind of insight, get that feedback, and start thinking about it and create that buy-in of what this company can ultimately look like.

Touraj Parang: In, in whose hands will it be? That that is such a critical point Um in fact in my in our webs.com sale um we ended up not hiring an investment banker because we had some really great [00:37:00] strategy advisors who held our hands through the process and who helped us Now

Todd Sullivan: Yeah.

Also the fact that I in the company full-time uh sort of could dedicate myself to running the process really helped A lot of

Todd Sullivan: Yeah.

Touraj Parang: don't have that and they have a need for an investment banker to help them whether a so practitioner or a firm to help them run the process A lot of work and takes takes a lot of uh leadership uh energy and focus away So um there are definitely times you need investment bankers but I think You always need this kind of deal advisor You may call it deal Sherpa uh someone that has a long-term perspective can uh that you may need at various stages [00:38:00] You know I talk about the deal that will be critical and instrumental in making a a a great transaction come to fruition

Todd Sullivan: I, I appreciate you saying that because, you know, we think of ourselves as creating the very specific dream team for every company, and in your book you pulled out very specifically m and a attorneys having very industry specific knowledge, right? And, and we say, yeah, absolutely. We focus a little bit more at the beginning with the investment bankers and.

Just some of the advice that I might give to fellow founders today is that being able to prepare for this exit and understand who your likely acquirers could be, would be a question that I would ask any investment banker that I was interviewing. Who do you think would be interested? Our company and the bankers that come back and say, well, why don't you tell us who.

you know, the [00:39:00] acquirers should be, it's great to have that in your pocket, but you really want your advisors, your bankers to know, Hey, this is the community. These are maybe three separate groups. Um, that would be likely. Here's why. And we've sold to these businesses before. I loved that you, you call it an advisor or a Sherpa.

That's how we kind of think of ourselves. But I have very rarely heard people pull. having industry expertise at the m and a attorney level, and I love that. It's absolutely something we promote, we bring, um, and, and rare to hear, so thank you for, for putting that in the book.

Touraj Parang: Absolutely I think another point that you you mentioned worth uh underlining and reemphasizing is that can talk to investment bankers and get information from them

Todd Sullivan: Yes. Yes.

Touraj Parang: with them even if you are not sell tomorrow because

Todd Sullivan: Yep.

Touraj Parang: they provide can provide you the blueprint for where you want to head in two years [00:40:00] and then come back to them to help you with executing that deal You know because frankly that unless you are really doing a In the in the near term and investment banking wouldn't wanna officially get engaged cuz they're very much transaction oriented However understand the value of building relationships so Oh yeah Build relationships with them Kind of compare and contrast different styles There there are all sorts of investment bankers out there and do reference checks you know come to trusted sources like your firm and uh kind of what's basically the the universe the kind of bankers that you can talk to All these data points are gonna be critical Planning that path towards an exit map Don't get me wrong I'm not saying sell sell right I'm not preaching that I'm saying be ready to sell Even if you don't need to sell That's the best position to be in

Todd Sullivan: Yeah, absolutely. I like your point you can work with an investment [00:41:00] banker, you can talk with an investment banker and get information. You do not have to be ready to sell. And they are a pretty good barometer of where the market is today, potentially where it's going. Uh, that may be very strategic for you.

I think of valuation in particular where we get a lot of founders that come to us and we say, okay. looked at at multiple investment bankers that are specific for you. Your valuation seems to fit within this range. But if you were to hold on 18 more months and do these three things that are in your projections, your valuation is gonna go through the roof, we really encourage you to, you know, stay the course, build the business, hit this next milestone, or it's, no, no, you're, you're right in the sweet spot to go today.
Everybody's gonna fight over you. Right? Just getting that insight and knowledge is really, and those bankers are on the front lines and, and can share that. So, uh, look, uh, uh, Torres, do you have anything else that, that advice that you would give our fellow founders about m and a before we leave here?
Touraj Parang: You know [00:42:00] I would say two key takeaways um that I would love everyone to take from this conversation One is there's no such thing as preparing too early

Todd Sullivan: Correct.

Touraj Parang: feel that uh no matter what the stage or size of your startup is thinking about the end and thinking about where you wanna head and how do you create strategic options for yourself gonna be game changing for you eventually one And the other one is um focus on relationships You you don't wanna up and starting in relationships from scratch with an acquirer when you are in the process of trying to sell your startup that's where I think a lot of good bankers would probably advise you to kind of take that initial step and and court these potential acquirers Um and and don't wait uh until the a a banker or advisor whoever sends out your pitch to uh to [00:43:00] acquires it's really low likelihood that that would materialize into something uh meaningful for you so those would be my my my key advice Of course there's a lot more of it in this book

Todd Sullivan: Yep.

Touraj Parang: the audio version is also out but uh you know um I highly recommend That.
folks take a look at it

Todd Sullivan: That's fantastic. Ta, thank you so much for all the time. Right. You're one of the rare people that, as we said at the beginning, has seen m and a from all sides of the table, and I think you've distilled a lot of what founders need to know, um, in the book Exit path. So thank you again for, for sharing everything today.

Touraj Parang: Yeah Thank you for the great questions I look forward to staying in touch

Todd Sullivan: Thanks again for listening to the Cashing Out podcast. For more Founder Exit stories, please subscribe to the Cashing Out podcast on Apple, iTunes, Spotify, or wherever you listen to your [00:44:00] favorite podcasts. And please remember, exit wise.com and the cashing Out podcast are for entertainment purposes only.

This should not be relied upon as the basis for investment decisions.