Navigating Startup Exits: Art or Science?
A startup exit refers to the moment when founders, investors, or stakeholders decide to exit their involvement with the startup, often with the goal of realizing a return on their investment or efforts. The key challenge in start-up exits is the valuation of a company and whether it’s the right time to exit, given the valuation you are getting. Startup exits take various forms, each with its implications:
- Being acquired by a larger company is a common exit strategy, often leveraging the acquiring company’s resources and customer base.
- Taking the startup public through an IPO involves listing its shares on a stock exchange, allowing public investment, which is very rare as it requires minimum investment amounts for it to be a viable option.
- Merging with another company provides growth opportunities and synergies while maintaining ownership in the combined entity. It generally doesn’t give cash exit to investors but shares in another company which is not preferred by investors.
- The startup’s management, possibly with external financing, buys the company from existing owners, ensuring continuity and autonomy. It’s not tax efficient and hence rarely used.
- A bigger investor (VC or a PE) buys angel investors to get a larger share in the company.
Factors Influencing Startup Exits: - The timing of the exit is critical, influenced by market conditions, the startup’s performance, and the economic landscape.
- Broader economic and industry-specific trends affect the feasibility of specific exit options.
- The terms of contracts and agreements, including equity agreements and investor rights, affect exit options and returns.
We as Ecosystem Ventures have also successfully completed a recent Exit for our Investors who have initially invested at INR 16 Crore Valuation and exited at INR 32 Crore Valuation in Navigene Genetic Science Pvt Ltd, through a Third Party Strategic Buyer.
We have been associated with Navigene since 2020. The Company strives for early and accurate prediction/diagnosis of disorders and ailments, through Preventive Genetic Screening solution for newborns, children and adults.
The Company is keen to penetrate the Government segment and has applied for ICMR approvals for the technology. The Strategic Buyer will be a resourceful aid to Navigene for achieving the same.
The buyer believes that Navigene is at an advantageous position and will get lot of Government orders thereby valuing the start relatively higher whereas we believe that Government contracts are very unpredictable and can result in delayed revenues and hence we valued the company conservatively.
The difference in perceptions play a critical role in valuing a company and hence it becomes more of an art than science to arrive at valuation of a company. We got a 26% IRR on our investment and it was a decent exit for us given that it will take much longer to realize the expected growth in valuation.
Startup Funding Summary
Third Wave Coffee, Bangalore-based QSR brand, has raised $35 Mn in Series C funding from Creaegis, Eight Roads Ventures and F-Prime Capital – Read More
Pilgrim, Mumbai-based personal care brand, has raised $20 Mn in Series B funding from Vertex Ventures Southeast Asia & India, Fireside Ventures and Narotam Sekhsaria Family Office – Read More
Legistify, Gurugram-based legaltech startup, has raised $4 Mn in Series A funding from Indiamart, Titan VC, GSF, Cathexis Ventures, Justin Hamilton and Enrission group – Read More
Raptee, Chennai-based EV startup, has raised $3 Mn in Pre-Series A funding from Bluehill Capital, Eugene Mayne, Lakshmi Narayanan, Ramesh Kannan, Kaynes Technology, Chandu Nair, Shankara Building Products and other HNIs – Read More
Clinikally, Gurugram-based healthtech platform, has raised $3 Mn in funding from Y Combinator, Tribe Capital, Goodwater Capital, Sequoia Scout Fund, Rebel Fund, Arash Ferdowsi, Kunal Shah, Austen Allred, Qasar Younis, Alagu Periyannan, Tanay Tandon, Deepika Bodapati and James Beshara – Read More
M&A Snippets
Bangalore-based fashion & lifestyle brand Styched has acquired Bangalore-based performance wear brand Zymrat for an undisclosed amount – Read More
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