Dealing with failure in startups is a hard thing. The chances of success aren’t great to begin with: be it the war on talent, series A crunch, or slow product market-fit, among other things, can kill a startup. So, in case the inevitable seems certain and the startup ran out of money to do one more pivot, what’s a founder to do?
Jacob Mullins, A senior associate at Shasta Ventures, created ExitRound with Greg Dean to help startups die gracefully by putting themselves on the market for acqui-hires by corporates. What AngelList is doing to the top of the funnel, facilitating Angel funding to early stage startups, ExitRound is looking to do a the end of the funnel, enabling modest exits for founders who are unable to float their startup or sell it because they are too small to get noticed.
ExitRound facilitates the strategic acquisition introductions anonymously through a private marketplace. The startups list anonymously and the buyers (corp dev, CEOs, recruiters or product leads) who went through an approval process to get on the site, can browse through the different profiles and request to connect. It is then up to the startup founder to choose if he wants to take the intro and reveal his identity. Clever. This reminds me of another startup that facilitates small-medium private equity deals through a marketplace, AxialMarket.
ExitRound spotted a nice gap in the market. These conversations with potential acquirers happen naturally between corporates looking for talent and the larger, vc-backed startups, seed funded companies are often skipped in these conversations. From the ExitRound blog post:
Startup founders who are having difficulty raising a subsequent round face a series of options: extend their previous round, cut the burn and bootstrap, shut the doors, or occasionally consider a strategic acquisition by a complementary partner. This type of conversation with strategic acquirers is common for larger venture-backed companies, however, not as common or accessible for the large number of seed-funded companies out there.Exitround is the way for founders to more easily explore the strategic acquisition option.
Meanwhile, the search for strong talent has never been more intense. Large technology companies and growing startups are starving for talent. Because of this stretch for talent, many companies are looking to strategic acquisitions as the opportune way to bring in both high quality people, and strong teams with deep area expertise and a familiarity of executing together.
It is at the convergence of these widespread industry trends that Exitround was born.
ExitRound makes money by charging a fee from the corporate acquirer upon completion of the M&A deal. The fees are expected to range between $10K and $20K. The company isn’t affiliated with Shasta Ventures and is described by Jacob as “largely an experiment created by me, Jacob Mullins, from the acute needs that I’m personally seeing within the industry today“. As many VCs turned entrepreneurs, Jacob decided not to raise VC money to support his venture, because he doesn’t want to be forced to sell early.
The application process is a short form, describing the startup’s team size (separate box for technical team members), accelerator affiliation, technology/IP and other sources of value: domain name, user base, pageviews, revenue, distribution, key partnerships, team, etc. My favorite was the last answer on the last question, “How quickly you need to sell?”. Answer” I needed to sell, like, yesterday”. Hope you never have to tick that box.