Why they exited?

The exit. It’s become the startup north star, even before the startup has gone from idea to operation. What is it? What does it involve? In this month’s 212 Deep Dive, we talked to a few founders to find out.

What is it?

To start, it’s important to note that “the exit” is a financial goal post. Not all entrepreneurs start companies with the idea of selling it to another or even going public. As Yemeksepeti co-founder, Melih Odemis, notes, it depends on the entrepreneur.

“If we’re talking about high impact entrepreneurs, we must talk about exits,” he says. High-impact entrepreneurs build companies that not only create jobs but that reshape the socio-economic landscape. In doing so, they’re continually building both in size and depth. Take Amazon and Google, Odemis says. “These companies morphed into totally different structures. Google’s founders never exited the parent company, but they have had partial exits on aspects of the business.”

With Yemeksepeti’s exit to Germany’s Delivery Hero in 2015 for $589 million, Odemis notes that “there was no particular timeline for an exit.” Nor, he notes, is there a particular path. Yemeksepeti received several different offers for acquisition. “After a few months, we considered Deliver Hero’s offer to be the best one for our shareholders.”

 

What does it involve?

Negotiation is at the heart of any exit. That is especially true if a startup has venture capital backers. Venture capital firms, by their very nature, are eager to see a return on their investment. That would make the exit process seem very black and white – a matter of numbers.

When Erdem Yurdanur sold his company, MacKolik, to Perform Group in 2012, he was surprised at what he encountered. “I thought that the exit process would be mathematical. I was wrong. It is mostly a psychological process.”

Firat Isbecer, the co-founder of Pozitron, which sold to Monitize for $100 million in 2014, agrees. “It (the exit) was more emotional than we imagined.” What made the difference for him and his brother, Fatih? Networks and culture. At the heart of the negotiations the Isbecer brothers were involved in were parties “who liked each other.” “Countries and culture also make a difference,” Isbecer says. It’s not just a matter of speaking the same language. It’s also having a similar mindset.

 

What would they change?

Of course, no exit process goes smoothly. But there are things a startup founder can be on the lookout for to avoid.

Firat Isbecer advises to avoid using an investment banker. “They have different priorities than business owners.”

Tarek Assaad, founder of the electronic bill payment company Fawry (sold to a consortium of international investors for $100 million) notes that “we could have spent less time on negotiating and re-drafting legal documents (which are in many instances driven by lawyers seeking to generate fees).”

Another thing many founders, particularly in the MENA region, talked about changing – instability. There is an appetite for strong, well-managed and well-established businesses, but in a region where political instability is the norm, there is also a desire to exit while the going gets good. That makes this region more ripe for exits, which isn’t necessarily a good thing. One thing that Numan Numan notes is that companies are undervalued, and that’s not good for the ecosystem.

 

To exit or not to exit?

Abdulaziz Al Loughani, founder of Kuwait based food delivery business, Talabat, notes that there are instances when a startup founder should NOT exit. “As long as you have the resources and the skills to grow a business, don’t exit. An exit should happen when your are not able to capture tangible opportunity at its fullest and your startup needs better resources to take it forward.”

Once you’ve exited, Al Loughani notes, things change. “You’re as good as your last deal, maintaining a high bar and repeatedly creating better/higher impact is something that keeps me awake.”

Indeed, the exit of a startup may be the final goal post in a business cycle. But it is not the final moment in an entrepreneur’s life. Among the things to think about are what to do after the exit? How to contribute and add value to the startup community/ecosystem? Do I start another business?

That’s something we’ll talk about soon.